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Remuneration

Remuneration statement 2018

Tikkurila publishes a remuneration statement in accordance with the Finnish Corporate Governance Code 2015. The statement consists of the following entities:

Decision-making process of remuneration

Board of Directors

The Annual General Meeting decides on remuneration paid to the members of the Board of Directors on the basis of the proposal made by the Nomination Board. The Nomination Board consists of the three largest shareholder representatives, in addition to which the Chairman of Tikkurila’s Board of Directors acts as an expert member of the Board. 

President and CEO and Management Board

The Board’s Remuneration Committee organizes matters connected with Management Board remuneration. Tikkurila’s Board of Directors decides on the remuneration of Tikkurila’s President and CEO and those Management Board members who report directly to her.
In the preparation of Board of Directors and management remuneration, external experts as well as related external research data are utilized.

Principles of remuneration

Board of Directors

Board members receive reimbursements related to Board membership and work on the Committees from Tikkurila. Board members are not within the sphere of Tikkurila’s incentive systems. Of the annual fee, approximately 40 percent is paid as Tikkurila shares obtained from the market and the rest in cash. Shares are directly obtained for the use of the Board within two weeks of when the year’s first quarter business review has been published.

President and CEO and Management Board

The total salary of the President and CEO and Management Board consists of a fixed basic salary including fringe benefits and variable performance-based pay involving two elements: a long-term share-based commitment and incentive system, as well as a short-term calendar year- and cash-based annual bonus.

Fixed salary of the President and CEO

A fixed monthly salary including fringe benefits, annually 418,000 euro.

Short-term incentive system, Cash-based annual bonus

According the decision of the Board of Tikkurila Oyj, the criteria for annual management bonus scheme for the financial year 2018 for the Tikkurila Management Team consist four bonus criteria: The Tikkurila Group adjusted operating profit, SKU reduction, cash flow from operations and personnel expenses for the 2018 financial year. CEO's annual cash-based bonus may not exceed 58.33% of CEO's annual salary. Other management Team members' annual cash-based bonus may not exceed 48.33% of their annual salary.

Long-term incentive system, share-based commitment and incentive plans

Tikkurila has several share-based commitment and incentive plans of management. All plans included CEO of Tikkurila Oyj, members of Tikkurila Management Team and other individual key employees. 

Resolutions of the Board of Directors of Tikkurila and key terms of the share-based incentive plans

The Board of Directors of Tikkurila Oyj approved in April 2016 a share-based incentive plan for the Group key employees. The plan consists of a performance share plan 2015-2019 and a matching share plan 2016-2018. In May 2017, the Board of Directors of Tikkurila resolved on matching share plan 2017-2019 for the selected Group key employees. On June 26, 2018, the Board of Directors of Tikkurila Oyj approved two new share-based incentive plans, performance share plan 2018-2022 and share plan 2018-2019, for the Group key employees. The aim of the new plans is to align the objectives of the shareholders and the key employees to execute Company's strategic transformation in the short-term and increase the value of the Company in the long-term, as well as to retain the key employees at the Company, and to offer them a competitive reward plan based on earning and accumulating the Company's shares. On December 19, 2018, the Board of Directors of Tikkurila Oyj decided the details of performance period 2019-2021 and to change the terms of plan in order to convert a proportion of the reward of the performance period 2019-2021 into a time-based reward. 

Performance Share Plan 2015-2019

Originally approximately 10 key employees belong to the target group of the performance period 2015-2019. The performance share plan includes three performance periods, calendar years 2015-2017, 2016-2018 and 2017-2019. At the end of 2018 the target group of performance period 2016-2018 included approximately 3 key employees, and the target group of performance period 2017-2019 included approximately 6 key employees. The rewards to be paid on a basis of the performance periods 2015-2017 and 2016-2018 would amount to an approximate maximum total of 250,000 Tikkurila Oyj shares. No payments were made from performance period 2016-2017, as the intrinsic value for the period of plan did not reach in advance set level. The rewards to be paid on a basis of the performance period 2017-2019 will amount to an approximate maximum total of 120,000 Tikkurila Oyj shares. In addition, the Company will pay taxes and tax-related costs arising from the reward to the participants in the connection with the reward payment.

