This Remuneration statement is published in accordance with the Corporate Governance Code 2015.
Remuneration and other benefits of the members of the Board of Directors
The Annual General Meeting decides annually on the remuneration payable to members of the Board of Directors for their term of office. The Nomination Committee of Oriola prepares and presents to the Board a recommendation for the proposal to be put by the Board to the Annual General Meeting concerning the composition and remuneration of the Board.
On 14 March 2017, the Annual General Meeting decided that the chairman of the Board will receive EUR 48,400 in remuneration for his term of office, the vice chairman of the Board and the chairman of the Board’s Audit Committee EUR 30,250 and the other members of the Board EUR 24,200 each. The chairman of the Board will receive an attendance fee of EUR 1,000 per meeting, and the other Board members EUR 500 per meeting. Attendance fees will also be paid correspondingly to the chairmen and members of Board and company committees. Travel expenses will be paid in accordance with the travel policy of the company. In accordance with the decision of the Annual General Meeting, 60 per cent of the annual remuneration was paid in cash and 40 per cent in class B shares. Oriola Corporation class B shares were acquired on the market for the Board members as follows: Anssi Vanjoki 5,020 shares, Anja Korhonen 3,137 shares, Mariette Kristenson 2,510 shares, Kuisma Niemelä 2,510 shares, Eva Nilsson Bågenholm 3,137 shares, Lena Ridström 2,510 shares and Staffan Simberg 2,510 shares.
Restriction periods are not included in the remuneration paid in Oriola Corporation class B shares. The members of the Board of Directors have not received any share-based rights as remuneration. They are not included in the company’s share incentive scheme. The company has not granted any loans to Board members nor given guarantees on their behalf.
The total fees and other benefits of the Board members for 2017 and shareholdings in the company on 31 December 2017 are available in notes 4.6. and 6.4. to the Consolidated Financial Statements and Remuneration report (http://www.oriola.com/investors/corporate-governance/remuneration-statement).
Main principles and decision-making process on the remuneration of the President and CEO and other executives
The salary of the President and CEO and other members of the Group Management Team consists of a fixed base salary, fringe benefits, a short term performance bonus and a long term share incentive plan. The remuneration commits management to develop the company and its financial success in the long term. The development stage and strategy of the company are considered when determining the principles for remuneration.
In accordance with its charter approved by the Board of Directors, the Compensation Committee monitors the effectiveness of the incentive schemes to ensure that the schemes promote the achievement of the company’s short term and long term goals. According to the charter, the Compensation Committee reviews management and personnel remuneration policies and issues related to management appointments, and makes proposals on such matters to the Board of Directors. More about Compensation Committee in Corporate Governance statement.
The Board of Directors reviews and decides annually on the remuneration and benefits of the President and CEO and other members of the Group management team, and the underlying criteria thereof.
The Board of Directors decides annually on the earnings criteria and the determination of the performance bonuses based on the proposal of the Compensation committee.
The company has not granted any loans to the President and CEO or to the members of the Group Management Team, nor given guarantees on their behalf. The company has no share option scheme in place. The President and CEO and the members of the Group Management Team have no supplementary pension scheme, except the vice president Consumer Business Area and the vice president Healthcare Business Area, who have a defined contribution pension benefit typically applied in Sweden.
Short term performance bonuses
The performance bonus is based on the achievement of the company’s financial targets and personal targets. The maximum performance bonus in 2017 for the President and CEO was 75 per cent of the annual salary and for the other Group Management Team members 40 per cent of the annual salary. The Board of Directors decides annually on the earnings criteria and the determination of the performance bonuses based on the proposal of the Compensation Committee.
Share based incentive programmes
The members of Oriola’s Group Management Team are part of the company’s long term share incentive scheme. The scheme unites the objectives of shareholders and key personnel to increase the value of the company, commits the key personnel to the company, and offers key personnel a competitive remuneration system based on ownership of shares in the company.
Executive incentive plan 2013 – 2015
On 19 December 2012, The Company’s Board of Directors approved a share-based incentive plan for the Group executives. At the end of 2017 the scheme covers four persons that remain in the employment of the Oriola Group. The Plan included three performance periods, calendar years 2013, 2014 and 2015. The company's Board of Directors decided on the earning criteria for the earning period and the targets to be set for these at the start of each earning period. The potential reward from the plan for the performance period 2015 was based on Oriola Group's Earnings per Share (EPS). The rewards to be paid on the basis of the performance period 2015 correspond to the value of an approximate maximum total of 148,524 Company's class B shares (including also the proportion to be paid in cash). No reward will be paid if an executive's employment or service in a Group company ends before the reward payment in 2018. There were no payments based on the performance periods 2013 and 2014 since the performance criteria for the Plan were not met.
