Remuneration

The objective of remuneration at Metso is to attract, retain and reward our people. Motivated, customer-oriented, performance-driven and innovative people are the key to success and the successful execution of our strategy.

Remuneration at Metso

We support, develop and encourage our people as individuals and as team members to perform and help Metso to achieve the set financial and operational targets and to strive for excellent performance. Total remuneration structures may vary by country and are aligned with Metso’s financial performance as well as with internal and external references. We monitor remuneration levels for similar positions among peer companies.

Board remuneration

The Annual General Meeting decides on the remuneration to the members of the Board for one term of office at a time.

According to the decision of the 2018 Annual General Meeting, the annual fees that will be paid to Board members in 2018 are:

  • Chair - EUR 120,000
  • Vice Chair - EUR 66,000
  • Other members - EUR 53,000

Additional remuneration:

  • Chair of the Audit Committee (AC) - EUR 20,000
  • Chair of the Remuneration and HR Committee (RHRC) - EUR 10,000
  • Committee members (AC) - EUR 10,000
  • Committee members (RHRC) - EUR 5,000

Meeting fees (incl. committee meetings) based on residence:

  • Nordic countries - EUR 800
  • Other European countries - EUR 1,600
  • Outside Europe - EUR 3,200

Compensation for travel expenses and daily allowances is paid in accordance with our travel policy.

Board remuneration in 2017

Based on the decision of the 2017 Annual General Meeting, 40 percent of the Board’s annual fees were used to buy Metso shares from the market. Altogether, 5,604 shares were acquired on April 26, 2017. There are no special terms or conditions associated with owning these shares.

The Board members, none of whom are employees of Metso, were paid annual remuneration and meeting fees totaling EUR 576,400 during the financial year that ended December 31, 2017. The Board members are not covered by Metso’s bonus plans, share-based incentive schemes or pension plans.

MemberPositionTotal annual
fee (EUR) *)
Number of Metso shares
received **)
Total   shareholding
as of Dec 31, 2017
(number of shares)
Mikael   Lilius Chair 126,200 1,458 32,444
Christer   Gardell Vice   Chair 73,200 786 6,196
Peter Carlsson Member 75,200 634 1,579
Ozey   K. Horton, Jr. Member 94,800 634 4,789
Lars   Josefsson Member 61,200 634 3,033
Nina   Kopola Member 61,200 634 3,080
Arja Talma Member 76,200 824 2,053
Wilson Nélio Brumer ***) Member 8,400   2,399

*) Total fee paid partly in cash, partly in shares
**) Shares were acquired on April 26, 2017
***) Until AGM 2017

Management remuneration

The Board of Directors decides on the remuneration, benefits and other terms of employment of the President and CEO. The remuneration of the President and CEO comprises a monthly total salary, including customary fringe benefits, pension and short- and long-term incentives. Remuneration levels are reviewed by the Board using market benchmark data.

Metso’s President and CEO is entitled to participate in short and long-term incentive programs according to the respective terms and conditions decided by the Board. The Board assesses the work and performance of the President and CEO.

The Board’s Remuneration and HR Committee decides on the compensation and benefits of the other Executive Team members based on the President and CEO’s proposal and general principles approved by the Board. The remuneration comprises a monthly total salary, customary fringe benefits, such as a car and a mobile phone, as well as short- and long-term incentives. Remuneration levels for the Executive Team members are reviewed using market benchmark data.

Executive Team members are entitled to participate in short- and long-term incentive programs according to the respective terms and conditions of the program. The Remuneration and HR Committee evaluates the achievement of the targets for the Executive Team. As long-term incentives, the Executive Team members are included in share plans that are decided and implemented by the Board.

Remuneration and employment terms of the President and CEO
The remuneration paid to the President and CEO is determined by the Metso Board. Metso’s President and CEO is entitled to participate in short- and long-term incentive programs. The terms and conditions of these programs are decided by the Board.

Employment terms and conditions of the President and CEO Pekka Vauramo

Annual Salary

Total annual salary EUR 750,000 including fringe benefits.

