Corporate Governance

Remuneration

Remuneration – Board of Directors

Lemminkäinen Corporation’s Annual General Meeting elects the members of the Board of Directors on an annual basis and also determines their fees. These fees are paid entirely as monetary compensation. The Board members’ terms of office end upon the conclusion of the first Annual General Meeting held after their election.

Members of Lemminkäinen’s Board of Directors do not fall within the scope of the company’s share scheme, nor do they have an employment contract with Lemminkäinen.

2014 The 2014 Annual General Meeting decided that the Chairman of the Board is paid a fee of EUR 10,000 per month (2013: EUR 10,000) and Board members each receive EUR 3,000 per month (3,000). Members of the Board also received an attendance fee of EUR 500 per meeting (500).

The Chairman of the Audit Committee was paid an attendance fee of EUR 1,000 (1,000) and members EUR 500 (500) per committee meeting.

The members residing abroad were paid the attendance fee increased by EUR 1,000.

Travel expenses were reimbursed as invoiced.

The Chairman of the Board of Directors, Berndt Brunow, acted as the company’s interim President and CEO from 2 April to 31 July 2014, after President and CEO Timo Kohtamäki left the company on 2 April 2014.

Fees – Board of Directors 1 Jan–31 Dec 2014 1 Jan–31 Dec 2013
EUR per annum    
Board of Directors    
      Berndt Brunow  120,000  120,000
      Juhani Mäkinen  36,000 36,000
      Noora Forstén  36,000  36,000
      Finn Johnsson 1)  36,000  26,143
      Mikael Mäkinen 2)    9,857
      Kristina Pentti-von Walzel  36,000  36,000
      Heikki Räty  36,000  36,000
Total 300,000 300,000

1) From 9 April 2013
2)
Until 9 April 2013


Meeting fees – Board of Directors  1 Jan–31 Dec 2014  1 Jan–31 Dec 2013
EUR per annum    
Board of Directors    
      Berndt Brunow 10,000  6,500
      Juhani Mäkinen  12,500  8,500
      Noora Forstén  10,000  6,500
      Finn Johnsson 1)  28,500  13,500
       Mikael Mäkinen 2)    2,000
      Kristina Pentti-von Walzel  13,000  9,000
      Heikki Räty  16,000  11,500
Total  90,000  57,500

1) From 9 April 2013
2) Until 9 April 2013

Remuneration – Management

On the basis of a proposal submitted by the HR Committee, Lemminkäinen’s Board of Directors decides on the salaries, short- and long-term incentives and other benefits received by the President and CEO and the Group Executive Team.

The scope of the management remuneration policy adopted by the Board of Directors encompasses, in addition to the President and CEO and the Group Executive Team, the business segment management teams and the Group’s other key personnel. According to the remuneration policy, the remuneration of the President and CEO, the members of the Group Executive Team and other management personnel consists of a fixed basic salary, other benefits, annual short-term incentives (a performance bonus), and long-term incentives (share-based incentives and pension schemes).

A fixed basic salary denotes monthly monetary compensation, which is determined by the nature of the position and the person’s experience and performance.

The content of the benefits defined in the management remuneration policy varies from country to country. The benefits available to the President and CEO and the Group Executive Team include the use of a company car and mobile phone, the meal benefit, and extended insurance coverage for accidents and travel during their leisure time. The meal benefit is generally available to persons whose employment started before 1 January 2012. For the President and CEO and the Group Executive Team, total remuneration therefore consists of both a basic salary and benefits (excluding the meal benefit).

Each year, Lemminkäinen’s Board of Directors decides on indicators and targets for short- and long-term incentives, which seek to support the achievement of the strategic targets. On the basis of a proposal by the President and CEO, the Board decides on the targets to be reached and the size of the incentives.

Short-term incentives

Management’s short-term incentives are based on the opportunity to receive an annual performance bonus. The size of this reward depends on whether or not the financial and operational targets specified at the beginning of each year have been achieved. Lemminkäinen’s management is divided into five groups, which determine the maximum percentage applicable to each individual. Individuals are allocated to these groups on the basis of their position in the organisational hierarchy and the nature and commercial value of their position.

2014 In 2014, the size of management’s performance bonus was based on the Group’s operating profit, the Group’s return on investment and the achievement of other growth and development targets, such as those associated with the improvement of customer satisfaction and operational efficiency. Performance bonuses for the Executive Vice Presidents of business segments were also based on each segment’s operating profit and return on capital employed. Achievements were monitored every six months. The maximum performance bonus payable to the President and CEO was 80 per cent of the annual salary and 60 per cent for other members of the Group Executive Team.

