Lilius steps aside, Kuula to take over as Fortum CEO

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The Board of Directors of the majority state-owned energy company Fortum named a new CEO for the company to take over as of the beginning of May to replace Mikael Lilius, whose departure was hastened by sharp comments that he made last week about state policy toward the company.
      At a meeting held on Tuesday before the company’s shareholders’ meeting, the board decided that Tapio Kuula will be taking over as CEO from the beginning of May. The 51-year-old Kuula has recently worked on issues involving the acquisition of a Russian electric utility by Fortum.
      On Thursday last week Lilius announced his intention to retire in December this year when he turns 60. At the same time he lashed out at what he saw as a lack of support by the company’s main owner, the state, and accused political decision makers of avoiding responsibility in the controversy over incentives for company executives.
     
In response, the board decided to move Lilius to deal with “special tasks” from the beginning of May and to have him replaced by Kuula.
      The search for a replacement for Lilius had been going on for a few months already. Without Lilius’s unexpected statements last week, plans were to announce a replacement in about a month, in connection with the announcement of the company’s first quarter results.
      In such a situation, the new CEO would have taken over in December.
     
Announcing Kuula’s appointment at a press conference on Tuesday, Matti Lehti, the Deputy Chairman of the Board said that Lilius would be moved to special tasks to be defined by the board and the CEO.
      He would still be entitled to the CEO’s full salary of EUR 72,000 a month.
      Kuula, who takes over as CEO at the beginning of next month, noted that Lilius has personal ties with Russia and Sweden, which he can use to the benefit of the company at the end of the year.
     
In practice, the arrangement means that Lilius will be relieved of all duties, regardless of his title. The mechanism of giving someone the position of an “expert” has been used at Fortum before as a means of getting members of the executive team to vacate their jobs without actually sacking them.
      Lehti said that a “search patrol” had been set up to find a successor for Lilius already at the end of last year. Only two candidates were in the running in the past couple of weeks - Kuula, and an outsider.
      As the salaries and perks of Fortum’s management have been denounced as excessive recently, Matti Lehti gave the basic information on Kuula’s benefits. his basic salary is EUR 70,000 a month, which is at the same level as Lilius.
      Kuula will have a retirement age of 62 years, which means that he has another ten years in the company, if he stays there that long.
     
The much-criticised bonus and share incentive systems will remain in the use, according to Lehti, who adds that the main question is how these systems are implemented. In this matter, the Board of Directors has considerable latitude in decision-making.
      Lehti promised that more detailed reports on Kuula’s job benefits will appear on the company’s website soon.
     
Fortum’s Board of Directors made its decisions on appointments before the shareholders’ meeting in the afternoon, where Lilius, and the outgoing Chairman of the Board Peter Fagernäs made their final appearances.
      The meeting flowed smoothly, because everyone knew that absolute power was in the hands of Pekka Timonen, who represented the majority shareholder, the Finnish state.


Previously in HS International Edition:
  Chairman Fagernäs and CEO Lilius to leave energy utility Fortum (2.4.2008)
  Government to re-examine incentive programmes for state-owned companies (1.4.2009)
  New Fortum board to consider position of CEO Lilius (7.4.2009)
  Announcing retirement, Fortum’s Lilius says decision-makers shirk responsibility (3.4.2009)

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