Corporate Governance

Biohit Oyj is a Finnish public limited company whose Series B share is quoted on NASDAQ OMX Helsinki in the Small cap/Healthcare group. The Biohit Group (hereafter abbreviated as ‘Biohit’) comprises the parent company Biohit Oyj and its foreign subsidiaries, which primarily focus on sales and marketing for Biohit Oyj’s products.

Biohit’s administration complies with current legislation, the rules and regulations of NASDAQ OMX Helsinki Oy, and Biohit Oyj’s Articles of Association. Biohit Oyj also follows the Finnish Corporate Governance Code for listed companies that was issued by the Securities Market Association in October 2008 and came into force on 1 January 2009. The Code covers the following areas:

Annual general meeting
Board of directors
Management
Compensation
Internal control, risk management and internal audit
Insider regulations

ANNUAL GENERAL MEETING

The tasks of the General Meeting

The General Meeting is Biohit’s highest decision-making body. It meets once a year (Annual General Meeting, AGM) or more frequently as required (Extraordinary General Meeting, EGM). The AGM is held annually by the end of April. An EGM may be held at the request of the Board of Directors or when stipulated by law. The Board of Directors calls General Meetings and presents issues for consideration at the meeting. General Meetings deal with issues that are the business of General Meetings as set out in the Finnish Companies Act and Biohit’s Articles of Association. According to the Finnish Companies Act, company shareholders also have the right to have issues presented for consideration by the General Meeting.

The major issues handled by the General Meeting include:
• Changes to the Articles of Association
• Share issues
• Determining the number of members on the Board of Directors and electing its members
• Electing an auditor
• Approving the financial statements
• Deciding on the distribution of profit and other funds

Notice of Annual General Meeting

A Notice of Annual General Meeting will be published in Helsingin Sanomat and Kauppalehti, and also on the company’s website. The Notice will include the time and place of the meeting, the proposed agenda, any measures that need to be taken by participating shareholders, the record date, the address of the company’s website, and where to obtain the material for the meeting. In addition to the agenda, the invitation will also include the nominees for the Board of Directors and the auditor. Nominees must have accepted their nomination and must be supported by shareholders possessing a total of at least 10% of the votes conferred by the company’s shares. In addition to the Notice of Annual General Meeting, at least 21 days before the meeting, the company’s website will also present the details of the Board nominees and the total number of shares and votes, by type of share, on the date the meeting was called. The Board’s proposals and the documents to be presented at the meeting will also be made available.

The date of the AGM will be set so as to enable as many shareholders as possible to attend. Biohit Oyj’s Board of Directors monitors trends in the company’s shareholder structure and, if required, will take action to ensure that shareholders can participate to the fullest extent possible in decision-making at the AGM.

AGM attendance and publishing decisions

Shareholders must register in advance by the date given in the Notice of Annual General Meeting. Shareholders can attend the meeting in person or may nominate a proxy. Both shareholders and proxies may have an assistant at AGMs.

In addition to shareholders, AGMs are attended by the Chairman of the Board of Biohit Oyj, at least half of the Board members, the President and CEO, and the principal auditor. Unless there is a cogent reason for absence, all first-time Board nominees must attend the AGM.
Minutes are taken at the AGM, and these minutes are made available to shareholders on the company’s website one (1) week after the meeting. Any decisions reached are published in a stock exchange bulletin immediately after the AGM.

Share series

Biohit’s shares are divided into two series: Series A and B shares. Series A shares confer twenty (20) votes at General Meetings and Series B shares confer one (1) vote. However, the dividend paid for Series B shares is higher than that paid for Series A shares by two (2) per cent of its nominal value. Series A shares are governed by surrender regulations, which are set out in more detail in Article 13 of the company’s Articles of Association.

BOARD OF DIRECTORS

Composition and term of office

The Board of Directors, which comprises at least five (5) members elected by the Annual General Meeting, is responsible for the administration and appropriate organisation of the Group’s business operations. The Board of Directors elects a chairman from amongst its members.

Those elected to the Board of Directors are expected to have the required competence for their tasks and sufficient time to carry out their duties. The majority of Board members should be independent of the company’s major shareholders. The Board of Directors evaluates members’ independence in accordance with Corporate Governance recommendation 15. Members must provide the Board with sufficient information on their competence and independence, including any changes in these details. After 1 January 2010, the Board must include both men and women.

Board membership commences at election by the AGM and lasts until the end of the next AGM.

Board members are presented in the section Board of Directors and their shareholdings are detailed in the Insider Register.

The tasks of the Board of Directors

The Board of Directors is responsible for the administration and appropriate organisation of business operations. The areas of responsibility laid down in the written rules of procedure approved by the Board are as follows:

To develop shareholder value
To ensure the appropriate organisation of accounting and financial management
To confirm the parent company and consolidated financial statements and the Report of the Board of Directors for the financial year now ended
To confirm the interim reports for each quarter at the end of March, June and September
To decide on Biohit’s business plan, budget and investment plan
To decide on Biohit’s financing and risk management policies
To approve management remuneration and incentive schemes
To appoint the President and CEO
To decide on Biohit’s strategy, organisational structure, investments and other wide-reaching and significant issues

The company’s operative management draws up reports on the business development of the Group and its units, and the Board of Directors bases its decisions on these reports.

