New Fortum board to consider position of CEO Lilius

Shareholders meet Wednesday - state holds majority

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The new Board of Directors of the majority state-owned energy company Fortum, which is to be named at Tuesday’s shareholders’ meeting, will have as one of its first tasks to review the position of CEO Mikael Lilius. Pekka Timonen, the head of the State Ownership Steering Department, says that the new board will have to consider the role of the CEO.
      Last week Lilius announced that he would retire at the end of this year, but in light of his recent statements, doubts have been cast on his prospects for staying in the post even that long.
     
On Thursday last week Lilius held a press conference in which he said that he would exercise his option of retiring in December when he turns 60. At the same time he lashed out at the state, the majority shareholder in the company, for withholding support from the management, and called on political decision-makers to bear responsibility for the widely criticised bonus programmes.
      Public criticism of Fortum’s management incentive programme prompted the current Chairman of the Board Peter Fagernäs to announce his resignation already before Lilius made his remarks.
      The shareholders’ meeting is expected to replace Fagernäs with Matti Lehti, Chancellor of the Helsinki School of Economics and Business Administration, who is currently the deputy chairman on the board.
      The members of the board will essentially be named by the state, which holds a majority of shares in Fortum, just under 51 per cent. Pekka Timomen represents the state at the meeting.
     
Timonen said on Monday that it is clear, on the basis of recent debate, that the new board will have to think about the position of Lilius.
      “I cannot know what might follow from this consideration, because it is not part of my authority as a representative of the owner; it is a matter for the board.”
      Matti Lehti, meanwhile, emphasised that as a mere candidate for the chairmanship of the board, he cannot say anything before the shareholders’ meeting.
      Minister of Defence Jyri Häkämies (Nat. Coalition Party), who also deals with matters of state corporate ownership, also would not comment on the status of Lilius on Monday.
     
Häkämies would be entitled to represent the state at the shareholders’ meeting, as his predecessor, Mauri Pekkarinen (Centre Party) the current Minister of Economic Affairs used to do. However, Häkämies is allowing Pekka Timonen to go in his place.
      “To my recollection, Häkämies has not attended a single shareholders’ meeting during his present term, and this is, in fact, normal civil servants’ work”, Timonen says.
     
The tirade that came from Lilius last week is placing Fortum’s Board of Directors in an awkward position.
      With eight months left to go until December, serious doubts have been raised on whether or not one of Finland’s largest listed companies can be managed by a person who has clearly voiced a lack of confidence in the activities of the main owner.
      If the board were to remove Lilius already before December, that is, if they were to sack him, it would mean that he would be entitled to a golden handshake worth two years’ basic salary - about EUR 1.7 million.
      This means that Lilius - who has been criticised for allowing excessively large bonuses for management-level staff - would get an extra prize for being pushed out.
     
Another possibility is that Lilius might be given some kind of advisory position through the end of the year, while someone else is appointed CEO. Possible names include Tapio Kuula and Timo Karttinen.
      Such an arrangement would require Lilius’s consent.


Previously in HS International Edition:
  Announcing retirement, Fortum’s Lilius says decision-makers shirk responsibility (3.4.2009)
  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)

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