CORPORATE GOVERNANCE IN 2016

General Meeting of shareholders
The Annual General Meeting was held in Helsinki, Finland on March 7, 2016.

Board of Directors and committees
The Annual General Meeting elected eight members to KONE’s Board of Directors. The full-time Chairman of the Board of Directors of KONE Corporation is Antti Herlin. Jussi Herlin is the Vice Chairman of the Board. The other members of the Board are Matti Alahuhta, Anne Brunila, Iiris Herlin, Ravi Kant, Juhani Kaskeala and Sirpa Pietikäinen. Out of the eight Board Members, five are male and three female.

Of the Board members, Anne Brunila, Iiris Herlin, Ravi Kant, Juhani Kaskeala and Sirpa Pietikäinen are independent of the Corporation. With the exception of Antti Herlin, Iiris Herlin and Jussi Herlin, the other Board members are independent of the Corporation’s significant shareholders.

In 2016, the Board of Directors convened 7 times, with an average attendance rate of 93%. Jukka Ala-Mello serves as Secretary to the Board and to its Committees.

Audit committee
The Board of Directors’ Audit Committee comprises Jussi Herlin (Chairman), Anne Brunila (independent member), Antti Herlin and Ravi Kant (independent member). The Audit Committee held 3 meetings in 2016, with an average attendance rate of 92%.

Caj Lövegren serves as the Head of Internal Audit.

Nomination and compensation committee
The Nomination and Compensation Committee comprises Antti Herlin (Chairman), Matti Alahuhta (independent of significant shareholders), Jussi Herlin and Juhani Kaskeala (independent member).

The Nomination and Compensation Committee held 2 meetings in 2016, with an average attendance rate of 100%.

Compensation and other benefits of the Board of Directors
The Annual General Meeting of KONE Corporation in March 2016 confirmed the fees of the members of the Board as follows (annual fees in EUR):

Annual feesEUR
Chairman of the Board54,000
Vice chairman44,000
Member33,000

Of the annual remuneration, 40 percent was paid in class B shares of KONE Corporation and the rest in cash. It was also confirmed that a meeting fee of EUR 500 is paid for each meeting of the Board and its committees but anyhow EUR 2,00 fee per those Committee meetings for the members residing outside of Finland. Board members’ travel expenses and daily allowances are compensated in accordance with the company’s travel expense policy.

Compensation and other benefits of the Chairman
The compensation for Antti Herlin, full-time Chairman of the Board, consists of a basic salary and a yearly bonus decided by the Board on the basis of the Group’s financial result. The yearly bonus may not exceed 100 percent of the recipient’s annual salary. In 2016, Antti Herlin’s basic salary was EUR 468,488. In addition, his accrued bonus for 2016 totaled EUR 391,800. He was also paid EUR 60,000 as compensation for serving as Chairman of the Board. Antti Herlin’s holdings of shares are presented in the Corporate Governance Statement 2016.

The full-time Chairman’s retirement age and pension are determined in accordance with Finland’s Pensions Act. No separate agreement regarding early retirement has been made.

President and CEO
Henrik Ehrnrooth serves as KONE Corporation’s President and CEO.

Compensation and other benefits of the President and CEO
The President and CEO’s compensation consists of a basic salary and a yearly bonus determined annually by the Board on the basis of the Corporation’s key targets. The yearly bonus may not exceed 100 percent of the recipient’s annual salary.

Henrik Ehrnrooth’s annual base salary is EUR 750,000. In addition, his accrued bonus for 2016 totaled EUR 600,000. Henrik Ehrnrooth’s holdings of shares is available in the Corporate Governance Statement 2016.

Henrik Ehrnrooth is included in the share-based incentive plan for the Group’s senior management. The potential bonus is based on the growth in KONE’s net sales and operating profit. In April 2016, on the basis of the incentive plan for the year 2015, Henrik Ehrnrooth received a bonus of EUR 3,527,900 which consisted of 40,495 KONE class B shares together with a cash bonus to cover taxes and similar charges arising from the receipt of shares. The corresponding bonus accrued from 2016 and due for payment in April 2017 is 36,715 KONE class B shares together with a cash bonus to cover taxes and similar charges arising from the receipt of shares.

Henrik Ehrnrooth’s retirement age and pension are determined in accordance with Finland’s Pensions Act. No separate agreement regarding early retirement has been made. Should his employment contract be terminated before retirement, he has the right to the equivalent of 18 months’ salary, which includes the salary for a six-month term of notice.

Executive Board
KONE’s Executive Board consists of President and CEO and 13 Members. Henrik Ehrnrooth serves as President and CEO. The other members of Executive Board are Max Alfthan, Axel Berkling (from October 1, 2016), Klaus Cawén, Ilkka Hara (from August 8, 2016), Thomas Hinnerskov (from September 1, 2016), William Johnson, Pekka Kemppainen, Mikko Korte, Heikki Leppänen, Pierre Liautaud, Tomio Pihkala, Kerttu Tuomas, and Larry Wash. During the year, Executive Board members also included Neeraj Sharma (until September 30, 2016), Eriikka Söderström (until July 31, 2016) and Noud Veeger (until April 2, 2016).

Compensation and other benefits of the Executive Board
The compensation for the members of the Executive Board comprises a base salary and a yearly bonus, based on the Group’s annual result and the achievement of personal targets. The bonus amount is determined by the Nomination and Compensation Committee and may not exceed 50 percent of the annual salary.

The Executive Board members’ holdings of shares is available in the Corporate Governance Statement 2016.

The members of the Executive Board are included in the share-based incentive plan for senior management. In April 2016, on the basis of the incentive plan, the members of the Executive Board received a bonus of 183,732 KONE class B shares together with a cash bonus equal to the amount required to cover taxes and similar charges arising from the receipt of shares. The corresponding bonus accrued from 2016 and due for payment in April 2017 is 282,142 KONE class B shares together with a cash bonus equal to the amount of taxes and similar charges. No separate agreement regarding early retirement has been made for the members of the Executive Board. The compensation for the termination of the employment contract prior to retirement is a maximum of 15 months’ salary, which includes the salary for a six-month term of notice.

Auditing
KONE Corporation’s Auditors are Niina Vilske, Authorized Public Accountant, and PricewaterhouseCoopers Oy, Authorized Public Accountants. The fees paid to companies in the PricewaterhouseCoopers chain for 2016 were EUR 3.1 million for auditing and EUR 1.6 million for other consulting services.

Insiders
The holdings of the Board of Directors and Management of KONE on December 31, 2016 and the changes occurring in them during the financial year are presented in the Corporate Governance Statement 2016.

(Updated on January 27, 2017)