Share-based incentive plan

The 2013–2015 incentive plan

At the end of 2012, Lemminkäinen Corporation’s Board of Directors decided to introduce a share-based incentive plan for key personnel. The plan consists of both a performance-based and a conditional reward. The conditional reward seeks to encourage the Group’s key personnel to increase their holding in the company. The Board of Directors recommends that the President and CEO and members of the Group Executive Team retain ownership of half of all the shares they receive through the plan until the value of their holding corresponds to half of their annual salary. They should maintain this holding during the validity of employment or service.

A reward paid through this plan may correspond to the value of a maximum of 700,000 Lemminkäinen Corporation shares (including the monetary portion). The value of the reward will be determined by the market price of the reward shares on the payment date. The Lemminkäinen Corporation shares handed over as rewards will be bought from the stock market. Therefore, the incentive plan will not have a diluting effect on the value of the shares.

Performance-based reward

The plan consists of three earning periods: the calendar years 2013, 2014 and 2015. The company’s Board of Directors decides on the plan’s earning criteria and the targets to be set at the beginning of each earning period.

A possible performance-based reward for the earning period will be paid out partly in company shares and partly in cash. The cash portion will cover any taxes and tax-related costs arising from the reward. The shares may not be transferred during the two-year commitment period. If a key person’s employment or service contract ends during the commitment period, they will generally have to return any reward shares to the company without compensation.

Conditional reward

In addition to the performance-based reward, the above-mentioned individuals also have the opportunity to receive a conditional reward based on share ownership and a continuation of their employment or service contract. In order to receive the conditional reward, a key person must already own or acquire a specified number of company shares, or a percentage thereof, by a specified date. The number and date are set by the Board of Directors. If they do so, key personnel will then be granted one share for each share acquired, as long as their employment or service contract remains valid and they retain ownership of these shares until the conditional reward is paid. The earning period for the conditional reward is the calendar years 2013–2015. The conditional reward will be paid by the end of April 2016, partly in shares and partly in cash.

2014 About 50 people fell within the scope of the plan during the 2014 earning period.

The performance-based reward was based on Lemminkäinen Group’s operating profit and its return on investment. The reward for the earning period 2014 will be paid out in 2015 partly in company shares and partly in cash. The cash portion will cover any deferred taxes and tax-related costs arising from the reward. The shares may not be transferred during the commitment period, which ends two years after the end of the earning period. The company’s President and CEO and the members of the Group Executive Team must retain ownership of half of all the shares they receive through the plan for two years after the end of the commitment period.

In order to receive the conditional reward, a key person had to own or acquire a specified number of company shares, or a percentage thereof, by 30 June 2013. The number was set by the Board of Directors. The conditional reward will be paid by the end of April 2016, partly in shares and partly in cash.

Pension plan

As of 1 January 2010, additional pension plans for the President and CEO and the Group Executive Team have been based on a defined contribution plan and obtaining a paid-up policy. Contributions are calculated as a percentage of annual salary.

The President and CEO and other members of the Group Executive Team are entitled to retire either upon reaching 60 years of age (under the old system) or upon reaching 63 years of age (under the new system, which came into force on 15 September 2011).

The President and CEO’s contract of service

The President and CEO’s contract of service may be terminated with six months’ notice. Upon termination of the contract by the company, the President and CEO shall be entitled to receive a one-off severance payment equivalent to 12 months’ salary in accordance with his or her salary rate at the time of termination. In Timo Kohtamäki’s contract of service, the severance payment was equivalent to 18 months’ salary.


Remuneration and fees – Executive Team members
(Excluding the President and CEO)
 1 Jan–31 Dec 2014  1 Jan–31 Dec 2013
EUR per annum    
      Monetary salary*  2,276,414  1,565,226
      Benefits  111,198 98,223
      Performance-based incentives  222,329 0
      Pension schemes  496,557  586,030
Total  3,106,498  2,249,479
     
 Share-based incentive (shares, no.)  2,269  0

*Includes compensations related to redundancy

Remuneration and fees – President and CEO

Timo Kohtamäki  1 Jan–2 Apr 2014  1 Jan–31 Dec 2013
EUR per annum    
      Monetary salary*  1,239,570  486,720
      Benefits  11,721  24,627
      Performance-based incentives  0  0
      Pension schemes  329,633  337,000
Total  1,580,924  848,347
     
Share-based incentive (shares, no.)  0 0

*Includes compensations related to redundancy

Berndt Brunow  3 Apr–31 Jul 2014
EUR per annum  
      Monetary salary*  124,000
      Benefits  2,164
      Performance-based incentives 0
      Pension schemes 0
Total  126,164
   
Share-based incentive (shares, no.) 0

*Excluding Chairman of the Board fee and meeting fees

Casimir Lindholm  1 Aug–31 Dec 2014
EUR per annum  
      Monetary salary  205,000
      Benefits  6,125
      Performance-based incentives 85,608
      Pension schemes  75,175
Total  371,908
   
Share-based incentive (shares, no.)  267

 

 
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