Board meetings and self-assessment

The Chairman is responsible for calling Board meetings and arranging Board activities. In general, the Board convenes once a month, that is, 10–12 times per year. When necessary, Board meetings are held more frequently or by teleconference. The meeting schedule for the entire term will be confirmed in advance.

The Board assesses its activities and working methods once a year. A self-assessment is carried out and discussed at a meeting of the Board.

The Board decides on the internal division of duties so as to best harness the expertise and experience of its members.

The scope of Biohit’s business operations does no require the appointment of an Audit Committee, and no other committees have been appointed to assist the Board.

President and CEO

The President and CEO is responsible for the day-to-day management of the company in accordance with the instructions and regulations given by the Board of Directors. The President and CEO of the parent company is elected by the Board and also acts as Group President. The President also ensures the legality and reliable organisation of the company’s accounting and financial management. The terms of the President’s employment are laid down in a written contract that is approved by the Board of Directors. The President cannot be elected Chairman of the Board.

The President is presented in the section President and CEO and his or her shareholdings are in the Insider Register.

MANAGEMENT

Group Management Teams

Biohit has two Management Teams. The Diagnostics Management Team focuses on the diagnostics business and its development, while the Liquid Handling Management Team focuses on the liquid handling business and its development, as well as Group-level administration.

The duty of the Management Teams is to assist the President and CEO in planning and monitoring the Group’s business operations, in managing daily operations, and in preparing matters to be submitted for consideration by the parent company’s Board.
The Management Teams comprise the President and CEO and the directors of Group functions. The following functions are represented: Sales and Marketing, Production, Finance, Research and Development, Administration, and Quality Systems. The President and CEO, or in his absence the Director of Administration, acts as chairman of the Management Teams.

The President and CEO appoints Management Team members and approves their employment contracts in accordance with the instructions given by the Board of Directors.
The Liquid Handling Management Team meets every other week as directed, and the Diagnostics Management Team meets once a month.

The Management Teams are presented in the section Management Teams and their shareholdings are in the Insider Register.

Managing directors of subsidiaries

The managing directors of subsidiaries and their Boards of Directors are responsible for the management of subsidiary operations. Subsidiaries are responsible for the sales and marketing of Biohit’s products in their market areas. The subsidiaries’ managing directors operate under the management and supervision of the President and CEO and the Director of Administration. Each subsidiary’s Board comprises its managing director and the requisite number of members of Biohit’s Management Teams.

Each subsidiary’s managing director is responsible for ensuring that business operations are managed, planned, monitored, reported on and developed in accordance with the Group’s operating principles.

Compensation

The Annual General Meeting approves the fees of the Board of Directors. Members receive monetary compensation, and there is no share-based incentive scheme for Board members.
The fees paid to Board members during the financial year now ended, as well as the fees paid for consultancy and on the basis of employment contracts, are detailed in the section Board membership fees and other benefits.

The Board approves the President and CEO’s fees and terms of employment. Like other Board members, the President is also paid an additional fee for Board membership. The fees paid to the President during the financial year now ended, as well as the President’s main terms of employment, are detailed in the section Management fees and other benefits.
The President and CEO approves the salaries and profit-based incentives of subsidiaries’ management in accordance with the instructions given by Biohit Oyj’s Board of Directors. Profit-based incentives depend on the sales and earnings trends of each unit’s product segments.

The President approves the fees and terms of employment of Management Team members. Biohit’s Board of Directors has approved the principles of the incentive schemes for Management Team members and the President. Bonuses are determined by the net sales and earnings trends of each person’s area of responsibility. The maximum bonus that can be received depends on each person’s monthly salary and can total no more than three month’s salary.

Biohit does not employ any incentive schemes that pay management in the company’s own shares.

COMPENSATION

The Annual General Meeting approves the fees of the Board of Directors. Members receive monetary compensation, and there is no share-based incentive scheme for Board members.

The Board approves the President and CEO’s fees and terms of employment. Like other Board members, the President is also paid an additional fee for Board membership.

The President approves the fees and terms of employment of Management Team members. Biohit’s Board of Directors has approved the principles of the incentive schemes for Management Team members and the President. Bonuses are determined on the basis of the net sales and earnings trends of each person’s area of responsibility. The maximum bonus that can be received depends on each person’s monthly salary and can total no more than three month’s salary.

The President and CEO approves the salaries and profit-based incentives of subsidiaries’ management in accordance with the instructions given by Biohit Oyj’s Board of Directors. Profit-based incentives depend on the sales and earnings trends of each unit’s product segments.

Biohit does not employ any incentive schemes that pay management in the company’s own shares.

INTERNAL CONTROL, RISK MANAGEMENT AND INTERNAL AUDIT

Internal control

Subsidiaries report on business and earnings trends to Group Management on a monthly and quarterly basis. Group Management reports to the Board of Directors on Group-level operations. The Board and the President and CEO decide on Group-level strategy and operational procedures.

