Remuneration is aligned with Metso’s financial performance, internal and external references and by observing remuneration levels for similar positions among peer companies. Metso’s remuneration package for key personnel and executives includes a competitive salary and employee benefits according to local market practices, short-term incentives based on predefined annual performance indicators, and long-term incentives that align the interests of the key executives and shareholders.
According to the decision of the 2016 Annual General Meeting, the annual fees paid to Board members are:
- Chairman of the Board – EUR 110,000
- Vice Chairman of the Board – EUR 62,000
- Chairman of the Audit Committee – EUR 65,000
- Other Board members – EUR 50,000
In addition, for Board members whose place of domicile is in the Nordic countries, a fee of EUR 700 per meeting is paid for each Board and committee meeting they attend. The meeting fee for members residing elsewhere in Europe is EUR 1,400 and for those residing outside of Europe EUR 2,800. Compensation for travel expenses and daily allowances is paid in accordance with Metso’s travel policy.
The AGM also decided that, as a condition for receiving their annual remuneration, the members of the Board of Directors will be obliged, based on the AGM’s decision, to use 40% of their fixed annual remuneration for purchasing Metso Corporation shares from the market at a price formed in public trading and that such purchases shall be carried out within two weeks following the publication of the interim review for January 1 – March 31, 2016.
|Fees paid in Metso shares in 2015|
|Ozey K. Horton, Jr.||797|
|Wilson Nelió Brumer||797|
The Board members, none of whom are employees of Metso, were paid annual remuneration and meeting fees totaling EUR 575,700 during the financial year that ended on December 31, 2015. The Board members are not covered by Metso’s bonus plans, share-based incentive schemes or pension plans.
In 2015, the remuneration of the President and CEO amounted to EUR 1,245,166 (EUR 799,516) and the remuneration of other Metso Executive Team members amounted to a total of EUR 3,213,626 (EUR 2,134,187). The tables below include the bonuses paid to MET, including the President and CEO, amounted to a total of EUR 531,479 (EUR 363,459).
|EUR||Annual salary||Paid performance bonuses||Fringe benefits||Share-based payment||Total|
|President and CEO||616,200||143,802||15,621||469,543||1,245,166|
|Executive Vice President||320,524||82,606||13,625||263,211||649,966|
|Other Executive Team members||1,559,558||305,070||20,885||648,146||2,533,660|
Additionally, executive management benefits include a supplementary defined contribution pension plan for all members of the Executive Team, with the exception of President and CEO Matti Kähkönen, who had already earlier been in a supplementary defined benefit pension plan. Metso’s Board has outlined that no new supplementary defined benefit pension plans will be introduced. In 2015, the pension insurance premium payments totaled approximately EUR 0.68 million (2014 EUR 0.52 million).
Employment terms and conditions of President and CEO Matti Kähkönen
Metso’s President and CEO Matti Kähkönen is entitled to participate in Metso’s short- and long-term incentive programs according to the respective terms and conditions of those programs. The terms and conditions are decided by the Board. The Board assesses the work and performance of the President and CEO and decides on his remuneration.
|Employment terms and conditions of the President and CEO as of January 1, 2016|
|Base salary and fringe benefits||Total monthly salary EUR 50,000, including salary and fringe benefits (company car and mobile phone)|
|Short-term incentive (annual performance bonus)||The annual bonus can be earned in accordance with terms approved by the Board. The maximum bonus is 75% of the total annual salary.|
|Long-term incentives||According to Metso’s long-term incentive plans. In Performance Share Plan the maximum share allocation for CEO corresponds to 150% of his annual salary.|
|Pension||Retirement age is 63 years. Kähkönen has a supplementary defined benefit pension plan. His total pension is 60% of average monthly earnings during the past four full calendar years prior to retirement.|
|Termination of assignment||The notice period for both parties is six months. Severance pay (if the company terminates the agreement) is six months’ notice period compen-sation plus severance pay correspon-ding to the last total monthly salary multiplied by 18.|
The Board annually confirms the terms and targets of the performance bonuses on the Group level. In December 2014, the Board approved a new short-term incentive plan, Metso Bonus. This plan covers globally approximately 6,000 employees, including the Executive Team and the President and CEO. The amount of bonus payment, if any, is based on achieving predefined financial performance targets. For 2015, the financial targets were 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 2015, the maximum annual performance bonus was 75% of total annual salary for the President and CEO. For the 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.
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 2016, 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.
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.