Remuneration

Remuneration Statement

Updated on February 14, 2017

This description on remuneration outlines the Group's decision-making procedures and main principles concerning the remuneration of the Board of Directors (Board), the Chief Executive Officer (CEO) and other Group Executive Team (GET) members. The Remuneration Statement is updated always when there are substantial changes to the information concerning remuneration. The Remuneration Report providing information on the remuneration paid during the previous financial period is included in the Company's Remuneration Statement and is also available as a separate document.

Board of Directors

Decision-making procedure concerning remuneration

The Annual General Meeting (AGM) decides annually on the remuneration payable to the members of the Board of Directors and its Committees as well as on related remuneration principles and on the principles for compensating the expenses of the Board members. The Nomination Committee of the Board of Directors prepares a proposal to the AGM on the same.

Main principles of remuneration

In accordance with the resolution passed by the AGM held on April 21, 2016, as of the AGM 2016 the annual compensation for the Chairman of the Board is EUR 120,000, for the Vice-Chairman EUR 68,000 and for other members EUR 57,000. In addition, the following meeting fees are paid for each meeting attended: EUR 1,000 for all meetings, except EUR 2,000 to the Chairman for the Audit Committee meetings, EUR 1,200 to the Chairman for the Human Resources Committee meetings and EUR 1,200 to the Chairman for the Nomination Committee meetings. Traveling expenses of the Board members are compensated in accordance with the Company policy. In addition, the Chairman of the Board has a mobile phone benefit.

None of the Board members is employed by the Company or any other Group Company or acts as an advisor for the Company and, thus, Board members are not eligible for any employment relationship related salaries or remuneration or financial or other benefits not related to the Board work nor are they eligible for any pension scheme. Board members do not receive Company shares as remuneration and they are not participants in Company’s share-based incentive plans.

Authorizations relating to remuneration

The AGM on April 21, 2016 decided in accordance with the proposal of the Board of Directors that the Board of Directors shall be authorized to resolve on the issuance of shares and the issuance of options and other special rights entitling to shares referred to in chapter 10, section 1 of the Companies Act as follows:

The aggregate number of shares to be issued on the basis of this authorization may not exceed 14,000,000 shares, which corresponds to approximately 13 percent of the current shares of the Company. The authorization concerns both the issuance of new shares and the transfer of the Company’s own treasury shares, however so that the number of new shares to be issued may not exceed 10,000,000 shares and the number of own treasury shares to be transferred may not exceed 4,000,000 shares. The Board of Directors resolves on all the terms and conditions of the issuance of shares and special rights entitling to shares and may deviate from the shareholders’ pre-emptive subscription rights (directed issue). The authorization remains in force until the end of the next AGM, however, no longer than until June 30, 2017.

During 2016 the Company’s Board decided, based on the authorization, to transfer in total 160,060 of the Company’s own shares as part of the Company’s performance share plan (directed issue).

Chief Executive Officer and Group Executive Team

Decision-making procedure concerning remuneration

Remuneration and financial benefits payable to the CEO and other GET members are determined by the Board of Directors on an annual basis. The Board also makes decisions concerning any potential compensation payable to the CEO and other GET members upon the termination of such person’s employment. Prior to the relevant Board meeting, the matter is deliberated by the Human Resources Committee of the Board of Directors.

Main principles of remuneration

The remuneration of CEO and other GET members is based on Group level remuneration principles, but local laws and market practices are taken into account when applying these principles. The remuneration consists of a non-variable annual base salary, benefits and an annually determined short-term incentive. In addition, the CEO and other GET members are participants in the long-term incentive plans consisting of the performance share plans.

The criteria on the basis of the remuneration of the CEO and other GET members are monitored and the results of such monitoring are regularly reported to the Human Resources Committee and the Board of Directors. The monitoring aims to follow the impact of the remuneration criteria on reaching the Group’s long-term financial targets.

