Remuneration of the members of the Board of Directors
The Annual General Meeting 2011 resolved to maintain the remuneration of the members of the Board of Directors unchanged. Thus, the Chairman receives an annual remuneration of EUR 76,500, the Vice Chairman EUR 64,500 and members EUR 50,400. One half of the remuneration was decided to be paid in cash while the other half was to be paid in the Company's B-series shares to be acquired from the stock exchange between 1 and 30 April 2011. As a result, the Chairman received 12,225, the Vice Chairman 10,307 and each Board member 8,054 B-series shares. The amount of the cash consideration correspods to the estimated withholding tax. In addition, the Annual General Meeting resolved to pay to the members a fee of EUR 500 per each attended Board and committee meeting.
Principles of compensation of operative management
The purpose of the management's compensation system is to compensate the management in a fair and competitive way for a successful and profitable implementation of the Company's strategy. The objective of remuneration is also to encourage management in the development of the Company strategy and business to thereby act for the benefit of the Company.
The Board approves the salary and compensation of the CEO and the principles applied in the compensation of other Corporate Management Team members. The Board further apporves the structures and basis for the Company's remuneration and incentive schemes. The Nomination and Compensation Committee assists the Board in matters relating to management remuneration, conditions of employment and engagement of management members as well as prepares Board decisions relating to management remuneration. The CEO decides on matters related to the compensation of other senior management members in accordance with the principles approved and guidance issued by the Board.
Remuneration of the CEO
The monthly salary of CEO Mikko Helander is EUR 40,463. The salary includes car and phone benefits. In addition, the Board may, in accordance with the managing director's service agreement, decide that the CEO receives bonus pay based on his overall performance corresponding to his six-month salary. In 2011, the CEO received a total of EUR 588,312 (EUR 1,429,371 in 2010) in salary, bonuses and other benefits, of which EUR 509,002 (EUR 497,849 in 2010) was fixed compensation and EUR 79,310 (EUR 931,522 in 2010) was bonus pay. In 2010, the bonus pay consisted of bonus pay in accordance with the CEO's service contract as well as a separate compensation approved by the Board of Directors in August 2010 and relating to the CEO's withdrawal from the Company's 2010 share bonus system and the simultaneous joining to Metsä Group's management share ownership scheme.
The CEO takes part in the management ownership system of Metsä Group's executive management, through which he indirectly owns shares in the Company.As a consequence, Helander is not entitled to the share bonus for the 2010 financial period under the Company's own share bonus system. Helander has in August 2010 invested approximately EUR 500,000 of his own funds in Metsä Group's new management holding company, in which he is a co-owner together with other Metsä Group's other executive management members. The holding company entitled Metsäliitto Management Ltd. has in August 2010 purchased Metsä Board's B-series shares using its own capital and additional debt capital obtained from Metsäliitto Cooperative. Altogether 881,933 B-shares purchased for the aggregate purchase price of approximately EUR 2.5 million have been allocated to the CEO. Mr Helander is tied to the holding company and, through that, to an indirect ownership of Metsä Board's shares until the end of 2013, at which time the management ownership system is planned to be terminated and dismantled. The system will, however, be extended for one year at a time if, in October–November 2013, 2014, 2015 or 2016, the stock exchange price of Metsä Board’s B-shares is lower than the average price at which Metsäliitto Management Ltd. originally acquired such shares. Upon dismantling of the system, the loan granted by Metsäliitto Cooperative to the management holding company becomes due. The remaining funds will be distributed to the participating shareholders in accordance with the shareholdings. The management holding company also has the right to prematurely repay the loan. Should Helander prior to the above point of time either resign or his service relationship with the Company is terminated by the Board of Directors, he is entitled to receive from the management holding company the funds he has personally invested in such company, however, no possible value increase. The transfer of Metsä Board’s B shares owned by Metsäliitto Management Ltd. is restricted during the entire validity of the system.
Remuneration of other Corporate Management Team members
Also other Corporate Management Team members also have written employment contracts. In 2011, other Corporate Management Team members received a total of EUR 2,306,377 (EUR 1,977,048 in 2010) in salary and bonuses of which EUR 1,568,004 (EUR 1,469,132 in 2010) were fixed salaries and benefits (car and phone) and EUR 738,372 (EUR 507,917 in 2010) bonuses. The members of the Corporate Management Team are entitled to a bonus pay corresponding to a maximum of their respective 6-month salary. The bonus pay is defined and decided by the Board and was in the financial year 2010 based on the Company's and its business areas' (business are heads) operating results (EBIT) and cash flow development, whereas in 2011 only based on operating results development. The 2012 bonus pay were based on the basis of the Company's and its business areas' operating result (EBIT), as determined by the Board of Directors.
In December 2010, the Board of Directors resolved on the current share-based incentive plan. The aim of the plan is to combine the objectives of shareholders and executives in order to increase the value of the Company, to commit the executives to perform the mutual strategy, and to offer them a competitive reward plan based on share ownership. The plan consists of three three-year earning periods, calendar years 2011-2013, 2012-2014 and 2013-2015. At the beginning of each period, the Board of Directors will decide on the earnings criteria and defined targets. The potential reward from the plan for the earning period 2011-2013 will be based on Metsä Board Group's equity ratio and the development of return on capital employed (ROCE) and earnings before interest and taxes (EBIT). Each period is followed by a two-year restriction period during which a participant is not entitled to transfer or dispose of the shares.
The potential reward from the earning period 2011-2013 will be paid in 2014 partly in the Company's B-series shares and partly in cash, whereas the potential reward from the earning period 2012-2014 will be paid in 2015 in a similar manner. The proportion to be paid in cash will cover taxes and tax-related costs. At the beginning the plan concerns 9 people, including members of the Corporate Management Team. The maximum reward to be paid for each of the three-year earning periods corresponds to the purchase price of approximately 1,000,000 B-series shares.
On 31 December 2011, neither the Board members nor the CEO or the Deputy to the CEO had monetary loans from the company or its subsidiaries, and no collateral arrangements existed between them.