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.

2015 The 2015 Annual General Meeting decided that the Chairman of the Board is paid a fee of EUR 10,000 (10,000) per month and Board members each receive EUR 3,000 (3,000) per month. Members of the Board also received an attendance fee of EUR 500 (500) per meeting.

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 (1,000).

Travel expenses were reimbursed as invoiced.

Fees – Board of Directors, EUR per annum

Member 1 Jan–31 Dec 2015  1 Jan–31 Dec 2014
Berndt Brunow 120,000  120,000
Juhani Mäkinen 36,000  36,000
Noora Forstén 36,000  36,000
Finn Johnsson 36,000  36,000
Heppu Pentti 1) 30,832  12,000
Kristina Pentti-von Walzel 36,000  36,000
Heikki Räty 36,000  36,000
Total 330,832 

312,000

 1) As of 25 March 2015 Heppu Pentti has been a member of the Group’s Board of Directors. During 2014 and until April 2015 he was a member of the Board of Directors of two subsidiaries.

Meeting fees – Board of Directors, EUR per annum

Member  1 Jan–31 Dec 2015  1 Jan–31 Dec 2014
Berndt Brunow 5,500  10,000
Juhani Mäkinen 7,500   12,500
Noora Forstén 5,500   10,000
Finn Johnsson 15,000  28,500
Heppu Pentti 1) 4,500  13,000
Kristina Pentti-von Walzel 7,000   
Heikki Räty 9,500  16,000
Total 54,500  90,000

 1) As of 25 March 2015

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 remuneration policy approved by the Board of Directors states that Lemminkäinen’s management consists of the President and CEO, the Group Executive Team, the members of the business segment management teams and the Group’s other key personnel on the basis of the significance of their responsibilities. According to the remuneration policy, the remuneration of the management 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 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. These seek to support the achievement of the company’s 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 the nature and commercial value of their position.

2015 In 2015, the size of the performance bonus for the President and CEO and the Group Executive Team was based on the Group’s operating profit and other financial targets as well as the achievement of targets associated with the improvement of efficiency or other development-related targets. Performance bonuses for the Executive Vice Presidents of business segments who are members of the Group Executive Team were also based on each segment’s operating profit. 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 plans

The 2013–2015 share-based 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.

2015 About 35 people fell within the scope of the plan during the 2015 earning period.

The performance-based reward was based on Lemminkäinen Group’s equity ratio and its return on capital employed. The reward for the earning period 2015 will be paid out in 2016 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.

The 2016–2018 share-based incentive plan

At the end of 2015, Lemminkäinen Corporation’s Board of Directors decided to introduce a new share-based incentive plan for key personnel. The plan aims to combine the objectives of the shareholders and key personnel in order to increase the value of the company, while committing the participants of the plan to the company and increasing their ownership in the company.

The plan consists of three earning periods: the calendar years 2016, 2017 and 2018. At the beginning of each earning period, the company’s Board of Directors decides on the plan’s earning criteria, the targets to be set, the number of shares to be allocated and the plan’s participants. The potential reward for each earning period will be paid in four instalments, each of them 25 per cent of the total reward. The reward payment will take place during the four years following the earning period. If a participant’s employment or service contract ends during the earning or payment period, they will not, as a rule, be entitled to any unpaid rewards.

The reward will be paid as a combination of shares and cash. The aim is that the cash portion will cover any taxes and tax-related costs arising from the reward. In paying rewards, Lemminkäinen Corporation may, at its discretion, use one or more of the following: new issued shares, the company’s own existing shares, shares purchased from the market or cash.

Approximately 110 people fall within the scope of the plan during the 2016 earning period. In 2016, the reward is based on Lemminkäinen Group’s return on capital employed (ROCE).

A reward paid through this plan may correspond to the value of a maximum of 1,200,000 Lemminkäinen Corporation shares (including the monetary portion).

The Board of Directors recommends that the President and CEO and members of the Group Executive Team retain ownership of 50 per cent of the shares they receive through the plan until the value of their holding corresponds to their six months’ salary. They should maintain this holding during the validity of employment or service.

Other long-term incentives

An agreement has been made on a performance bonus payable to the President and CEO, the Executive Team and separately specified key personnel for 2016–2018. The aim of the bonus is to ensure the continuity and profitability of the business over the long term. The bonus, if any, will be paid in 2016 and 2018, and it is equivalent to a maximum of 15 months’ cash salary. The criteria for the payment of the bonus include the Group’s financing arrangements succeeding as planned.

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 upon reaching 63 years of age.

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.

Remuneration and fees – Executive Team (Excluding the President and CEO)

  1 Jan–31 Dec 2015 1 Jan–31 Dec 2014
EUR per annum    
     Monetary salary 1) 1,464,294  2,276,414
     Benefits 81,162  111,198
     Performance-based incentives 127,063  222,329
     Pension schemes 298,017  496,557
Total 1,970,535  3,106,498
     
Share-based incentive (shares, no.) 11,066  2,269

1) Includes compensation related to redundancy


Remuneration and fees – President and CEO

  1 Jan–31 Dec 2015 1 Jan–31 Dec 2014 1)
EUR per annum    
     Monetary salary 496,462  1,568,570 2)
     Benefits 19,801  20,010
     Performance-based incentives 42,762  85,608
     Pension schemes 120,200  261,789
Total 679,224  1,935,977
     
Share-based incentive (shares, no.) 6,782  267

1) As of 1 August 2014, Casimir Lindholm has served as the President and CEO. The Chairman of the Board of Directors, Berndt Brunow, acted as the interim President and CEO from 2 April to 31 July 2014, after Timo Kohtamäki left the company on 2 April 2014.

2) Includes compensation related to redundancy.