Remuneration of the members of the Board of Directors
The Annual General Meeting 2019 resolved to keep the remuneration of the members of the Board of Directors unchanged. As a result, the Chairman receives an annual remuneration of EUR 95,000, the Vice Chairman EUR 80,000 and members EUR 62,500. Approximately one half of the remuneration was decided to be paid in the Company's B-series shares which were acquired from public trading during April 2019. As a result the Chairman received 7.920, the Vice Chairman 6.670 and each member 5.211 B-series shares. The amount of the cash consideration corresponds to the estimated withholding tax. The transfer of the shares is restricted for a period of two years following receipt. In addition, the Annual General Meeting resolved to pay to the members a remuneration of EUR 700 per each attended Board and committee meeting. Further, the Annual General Meeting decided that an additional monthly compensation of EUR 800 be paid to the Chairman of the Audit Committee.
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 in the long run.
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 approves the structures and basis as well applicable measures 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 acting in cooperation with the Chairman of the Board 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 Mika Joukio is EUR 40,614. The salary includes car and phone benefits as well as an extended cover for travel and accident. 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 and corresponding to his seven-month salary. In 2018, CEO Joukio received a total of EUR 1,766,254 in salary, bonuses and other benefits (1,339,476 euros in 2017 and 1,173,861 euros in 2016), of which EUR 510,397 was fixed compensation and EUR 232,933 was short-term bonus pay and EUR 1,022,925 was share based remuneration.
Remuneration of other Corporate Management Team members
Also other Corporate Management Team members have written employment contracts. In 2018, other Corporate Management Team members received a total of EUR 2,305,601 in salary and bonuses (1,889,801 euros in 2017 and 2,460,712 euros in 2016), of which EUR 1,023,773 was fixed salaries and benefits (car and mobile phone) and EUR 340,878 was short-term bonus pay and EUR 940,950 was share based remuneration. The members of the Corporate Management Team are entitled to a bonus pay corresponding to a maximum of their respective 6-month salaries. The bonus pay is defined and decided by the Board and was in the financial years 2015–2017 based on the Company's operating results (EBIT) and cash flow, other targets set for the functions as well as on personal targets.
Share Based Remuneration
The Board decided in December 2013 and again in January 2017 to continue the share-based incentive scheme for management. 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 consecutive three-year earnings periods, of which periods 2016–2018, 2017–2019 and 2018–2020 are currently pending. At the beginning of each period, the Board of Directors decided on the earnings criteria and defined performance targets. The potential reward from the plan for each of the earnings periods is based partly on Metsä Board Group’s equity ratio at the end of the period as well as the development of return on capital employed (ROCE) and operating results (EBIT) and partly based on corresponding indicators for Metsä Group, as determined by the Board. The reward includes a cash element to cover taxes and tax related payments on behalf of the participant. Each earnings period is followed by a close to two-year restriction period during which a participant is not entitled to transfer or dispose of the shares.
The reward for the earnings period 2016-2018 was paid in March 2019 (see below). The potential reward for the earnings period 2017-2019 will be paid in 2020 and entitles at the beginning of the period to the payment of a maximum of 263,750 B-shares. Similarly the potential reward for the earnings period 2018-2020 will be paid in 2021 and entitles at the beginning of the period to the payment of a maximum of 276,250 B-shares. The amount of the reward may be limited. Changes in participants have an effect on the maximum number of shares available.
The Board confirms the outcomes of the long-term share based incentive system based on principles, indicators and scales approved by it. The Board confirmed results for earnings period already ended as follows:
- in February 2017 that the result for the earnings period 2014-2016 was 111.6 per cent, based on which a total of 259,162 B-series shares were paid to six participants. Of these 82,973 were paid to CEO Joukio. The payment of a part of the total reward was postponed in accordance with the system rules;
- in February 2018 that the result for the earnings period 2015-2017 was 117.1 per cent, based on which a total of 250,516 B-series shares were paid to eight participants. Of these 103,000 were paid to CEO Joukio. The payment of a part of the total reward was postponed in accordance with the system rules;
- in February 2019 that the result for the earnings period 2016-2018 was 63.6 per cent, based on which a total of 131,792 B-series shares were transferred to 14 recipients. Of these, 47,700 B-shares were paid to CEO Joukio. Any reward exceeding a participant's personal remuneration cap was not paid.