This Remuneration Statement is published in accordance with Recommendation 47 of the Corporate Governance Code 2010.
Remuneration and other benefits of the members of the Board of Directors
The Annual General Meeting decides annually on the remuneration payable to members of the Board of Directors for their term of office.
On 30 March 2015 the Annual General Meeting confirmed that the fee for the term of office of the Chairman of the Board of Directors is EUR 48,400, the fee for the term of office of the Vice Chairman of the Board of Directors and for the Chairman of the Board's Audit Committee is EUR 30,250 and the fee for the term of office of other members of the Board of Directors is EUR 24,200. Of the annual fee, 60 per cent shall be paid in cash and 40 per cent shall be used to acquire Oriola-KD Corporation's class B shares for the Board members on the NASDAQ OMX Helsinki Stock Exchange within two weeks from the release of the Interim Report 1 January - 31 March 2015 of the company. The Chairman of the Board of Directors receives an attendance fee of EUR 1000 per meeting and the other members EUR 500 per meeting. Attendance fees are correspondingly also paid to the chairmen and members of Board and company committees. Travel expenses are compensated in accordance with the travel policy of the company.
The total fees and other benefits of the Board members for 2014 and shareholdings in the company 31 December 2014 are available in the financial statements.
Main principles and decision-making process on the remuneration of the President and CEO and other executives
The salary of the President and CEO and other members of the Group Management Team consists of a fixed base salary, fringe benefits, a short term performance bonus and a long term share incentive plan. The remuneration commits management to develop the company and its financial success in the long term. The development stage and strategy of the company are considered when determining the principles for remuneration.
In accordance with its charter approved by the Board of Directors, the Compensation Committee monitors the effectiveness of the incentive schemes to ensure that the schemes promote the achievement of the company’s short term and long term goals.
The Board of Directors reviews and decides annually on the remuneration and benefits of the President and CEO and other members of the Group Management Team, and the underlying criteria thereof.
The Board of Directors decides annually on the earnings criteria and the determination of the performance bonuses based on the proposal of the Compensation Committee.
The company has not granted any loans to the President and CEO or to the members of the Group Management team, nor given guarantees on their behalf. The company has no share option scheme in place. The President and CEO and the members of the Group Management Team have no supplementary pension scheme, except the Vice President Pharmaceutical Wholesale Sweden and Vice President Pharmaceutical Retail Sweden, who have a defined contribution pension benefit typically applied in the Swedish market.
Short term performance bonus
The performance bonus is based on the achievement of the company’s financial targets and personal targets. The maximum performance bonus in 2014 for the President and CEO is 58 per cent of the annual salary and for the other Group Management Team members 33 per cent of the annual salary. The Board of Directors decides annually on the earnings criteria and the determination of the performance bonuses based on the proposal of the Compensation Committee.
Long term share based incentive scheme
The members of Oriola-KD’s Group Management Team are in the company’s long term share incentive scheme. The scheme unites the objectives of shareholders and key personnel to increase the value of the company, commits the key personnel to the company, and offers key personnel a competitive remuneration system based on ownership of shares in the company.
The Board of Directors of Oriola-KD approved on 19 December 2012 a new share-based incentive plan for the Group executives for the years 2013-2015. The share-based incentive plan includes three performance periods which are calendar years 2013, 2014 and 2015. The Board of Directors of the company will decide on the performance criteria and on targets to be established for them at the beginning of each performance period. The potential reward from the plan for the performance period 2014 will be based on Oriola-KD Group’s Earnings per Share (EPS).
The potential reward from the performance period 2014 will be paid partly in the company’s series B shares and partly in cash in 2017. The company will cover taxes and tax-related costs arising from the reward to the executives with the proportion to be paid in cash. No reward will mainly be paid if an executive’s employment or service in a Group company ends before the reward payment.
If an executive’s total earnings are more than his or her total salary of the calendar year preceding the reward payment multiplied by 3.5, the reward to be paid on the basis of the performance period will be reduced for such exceeding part. Total earnings mean total salary together with annual bonus and long-term incentive plan, and total salary means fixed base salary together with fringe benefits.
The target group of the share-based incentive plan consists of seven executives during the performance period 2014. The rewards to be paid on the basis of the performance period 2013 will correspond to the value of a maximum total of 720,000 Oriola-KD Corporation series B shares (including also the proportion to be paid in cash).
The Board of Directors of Oriola-KD approved the terms and conditions of the key employees’ share savings plan on 28 May 2013. On 27 August 2014 the Board of Directors decided to continue the Share Savings Plan with a new savings period 2014-2015. A total of about 40 key employees are participating in the plan. The savings period started on 1 October 2014 and ends on 30 September 2015.
The maximum monthly saving is ten per cent and the minimum is two per cent of each participant’s fixed monthly gross salary. The accumulated savings are used for purchasing Oriola-KD class B shares for the participants at market prices. In return, each participant will receive two free class B matching shares for every three acquired savings shares. Matching shares will be delivered to a participant if the participant holds the acquired shares from the Savings Period until the end of the designated holding period and if his or her employment with a company has not been terminated on the last day of the holding period on bad leaver terms. The holding period will end on the publication date of the Oriola-KD Q3/2016 interim report. Matching shares will be paid partly in the Company’s class B shares and partly in cash. The cash proportion is intended for covering taxes and tax-related payments arising from the reward to a key person.
Financial benefits of the President and CEO in 2014
The salary and other remuneration, including fringe benefits, paid in 2014 to the President and CEO Eero Hautaniemi, amounted to a total of EUR 496,691 as follows:
• fixed base salary of EUR 426,147;
• fringe benefits of EUR 20,400;
• performance bonus of EUR 70,544; and
• share-based payments of EUR - .
The President and CEO has a six-month period of notice and is entitled to severance pay equal to 12 months’ salary. The retirement age of the President and CEO is 63 years and his pension is in accordance with the Employees’ Pensions Act. The President and CEO is included in the company’s share based incentive scheme. Shareholdings of the President and CEO in the company are available on the company’s website www.oriola-kd.com and in the annual report and financial statements.
Financial benefits of other executives 2014
The salaries and other remuneration, including fringe benefits, paid in 2014 to the members of the Group Management team totalled EUR 1,481,191 as follows:
• fixed base salaries totalling EUR 1,259,386;
• fringe benefits totalling EUR 46,047;
• performance bonuses totalling EUR 221,805; and
• share-based payments totalling EUR - .
The members of the Group Management Team are included in the company’s share based incentive scheme. Shareholdings of the members of the Group Management Team in the company are available on the company’s website www.oriola-kd.com and in the annual report and financial statements.