39 Related-party transactions
Lemminkäinen Group's related parties comprise associates and joint ventures as well as members of the key management personnel including their related parties. Members of the key management personnel comprise the Board of Directors, the President and CEO, the Executive Team and the Head of Internal Audit.
Transactions with related parties
|EUR 1,000||1 Jan–31 Dec 2014||1 Jan–31 Dec 2013|
|Sales of goods and services|
|To associates and joint ventures||1,878||2,948|
|To key management personnel and their related parties||380||125|
|Purchases of goods and services|
|From associates and joint ventures||15,748||11,275|
|EUR 1,000||31 Dec 2014||31 Dec 2013|
|Balance of purchases/sales of goods and services|
|From associates and joint ventures||13||28|
|From key management personnel and their related parties||80||125|
|To associates and joint ventures||241||212|
|EUR 1,000||31 Dec 2014||31 Dec 2013|
|Loan receibables from associates and joint ventures||154|
Related-party transactions with associates and joint ventures are mainly asphalt works and mineral aggregate deliveries. Sales to a key management personnel and their related parties include one sale of a non-current asset at market price and one sale of construction service at a market price. A list of investments in subsidiaries and associates and joint ventures is presented in Note 11.
Remuneration of key management personnel
On the basis of a proposal submitted by the HR 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 Team. 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 of Directors 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 Team 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.
Costs related to remuneration of key management personnel are presented in the table below. The figures in the table are presented separately for each President and CEO of the Group and as a total for other key management personnel. In 2014, the company booked social security costs of EUR 0.9 million (EUR 0.8 mill.) from key management personnel’s salaries, fees and other short-term employee benefits. The social security costs are not included in the table’s figures 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. The figures do not include the Chief Financial Officer’s service fee from the time period between 1 April and 30 June 2014.
|EUR 1,000||1 Jan–31 Dec 2014||1 Jan–31 Dec 2013|
|Short-term employee benefits||2,779||2,622|
|Bernd Brunow (President & CEO term)*||170|
|Casimir Lindholm (President & CEO term)||297|
|Key management personnel other than the President & CEO||2,145||2,110|
|Casimir Lindholm (President & CEO term)||75|
|Key management personnel other than the President & CEO||354||498|
|Casimir Lindholm (President & CEO term)||5|
|Key management personnel other than the President & CEO||91||300|
|Key management personnel other than the President & CEO **||919|
|Other long term benefits||6|
|Key management personnel other than the President & CEO||6|
|Remuneration of key management personnel, total||5,669||3,891|
*Includes fees paid for Board work during the CEO period as well as fees for working as a President and CEO
**Does not include share based payments or costs of additional pension plans for the term of notice
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. Lemminkäinen's management 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 organisation level as well as the requirements and operational influence of the position. In 2014 the level of performance-related reward of the management was based on profit before taxes and reaching goals related efficiency improvement measures and other development targets. Performance-related rewards of the Executive Vice Presidents of the business segments, who are members of the Group's Executive Team were also based on the operating profits of each segment. Achieving targets set on performance-related rewards were assessed semi-annually. 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.
Lemminkäinen Corporation’s General Meeting elects each year the members to serve on the company’s Board of Directors and decides on 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 2014 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 Team 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 and oher members of the Executive Team 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. The amount of the President and CEO’s defined contribution pension benefit equals 20 per cent of his annual fixed salary.
Other long term benefits
Other long term benefits expenses arose from service year awards and anniversary gifts to related-party personnel. The awards and gifts comply with the Group’s HR practices.
Term of notice for the Lemminkäinen’s President and CEO agreement and for other members of the Executive Team is six months. If the company dismisses the President and CEO agreement, the President and CEO is entitled to an absolute severance pay equal to 12 months cash salary at the time of the agreement's termination. For other members of the Executive Team the equivalent severance pay equals to six months cash salary at the time of the agreement’s termination. Severance pay in Timo Kohtamäki’s President and CEO agreement equalled 18 month cash salary.
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 2014 were related to the company’s return on investment and equity ratio.
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 30.