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Remuneration

Remuneration statement

Tikkurila publishes a remuneration statement in accordance with the Corporate Governance 2015. The statement consists of the following entities:

Decision-making process of remuneration

Board of Directors

The Annual General Meeting decides on remuneration paid to the members of the Board of Directors on the basis of the proposal made by the Nomination Board. The Nomination Board consists of the three largest shareholder representatives, in addition to which the Chairman of Tikkurila’s Board of Directors acts as an expert member of the Board. 

 

President and CEO and Management Board

The Board’s Remuneration Committee organizes matters connected with Management Board remuneration. Tikkurila’s Board of Directors decides on the remuneration of Tikkurila’s President and CEO and those Management Board members who report directly to him.

In the preparation of Board of Directors and management remuneration, external experts as well as related external research data are utilized.

Principles of remuneration

Board of Directors

Board members receive reimbursements related to Board membership and work on the Committees from Tikkurila. Board members are not within the sphere of Tikkurila’s incentive systems. Of the annual fee, approximately 40 percent is paid as Tikkurila shares obtained from the market and the rest in cash. Shares are directly obtained for the use of the Board within two weeks of when the year’s first quarter business review has been published.

 

President and CEO and Management Board

The total salary of the President and CEO and Management Board consists of a fixed basic salary including fringe benefits and variable performance-based pay involving two elements: a long-term share-based commitment and incentive system, as well as a short-term calendar year- and cash-based annual bonus.

In addition to the above-mentioned items, the President and CEO has a defined contribution-based supplementary pension plan.

Elements of Management Board remuneration:

Fixed salary of the President and CEO

A fixed monthly salary including fringe benefits, annually 445.000 euro.

Short-term incentive system

Cash-based annual bonus. The Board of Tikkurila Oyj decided on 6 April 2016 on the 2016 annual bonus targets for the Group management. The bonus criteria were two: The Tikkurila Group revenue and operating profit (EBIT) for the 2016 financial year. 

Long-term incentive system

Share-based commitment and incentive plan. 

Share-based commitment and incentive system: earning periods 2012–2014, 2013–2015 and 2014–2016

On 15 February 2012, Tikkurila Oyj’s Board of Directors decided on a share-based plan for the commitment and incentive of key personnel. There are three earning periods in this plan. The company’s Board decides on the plan's earning criteria and the target sets for them at the outset of each earning period. Participation in the plan and the receipt of remuneration requires that the key person purchases Tikkurila shares from the market in accordance with the plan’s terms and conditions. 

The remuneration for earning period 2012–2014 was based on Tikkurila Group’s Operative Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and net debt during financial years 2012–2014. The prerequisite for the payment of remuneration was that the employment or service relationship of the key person concerned is in effect at least until spring 2015, and that s/he owns Tikkurila shares purchased from the market. The amount of remuneration depended on the total number of shares and the realization of earning criteria. Part of the remuneration was paid in December 2014 and part was paid in March 2015. Approximately half of remuneration was paid as shares and the other half in cash.

The remuneration for earning period 2013–2015 was based on Tikkurila Group’s Operative Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and net debt during financial years 2013–2015. The prerequisite for the payment of remuneration was that the employment or service relationship of the key person concerned is in effect at least until spring 2016, and that s/he owns Tikkurila shares purchased from the market. The amount of remuneration depended on the total number of shares and the realization of earning criteria. Remuneration was paid in March 2016 by decision of the Board on an exceptional basis in total as a cash remittance, owing to the amount of the remuneration and in order to ensure the effectiveness of execution.

The possible remuneration for earning period 2014–2016 is based on Tikkurila Group’s Operative Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and net debt during financial years 2014–2016. The prerequisite for the payment of remuneration is that the employment or service relationship of the key person concerned is in effect at least until spring 2017, and that s/he owns Tikkurila shares purchased from the market. The amount of remuneration depends on the total number of shares and the realization of earning criteria. Possible remuneration will be paid in spring 2017, partly as company shares and partly as cash.

2016 Incentive Program: Performance Share Plan 2015-2019 and Matching Share Plan 2016-2018

In April 2016, the Board of Directors of Tikkurila Oyj approved a new share-based incentive program for Group key employees. The new program consists of a Performance Share Plan 2015-2019 and a Matching Share Plan 2016-2018. The aim of the new program is to combine the objectives of the shareholders and the key employees in order to increase the value of the company in the long-term, to bind the key employees to the company, and to offer them competitive reward plans based on earning and accumulating the company's shares. 

Performance Share Plan 2015-2019

The performance share plan includes three performance periods, calendar years 2015-2017, 2016-2018 and 2017-2019. Approximately 10 key employees, including the members of the Tikkurila Management Board, belong to the target group of the performance periods 2015-2017 and 2016-2018.