Executive incentive plan 2016 - 2018
The Board of Directors established a share-based incentive plan directed to a group of the key personnel (the Plan) on 4 December 2015. The Plan harmonises the Group incentive plans into a single-platform Plan where the Group’s key personnel share savings plan and long-term incentive plan are combined.
The Plan includes three performance periods, calendar years 2016, 2017 and 2018 and three vesting periods, calendar years 2017, 2018 and 2019, respectively. The Board of Directors will resolve on the Plan's performance criteria at the beginning of each performance period. Approximately 20 key members of personnel, including members of the Group Management Team belong to the target group of the Plan.
The essential precondition for participation in the Plan and for receipt of reward on the basis of the Plan is that a key person has enrolled in the Share Savings Plan and makes the monthly saving from the fixed gross monthly salary, in accordance with the rules of the Share Savings Plan in force.
The potential reward for the performance period 2016 was based on the Group's Earnings per Share (EPS). The rewards to be paid on the basis of the performance period 2016 corresponded to the value of 119,803 Class B shares (including also the proportion to be paid in cash). The potential reward will be paid partly in Oriola Class B shares and partly in cash in 2018. The cash proportion is intended to cover taxes and tax-like charges arising from the reward to a key person. The potential reward for the performance period 2017 was based on the Group's Earnings per Share (EPS). The set EPS target was not met in 2017.
Share savings plans
On 18 June 2015 the Board of Directors of Oriola Corporation decided to launch a key personnel share savings plan. The maximum monthly saving was 8.3 percent and the minimum 2 percent of each participant's fixed monthly gross salary. Approximately 45 group key employees participated in the savings period that began on 1 October 2015 and ended on 31 December 2016. The matching shares to be transferred to eligible participants in 2018 correspond to the value of 45,702 Oriola Class B shares, including the proportion to be paid in cash
On 19 October 2016 the Board of Directors decided to launch a savings period 2017, from 1 January to 31 December 2017. Similarly approximately 45 key employees participated in the share savings plan. The holding period will end on the publication date of the Oriola’s Financial Statements Release 1 January – 31 December 2018. Matching shares will be paid partly in Oriola’s class B shares and partly in cash. The matching shares will be transferred to eligible participants in 2019. The estimated number of matching shares, including the portion to be paid in cash, is 55,000.
Approximately 60 key employees participate in the Oriola Corporation key personnel share savings plan for the savings period 1 January–31 December 2018. The accumulated savings will be used for purchasing Oriola’s class B shares for the participants at market prices. In return, each participant will receive two free class B matching shares for every three acquired savings shares. Matching shares will be paid partly in Oriola’s class B shares and partly in cash. The matching shares will be transferred to eligible participants in 2020.
Financial benefits of the President and CEO in 2017
The salary and other remuneration, including fringe benefits, paid in 2017 to the President and CEO Eero Hautaniemi, amounted to a total of EUR 555,701 as follows:
- Fixed base salary of EUR 442,183;
- Fringe benefits of EUR 28,501;
- Performance bonus of EUR 85,017; and
- Share-based payments of EUR 0.
The Board of Directors terminated Eero Hautaniemi’s service contract as President and CEO as of 18 December 2017. Eero Hautaniemi was given a six-month period of notice and is entitled to severance pay equal to 12 months’ salary as a result of the termination. Eero Hautaniemi is not entitled to any future reward under the company’s share based incentive schemes. The compensation to Eero Hautaniemi in 2017, in accordance with the service agreement, was EUR 656,622.
The salary and other remuneration, including fringe benefits, paid to the acting President and CEO Kimmo Virtanen for the period 18 December 2017 – 31 December 2017 amounted to a total of EUR 9,125.
The CEO pay ratio, i.e. the relation of the base salary of the CEO to the median FTE base salary in Oriola Group was 12 (11).
Financial benefits of other Group Management Team members 2017
The salaries and other remuneration, including fringe benefits, paid in 2017 to the members of the Group Management Team totalled EUR 1,150,944 as follows:
- Fixed base salaries totalling EUR 990,221;
- Fringe benefits totalling EUR 58,665;
- Performance bonuses totalling EUR 102,058 and
- Share-based payments totalling EUR 0.
The members of the Group Management Team are included in the company’s share based incentive scheme. Shareholdings of the members of the Group Management Team in the company are available in note 6.4. to the Consolidated Financial Statements and in the Remuneration report on the company web site.