The Board annually confirms the terms and targets of the performance bonuses on the Group level. Metso’s short-term incentive plan, Metso Bonus, covers approximately 6,000 employees globally, including the Executive Team and the President and CEO.
The amount of bonus payment, if any, is based on the achievement of predefined financial performance targets. For 2016, the financial performance targets were adjusted EBITA, orders received and cash flow of Metso and/or the business area in question. In addition, individual and/or team targets were used.
In 2016, the maximum annual performance bonus for the President and CEO was 75% of total annual salary. For other Executive Team members, the maximum annual performance bonus was 40–60%. For other employees, the maximum bonus is determined according to the job level and is 40% at the highest level.
In addition to the Metso Bonus, there are also other bonus plans that are used to meet the local legislative requirements and to provide a more suitable bonus plan for production units. The local mandatory bonus plans are typically profit sharing plans, and the local production bonus plans are based on the productivity, quality and safety KPIs of the production unit in question. According to Metso’s policy, an employee can participate in only one bonus plan at a time.
Share-based incentive plans
The Board decides on and implements Metso’s share-based incentive plans, which are part of the remuneration program for Metso management. The purpose of the plans is to align the goals of Metso’s shareholders and management to enhance the value of the company. The plans also aim to ensure commitment of management and to offer them a competitive, ownership-based reward scheme.
Any shares to be potentially rewarded are acquired through public trading, and therefore the incentive plans will have no diluting effect on the share value. The share repurchase and share issue authorizations are obtained from the Annual General Meeting. There are no options outstanding or available from any of Metso’s prior option programs.
Metso has a share ownership recommendation policy for the members of the Metso Executive Team. In accordance with this policy at least 50% of the share rewards (net shares after the deduction of applicable payroll tax) received by these individuals under the Performance Share Plans shall be retained until the share ownership of the individual Metso participant amounts to his/her annual gross base salary.
Performance Share Plan
In December 2014 the Board decided on a new long-term share-based incentive plan for the Group's senior management, with a Performance Share Plan (PSP) as the main structure. In addition, the Board decided to establish a Restricted Share Plan (RSP) as a complementary share-based incentive structure for specific situations.
The Performance Share Plan consists of annually commencing performance share plans, each with a three-year earning period. The commencement and earning criteria of each new plan will be subject to separate approval by the Board. If a participant’s employment or service ends for reasons relating to the participant before the reward payment, no reward will be paid.
The complementary Restricted Share Plan (RSP) consists of annually commencing restricted share plans, each with a three-year vesting period, after which the allocated share rewards will be delivered to the participants provided that their employment with Metso continues until the delivery date of the share rewards. The commencement of each new plan is subject to separate approval by the Board.
In December 2017, The Board decided to continue the long-term share-based incentive plan for the Group's senior management, with a Performance Share Plan (PSP) as the main structure and the Restricted Share Plan (RSP) as a complementary share-based incentive structure for specific situations.
More information about the plans can be read from our Corporate Governance Statement 2016.
Metso applies a share ownership recommendation policy for the members of Metso Executive Team. In accordance with this policy at least fifty per cent of the share rewards (net shares after the deduction of applicable payroll tax) received by these individuals under the above plans shall be retained until the share ownership of the individual participant in Metso amounts to his/her annual gross base salary. The incentive plans will have no diluting effect as no new shares will be issued in connection with them.