Corporate governance
Maintaining the confidence and trust of all our stakeholders.
About us
Klarna Bank AB (corporate registration no. 556737-0431) (“Klarna”) is a Swedish public limited liability company licensed to carry out banking activities under the supervision of the Swedish Financial Supervisory Authority (SFSA). Klarna is categorized by the SFSA as a category 2 institution.
Klarna Bank AB provides its financial services in other EEA countries through passporting its license in accordance with EU directive 2013/36/EU and by establishing local branches. Klarna also offers its financial services outside the EEA through the establishment of local subsidiaries in certain jurisdictions.
Klarna’s corporate governance framework and approach apply to Klarna Holding AB, Klarna Bank AB and all branches and subsidiaries.
Corporate governance
Corporate governance structure
Klarna’s corporate governance structure distributes rights and responsibilities between the shareholders, the Board and the CEO according to the relevant laws, rules and internal processes. We believe well-defined reporting lines and distribution of distinct responsibilities are essential to good corporate governance. Our high ethical and professional standards and a sound risk culture are also vital in ensuring good governance.
The image provides a summary of how governance and control are organized at Klarna.
Framework for corporate governance
In addition to general laws, rules and industry practices, Klarna must also comply with the detailed regulations specific to banks and payment service providers. These include the Swedish Banking and Financing Business Act (SFS 2004:297) and rules and recommendations issued by the SFSA with regard to, among other things, capital and liquidity requirements as well as rules on internal governance and control.
In order to ensure compliance with external regulations Klarna has developed an internal framework which incorporates the external requirements on corporate governance.
Of primary importance are the Rules of Procedure of the Board (which include how to address conflicts of interest for Board members and instructions for the Board’s committees), the Instructions for the CEO, the Policy for Suitability, Training and Diversity of the Board, Management and Key Function Holders, and the Policy for Klarna Board Committees. These documents have been adopted by Klarna’s Board. Additionally, Klarna’s Code of Conduct provides an ethical framework for the company.
Klarna has established a framework of approved policies and instructions. These are important tools for the Board and the CEO in their governing and controlling roles, as well as defining the roles, requirements and expectations of the second and third lines of defense within risk ownership and all employees in the fulfillment of their roles. These policies include, for example, the Risk Policy, Compliance Policy, Credit Policy, Insider and Disclosure Policy, Conflicts of Interest Policy, AML & CTF Policy, Remuneration Policy, and the Global Work Environment Policy.
Together with the Articles of Association, these constitute the internal framework that regulates corporate governance at Klarna.
Klarna's organization
Klarna's organization is divided into domains that are led by a domain lead who reports to a CXO. Each CXO reports to the CEO and the CEO reports to the Board. There are also three independent control functions outside of the domains: Risk Control, Compliance and Internal Audit. Risk Control and Compliance are both directly subordinated to the CEO and the Board. Internal Audit, which reports directly to the Board, has been outsourced to an external party.
General meeting
A General Meeting is a meeting where members of a company convene to consider and vote on significant decisions related to the company's business and operations. Decisions at a General Meeting often include matters such as approval of the annual report, income statement and balance sheet, dividend distribution, election of the Board of Directors and auditors, and remuneration for Board members and auditors.
The Board
The Board is Klarna’s highest decision-making body, responsible for overseeing the company’s strategy, organization, and management of operations. It also holds ultimate responsibility for ensuring effective corporate governance throughout the organization.
The Board members are elected by the shareholders at the Annual General Meeting (AGM) for a one-year term of office extending through to the next AGM. Klarna is not required to have a nomination committee and as such the Board has not adopted a nomination policy. In practice, the Board members are proposed and appointed by the shareholders holding a majority of the votes as well as the capital of the company.
The Board has adopted Rules of Procedure that regulate the Board’s role and ways of working as well as policies for the Board’s committees. The Board has overall responsibility for the activities carried out within Klarna and has the following duties, among others:
deciding on the nature, direction and strategy of the business as well as the framework and objectives of the activities.
evaluating the effectiveness of operations in relation to the agreed strategy, framework and objectives on a regular basis.
ensuring that the business is organized in such a way that the accounting, treasury management and financial conditions in all other respects are controlled in a satisfactory manner and that the risks inherent in the business are identified, defined, measured, monitored and controlled in accordance with external and internal framework, including the Articles of Association. The board is also responsible for setting Klarna’s risk appetite and policies establishing the principles for risk management.
deciding on major acquisitions and divestments as well as other major investments,
selecting, monitoring and planning the succession of the Board members,
appointment or dismissal of the CEO, the Chief Risk Officer, the Chief Compliance Officer and the Chief Information Security Officer.
deciding on appointment and dismissal of the Internal Auditor (outsourcing partner and/or individual).
deciding on remuneration of the CEO, members of the CXO team and the heads of the control functions, Risk Control and Compliance.