Matching Share Plans 

In both Matching Share Plan there is one vesting period, calendar years 2016-2018 and 2017-2019. The prerequisite for receiving reward on a basis of these plans is that a person participating in the plan acquires the Company's shares up to the number determined by the Board of Directors. Furthermore, receiving of reward is tied to the continuance of participant's employment or service upon reward payment. The rewards to be paid on a basis of the matching share plan which vesting period is 2016-2018 will amount to a maximum total of 4,000 Tikkurila Oyj shares. The reward from the plan will be paid partly in the Company's shares and partly in cash in 2019. The rewards to be paid on a basis of the matching share plan which vesting period is 2017-2019 will amount to a maximum total of 8,000 Tikkurila Oyj shares. The reward from the plan will be paid partly in the Company’s shares and partly in cash in 2020. The Company will additionally pay from both matching share plans taxes and tax-related costs arising from the reward to the participants of in the connection with the reward payment.

Performance share plan 2018-2022

Share plan 2018-2022 includes three performance periods, calendar years 2018-2020, 2019-2021 and 2020-2022. The potential rewards from the plan will be paid partly in cash and partly in shares of Tikkurila Oyj in year 2021, 2022 and 2023. The cash proportion is to cover taxes and tax-related costs arising from the reward to the participants. The target group of performance period 2018-2020 includes approximately 10 key employees, including the members of the Management Board. The potential reward of the plan from the performance period 2018-2020 will be based on the Tikkurila Group’s average EBITDA and net debt based intrinsic values for 2018-2020. The rewards to be paid on the basis of the performance period 2018-2020 will amount to an approximate maximum total of 130,000 Tikkurila Oyj shares. On December 19, 2018, the Board of Directors of Tikkurila decided changes of share-based plans and details of performance period 2019-2021. The Board of Directors changed the terms of performance share plan 2018-2022 so that part of the reward for the performance period 2019-2021 will be a time-based reward and the number of the participants of the plan was increased. Possible rewards from performance period 2019-2021 will be paid partly in cash and partly in the Company’s shares in year 2022. Approximately 20 key employees, including the members of the Management Team, belong to the target group of the plan during the performance period 2019-2021. The potential reward of the plan will be based on the Tikkurila Group´s average EBITDA-based intrinsic values for 2019-2021. The rewards to be paid on the basis of the performance period 2019-2021 will amount to an approximate maximum total of 130,000 Tikkurila Oyj shares. A member of Tikkurila Management Team must hold a minimum of 50 per cent of the net number of shares received on the basis of the plan, until his or her total shareholding in the company equals the value of his or her annual gross salary. Such number of shares must be held as long the member’s employment or service in a group company continues. 

Share plan 2018-2019

Share plan 2018-2019 includes one performance period, calendar years 2018-2019 and the potential reward will be paid partly in cash and partly in shares of Tikkurila Oyj. Approximately 30 key employees, including the members of the Management Board, belong to the target group of the plan. The potential reward of the plan will be based to the cumulative revenue and adjusted EBIT from the performance period 2018-2019. The calculated aggregate value of the plan will amount to an approximate maximum of EUR 3.2 million.

Pension benefits

The retirement age of the CEO and other Management Team members is specified in accordance with the legislation.
The CEO has no supplementary pension plan.

Termination

A six-month period of notice applies to the CEO. In addition, the CEO will receive a severance pay equaling her 6-month salary if the company terminates her agreement. 

The other Management Team periods of notice and reimbursement are specified in the employment contracts of each person.
Nomination Board

No remuneration is payable to the members of the Nomination Board in relation to their duties in the Nomination Board.
 