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 the Long-term Performance Share Plan, the maximum share allocation for the President and CEO corresponds to 150 percent of the total annual salary. The purpose of the plan is to align the interests of Metso’s management and shareholders in creating shareholder value. In addition, the President and CEO is entitled to participate in a share matching program.

Pension

The retirement age for the President and CEO is 65 years, unless otherwise to be agreed by the Company and the President and CEO. The President and CEO is entitled to participate in a supplementary defined contribution pension plan. The supplementary pension contribution is equivalent to 25% of the annual salary.

Termination of assignment

The notice period for both parties is six (6) months. Severance pay is the full monthly salary multiplied by twelve (12) if the agreement is terminated by the company.

 

Management remuneration in 2017
In 2017, the remuneration of the President and CEO, Matti Kähkönen between January 1 – July 31, 2017 and Nico Delvaux between August 1 – December 31, 2017, amounted to EUR 929,669 (in 2016: EUR 743,861) and the remuneration of other Executive Team members amounted to a total of EUR 2,626,818  (in 2016: EUR 2,367,341). The tables below include the bonuses paid to the Executive Team, including the President and CEO, amounting to a total of EUR 296,517 (in 2016: EUR 298,487).

Executive team benefits also include a supplementary defined contribution pension plan. Former President and CEO Matti Kähkönen was part of a defined benefit pension plan and the Board has outlined that no new supplementary defined benefit pension plans will be introduced.

In 2017, pension insurance premium payments totaled EUR 1,219,566 (in 2016: EUR 707,440).

EUR Annual salary Paid performance
bonus
Fringe benefits Share-based
payment
Total
President and CEO Nico Delvaux *) 299,408 - 9,128 - 308,536
President and CEO Matti Kähkönen **) 406,765 135,000 12,544 66,824 621,133
Other Executive Team members 2,307,889 161,517 19,205 138,207 2,626,818
Total 3,014,062 296,517 40,877 205,031 3,556,487

*) President and CEO between August 1, 2017 – December 31, 2017
**) President and CEO between January 1 – July 31, 2017

Incentive programs at Metso

Short-term incentives

Our short-term incentive plan, Metso Bonus, covers approximately 6,000 employees globally, including the Executive team. The Board approves the Group level terms and targets for the Metso Bonus annually. In addition, the Board annually sets and approves the President and CEO’s short-term incentive plan.

The Metso Bonus payout, if any, is mainly based on the achievement of predefined financial targets. For 2017, the financial targets were the adjusted EBITA, orders received and cash flow for the Metso Group or Business Area in question. In addition to the financial targets, individual, team and business bonus performance targets are used.

Maximum Metso Bonus payout, % of total annual salary

 Maximum Bonus payout 
President and CEO 75%
Other Executive Team members 40-60%
Other Metso employees 40% (at   highest, maximum varies based on role)

In addition to the Metso Bonus, local productivity plans are designed to drive and support the performance of various production units. Targets for local productivity plans are mainly based on productivity, quality and safety KPIs. Local mandatory bonus plans are defined by local legislative requirements and are typically profit-sharing plans.

According to our Performance and Reward Policy, an employee can participate in a one bonus plan at a time.

Long-term incentives

The Board decides on and implements Metso’s long-term incentive plans. The purpose of these plans is to align the interests of the management and Metso’s shareholders. The plans also aim to ensure long-term commitment of management and to offer them a competitive reward scheme.

Any shares to be potentially rewarded in these incentive plans are acquired through public trading, and therefore have no diluting effect on the share value. Share repurchase and share issue authorizations are obtained from the Annual General Meeting. Current valid authorizations are presented on our website at www.metso.com/board. 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 Executive Team including President and CEO. In accordance with this policy, at least 50% of the share rewards (net shares after deduction of the 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.

Long-term Incentive Plan 2012-2014

In December 2011, the Board decided to establish a share-based incentive plan that had three performance periods and a related two-year vesting period. For each performance period, the performance criteria and participants were subject to a separate decision by the Board.