The Chairman
The Chairman of the Board organizes and leads the work of the Board. According to the Rules of Procedure, the Chairman will maintain regular contact with the CEO, ensuring that the Board receives sufficient information and documentation to effectively assess Klarna’s current position, financial plans, risks and risk management and future development, and deliberate with the CEO on strategic issues.
The reputation, experience and assignments of the Board and the CEO
Board members bring a wealth of relevant professional experience to Klarna, including expertise in banking and finance, e-commerce, technology, payment cards, risk management, governance, accounting, international sales, venture capital, entrepreneurship, and leadership. Additionally, their diverse backgrounds provide valuable knowledge and insight into the conditions and requirements for conducting business in the different markets where Klarna operates.
To ensure Klarna’s Board members and CEO have the right skills, knowledge and experience, the Board has adopted the Policy for Suitability, Training and Diversity of the Board, Management and Key Function Holders. This policy looks at the person’s experience and reputation and makes sure they’re a good fit for the company. It also evaluates their ability to commit the time and effort needed to do their job well. The Chief Operating Officer is responsible for the assessment at appointment and then subsequently at least every two years or sooner if events observed through the ongoing monitoring process suggest a review would be prudent. When a new Board member or a new CEO assumes their duties, they are also externally assessed by the SFSA.
The CEO’s performance and qualifications will be evaluated the same way as Board members. According to the Rules of Procedure of the Board, the Board ensures that the CEO fulfills his duties. The Board is responsible for appointing and retains the authority to dismiss the CEO of Klarna.
Klarna understands that having a diverse Board is crucial to ensure the Board can do its job well and has the knowledge and experience needed to navigate the various social, business and cultural conditions of the markets Klarna operates in and the activities the company is involved in.
The Policy for Suitability, Training and Diversity of the Board, Management and Key Function Holders adopted by the Board lays out the diversity requirements Klarna’s Board is expected to meet. This policy emphasizes that all Board assignments should be made based on merit and with the goal of maintaining and enhancing the Board’s overall effectiveness. In order to achieve this, the company looks for a wide range of qualifications and competencies, and places a strong emphasis on diversity in terms of age, gender, geographical background, and educational and professional experience.
Klarna must evaluate the number of positions held by the Board members and CEO to ensure that it is reasonable and appropriate. The evaluation takes into account the specific circumstances and the nature, scale, and complexity of Klarna’s business operations. The company has determined that all Board members’ assignments comply with regulatory requirements.
The Board sets a training plan every year, and it is the responsibility of the Compliance function to implement the plan for the Board. The training plan includes an orientation program for new Board members and ongoing training on important topics for individual members and the Board as a whole in matters that have been considered important by the Board itself. This is to ensure that the Board is continuously informed and updated on the relevant matters that affect the company.
Board committees
The Remuneration Committee is responsible for preparing and presenting proposals on remuneration matters to the Board. This includes making proposals about the Group’s Remuneration Policy and the remuneration for members of the CXO-team and heads of control functions. Klarna’s Board has adopted a Remuneration Policy that establishes consistent and sound remuneration structures throughout the organization. This policy is reviewed at regular intervals and updated as needed, and at least annually.
The Remuneration Committee is responsible for independently evaluating Klarna’s Remuneration Policy and remuneration system. It presents its findings to the Board at least on an annual basis, in collaboration with the appropriate control function(s). The Remuneration Committee manages its responsibilities continuously through communication among its members. Any formal decisions that exceed its delegated authority are reported to the Board and documented at the next Board meeting. Under the oversight of the Remuneration Committee, Klarna has established a Remuneration Policy and processes to ensure consistent and sound remuneration structures across the organization.
Members:
Omid Kordestani (Chair)
Michael Moritz
Sarah Smith
The Audit, Compliance & Risk Committee (ACRC) is responsible for oversight and preparation of all matters related to audit (both internal and external), compliance, risk and financial reporting and related internal control arrangements. ACRC held 9 meetings in 2023 and provided regular updates to the Board on matters pertaining to its responsibilities. More information about the number of meetings and attendance can be found below.
ACRC has had nine meetings in 2023.
Members:
Sarah Smith (chair)
Lise Kaae
Roger Ferguson
The Chief Executive Officer
Klarna’s Chief Executive Officer (CEO) is responsible for the day-to-day management of the Group’s activities in accordance with the external and internal frameworks. The CEO reports to the Board and at each board meeting they submit a report on the performance of the business including updates on strategic priorities set by the Board.
