The purpose of the governance code is to promote openness, transparency and good governance, supporting the competitiveness and success of Metsähallitus and enhancing cooperation with stakeholders.
1. General governance principles
Metsähallitus is a State-owned enterprise that operates in the administrative sector of the Ministry of Agriculture and Forestry. In matters relating to nature conservation, Metsähallitus is steered by the Ministry of the Environment. The governance of Metsähallitus and the organisation of its finances and administration are based, among other things, on the State Enterprise Act (1185/2002) and the Act (1378/2004) and Decree (1380/2004) on Metsähallitus.
Commercial principles apply in the enterprise’s business operations. Public administration duties are laid out in the law and they are conducted separately from business operations. The public administration duties are financed from provisions in the state budget. Business assets are not used in financing the public administration duties and public funds are not used in financing business activities. The business and public administration duties have separate accounting systems and separate financial statements are produced. Separate balance sheets have been approved for capital available for business and public administration duties.
Administrative decisions concerning the rights and benefits offered to citizens or communities are conducted in the Unit for Public Administration Duties or under its authorisation. The decisions can be appealed in an autonomous court of law. Administrative decisions are not within the authority of the Managing Director or the Board of Directors of the enterprise.
2. Steering of business activities
Steering competence of Parliament, the Government and the Ministry
2.1 Finnish Parliament
- approves the central service targets and other operating targets;
- approves the raising or lowering of the basic capital and decides on the inclusion of an appropriation in the State budget to be granted for the raising of the basic capital;
- authorises the enterprise to raise a loan and to grant a guarantee for a loan of a subsidiary in the form of a limited company belonging to the enterprise;
- approves the maximum amount of investments for the fiscal year as well as an authorisation to make commitments relating to investments causing expenses in the following fiscal years;
- lays down a maximum for securities that can be issued in business activities.
- confirms the final accounts of the enterprise and the consolidated final accounts of the group and decides on the crediting of the profit to the State budget;
- appoints the Board of Directors and relieves the Board or member thereof of their duties;
- issues a Government Decree on the collection of a guarantee fee for loans raised by the enterprise and on guarantees granted for subsidiaries’ loans;
- decides on transfers between the enterprise and State budget entities where this competence does not belong to any ministry;
- authorises the acquisition and conveyance of shares in subsidiaries in cases where the value of those shares is considerable or the if the corporate relationship of Metsähallitus and the subsidiary is otherwise deemed significant; and in a corresponding acquisition or conveyance of a significant holding in an undertaking other than a subsidiary;
- where necessary, gives orders and instructions on the operation and finances of the enterprise.
2.3 Ministry of Agriculture and Forestry
- decides on the service targets and other operating targets as well as on the performance target and the profit-crediting target, within the boundaries approved by Parliament in the State budget handling process the general social obligations stipulated in section 4 of the Act on Metsähallitus shall be taken into account as a factor affecting the profit performance;
- decides on the use of appropriations contained in the State budget for financing economically unviable tasks;
- appoints two auditors to audit the management, finances and accounts of the enterprise;
- determines the remunerations of the members of the Board of Directors and auditors;
- decides on transfers between the enterprise and State budget entities if the current value of property transferred does not exceed EUR 5 million and the object of transfer is other equity capital of Metsähallitus.
3. Management of public administration duties
Steering competence of Parliament, the Government and Ministries
3.1 Finnish Parliament
- approves the service targets and other operating targets of public administration duties;
- approves the appropriations necessary for funding these operations.
- confirms the final accounts concerning public administration duties.
3.3 Ministry of the Environment and Ministry of Agriculture and Forestry
- lay out, based on the targets set for the development of social effectiveness in the Ministry’s branch of activity, targets for the effectiveness of public administration duties; and determine the terms for using appropriations within the boundaries approved by Parliament in the State budget handling process;
- conclude annual agreements with Metsähallitus on the management and funding of public administration duties based on targets set and appropriations available; and supervise the use of appropriations and the achievement of targets.
3.4 Ministry of the Environment
- decides on transactions between the enterprise and State budget entities if the current value of property transferred does not exceed EUR 5 million and the object of transfer is other equity capital of Metsähallitus; and the transaction concerns nature conservation operations.
4. Metsähallitus Board of Directors
The Government appoints the Metsähallitus Board of Directors for a maximum term of three years. In addition to the chairperson, the Board of Directors shall comprise five to seven members. One member shall represent the personnel and be employed by the enterprise. One shall be appointed from the Ministry of Agriculture and Forestry, one from the Ministry of the Environment and one from the Province of Lapland.
Members of the Board of Directors shall have expertise in Metsähallitus’s branch of activities, business economy or in regional issues and they shall be independent in a manner required in terms of the competitive situation.
The annual report of Metsähallitus shall provide sufficient information on the members of the Board of Directors in terms of the requirement of expertise and independence.
The Board of Directors shall steer and supervise the operations of the enterprise, be responsible for the management, supervision, risk management and proper arrangement of the operations, as well as especially for compliance with the decisions and regulations of Parliament and other authorities and for the proper supervision of the accounting and the financial matters of the enterprise. These duties apply to both the business operations and public administration duties.
