Boardman International Blog: Serving as a Board Member in a Joint Venture in Finland

Boardman International Blog: Serving as a Board Member in a Joint Venture in Finland

For some, such as myself, taking a board role in a joint venture or partially owned subsidiary can be an interesting first experience of serving on a board in Finland. I have been serving on the boards of Spinnova’s joint venture companies Woodspin Oy (50% owned by Spinnova and 50% owned by Suzano S.A.) and Respin Oy (50% owned by Spinnova and 50% owned by ECCO Investment Corporation A/S) for around 3 years. As an executive already living and working in Finland in listed companies, I had experience of Finnish corporate governance before taking these roles.

Ben Selby is the CFO and Deputy Chief Executive Officer at Spinnova and a Boardman Member.

For others, such as international executives who take a board position in a Finnish company because of their parent company’s ownership of the JV or subsidiary, their experience may be different. Even when you may assume a board position due to your managerial position at one of the joint venture investors, it is critical to understand the personal responsibilities that this entails and other nuances of working with a Finnish company. This blog post will dive deeper into these topics.

Understanding Your Obligations

As an employee of one of the JV investors, your first instinct will likely be that your role as board member of the JV is to protect the interests of your current employer. However, it is important to understand that when acting as a board member of the JV, your obligation is to safeguard the interests of the JV, ensure good governance is in place and make sure that the JV adheres to its statutory obligations. Board members in Finland can be held personally liable for decisions that cause damage to the company or breach their duties.

Before taking such a position, it is important to have a clear understanding of these topics, including familiarising yourself with the Finnish Corporate Governance Code. Organisations such as Boardman provide training for international executives serving on Finnish boards, or else local law firms are available able to provide a briefing on the key obligations and corporate governance topics. Appointing a Board Secretary who is well versed in Finnish corporate governance, either from within your or one of the other JV owners’ organisations or utilising an external law firm for this can also help to ensure that these obligations are met.

It is also worth confirming that Directors’ and Officer’s liability (D&O) insurance has been put in place at the joint venture level, as you may not be covered by the insurance at the parent company that employs you, particularly if the parent company does not have a controlling stake in the JV.

The Importance of Shareholder Strategy

As a board member in any company, understanding the strategy of the shareholders is key to your personal success on the board and to the success of the company. As a representative of one of the shareholders, you have an advantage here as you already have a clear understanding of your own company’s ownership strategy related to the JV. Indeed, it may be that the same people serving as board members of the JV are also making the investment management decisions related to the JV on behalf of the shareholder they work for.

It is nevertheless important to separate your role as a representative of the company who employs you and as a board member of the JV. One effective way I have found to do this is to ensure that there is a clear delineation between what is a shareholders’ meeting, where for example topics like shareholder funding of the JV is discussed, and what is a board meeting, where JV company topics are discussed such as operational performance, budget, safety oversight, etc.

The shareholder meetings are also the place where the owners can align together on the overall shareholder strategy, and if necessary, iron out any differences of viewpoint, so that clear guidance on the JV strategy can be given to the JV management in the board meetings.

Differences from Listed Company Parents

If you are joining the JV board as a representative of an international listed parent company, there may be other differences for you to familiarise yourself with than just the corporate governance environment.

For example, as an executive at an international company, you are likely familiar with IFRS financial reporting. However, unless a conscious decision is made for the JV to report its financials under IFRS, it is likely that the JV will report its financials under Finnish Accounting Standards (FAS). Depending on the nature of the JV’s operations, there can be significant differences related to amongst other things, revenue recognition, capitalisations, recognition of assets, that as a board member you will need to have some familiarity with to track the financial performance of the JV. Of course, eventually and depending on the preferences of the JV owners, it can make sense to have the JV report under IFRS to avoid these potential areas of confusion.

Another notable difference is that listed companies typically have more rigid governance protocols and annual clocks, whereas JVs often have a more flexible and dynamic board environment. This flexibility can be advantageous, allowing for agile decision-making and rapid response to emerging challenges. However, it also demands a higher degree of vigilance and adaptability from board members to ensure that compliance and other topics are adequately addressed.

Conlusion

In conclusion, serving on the board of a JV company in Finland can be an exciting challenge and first step into board work in Finland. By understanding your obligations and separating your role between JV board member and representative of the JV owner, you can better support the management of the JV and contribute to its success.

Author

Ben Selby is the Chief Financial Officer and Deputy Chief Executive Officer at Spinnova, as well as Board Member at Woodspin Oy and Respin Oy. Ben has extensive experience and a proven track record in capital raising, strategy development and finance. He is a dual citizen of the United Kingdom and Finland, residing in Helsinki with his family. Ben is a member of the Boardman network.

Read about Boardman’s English-language membership


Subscribe to newsletter