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 26 March 2012, the Annual General Meeting decided to maintain that the Chairman of the Board will receive EUR 48,400 in remuneration for his term of office, the Vice Chairman EUR 30,250 and the other members of the Board EUR 24,200 each. The Chairman of the Board will receive an attendance fee of EUR 800 per meeting, and the other Board members EUR 400 per meeting. Attendance fees will also be paid in the same manner to members of committees set up by the Board of Directors or the company. The Chairman of the Board also has a company-paid phone. Travel expenses will be paid in accordance with the travel policy of the company. In accordance with the decision of the Annual General Meeting, 60% of the annual remuneration was paid in cash and 40% in class B shares. Oriola-KD Corporation class B shares were acquired on the market for the Board members as follows: Olli Riikkala 10,443 shares, Outi Raitasuo 6,527 shares, Jukka Alho 5,221 shares, Harry Brade 5,221 shares, Per Båtelson 5,221 shares, Pauli Kulvik 5,221 shares, Ilkka Salonen 5,221 shares, and Mika Vidgrén 5,221 shares.
Restriction periods are not included in the remuneration paid in Oriola-KD Corporation class B shares. The members of the Board of Directors have not received any share-based rights as remuneration. They are not included in the company’s share incentive scheme. The company has not granted any loans to Board members nor given guarantees on their behalf.
The total fees and other benefits of the Board members for 2012 and shareholdings in the company 31 December 2012 are available in the annual report on 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 2012 for the President and CEO is 58% of the annual salary and for the other Group Management Team members 33% 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 President and CEO, members of the Group Management Team and certain key personnel in the Group are also covered by a 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.
On 10 February 2010, Oriola-KD’s Board of Directors decided on a share incentive scheme for the Group’s key personnel for the years 2010–2012. The share incentive scheme has three earning periods, which are the calendar years 2010, 2011 and 2012. The company’s Board of Directors decides on the earning criteria for the earning period and the targets to be set for these at the start of each earning period. Any payment under the scheme for the earning period 2012 will be based on the achievement of strategic objectives of individual business segments in the Oriola-KD Group.
The potential reward from the earning period 2012 will be paid in partly in the company’s class B-shares and partly in cash. The proportion paid as cash will cover the taxes and tax-like charges associated with the payment. If, at the time of payment of a reward based on the Plan, a key person’s total earnings exceed his/her previous year’s total salary multiplied by 3.5, the reward to be paid on the basis of this plan 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 basic salary together with fringe benefits.
The shares cannot be transferred during a restriction period, which ends two years from the end of the earning period. No reward will be paid if a key person’s employment or service with a Group company ends before the reward payment. Should a key person’s employment or service with a Group Company end during the restriction period for reasons attributable to the key person, he/she must gratuitously return to the company the shares given as reward, which are subject to the transfer restriction. The President and CEO of the Company and the members of the Group Management Team must hold 50% of the shares received on the basis of the plan as long as his/her employment or service with a Group company continues.
The target group of the incentive scheme consists of some 40 employees and the company’s class B shares under the scheme can total a maximum of 1,200,000 shares during 2010-2012. The payments to be made under the scheme correspond in total to a value of no more than approximately 2,400,000 Oriola-KD Corporation class B shares (including the proportion to be paid as cash).
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 2013 will be based on Oriola-KD Group’s Earnings per Share (EPS) and Return on Capital Employed (ROCE), per cent.
The potential reward from the performance period 2013 will be paid partly in the company’s series B shares and partly in cash in 2016. 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 new share-based incentive plan consists of approximately 10 executives during the performance period 2013. The rewards to be paid on the basis of the performance period 2013 will correspond to the value of a maximum total of 1,010,000 Oriola-KD Corporation series B shares (including also the proportion to be paid in cash).
In addition, Oriola-KD Corporation is planning to launch a share savings plan to be offered to 70 Group key personnel. Key employees will be offered an opportunity to save a proportion of their salaries. The accumulated savings are used for share purchases in the company. After approximately three years, each participant is awarded two free matching shares (including taxes and tax-related costs) for each three purchased shares, provided that the initially purchased shares are retained and the participant’s employment or service continues.
The intention of the Board of Directors is to finally decide on the launch of the share savings plan in spring 2013, with savings estimated to begin in July 2013.
Financial benefits of the President and CEO in 2012
The salary and other remuneration, including fringe benefits, paid in 2012 to the President and CEO Eero Hautaniemi, amounted to a total of EUR 489,895.71 as follows:
- fixed base salary of EUR 410,267.87;
- fringe benefits of EUR 20,854.84;
- performance bonus of EUR 58,773.00; and
- share-based payments of EUR 0.00 (including 0 company class B-shares).
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 in the annual report on financial statements.
Financial benefits of other executives 2012
The salaries and other remuneration, including fringe benefits, paid in 2012 to the members of the Group Management team totalled EUR 1,576,049.22 as follows:
- fixed base salaries totalling EUR 1,360,352.88;
- fringe benefits totalling EUR 114,313.34;
- performance bonuses totalling EUR 101,383.00; and
- share-based payments totalling EUR 0.00 (including 0 company class B-shares).
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 in the annual report on financial statements.