Further stipulations on the duties of the Board of Directors are included in the State Enterprise Act and in the Act and the Government Decree on Metsähallitus. The number of meetings of the Board of Directors and the attendance of each member during the financial period shall be reported in the annual report.
The Board of Directors shall assess its operations and working methods once a year either by means of internal supervision or with the help of a third party auditor.
Each member of the Board of Directors shall acquire sufficient information and be kept up to date by the Managing Director and other executive management on the enterprise’s structure, business operations, risks and markets. The Managing Director shall be obligated to provide information throughout the year. A new member shall be familiarised with the operations of the enterprise.
Each member of the Board of Directors must keep the Board up to date of any issues that are relevant for assessing his or her independence. If necessary, the Board of Directors shall notify the Government of changes affecting a member’s independence.
The remuneration of the members of the Board is decided by the Ministry of Agriculture and Forestry.
The Board of Directors can facilitate the preparation of issues under its authority by setting up committees made up of Board members. These committees have no authority of their own. If a committee is set up, the Board of Directors shall lay down its agenda that includes at least its
- chairperson and members
- period of office
- reporting to the Board of Directors
- remuneration of members
5. Managing Director
The Government appoints the Managing Director, who manages and develops the operations of the enterprise, takes care of day-to-day administration and ensures that its accounting complies with the legislation and that its financial administration is reliably organised. The Managing Director is responsible for the implementation of the Board of Directors’ decisions and keeps the Board informed of measures and events that have significance for the enterprise.
The Managing Director is an organ of the enterprise, and what is stipulated in the Companies Act concerning a managing director applies to him or her as far as appropriate.
The Board of Directors is responsible, if necessary, for initiating a proposal on the dismissal of the Managing Director to the Ministry of Agriculture and Forestry.
The Managing Director is not a member of the Board of Directors.
The terms of the Managing Director’s contract are laid out in a written agreement approved by the Board of Directors.
Information on the Managing Director shall be provided in the annual report.
6. Management Group
The Managing Director is assisted in his or her work by a Management Group. The Management Group shall include the Business Unit directors appointed by the Managing Director, head of the Public Administration Unit and the heads of group support units. The composition of the Management Group can vary according to the issues discussed. The Managing Director shall chair the Management Group and appoint its secretary. Minutes shall be kept of the Management Group’s meetings.
Information on the Managing Group members shall be provided in the annual report.
7. Incentive and merit pay systems
The enterprise may adopt an incentive or merit pay system which may be based on a personnel fund or profit bonus system or other system suitable for the enterprise’s operations. The introduction of a personnel fund and profit bonus system and its criteria shall be determined by the Board of Directors. Other incentive or merit pay system shall be decided by the Managing Director.
Information on the remuneration of the Board of Directors and Managing Director shall be provided in the annual report.
8. Internal supervision and risk management
The internal supervision is based on Finnish legislation, ownership policy, steering and supervision of the Board of Directors and internal supervision guidelines and instructions approved by the Board of Directors. The functionality of internal supervision is ensured through appropriate organisation of tasks and competence and proper practices of the operating management. The definition, monitoring and revision of annual and longer-term plans and targets contribute to systematic operations and proper internal supervision.
Risk management is one part of internal supervision and of the steering and management of State administration activities and finances. The applied evaluation framework is intended to serve as a management tool in assessing the adequacy and sufficiency of supervision and risk management and to help recognise development needs.
Risk management is also an integral part of the enterprise supervision system. Risk management aims to identify the risks affecting the business and other operations and to eliminate them. The Board of Directors approves the risk policy and ratifies its principles. The Board monitors and supervises the implementation of the risk policy. The Managing Director is responsible for laying out and regularly monitoring the risk management process and for keeping the Board up to date. The operating management is, at all times, obligated to keep the Board of Directors informed of any risks jeopardising or affecting the operations.
The final accounts must provide information on the arrangement for internal supervision and risk management; the adequacy of these tasks is evaluated by the auditor as part of their statement. The final accounts for public administration duties shall additionally contain an evaluation of the adequacy and sufficiency of internal supervision and related risk management and a statement on the state and significant developing needs of internal supervision.
9. Internal auditing
An internal audit shall be conducted in the enterprise independently of operations in compliance with international standards and in co-operation with the financial auditors. If a special internal audit is implemented, it will be conducted under supervision of the Managing Director and report to the Managing Director and the Board of Directors.
10. Auditing of the accounts
The Ministry of Agriculture and Forestry appoints two auditors each year to audit the management, finances and accounts of the enterprise. The tasks of the auditors are laid out in the State Enterprise Act. Information on the auditors and their compensation shall be provided in adequate detail in the annual report.
State auditors supervise and the State Audit Office audits the operations of the enterprise.
The Act on the Openness of Government Activities (621/1999) is applied.
12. Publicity of the management and governance system
The enterprise shall publish this description of its management and governance system on its website. Information publishable in accordance with this system shall be available in the annual report, which is also published on the website and available in print from Metsähallitus.