Short-term incentives

The short-term incentives for the CEO and other GET members are based on the financial performance of the Group and the achievement of personal objectives. The short-term incentives for those GET members having a business segment responsibility are also determined based on the financial performance of the business segment in question. The relevance of the financial performance is 90% for the CEO and 80% or 90% for other GET members and the relevance of the personal objectives is correspondingly 10% for the CEO and 20% or 10% for other GET members. The following indicators are applied when setting financial objectives: earnings per share (EPS) before taxes and return on investment (ROI). In addition, for the GET members having a business segment responsibility also return on net assets (RONA) and value added of the business segment in question are relevant indicators. The above mentioned criteria are selected to promote the Group’s financial targets and success on a short- and a long-term basis.

Objectives for the short-term incentives are set and the achievement is evaluated annually. Possible incentive payments are typically made in March following the earnings period January-December. The payment of the incentive is subject to the person being employed by the Group and not having resigned by the time of the payment. The maximum amount of the short-term incentive for the CEO is the amount corresponding to 100% of the non-variable annual base salary. The maximum amount of the short-term incentives for other GET members varies depending on the position between 50–75% of the non-variable annual base salary.

Performance share plans

Performance share plans function as long-term incentives for the CEO and other GET members. On March 12, 2010 the Board of Directors of the Company decided on establishing a Performance Share Arrangement to form a part of the longterm incentive and retention program for the key personnel of the Company and its subsidiaries. The Performance Share Arrangement offers a possibility to earn the Company shares as remuneration for achieving established targets. A cash payment equivalent to taxes arising to the key personnel from the reward may be granted as part of the remuneration. Participants to the plan belonging to the GET shall hold at least 50% of the shares received until he/she holds shares received from the Performance Share Plans corresponding in aggregate to the value of his/her annual base salary. The ownership requirement applies until termination of employment or service.

The arrangement includes three-year performance share plans which commence annually. A possible reward shall be paid during the calendar year following each three-year plan. Commencement of each three-year plan will be separately decided by the Board of Directors. The Company’s share-based incentive plans in which the earnings year is 2014 or later and based on which incentives are paid in 2015 or later have been described below.

  • Performance Share Plan 2012–2014 commenced in 2012 and the reward was based on the Group’s earnings per share (EPS) in 2014. The reward was paid in 2015.
  • Performance Share Plan 2013–2015 commenced in 2013 and the reward was based on the Group’s earnings per share (EPS) in 2015. The reward was paid in 2016.
  • Performance Share Plan 2014–2016 commenced in 2014 and the reward will be based on the Group’s earnings per share (EPS) in 2016. The reward will be paid during 2017.
  • Performance Share Plan 2015–2017 commenced in 2015 and the possible reward will be based on the EPS in 2017. The reward, if any, will be paid during 2018.
  • Performance Share Plan 2016–2018 commenced in 2016 and the possible reward will be based on the Group’s EPS in 2018. The reward, if any, will be paid during 2019.

Other key terms

The retirement and resignation age of the CEO is 60 years, unless otherwise agreed upon. In addition to statutory employment pension contribution, early retirement is covered by an arrangement under which the Company contributes annually to a supplementary pension arrangement an amount which shall not exceed the CEO’s monthly base salary. However, the contribution paid by the Company is subject to the CEO contributing the same amount to the supplementary pension arrangement. In case the Service Agreement is terminated prior to the retirement and resignation age, the CEO maintains the right to the funds in the supplementary pension arrangement. The amount of the supplementary pension is determined based on funds contributed to the arrangement by the Company and the CEO as well as returns on these funds.

All other GET members belong to pension systems of their country of residence in force at the time. In addition to the CEO, five other GET members belong to the national employee pension system in Finland and two GET members belong to corresponding pension systems in the United States and the Czech Republic. Subject to a specific resolution by the Board, GET members may additionally be entitled to pension arrangements following local practices, which may be considered partly comparable to supplementary pension plans.

According to the Service Agreement between the Company and the CEO, either party may terminate the Service Agreement with six months’ prior notice. During the notice period, the CEO is entitled to normal salary payments. If the Company terminates the Service Agreement, the CEO is entitled to a termination compensation amounting to 18 months’ base salary in addition to the six months’ salary paid for the notice period. The notice periods and terms applicable to any compensation payable upon the termination of the employment of the other GET members are based on the Service Agreement between the Company and each GET member.

Remuneration Report

The Remuneration Report providing information on the remuneration paid during the previous financial period is prepared separately.