Updated on April 26, 2018
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 Global 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.
The decision-making process in remuneration related matters is presented below.
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
The remuneration of the Board members consists of annual compensation and meeting fees paid for each meeting attended. The AGM on April 25, 2018 decided on the following remuneration:
Meeting fees for each Board meeting attended
Meeting fees for each Committee meeting attended
|Chairman of the Audit Committee||2,000|
|Chairman of the Human Resources Committee||1,200|
|Chairman of the Nomination Committee||1,200|
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.
Decision-making procedure concerning remuneration
Remuneration and 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 always 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 arrangement consisting of the individual performance share plans.
The criteria for the remuneration of the CEO and other GET members are reviewed and the results of such reviews are regularly reported to the Human Resources Committee and the Board of Directors. The reviews aim to follow the impact of the remuneration criteria on reaching the Group’s long-term financial targets.
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 the GET members having a business segment responsibility are also determined based on the financial performance of the business segment in question. The weighting of the financial objectives is 90% for the CEO and 80% or 90% for other GET members and the weighting 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 (VA) 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 annual 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. According to the established principles of the Group, the CEO and the GET members having a business segment responsibility are not paid any short-term incentives (including any incentives based on personal objectives) if the criteria for financial performance of the Group or the relevant business segment is not achieved.
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 long-term 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.
The Arrangement consists of annually commencing individual three-year performance share plans. 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 performance share plans with earnings year 2015 or later and based on which incentives may be paid out in 2016 or later have been illustrated below.
A cash payment equivalent to taxes and tax-like charges arising to the key personnel from the reward may be granted as part of the remuneration. GET members that are participants to the performance share plan shall hold at least half (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 gross base salary. The ownership requirement applies until termination of employment or service.
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 EUR 150,000. 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.
The AGM on April 25, 2018 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% 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, 2019.
During 2017 the Company’s Board decided, based on the authorization valid in 2017, to transfer in total 255,528 of the Company’s own shares as part of the Company’s performance share plan (directed issue).