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Remuneration

Remuneration statement

Tikkurila publishes a remuneration statement in accordance with the Corporate Governance 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 him.

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.

In addition to the above-mentioned items, the President and CEO has a defined contribution-based supplementary pension plan.

Elements of Management Board remuneration:

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

In December 2017, the Board of Tikkurila Oyj decided on the 2018 annual bonus targets for the Tikkurila Management Team. The bonus criteria were four: The Tikkurila Group adjusted operating profit, SKU reduction, cash flow from operations and personnel expenses for the 2018 financial year. The cash-based annual bonus of the CEO may not exceed 58.33 percent of the annual fixed salary. For other Tikkurila Management Team members it may not exceed 48.33 percent of the fixed annual salary. 

Long-term incentive system: Share-based commitment and incentive plan

The Board of Directors of Tikkurila Oyj has approved two new share-based incentive plans 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. 

Share plan 2018-2022

The plan includes three performance periods, calendar years 2018-2020, 2019-2021 and 2020-2022. The potential rewards from the plan will be paid partly in the Company's shares and partly in cash in 2021, 2022 and 2023. The cash proportion is to cover taxes and tax-related costs arising from the reward to the participants. Payment of the reward is conditional to that a participant is employed at the time of the payment. The reward amounts earned through the plan will be capped if the limits set by the Board of Directors for the payable reward are reached.

A participant must hold a minimum of 50 percent 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 as the participant's employment or service in a group company continues.

Approximately 10 key employees, including the members of the Management Team, belong to the target group of the plan during the performance period 2018-2020.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. In addition, the Company will pay taxes and tax-related costs arising from the reward to the participants in connection with the reward payment.

Share plan 2018-2019

The plan includes one performance period, calendar years 2018-2019. The potential reward from the plan will accrue in cash and will be paid partly in the Company's shares and partly in cash in 2020. The cash proportion is to cover taxes and tax-related costs arising from the reward to the participants. Payment of the reward is conditional to that a participant is employed at the time of the payment.

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 his 6-month salary if the company terminates his 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 2017

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

In 2017, 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 2017:

  • 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 2017 was published.

Meeting fees paid to the Board of Directors for 2017:

  • 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

 

2017

 2016

Jari Paasikivi, Chairman of the Board 

73

 70

Petteri Walldén, Vice Chairman of the Board 

49

 46

Harri Kerminen

41

37

Pia Rudengren

57

46

Eeva Ahdekivi

42

48

Riitta Mynttinen 

49

46

Total

311

 295

 

*Of the annual fee, 40 percent was paid as Tikkurila shares. The proportion paid in total as shares was EUR 96,000 (96,000), and it is included in the above remuneration.

 

Remuneration of the President and CEO in 2017

 

Accrual, one thousand euros

 

2017

2016

Fixed salary with fringe benefits

1,200*

445

Bonuses

21

87

Share-based incentive system

-

 -

Total

1,221

 532

Supplementary pension system

91

 70

 

*CEO Erkki Järvinen from January 1 until September 21, 2017 and Interim CEO Jukka Havia from September 21 until December 31, 2017. Includes the one-time termination salaries, as well as the salary of the notice period until the end of 2017. 

 

Pce

 

2017

2016

Transferred shares (included in the information presented above)

-

-

 

 

Remuneration of the other Management Board in 2017

Accrual, one thousand euros

 

2017

2016

Fixed salary with fringe benefits

1,168

706

Bonuses

28

145

Share-based incentive system

10

-

Total

1,206

850

 

Pce

 

2017

2016

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.