Corporate Governance

Corporate Governance Guidelines

Tamro Corporation’s governing bodies and management practices comply for the most part with the February 1997 Guidelines on the Corporate Governance of Publicly Traded Companies issued by the Central Chamber of Commerce in Finland and the Confederation of Finnish Industry and Employers (TT). The Auditors’ statement on Tamro’s corporate governance is included in the Auditors’ Report.

Board of Directors and President/CEO

Tamro Corporation's board of directors comprises a minimum of three and a maximum of ten members elected at the annual general meeting. The term of a board member expires at the close of the following year's annual meeting. The annual general meeting elects the chairman of the board of directors.

The board has appointed a budget committee consisting of the chairman of the board of directors, three other board members and the group management of Tamro Corporation. The committee’s duty is to supervise the development of the business units in accordance with the decisions of the board of directors.

The articles of association of Tamro Corporation specify no other tasks for the board of directors than those prescribed under the Finnish Companies Act.

In addition to the provisions of the Finnish Companies Act, it is the duty of the CEO to

• direct the company's business activities according to the guidelines and regulations issued by the board of directors,
• monitor economic trends in the countries of operation and adjust corporate activities as required by the changing business environment,
• manage the company's strategic planning and monitor the development of the Group's operational organisation and efficiency,
• direct and supervise the use of the available development opportunities in co-operation with subsidiaries in the Group's core business areas, and
• present the items on the agenda to the board of directors at different meetings.

No group employee is nominated to the parent company's board of directors. No director of the corporate board serves on the boards of group subsidiaries, with the temporary exception of Apokjeden AS, where two of the corporate board directors have been elected as board members by the shareholders. The board of directors in any subsidiary should preferably not have any members belonging to the staff or officers of the same unit, unless otherwise guided by local business practice or relevant local law.

The CEO is nominated by the board of directors, which also approves the terms and conditions of his post as stipulated in a written executive employment contract. All executives of the Corporation are appointed with the terms and conditions of their contracts approved by the superior of the appointing person.

Tamro has elected to use a double signature policy throughout the whole Group. The name of the company, whether Tamro Corporation or its subsidiary, is signed by the members of the board and the managing director, two together or by the procuration holder(s) authorized by the board to do so together with another person entitled to sign. Where the subsidiary has no board of directors, the subsidiary is signed for by the procuration holder(s) authorized by the shareholder to do so either together with another procuration holder or with the managing director.

Organisation of business activities and areas of responsibility

The Group's core business – pharmaceutical distribution – is organised under eight country-specific business units. The sales and marketing of healthcare and laboratory supplies are grouped under the Tamro MedLab organisation.

All units, including Tamro MedLab, are headed by managing directors reporting to the CEO of Tamro Corporation.

The group management comprises the CEO, the Group's chief financial officer and the Group’s logistics director.

The responsibilities of the Group's chief financial officer are to manage the corporate business controlling, treasury and group administrative functions. He also establishes adequate financial standards and routines to be properly adopted and applied by all group companies, and he guides the companies in their use of the said tools. He is responsible for the group budgeting, reporting to the board of directors – including making pertinent comments and highlighting substantial deviations from plan – and making valid forecasts. The CFO also takes care of corporate tax planning.

The Group's logistic director is responsible for driving the operational efficiency and quality of our operational processes. He is responsible for operational benchmarking processes in the Group, based on the key logistic parameters used to identify best practices that can be adopted by the local business units, as well as for driving and leveraging the efficiency and quality improvement work of the distribution units, in order to ensure competitive operations.

The responsibilities of the Group's chief financial officer and logistics director have been laid down by the CEO and approved by the board.

A separate routine and rules for investments and expenses as well as chart of authority have been established at Tamro Corporation for application throughout the Group.

Insider issues

Tamro has applied the Helsinki Exchanges Guidelines for Insiders by introducing, as of 1 March 2000, insider regulations ratified by Tamro’s board of directors.

Auditing

The auditors are elected annually by the general meeting. In addition to the tasks specified in the currently valid rules and regulations, the auditors report their audit findings to the board of directors when necessary and take part in the meetings of Tamro's board of directors at least twice a year.

Risk management

For the success of Tamro Group it is essential that the risks involved in the business are well under control. The objective of Tamro Group's risk management practices is to identify and minimise risks associated with operations, assets and personnel. Risk management is handled both on the corporate and the business unit level. The responsibility for risk management lies with the business units.

The business units see to it that sufficient insurance coverage is in place and that the deductibles on the responsibility of a business unit are in accordance with the approved insurance policies, and that any loss or damage is reported to the appropriate insurance company. A master insurance policy is administered at group level.

Tamro has installed an internal audit team. The function of the team is to, among others, report on the adequacy of internal controls and the level of compliance with Tamro Group regulations. The team also provides recommendations about the activities reviewed.

Subsidiaries

In a subsidiary where Tamro Corporation is the sole shareholder, the general meetings are convened either by the board of the local company or by Tamro Corporation. The chairman of the general meeting is either Tamro Corporation’s CEO or a designated Tamro Corporation executive. The chairman of the board is either Tamro Corporation’s CEO or another designated Tamro Corporation executive.

If local laws permit, in a subsidiary where Tamro Corporation is the sole shareholder, any written instruction given by Tamro’s CEO constitutes the exercise of the powers of a general meeting, and no member of Tamro Corporation’s board of directors is elected to the board of the subsidiary, unless necessary for special reasons. If a board of directors is not needed, the tasks laid down for the board of directors are mainly assigned to the general meeting as specified in the articles of association of the relevant subsidiary.

The managing director of the subsidiary is appointed by Tamro Corporation’s CEO, with the terms and conditions of their contracts approved by the chairman of Tamro Corporation’s board of directors as superior of the appointing person.