Remuneration of Senior Management

Decision-making procedure concerning remuneration

Vapo Oy’s Annual General Meeting appoints the members of the Supervisory Board and the Board of Directors annually and decides on their remuneration based on a proposal issued by the Board’s Personnel Committee.

Vapo’s Board of Directors decides on the basic salary and other benefits of the CEO and the Group Management Team as well as their short-term and long-term incentive schemes based on a proposal issued by the Board’s Personnel Committee.

Vapo’s Board of Directors approves the remuneration policy that defines key remuneration principles, among other things.

Key remuneration principles

Members of the Supervisory Board

The fees paid to the members of the Supervisory Board are paid entirely in cash. The term of the members ends at the conclusion of the next Annual General Meeting. The members of Vapo’s Supervisory Board are not included in share-based incentive schemes and they are not in an employment relationship with Vapo.

Members of the Board of Directors

The fees paid to the members of the Board of Directors are paid entirely in cash. The term of the members ends at the conclusion of the next Annual General Meeting. The members of Vapo’s Board of Directors are not included in share-based incentive schemes and they are not in an employment relationship with Vapo.

The CEO and the other members of the Group Management Team

In accordance with the remuneration policy approved by the Board of Directors, the fixed salary of the CEO and the members of the Group Management Team is defined as a total salary that includes fringe benefits. They are also included in short-term and long-term incentive programmes.
A fixed monthly salary refers to an individual’s total monthly salary determined based on the level of competence required for the position as well as the individual’s experience and performance.

The Group CEO and the members of the Group Management Team may be eligible for a car benefit, mobile phone benefit and medical insurance as part of their total remuneration.

Vapo’s Board of Directors decides annually on the performance indicators and targets for the short-term and long-term incentive schemes of the CEO and the members of the Group Management Team. They are aimed at supporting the achievement of the company’s strategic targets.

Based on a proposal by the CEO, the Board of Directors decides on the achievement of the targets set relative to the performance indicators and the amount of remuneration.

Short-term remuneration

The management’s short-term remuneration is based on the possibility of earning an annual incentive bonus. The amount of incentive pay depends on the achievement of the financial and operational targets set at the beginning of the financial year. Vapo Group’s senior management is divided into two incentive pay groups that determine the maximum incentive pay percentage for each individual. The incentive pay group is determined based on the competence requirements of the position and its impact on the Group’s business.

At least 50% of the incentive pay is based on financial targets and the remainder on operational targets. The payment of incentive bonuses is also subject to the achievement of a certain minimum level in terms of the financial targets.

The maximum incentive pay corresponds to 40% of the annual salary for the CEO of Vapo Group and the director of the Grow&Care division and 30% of the annual salary for the other members of the Group Management Team.

The incentive bonus is paid in cash in accordance with the payment schedule of the incentive programme.

Long-term remuneration

The management’s long-term incentive scheme consists of two 12-month earning periods, corresponding to the financial years 1 May 2017–30 April 2018 and 1 May 2018–30 April 2019. The incentive scheme provides the participants with the opportunity to earn a monetary bonus for achieving earning criteria set separately for each earning period by the Board of Directors. The Board decides on the earning criteria and targets for each earning period. The Board sets a starting level, target level and maximum level for the target for each earning criteria. For the financial year 1 May 2018–30 April 2019, the targets were the Group’s operating margin (EBITDA) and strategic projects.

The incentive bonuses are paid in cash in accordance with the payment schedule of the incentive programme in question.

The bonuses paid under the various incentive schemes cannot under any circumstances exceed 80% of the individual’s fixed annual salary.

Pension plans

The Group CEO and the other members of the Group Management Team are covered by a pension scheme pursuant to the Employees’ Pensions Act. In addition, those members of the Group Management Team whose managerial employment agreement entered into effect before 23 November 2017 are entitled to a defined contribution collective supplementary pension insurance to which the employer contributes an amount equivalent to 10% of their total annual salary (12 x monthly salary), excluding bonuses, every year. The company has an agreement with a pension insurance company on said supplementary pension rights. The supplementary pension programme for senior management was closed on 23 November 2017. Members of the senior management appointed after the aforementioned date will no longer have the right to a supplementary pension as part of their contract terms.

Compensation for termination of employment

The contractual period of notice of the Group’s CEO is six months. In the event that the contract is terminated by the company, the CEO shall have the right to a lump sum compensation for termination, corresponding to the CEO’s total salary for six months.

The period of notice for the other members of the Group Management Team is three months. In the event that their contract is terminated by the company, the members of the Group Management Team shall have the right to a lump sum compensation for termination, corresponding to their total salary for three months. For contracts that entered into effect before 2013, the compensation for termination of members of the Group Management Team corresponds to nine months’ total salary.

Fees paid to the members of the Supervisory Board

The Chairman of the Supervisory is paid a meeting fee of EUR 800, the Vice Chairman EUR 600 and the other members EUR 500 per meeting.

Fees paid to the members of the Board of Directors

The Chairman of the Board of Directors is paid EUR 2,750, the Vice Chairman EUR 1,900 and the other members EUR 1,550 per month. A meeting fee of EUR 500 is paid for both Board and Board committee meetings.

The remuneration paid to the external members of the boards of directors of the subsidiaries is determined by Vapo Oy’s Board of Directors. Members of the board of directors of the subsidiaries employed by Vapo are not usually paid separately for their membership. Members of the boards of directors of associates or subsidiaries who are employed by Vapo can be paid a fee when it is justifiable to ensure equality between them and the other members. The principles for the fees are agreed upon by Vapo Oy’s Board of Directors, and the Board of Directors issues a recommendation concerning the remuneration for review by the general meeting of shareholders of the company in question.

Terms of the CEO’s contract

The CEO’s monthly salary including fringe benefits is EUR 27,500.

The contract includes an incentive bonus, which may not exceed 40% of the annual salary, linked to annual targets set by the Board of Directors.

The CEO may furthermore receive an incentive bonus for reaching long-term targets. The bonus is based on a two-year earnings period. The Board of Directors will decide on the earnings criteria and targets for each earnings period.

The bonuses paid under the various incentive schemes cannot under any circumstances exceed 80% of the CEO’s fixed annual salary.

The CEO is entitled to statutory pension benefits as well as a defined contribution group pension scheme for senior management. The amount paid into the CEO’s defined contribution pension plan corresponds to 10% of total pay (12 x monthly salary) excluding bonuses.

The CEO’s period of notice is six months if he is dismissed by the Board of Directors, in addition to which he is entitled to compensation corresponding to 6 months’ salary. If the CEO resigns, the period of notice is six months. Irrespective of the aforementioned provisions, the CEO’s contract shall be terminated without separate notice at the end of the month in which the CEO reaches the lower limit for old-age pension stipulated by the Employees’ Pensions Act. The current lower limit is 65 years.

Options and other share-based incentive schemes

The company does not have option plans or other share-based incentive schemes.