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Emerging Corporate Governance Issues In Finland

Emerging Corporate Governance Issues in Finland

1. Legal & Regulatory Background

Finland’s corporate governance framework is shaped by:

The Limited Liability Companies Act (624/2006), which defines directors’ duties, shareholder rights, and board responsibilities.

The Finnish Securities Market Act (746/2012) regulating listed company disclosure and transparency.

The Finnish Corporate Governance Code 2025, a self‑regulatory framework updating diversity, transparency, and governance expectations for listed companies.

EU directives such as the Corporate Sustainability Reporting Directive (CSRD) and the Board Gender Balance Directive (EU) 2022/2381, implemented into Finnish law, notably requiring balanced gender representation by June 30, 2026.

These rules collectively frame ongoing governance developments in Finland, especially around transparency, diversity, ESG obligations, and board accountability.

2. Key Emerging Issues in Corporate Governance

A. Board Diversity and Gender Balance

Issue: Historically, Finland relied on “comply or explain” diversity recommendations. The 2025 Code now mandates (for many listed companies) gender balance targets, intensifying board composition debates.

Governance Implications:

Boards must meet or justify not meeting gender balance targets.

Increased transparency in nomination and reporting of board diversity.

Pressure on governance to recruit broader talent pools.

Case Law Context:
Although no Finnish Supreme Court case yet directly addresses board diversity, governance disputes over board appointments and gender diversity plans may trigger litigation as mandatory targets approach 2026.

B. Board and Executive Liability in Financial Stress

Issue: With increased bankruptcies and economic uncertainty, Finnish courts have stressed directors’ duties to exercise due diligence and act in the company’s best interest, especially during liquidity crises.

Case Example 1 (Analogue – Board Duty Enforcement):
A Finnish commercial case highlighted strict board oversight obligations where courts emphasize that directors must supervise daily management and stop harmful operations. Failure to supervise properly may result in liability for damages from negligent governance decisions. Analogue from Finnish case databases (often cited in Nordic governance practice guides).

Lesson: Boards must document risk assessments, decisions, and consult external experts to defend governance decisions.

C. Piercing the Corporate Veil and Group Liability

Issue: The Finnish Supreme Court has affirmed that under exceptional circumstances, the corporate veil can be pierced, holding parent companies liable for subsidiary obligations—raising governance concerns about group structures and corporate separation.

Case Law 2: KKO 2015:17 (Supreme Court)

Facts: A Finnish company was held liable for the obligations of its Estonian subsidiary because it exercised artificial and reprehensible control, evading statutory duties.

Principle: Corporate governance failures in segregating decision‑making and respecting legal separateness can trigger veil piercing.

Lesson: Boards must ensure corporate structures are not misused to circumvent duties or liabilities.

D. ESG and Environmental Liability

Issue: ESG governance is becoming integral, with Finland implementing CSRD and preparing for the Corporate Sustainability Due Diligence Directive (CSDDD). Courts are increasingly scrutinizing corporate practices regarding environmental harm and supply chain impacts.

Case Law 3: Ahtium/Talvivaara Environmental Incident (Finnish Courts)

Facts: Directors, including CEOs, were charged with aggravated environmental offenses related to safety failures at a mining site, carrying potential prison sentences and heavy fines.

Principle: Corporate governance now includes environmental risk management; boards and executives may face criminal exposure for negligence.

Lesson: ESG risks must be actively managed at board and executive levels.

E. Transparency and Reporting Obligations

Issue: Under Finnish law and the Corporate Governance Code, transparency in reporting to shareholders and in corporate governance statements is increasingly mandated, especially with CSRD changes.

Case Law 4: Mehiläinen Tax Responsibility Case (District Court)

Facts: The Helsinki District Court held Mehiläinen liable for tax evasion following scrutiny of its tax shelter arrangements, leading to a tax payment of €13.8M.

Principle: Governance transparency includes fiscal responsibility; boards must ensure compliance with reporting standards and tax obligations.

Lesson: Corporate governance demands accurate financial and tax disclosure; missteps can erode trust and invite litigation.

F. Corporate Scandals and Ethical Governance

Issue: High‑profile controversies spark governance reforms and litigation around ethical conduct, corruption, and governance culture.

Case Law 5: Stora Enso Environmental Controversy

Facts: Environmental harm caused by logging machines in critical habitats led to government scrutiny and public outcry, with authorities investigating aggravated environmental crimes.

Principle: Boards must integrate environmental governance into strategic risk oversight; reputational and legal consequences can follow ethical governance failures.

Lesson: Ethical governance and proactive risk mitigation are necessary to avoid costly investigations and reputational damage.

G. Corporate Funding Transparency (Historical Context)

Issue: Broader societal debates about corporate transparency often influence governance norms, even when not strictly corporate law cases.

Case Law 6: 2007 Finnish Campaign Finance Scandal (Political)

Facts: Lack of transparency in campaign funding generated political scandal and criticism of corporate donors, highlighting society’s demand for financial transparency.

Principle: Governance issues extend beyond corporate boards to public expectations of transparency and ethical funding practices.

Lesson: Corporate governance must align with societal standards on transparency and integrity.

3. Trends and Future Litigation Risks

ESG‑related litigation is expected to grow with CSDDD implementation, particularly around climate and human rights due diligence.

Shareholder activism may increase as investors demand better ESG integration, board diversity, and transparency.

Director liability cases may rise, testing the duty of care in contexts like ESG, technological risks, and strategic governance.

4. Summary: Emerging Governance Themes in Finland

5. Conclusion

Corporate governance in Finland is evolving rapidly under EU influences, ESG imperatives, and increased public scrutiny. Boards and executives face heightened expectations around diversity, environmental oversight, transparency, and ethical conduct. Finnish court decisions (especially KKO 2015:17 on veil piercing and governance obligations), environmental enforcement actions, and tax transparency rulings underscore these emerging governance challenges. Directors must adapt governance frameworks proactively to manage risks, fulfill statutory duties, and retain stakeholder trust.

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