The AGM on April 29, 2020 approved the Remuneration Policy for the Company’s Governing Bodies presented to it.
The Remuneration Report providing information on the remuneration paid during the previous financial period is available as a separate document.
Decision-making procedure in remuneration related matters
The decision-making procedure in remuneration related matters follows principles aimed at ensuring the prevention and the management of conflicts of interest. The remuneration of a governing body is generally decided on by another corporate body responsible for the appointment of the said governing body. The Company complies with its Code of Conduct, the Finnish Companies Act, other applicable laws and regulations as well as the Finnish Corporate Governance Code adopted by the Securities Market Association which stipulate governance procedures and rules for the avoidance of conflicts of interest. The decision-making process described below aims at guaranteeing that the decisions are fair and unbiased.
The General Meeting decides on the remuneration payable to Board members. Subject to as in each case is decided by the General Meeting, the remuneration of the Board members may consist of annual compensation and meeting fees paid for each meeting attended. The annual fee may either solely comprise a cash payment or may be split into a component paid in shares of the Company and in cash. Additional or higher compensation may be paid to Board members based on various grounds, such as (but not limited to) the role as the Chairman or Vice Chairman of the Board or as the Chairman, Vice Chairman or member of a Committee established by the Board, or specific tasks designated to individual Board members, or the geographical location of the meeting. The Board members may be granted a mobile phone benefit. Traveling expenses of the Board members are compensated in accordance with the Company policy.
None of the Board members shall be employed by the Company or any company belonging to the Company’s group or acts as an advisor thereof. Thus, Board members are not eligible for any employment relationship related salaries, remuneration or financial or other benefits not related to their position as a Board member nor are they eligible for any pension scheme. The Board members shall not participate in the same remuneration or incentive plans with the executive management and other personnel in order to safeguard the Board members’ independence in the performance of their duties.
The AGM on April 29, 2020 confirmed that the following remuneration will be paid to the members of the Board of Directors:
Annual compensation 2020
Meeting fees for each Board meeting attended 2020
Meeting fees for each Committee meeting attended 2020
|Chairman of the Audit Committee||3,000|
|Chairman of the Human Resources Committee||1,750|
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.
The remuneration of the President and CEO may consist of a non-variable annual base salary, benefits and annually determined short-term incentive plans. In addition, the President and CEO may be nominated as a participant in long-term incentive plans. Local laws and market practices are taken into account when applying the group level remuneration principles to the President and CEO’s remuneration.
The criteria for the remuneration of the President and CEO are reviewed and the results of such reviews are regularly reported to the Human Resources Committee and the Board. The reviews aim to follow the impact of the remuneration criteria on reaching the Group’s long-term financial targets.
Non-variable annual base salary and benefits
The non-variable annual base salary of the President and CEO is EUR 800,000. In addition, the President and CEO has the following benefits:
- Car benefit
- Housing benefit
- Support for child’s education
- Support for insurance premiums
The short-term incentives for the President and CEO are based on the financial performance of the Group. The short-term incentives for the 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 100% for the President and CEO and 80% or 90% for other GET members. The weighting of the personal objectives is correspondingly 20% or 10% for other GET members. The following indicators are applied when setting financial objectives: EBIT and free cash flow (FCF). In addition, for the GET members having a business segment responsibility also EBIT and operating cash flow (OCF) 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 President and 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 60–75% of the non-variable annual base salary. According to the established principles of the Group, 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 relevant business segment is not achieved.
In addition to above, the Board of Directors may decide on other short-term incentive plans for the President and CEO and other GET members. These plans are usually done on retention purposes and are aligned with existing short-term incentives.
Performance share plans
Performance share plans function as long-term incentives for the President and CEO and other GET members. On March 12, 2010 the Board 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. The Company’s performance share plans with earnings year 2018 or later and based on which incentives may be paid out in 2019 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, including the President and CEO, that are participants to a 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.
The President and CEO has been nominated to participate in the following performance share plans:
- Performance Share Plan 2017–2019
- Performance Share Plan 2018–2020
- Performance Share Plan 2019–2021
- Performance Share Plan 2020–2022
Other key terms
The President and CEO is entitled to a signing bonus as follows: first part of the signing bonus was paid in 2019 upon joining. The signing bonus was 15,000 Huhtamaki shares (net amount). In addition, the Company processed a cash payment to cover taxes and tax related payments. A lock-in period of 12 months applies. Second part of the signing bonus, 15,000 Huhtamaki shares (net amount), is paid in 2021, subject to reaching EBIT target for 2020, set by the Board. lf the payment is made, the Company will in addition process a cash payment to cover taxes and tax related payments. A lock-in period of 12 months will apply.
The pension coverage is arranged by the President and CEO himself. The company contributes towards the pension through monthly cash payments to the President and CEO. The total cash payment is EUR 280,000 per annum gross.
All other GET members belong to pension systems of their country of residence in force at the time. At the end of the year 2019 six GET members belonged to the national employee pension system in Finland and one GET member belonged to corresponding pension system in the United States. 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 President and CEO, either party may terminate the Service Agreement with six months’ prior notice. During the notice period, the President and CEO is entitled to normal salary payments. If the Company terminates the Service Agreement, the President and CEO is entitled to a termination compensation amounting to 12 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 decided on April 29, 2020 as proposed by the Board of Directors, to authorize the Board of Directors to resolve on the issuance of shares and the issuance of special rights entitling to shares referred to in chapter 10 section 1 of the Companies Act as follows: The aggregate number of new shares to be issued may not exceed 10,000,000 shares which corresponds to approximately 9.3 percent of the current shares of the Company, and the aggregate number of own treasury shares to be transferred may not exceed 4,000,000 shares which corresponds to approximately 3.7 percent of the current shares of the Company. The authorization covers also directed issuances of shares. The authorization remains in force until the end of the next AGM, however, no longer than until June 30, 2021.