Klarna’s CEO is also a Board member and participates in all board meetings, except on matters in which the CEO has an interest that may be in conflict with the interests of Klarna, such as when the CEO’s work is evaluated. Other members of the Group Management Team participate as required by invitation from the Board or CEO.
The Board has adopted an instruction for the CEO’s work and duties which also regulates the division of responsibilities and the interaction between the CEO and the Board. The CEO appoints the CXOs and the heads of the control functions. The Chief Risk Officer and the Chief Compliance Officer appointment and replacement is also approved by the Board. The CEO is
.The Group Management Team
Chief Executive Officer
Sebastian Siemiatkowski
Chief Financial Officer
Niclas Neglén
Chief Product and Design Officer
David Fock
Chief Technology Officer
Yaron Shaer
Chief Marketing Officer
David Sandström
Chief Commercial Officer
David Sykes
Chief Operating Officer
Camilla Giesecke
Chief Risk Officer
Joachim Reuss
Chief Compliance Officer
Joaquín Calderón
Chief Credit Risk Officer
Arvind Varadhan
Chief Legal Officer
Boudien Moerman
Chief Information Security Officer
Harjyot Lidher
Management committees
The CEO has, along with the Group Management Team, three separate committees at his disposal for the purpose of managing the operations:
The Executive Credit and Fraud Committee is responsible for reviewing credit risk results and trends as well as steering the company’s overall generation of credit risk.
The Capital and Liquidity Committee is responsible for assessment and decision within the internal capital assessment process.
The Audit Compliance and Operational Risk Committee is responsible for providing oversight and retaining executive responsibility for all Audit, Compliance and Operational Risk related matters.
Remuneration
Klarna's remuneration structure
Klarna has clear remuneration policies, instructions, and processes, securing sound remuneration structures throughout the organization. Our remuneration structure recognizes the importance of well-balanced but differentiated remuneration structures, based on business and local market needs, as well as the importance of being consistent with and promoting sound and efficient risk management not encouraging excessive risk-taking and short-term profits or counteracting Klarna’s long term interests.
The aim of the remuneration structure is to both support the ability to attract and retain talent in every position and to support equal and fair treatment, but also to ensure that remuneration in Klarna is aligned with efficient risk management and compliant with existing regulations.
Klarna’s Board has confirmed this in the adopted Remuneration Policy, which is revised as necessary, and at least annually.
Statement of remuneration in Klarna in accordance with the Swedish Financial Supervisory Authority’s regulatory framework
Here you find Klarna’s annual statements for the Klarna Group according to the Swedish Financial Supervisory Authority’s regulatory framework. Since 2020, this information is found in the Annual Report.
Remuneration to the Board of Directors, the CEO and the CXO team
The Annual General Meeting decides on the Board members' fees in accordance with Swedish law. It is Klarna’s Remuneration Committee that prepares proposals for the Annual General Meeting regarding these remunerations.
Klarna’s Board of Directors decides on remuneration for the CEO and other members of the CXO team, following proposals from the Remuneration Committee.
Risk management, risk reporting and control functions
Risk at Klarna
Risk management is central to Klarna’s operating model and underpins all activities conducted throughout the organization. The purpose of risk management is to safeguard Klarna’s long-term viability, mitigate volatility in financial performance, enhance operational resilience and performance, and facilitate informed decision-making.
Klarna’s risk management governance model encourages a risk-aware culture combined with control structures which are monitored and enforced by independent control functions. Key controls are documented and assessed on a regular basis, with assessments considering both effectiveness of design and operation. The risk strategy is a natural extension of the business model that focuses on identification, assessment, management and monitoring of the material risks that Klarna is exposed to.
Klarna operates a financial services industry standard three lines of defense model for risk management and control.
The ultimate responsibility for risk management rests with the Board, which sets Klarna’s risk appetite and policies establishing the principles for risk management. It also oversees and promotes a sound risk culture of risk awareness and understanding across the organization to encourage informed decision making. The Board is supported by the Audit, Compliance, and Risk Committee (ACRC), Executive Credit and Fraud Committee (ECFC) and the Capital and Liquidity Committee (CLC) in performing their duties regarding risk management, including risk identification, measurement, monitoring and ensuring appropriate controls are in place.
The Group Management Team is responsible for implementing the risk strategy. They are also accountable for the management of risks and within each of their areas of responsibility, and to promote a sound and effective risk culture across their teams and the Klarna as a whole.
Business Line Management, in the first line of defense, are responsible for the risks, and the management of these, within their respective area of responsibility. They are responsible for ensuring that the appropriate organization, procedures and support systems are implemented to ensure a sufficient system of internal controls.
