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
|Other Executive Team members
|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.
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 Plans||PSP 2015-2017||PSP 2016-2018||PSP 2017-2019|
|Current number of participants
|Maximum number of gross shares to be paid *)
|- CEO and the Executive team
|- Other participants
|Total maximum number of gross shares to be paid *)
||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
*) 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 Plans||RSP 2015-2017||RSP 2016-2018||RSP 2017-2019|
|Current number of participants
|Number of gross shares nominated *)
|Share delivery year
*) 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