The potential reward of the plan for performance periods 2015-2017 and 2016-2018 will be based on Tikkurila Group's average EBITDA-based intrinsic values for 2015-2017 and 2016-2018, respectively. The rewards to be paid on the basis of the performance periods 2015-2017 and 2016-2018 will amount to an approximate maximum total of 250,000 Tikkurila Oyj shares. In addition, the company will pay taxes and tax-related costs arising from the reward to the participants in connection with the reward payment. The Board of Directors will resolve on the details of the performance period 2017-2019 at the beginning of the performance period.

The potential reward from the plan will be paid partly in the company's shares and partly in cash in 2018, 2019 and 2020. The cash proportion is intended to cover taxes and tax-related costs arising from the reward to the participants. As a rule, no reward will be paid, if a participant's employment or service ends before the reward payment. The reward amounts to be earned through the plan will be capped if the limits set by the Board of Directors for the payable reward of a performance period are reached.

Matching Share Plan 2016-2018

The matching share plan includes one vesting period, calendar years 2016-2018. Eligibility for the reward requires the participant in the plan to acquire the company's shares up to the number determined by the Board of Directors and to be under an employment or service contract with the Company at the time of payment of the reward. The reward from the plan will be paid partly in the Company's shares and partly in cash in 2019.

The matching share plan is intended for selected key employees determined by the Board of Directors, who have not participated in the share-based plan launched in 2012. The rewards to be paid on the basis of the vesting period 2016-2018 will amount to a maximum total of 4,000 Tikkurila Oyj shares. In addition, the company will pay taxes and tax-related costs arising from the reward to the participants in connection with the reward payment.

Pension benefits

The retirement age of the President and CEO is 63.

The retirement age of other Management Board members is specified in accordance with the legislation.

The President and CEO belongs to the defined contribution-based supplementary pension plan.

Termination

A six-month period of notice applies to the President and CEO. In addition, the President and CEO will receive a severance pay equaling his 12-month salary if the company terminates his agreement. 

The other Management Board periods of notice and reimbursement are specified in the employment contracts of each person.

Nomination Board

No remuneration is payable to the members of the Nomination Board in relation to their duties in the Nomination Board.

Remuneration report

Financial benefits of the Board of Directors in 2017

The Annual General Meeting decides on remuneration paid to the members of the Board of Directors.

In 2017, the members of Tikkurila’s Board of Directors were paid annual and meeting-based remuneration. Travel expenses were reimbursed in accordance with the company’s travel regulations.

The annual fees paid to the Board of Directors for 2017:

  • Chairman EUR 64,000 for the year
  • Vice Chairman and Inspection Committee Chairman EUR 40,000 for the year
  • Other members EUR 32,000 for the year

Of the annual fee, approximately 40 percent is paid as Tikkurila Oyj shares obtained from the market and the rest as cash. The shares were acquired directly for the members of the Board within two weeks from when the business review from the period 1 January – 31 March 2017 was published.

Meeting fees paid to the Board of Directors for 2017:

  • EUR 600 for meetings held in the home state of a member
  • EUR 1,200 for meetings held outside the home state of a member
  • EUR 600 for telephone meetings  

Those attending Committee meetings were also entitled to a fee per meeting. The meeting remuneration fees were paid in cash.


Remuneration* paid to the members of the Board of Directors

One thousand euros

 

2017

 2016

Jari Paasikivi, Chairman of the Board 

73

 70

Petteri Walldén, Vice Chairman of the Board 

49

 46

Harri Kerminen

41

37

Pia Rudengren

57

46

Eeva Ahdekivi

42

48

Riitta Mynttinen 

49

46

Total

311

 295

 

*Of the annual fee, 40 percent was paid as Tikkurila shares. The proportion paid in total as shares was EUR 96,000 (96,000), and it is included in the above remuneration.

 

Remuneration of the President and CEO in 2017

 

Accrual, one thousand euros

 

2017

2016

Fixed salary with fringe benefits

1,200*

445

Bonuses

21

87

Share-based incentive system

-

 -

Total

1,221

 532

Supplementary pension system

91

 70

 

*CEO Erkki Järvinen from January 1 until September 21, 2017 and Interim CEO Jukka Havia from September 21 until December 31, 2017. Includes the one-time termination salaries, as well as the salary of the notice period until the end of 2017. 

 

Pce

 

2017

2016

Transferred shares (included in the information presented above)

-

-

 

 

Remuneration of the other Management Board in 2017

Accrual, one thousand euros

 

2017

2016

Fixed salary with fringe benefits

1,168

706

Bonuses

28

145

Share-based incentive system

10

-

Total

1,206

850

 

Pce

 

2017

2016

Transferred shares (included in the information presented above)

-

-

 

The President and CEO and other Group management remuneration information presented above is based on the accrual entries in the IFRS Group Consolidated Financial Statements. In Tikkurila Oyj’s separate financial statements, which are based on Finnish accounting norms, the appreciation of remuneration paid as shares and the timing of their write-offs differ from the Group calculation. In addition, it must be taken into account that payments respective to variable salary elements as well as the cash-based annual bonus and long-term share-based incentive system occur afterwards following each earning period, so the payments and costs typically target various financial years.