Profit Blog

Jarmo Manninen & Muutosdraiveri Oy


What are the general principles for the actions of the company's management and board of directors?

7. huhtikuuta 2025

In the following text, the word company has been replaced by the word enterprise. The responsibilities and duties of the company's management and board of directors are defined in the Limited Liability Companies Act 624/2006. The law states that it is a general principle that the company's management must act diligently to promote the company's interests. The law also states that the company's board of directors is responsible for ensuring the company's administration and the proper organization of its operations (general authority). The law also states that the company's board of directors is responsible for ensuring that the company's accounting and financial management are properly organized. All of these are legal provisions, or requirements. They are not recommendations, meaning they cannot be ignored. For these reasons, the company's board of directors and management must know what these requirements mean in practice and how the company must act in such a way that the provisions defined by the law are met.

In my experience, the phrase “the management of a company must act diligently in the best interests of the company” means that the board of directors, the CEO and other management are obliged to make decisions and actions that require:

1. Due diligence: Managers must act professionally and with due judgment when making decisions. They must obtain sufficient information before making significant decisions on behalf of the company.

2. The primacy of the company’s interests: Decisions must promote the company’s financial success and sustainable operations, not, for example, the interests of individual shareholders, managers or external parties.

3. Responsibility: The company’s interests also include long-term actions that take into account, for example, the impact of employees, customers and environmental aspects on the business, as these can affect the company’s future success.

My experience is that in order for the company's management to have sufficient information when making decisions, the company's financial management conditions must be in order, as explained in my previous blog posts, so that the company's management is not held liable for neglecting these obligations.

Another important clause in the Limited Liability Companies Act is that the company's board of directors is responsible for ensuring that the company's accounting and financial management control is properly organized. In practice, this means the following responsible actions:

1. Organizing accounting: The board of directors must ensure that the company's accounting meets the requirements of the Accounting Act and that it is up-to-date and accurate. This must include a deep understanding and cooperation with the accountant.

2. Financial management control: The management of the company's assets, such as monitoring cash flow, payment transactions and investments, must be organized in such a way that abuses and financial risks are minimized.

3. Organizing internal control: The board must create and maintain internal control systems that help detect and prevent financial errors or abuse.

4. Oversight of the audit: If the company has an auditor, the board must ensure that the audit is carried out properly and that the auditor's recommendations are taken into account.

In practice, the board is responsible for the company's financial operations and ensures that all financial activities support the company's profitable development in line with its goals, the company's stability and compliance with the law.

My experience is that the company's operational management and the board must have access to the company's internal goals, budget figures, action plans and actual figures for each company.

I encourage you to share this blog post of mine on social media. If you have any suggestions for the topics of the next blog posts, I will gladly accept them.

I hope that you were interested in this matter and that you can continue to be involved.

I have written four books on creating the conditions for the company's financial management, and they are available in well-stocked bookstores and online bookstores in Finland, for example from BoD (Books On Demand) at:






 



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