The Liquid Handling Management Team decides, on the basis of the instructions given by the Board, on the Group’s steering, financing and investments.

The Boards of subsidiaries follow business development at the subsidiary level and monitor that the steering instructions approved by the parent company and any other procedures are duly followed. Each subsidiary’s Board usually convenes after each calendar quarter. Subsidiary Boards work with financial reports and the written interim reports drawn up by subsidiary management.

The Biohit Group’s steering and control is carried out in accordance with the management system described above. The company provides all the reporting systems required for the monitoring of operations and financial management.

The parent company’s financial department provides instructions for drawing up interim reports and financial statements, and prepares the consolidated financial statements. The parent company’s financial department retains central control of funding and administrative matters, and is also responsible for the management of interest and exchange rate risks. The managing directors of subsidiaries ensure that subsidiary reporting is carried out in accordance with the instructions given by Group Management. The parent company’s administrative department controls and provides instructions on Group-level personnel policies and any agreements made within the Group.

Risk management

The main objective of Biohit’s risk management policy is to identify major risks associated with the Group’s business operations and environment. The cost-effective management and monitoring of these risks will then ensure that the company’s strategic and operational targets can be reached as intended.

The Board of Directors carries the main responsibility for the company’s risk management policy and monitoring its implementation. The President and CEO works with the parent company’s operative management and subsidiaries’ managements to ensure that the Group’s risk management is duly arranged. The parent company’s operative management is responsible for identifying and managing the risks involved within each business area, while subsidiaries’ managements are responsible for those in their own market areas.

Risk management is one of the areas covered by Biohit’s business planning and monitoring system, which regularly monitors the risks associated with the company’s business operations, identifies any changes and, if necessary, takes appropriate action to hedge against them.

The major short-term risks and uncertainty factors affecting Biohit’s business operations are presented in detail in the Report of the Board of Directors, and this information is updated throughout the year in the Financial Statement Bulletin and interim reports.

Internal audit

Biohit has not appointed a separately organised function for internal auditing purposes. The Group’s financial management holds primary responsibility for the practical implementation of the internal audit.

The Group has all the reporting systems required for financial management and monitoring business development. The reporting systems produce monthly financial data to ensure that the financial management instructions approved by the parent company on, for example, authorities are being adhered to. The Group’s auditor and the auditors of each subsidiary evaluate the effectiveness of the internal audit both in connection with the external audit and through spot checks throughout the financial year. See also Short-term risks.

INSIDER REGULATIONS

Insider guidelines

Biohit Oyj applies the Guidelines for Insiders approved by NASDAQ OMX Helsinki Oy, as well as any relevant amendments.

Permanent insiders and insider registers

According to securities market legislation, Biohit’s permanent insiders comprise the members of the parent company’s Board of Directors, the President and CEO, and the principal auditor. Biohit’s Board of Directors has decided that the company’s Management Team members will also be classed as permanent insiders.

In addition to the public register of insiders, the company also keeps a non-public register of insiders that lists both permanent insiders and project-specific insiders. People listed in the non-public register as permanent insiders are those who regularly receive inside information as part of their business activities. Project-specific insiders are those people who receive inside information in conjunction with a specific project.

Insider control

Biohit’s head of legal affairs is responsible for insider control. He or she ensures that insiders are aware of insider regulations and adhere to trading restrictions. For example, permanent insiders are not allowed to trade Biohit securities for 21 days before the publication of the company’s financial statement bulletin and interim reports. Project-specific insiders are not allowed to trade Biohit securities before the project has been made public or discontinued.

Audit

The auditor elected by the AGM is responsible for the statutory audit. According to the Articles of Association, the company must have one auditing firm that has been approved by the Central Chamber of Commerce. The auditing firm announces the name of the individual auditor who will assume principal responsibility for conducting the audit. The auditor’s term of office begins during the current financial year and ends at the next AGM.

The auditors issue their statutory report to the shareholders in connection with the publication of the company’s financial statements. The auditors of the parent company report their findings to the Board of Directors and President. The reports drawn up by parent company auditors are based in part on audits carried out by subsidiary auditors. These reports are also reviewed by Group Management.

Biohit’s auditors and the fees paid to them during the financial year now ended are presented in the section Auditors.

Communications

Biohit’s communications are based on policies approved by the Board of Directors and the legislation and regulations governing securities markets. Biohit seeks to maintain proactive communications with all of its interest groups and to pay attention to each group’s specific needs and interests. Biohit aims to increase confidence in the company and thereby promote its business operations.

Biohit’s major interest groups are its customers, shareholders and personnel. Other significant interest groups include analysts, authorities, mass media representatives, scientific communities, job seekers, and other partners in cooperation.

The President and CEO and the Director of Administration are responsible for ensuring that the company adheres to regulations on investor relations and communications and stock exchange releases. The Director of Communications is responsible for press releases and coordinating media relations.

All of Biohit’s investor communications are published in both Finnish and English.