38 RELATED-PARTY TRANSACTIONS
Lemminkäinen Group's related parties comprise associates and joint ventures as well as members of the key management personnel including close members of their families. Members of the key management personnel comprise the Board of Directors, the President and CEO, Executive Board and the internal audit manager.
Transactions with related parties
|EUR 1,000||1 Jan–31 Dec 2013||1 Jan–31 Dec 2012|
|Sales of goods and services|
|To associates and joint ventures||2,948||3,903|
|To a company under the influence of a key management person’s family member||125||200|
|Purchases of goods and services|
|From associates and joint ventures||11,275||14,429|
|EUR 1,000||31 Dec 2013||31 Dec 2012|
|Balance of purchases/sales of goods and services|
|From associates and joint ventures||28||2,200|
|From a company under the influence of a key management person’s family member||125||200|
|To associates and joint ventures||212||218|
Related-party transactions with associates and joint ventures are mainly asphalt works and mineral aggregate deliveries. Related-party transaction with a company under the influence of a family member of a member of the key management personnel is a market-based sale of construction service. A list of investments in subsidiaries and associates and joint ventures is in note 39 and additional information on associates and joint ventures in note 11.
Remuneration of key management personnel
On the basis of a proposal submitted by the Remuneration Committee, the company’s Board of Directors decides on the basic salary and fringe benefits as well as on both short-term and long-term remuneration of the President and CEO and of the Executive Board. The Board of Directors decides annually both short and long-term indicators for Management remuneration and the target values for the indicators which are designed to support achievement of the strategic goals. On the basis of the President and CEO’s proposal, The Board decides on the amount of fees and whether the indicator-based goals have been reached.
According to management remuneration policy approved by the Board of Directors, the remuneration of the President and CEO, members of the Group's Executive Board, and other management personnel consists of a fixed basic salary, fringe benefits, other benefits, annual short-term incentives (performance-based pay) as well as long-term share based incentive plans and pension plans.
In 2013, The Company booked social security costs of EUR 0.8 million (EUR 0.7 mill.) from key management personnel’s salaries, fees and other short-term employee benefits. The costs are not included in the figures presented in the table below. The table’s figures are calculated on accrual basis and the performance and share-based rewards included in the figures are based on a year-end estimate.
|EUR 1,000||1 Jan–31 Dec 2013||1 Jan–31 Dec 2012|
|Short-term employee benefits||2,622||2,793|
|Other long term benefits||6|
Short-term employee benefits
A fixed basic salary refers to a person's monthly salary, which is determined by the requirements of the position as well as the performance and experience of the person holding the position. In addition to the use of a company car and mobile phone and a meal benefit, management personnel have extended insurance cover for accidents and travel in their leisure time. The total salary covers fixed basic salary and fringe benefits.
The amount of the management's performance-related reward is earned by exceeding financial and operational profit targets specified at the beginning of the year. The Executive Board is divided into four performance-related reward groups which define the maximum performance-related reward percentage for each person. Defining a person's reward group is based on organization level as well as the requirements and operational influence of the position. In 2013 the level of performance-related reward of the Management was based on the profit before taxes and reaching other growth and development targets such as efficiency improvement of working capital. The performance-related rewards of the Presidents of business segments, who are members of the Group's Executive Board, are also based on the gross profits of each segment. Achieving performance-related reward targets were assessed semi-annually. The maximum performance-related reward payable to Lemminkäinen's President and CEO was 80 per cent of his annual cash salary. The corresponding percentage for the other members of the Group's Executive Board was 60 per cent of their annual cash salary.
Lemminkäinen Corporation’s General Meeting elects each year the members to serve on the Company’s Board of Directors and decides their fees. The fees are paid fully in cash. The term of office of the board members lasts until the end of the first Annual General Meeting held after their election. The members of Lemminkäinen’s Board of Directors do not belong to the share-based incentive plan, and they are not employees of Lemminkäinen. The 2013 Annual General Meeting decided that the Chairman would be paid a fee of EUR 10,000 per month (EUR 10,000) and the board members would each receive a fee of EUR 3,000 per month (EUR 3,000). The board members also receive an attendance fee of EUR 500 per meeting (EUR 500). The chairman of the Audit Committee is paid an attendance fee of EUR 1,000 (EUR 1,000) and the members of the Audit Committee EUR 500 (EUR 500) for each meeting of the Committee. Board members living outside Finland receive an extra EUR 1,000 to their attendance fees.
From the beginning of 2010 the additional pension plan of the President and CEO and the members of Executive Board is based on cash basis and earning a paid-up policy. The amount of payment is defined as percentages of the annual salary. The president and CEO is entitled to retire at the age of 60. Other members of the Executive Board are, according to the old policy, entitled to retire at the age of 60 or according to the policy valid since 15.9.2011 at the age of 63.
In 2013, the company incurred accrual based costs of EUR 88 thousand (EUR 99 thousand) from statutory pensions and EUR 249 thousand (EUR 196 thousand) from voluntary pensions of the CEO & President Timo Kohtamäki. The amount of the President & CEO’s defined contribution pension benefit equals 40 per cent of his annual fixed salary. The company incurred no statutory or voluntary pension costs from the board members during the accounting or comparison period.
Other long term benefits
In 2013, EUR 6 thousand was recognised as expense in other long term benefits. These expenses arose from service year awards and anniversary gifts to related-party personnel. The awards and gifts comply with the group’s HR practices. In 2012, no expenses were recognised in other long term benefits.
The term of notice for the Lemminkäinen’s President and CEO agreement is six months. If the company dismissed the agreement, the president and CEO is entitled to absolute severance pay eaqual to 18 months cash salary at the time of the agreement's termination. In 2013 and 2012, no termination benefits were booked.
The share-based incentive plan for the Group's key personnel comprises of performance-based and conditional rewards.
Performance based reward comprises of three earning periods, which are calendar years 2013, 2014 and 2015. The company's Board of Directors decides on the earning criteria and the targets to be set at the beginning of each period. Performance based compensation targets for 2013 were not met, and therefore no reward is paid.
In addition to the performance-based reward, the key personnel also have the opportunity to receive a conditional reward based on share ownership and a continuation of their employment or service contract. The conditional reward seeks to encourage the Group’s key personnel to increase their holding in the company. The earning period for the conditional reward is the calendar years 2013–2015.
Share-based payments are described in more detail in the note 29.