The second line of defense, consisting of the functions Risk Control and Compliance oversee risk. These functions set the principles and framework for risk management, facilitate and challenge risk assessments, perform independent control testing, and report on adherence to risk appetites, limits and frameworks.
The control functions are independent of business line management. They attend and report to the Audit, Compliance and Risk Committee (ACRC) and the Board.
Internal Audit, in the third line of defense, provides risk assurance through independent periodic reviews of governance structures and control systems. This includes regular evaluation of Klarna’s framework for risk management and a yearly review of the control functions in the second line of defense. Internal audit reports directly to the Board of directors.
Klarna’s risk strategy is set by the Board and outlines the nature of risks that the business is exposed to, its willingness to take these risks and how they are managed. It is formed through Klarna’s business plan, established by the Group Management Team and approved by the Board; the Risk Policy, which forms the basis of Klarna’s risk management framework; the Credit Policy which sets out Klarna’s credit strategy; and the Internal Capital and Liquidity Adequacy Assessment Process.
The risk appetite framework outlined in the Risk Policy reflects Klarna’s willingness to take and limit risk. The appetite is set by the Board and reviewed and updated regularly, at least on an annual basis. This annual review is an integral part of the annual business planning process, ensuring alignment of the business strategy, planned business activities and Klarna’s risk exposures.
Klarna’s risk appetite approach commences with an assessment of Klarna’s risk capacity, the maximum level of risk Klarna is able to assume, and continues with the level of aggregate risk appetite that the Board is willing to accept. Limits are set on risk appetite metrics and reported on a monthly basis. Any limit breaches are escalated to the Board.
The Board and the Group Management Team also issue specific written policies and instructions for managing risks, which are complemented by detailed routine descriptions within the organization. The second line functions provide an independent assessment of Klarna’s risk profile to the Group Management Team and the Board on at least a quarterly basis.
In the Risk Policy the Board has established how and when it shall receive information about Klarna’s risks and risk management. The periodic, recurring risk reporting in Klarna provides reliable, current, complete, and timely information, reflecting the nature of different risk types as well as market developments. The Board, the ACRC, the CEO, and the Group Management Team, as well as other functions that require such information, receive regular reports on the status of risks and risk management to ensure they are aware of material risks and control weaknesses.
Klarna maintains risk management processes and internal controls relating to financial reporting which are designed to ensure accuracy of financial records, appropriate application of accounting policies and compliance with relevant regulations and provide management with accurate and timely financial reporting in order to accurately view the Group’s performance and make informed decisions.
Klarna’s Internal Audit Function is independent of the business, directly reporting to the Board. The Board has adopted a Policy on Internal Audit.
The responsibility of Internal Audit is to provide reliable and objective assurance to the Board and the CEO regarding the effectiveness of controls, risk management, and governance processes by performing independent periodic reviews of the governance structure and the system of internal controls.
The Board has decided to outsource Klarna’s Internal Audit Function to an external party and has appointed Deloitte as Internal Auditor. The Risk Control Function is the internal coordinator for the internal audit activities.
The Internal Audit Function reports regularly to the Board and ACRC the results of its audits, including identified risks and suggestions for improvements. Internal Audit also informs the CEO, the Group Management Team and the relevant departments on internal audit matters. The Board annually establishes a plan for the internal audit work.
Klarna’s external auditors are formally elected at the General Meeting on an annual basis in line with Swedish Company law. Ernst & Young AB was re-elected at the 2022 AGM as external auditor for the period up to the 2023 AGM.
The ACRC receives reports from the auditor, which include details of significant internal control matters that they have identified, and meets with the auditor on a regular basis.
The ACRC oversees appropriate procedures to maintain the independence of the external auditor, this includes Klarna’s non-audit services policy which sets out those services that the auditor is permitted to provide and the requirements for pre-approval by ACRC in advance of provision of non-audit services.
Whistleblowing
Reporting unethical or illegal misconduct
Employees, consultants, and other partners may report observations relating to unethical or illegal misconduct through Klarna's external whistleblowing tool.
The identity of the person filing a report will be kept secret in any potential follow-up, inquiries, and discussions unless Klarna is obliged by law to disclose the identity. Should this be the case, the person reporting will be informed. The whistleblower will not be subject to any negative consequences when filing the report, or any time thereafter.
External whistleblowing tool
Reporting of observations can be done completely anonymously via the digital service
. The service is completely outside Klarna and meets the highest security requirements regarding encryption, data security, and protection of whistleblower anonymity.Corporate governance reports
From and including 2023, the Corporate Governance report is included in the Annual Reports which are linked below.