Governance at Essity

General shareholder meeting

The general shareholder meeting is Essity’s highest decision-making body, which all shareholders are entitled to attend, to have a matter considered and to vote for shares held by the shareholder. The company’s Board of Directors and auditor are elected at the Annual General Meeting (AGM). The AGM also resolves on the remuneration of the Board members and determines guidelines for the remuneration of senior executives. Essity has two listed classes of shares: Class A and Class B shares. Every Class A share represents ten votes while every Class B share represents one vote. There are no other restrictions on voting rights in respect of shares used by shareholders at the gen­eral shareholders meeting.

Nomination Committee

Shareholders appoint members of the Nomination Committee at the AGM, or stipulate how the members shall be appointed. The Nomination Committee represents the company’s shareholders. Most members shall be independent of the company and corporate management. The CEO and other member of corporate management may not be a member of the Nomination Committee. The main duty of the Nomination Committee is to prepare and present proposals for the AGM’s resolutions with respect to election and remuneration matters.

Board of Directors

The Board of Directors has overall responsibility for the Company’s organization and administration. This responsibility is fulfilled, inter alia, through regular monitoring of the business and by ensuring the appropriateness of the organization, management team, guidelines and internal control. The Board approves strategies and targets, and decides on major investments, acquisitions and divestments of operations, among other matters.

The Board of Directors comprises ten members elected by the shareholders at the 2017 AGM. According to the Articles of Association, the Board of Directors is to consist of not less than three and not more than twelve members elected by the AGM. The Board of Directors also includes three employee representatives with deputies, who are appointed by the respective employee organizations under Swedish law.

Essity’s Articles of Association contain no provisions regarding appointment or dismissal of Board members or amendments to the Articles. The general share­holder meeting has not delegated to the board to resolve to issue new share or to repurchase new shares.

Chairman of the Board

The Chairman of the Board leads the work of the Board and is responsible for ensuring that it is effectively organized and that work is efficiently conducted. This includes continuously monitoring the company’s operations in close dialog with the President and CEO and ensuring that other Board members receive information and decision data that will enable high-quality discussion and decisions by the Board. The Chairman leads the assessment of the Board’s and the President’s work. The Chairman also represents the company in ownership matters.

Audit Committee

The role of the Audit Committee, without prejudice to the Board of Director’s responsibility and other duties, is to monitor the company’s financial reporting and provide recommendations and proposals to ensure the reliability of reporting. With regard to the financial reporting, the Committee overseas the effectiveness of the company’s internal control, internal audit and risk management. The Audit Committee keeps itself continuously informed about the audit of the annual accounts and consolidated accounts and where applicable about the conclusions of the quality control by the Swedish Inspectorate of Auditors concerning the company’s external auditor. The Committee receives and addresses the supplementary report concerning the conducted audit that the auditor submits in accordance with the EU Audit Regulation and Directive. The Audit Committee informs the Board of its observations and the results of the audit. The Audit Committee also examines and monitors the impartiality and independence of the auditor. In respect to this, particular attention is paid to whether the auditor is providing the company with services other than auditing services. The Committee also assesses the work of the auditor and provides proposals to the company’s Nomination Committee concerning the appointment of auditor for the following mandate period.

Members of the Audit Committee may not be employed by the company and at least one member must have accounting or auditing expertise.

Remuneration Committee

The Remuneration Committee drafts the Board’s motions on issues relating to remuneration principles, remuneration and other terms and conditions of employment for the President and CEO and is authorized to make decisions in these matters for the company’s senior executives. The Committee monitors and assesses programs for variable remuneration, the application of the AGM’s resolution on guidelines for remuneration of senior executives and the applicable remuneration structure and remuneration levels in the Group.

Internal audit

The internal audit assess and improves the effectiveness of Essity’s internal governance and control as well as risk management. This function reports to the Audit Committee and the Board in relation to internal audit issues. The internal auditors are geographically located throughout the world where Essity conducts operations. The function examines, among other aspects, Essity’s internal processes for sales, financial reporting, IT systems, HR issues, various types of projects and compliance with Essity’s policies, including the company’s Code of Conduct. The function also offers internal consultancy services in connection with internal control matters and risk management.

President and CEO

Essity’s President and CEO is responsible for and manages the day-to-day administration of the Group and follows the Board’s guidelines and instructions. The President and CEO is supported by the Executive Management Team, the work of which is led by the CEO. The Executive Management Team comprises the CEO, CFO, four Business Unit Presidents, the Presidents of three global units, and Senior Vice Presidents of five Group functions. The working procedures for the Board of Directors and terms of reference issued by the Board of Directors to the President detail, for example, the division of work between the Board and President. In consultation with the Chairman and Secretary of the Board, the President prepares documentation and decision data for the Board’s work.

Business units and global units:

• Health and Medical Solutions, offers incontinence products in Europe and North America and medical solutions in Asia, Europe and North America.
• Consumer Goods, offers consumer tissue, baby care and feminine care in Europe, the Middle East and Africa.
• Latin America, offers consumer tissue, baby care, incontinence products, medical solutions, feminine care and professional hygiene in Latin America.
• Professional Hygiene, offers professional hygiene in Europe and North America.

In addition to the business units, Essity has established three global units:

• Global Hygiene Category (GHC), with global responsibility for customer and consumer brands and innovation.
• Global Hygiene Supply Tissue (GHS-T), with global responsibility for sourcing, production, logistics and technology in Consumer Tissue and Professional Hygiene.
• Global Hygiene Supply Personal Care (GHS-PC), with global responsibility for sourcing, production, logistics and technology in Personal Care.

Essity’s business units adhere to the principle of distinct decentralization of responsibility and authority. The business units are fully responsible for managing and developing their respective operations through established objectives and strategies, a process that is also centrally coordinated. The business units are responsible for their operating results, capital and cash flow. The business and earnings position is followed up by the entire Executive Management Team on a monthly basis. Each quarter, business review meetings are conducted during which the management of each business unit personally meets with the President, the CFO and others. These meetings function as a complement to the daily monitoring of operations. Through working procedures and terms of reference, a number of issues of material significance are placed under the control of the CEO and the Parent Company’s Board of Directors. Essity divides and reports its operations according to three business areas – Personal Care, Consumer Tissue and Professional Hygiene.

External auditors

The Company’s auditor, elected at the Annual General Meeting, examines Essity’s annual report and consolidated financial statements and the Board’s and President’s administration, and submits an audit report.

The audit is performed in accordance with the Swedish Companies Act, International Standards on Auditing (ISA) and generally accepted auditing principles in Sweden.