All performance periods and related two-year vesting periods have now been completed. In March 2017, a total of 12,590 treasury shares were used to pay rewards to 49 participants; the Executive Team at the time of payment received a reward of 3,875 shares. In March 2015, a total of 95,270 treasury shares were used to pay rewards to 56 participants. No shares were delivered in March 2016 as the targets set for the performance period 2013 were not met.

Long-term Incentive Plans 2015 onwards

In December 2014, the Board decided on a long-term share-based incentive plan for the Metso management and key employees, 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 commencement of each new PSP and RSP plan and the earnings criteria for each new PSP plan will be subject to a separate decision by the Board. The PSP consists of annually commencing performance share plans, each with a three-year earning period, and the complementary RSP consists of annually commencing restricted share plans, each with a three-year vesting period.

The possible rewards will be paid partly in Metso’s shares and partly in cash. If a participant’s employment or service ends for reasons relating to the participant before the reward payment, no reward will be paid from either of these plans.

In December 2017, the Board decided to continue with the Performance Share Plan (PSP) as the main structure for President and CEO and selected senior executives. In addition, the Board decided to continue a Restricted Share Plan (RSP) as a complementary share-based incentive structure for specific situations.

The potential share reward payable under the PSP 2018–2020 is based on the total shareholder return of Metso’s share during 2018–2020. The plan covers a total of 11 employees, including the  President and CEO, Executive Team members and selected key management nominated by the Board. The PSP 2018-2020 will comprise a maximum of 160,000 reward shares (gross before deduction of the applicable payroll tax).

According to the Board’s decision, the maximum number of shares that may be allocated and delivered within the RSP 2018-2020 totals 50,000 reward shares (gross before deduction of the applicable payroll tax). The Board approves nominations for the RSP plan based on the President and CEO’s proposal.

Status of the ongoing Performance Share Plans as of December 31, 2017

Performance Share PlansPSP 2015-2017PSP 2016-2018PSP 2017-2019
Current   number of participants 79 86 95
Maximum   number of   gross shares to be paid *)      
- CEO and the Executive team 16,600 51,800 110,000
- Other participants 269,610 324,200 285,800
Total   maximum number   of gross shares to be paid *) 286,210 376,000 395,800
Performance   criteria Total shareholder return (TSR) of   Metso’s share during 2015–2017 Total shareholder return (TSR) of   Metso’s share during 2016–2018 Total shareholder return (TSR)   of Metso’s share during 2017–2019
Share   delivery year 2018 2019 2020

*) Maximum number of gross shares, taxes included, payable if the performance criteria is achieved in full

Status of the ongoing Restricted Share Plans as of December 31, 2017

Restricted   Share PlansRSP 2015-2017RSP 2016-2018RSP 2017-2019
Current   number of   participants 0 0 5
Number   of gross   shares nominated *) - - 15,900
Share   delivery year 2018 2019 2020

*) Maximum number of gross shares, taxes included

Long-term Incentive Plan 2018 onwards

In addition to the already existing PSP and RSP plans, in December 2017 the Board decided to implement a Deferred Share Unit Plan (DSUP), an additional long-term share value-based incentive plan for the Metso management and key employees.

DSUP is a long-term share value-based incentive plan that aligns and rewards employee’s performance and share value development during a performance period. The plan consists of approximately 120 key employees, who are not participating in the PSP 2018-2020 plan, and is payable after three years of the program commencing if the terms of payment are met.

Any potential rewards from DSUP 2018-2020 will be paid in 2021. If a participant’s employment or service ends for reasons relating to the participant before the reward payment, no reward will be paid. The maximum amount of rewards payable based on the first plan for the years 2018-2020, based on the average price of the Metso share on December 13, 2017, is approximately EUR 9 million (gross before the deduction of applicable payroll tax). The final value of this individual plan will depend both on the achievement of the performance targets set by the Board of Directors for 2018 and the development of Metso's share price during 2019-2020.

More information about the plans can be read from our Corporate Governance Statement 2017