Remuneration report

Financial benefits of the Board of Directors in 2018


The Annual General Meeting decides on remuneration paid to the members of the Board of Directors.

In 2018, the members of Tikkurila’s Board of Directors were paid annual and meeting-based remuneration. Travel expenses were reimbursed in accordance with the company’s travel regulations.

The annual fees paid to the Board of Directors for 2018:

  • Chairman EUR 64,000 for the year
  • Vice Chairman and Inspection Committee Chairman EUR 40,000 for the year
  • Other members EUR 32,000 for the year
     

Of the annual fee, approximately 40 percent is paid as Tikkurila Oyj shares obtained from the market and the rest as cash. The shares were acquired directly for the members of the Board within two weeks from when the business review from the period 1 January – 31 March 2018 was published.

Meeting fees paid to the Board of Directors for 2018:

  • EUR 600 for meetings held in the home state of a member
  • EUR 1,200 for meetings held outside the home state of a member
  • EUR 600 for telephone meetings  

Those attending Committee meetings were also entitled to a fee per meeting. The meeting remuneration fees were paid in cash.


Remuneration* paid to the members of the Board of Directors

One thousand euros

 

2018

2017

Jari Paasikivi, Chairman of the Board 

72

73

Petteri Walldén,
Vice Chairman of the Board 

48

49

Harri Kerminen

40

41

Pia Rudengren

56

57

Riitta Mynttinen 

49

49

Catherine Sahlgren
(as of April 12, 2018)

39

-

Heikki Westerlund
(as of April 12, 2018)

39

-

Eeva Ahdekivi
(until April 12, 2018)

2

42

Total

346

311

 

*Of the annual fee, 40 percent was paid as Tikkurila shares. The proportion paid in total as shares was EUR 109 (96) thousand, and it is included in the above remuneration.

 

Remuneration of the President and CEO in 2018

 

Accrual, one thousand euros

CEO from April 12, 2018 onwards

2018

2017

Elisa Markula
Fixed salary with fringe benefits


 

286

-

Bonuses
 

54

-

Share-based incentive plan
 

47

-

Total

388

-

 

 

 

Interim CEO*)
(from September 21, 2017
until April 11, 2018)
Jukka Havia
Fixed salary with fringe benefits

 

75

71

CEO until September 21, 2017

Erkki Järvinen
Fixed salary with fringe benefits

-

706

Bonuses

-

21

Benefits related to termination of employment

-

422

Total

-

1 149

Supplementary pension system

-

 91

 

*) Tikkurila Oyj’s Board of Directors appointed CFO Jukka Havia as Tikkurila’s Interim CEO starting from September 21, 2017. He acted in this position until the new CEO, Elisa Markula, started at Tikkurila. Jukka Havia has been a member of the Tikkurila Management Team and his employee benefits until September 21, 2017 and after April 12, 2018 is disclosed as part of the Other Management Team members’ remuneration.

 

Pce

 

2018

2017

Transferred shares (included in the information presented above)

-

-

 

Remuneration of the other Management Board in 2018
 

Accrual, one thousand euros

 

2018

2017

Fixed salary with fringe benefits

945

1,093

Bonuses

141

28

Benefits related to termination of employment

86

75

Share-based incentive plan

107

10

Total

1,279

1,206

 

Pce

 

2018

2017

Transferred shares (included in the information presented above)

-

-

 

The President and CEO and other Group management remuneration information presented above is based on the accrual entries in the IFRS Group Consolidated Financial Statements. In Tikkurila Oyj’s separate financial statements, which are based on Finnish accounting norms, the appreciation of remuneration paid as shares and the timing of their write-offs differ from the Group calculation. In addition, it must be taken into account that payments respective to variable salary elements as well as the cash-based annual bonus and long-term share-based incentive system occur afterwards following each earning period, so the payments and costs typically target various financial years.