Stora Enso aims to provide a level of remuneration that motivates, encourages, attracts and retains employees of the highest calibre. To maximise the effectiveness of the remuneration policy, careful consideration will be given to aligning the remuneration package with shareholder interests and best market practice.
A fundamental element in the remuneration principles is the concept of pay-for-performance, and an important aspect of Stora Enso’s approach to remuneration is to look at the total remuneration provided to employees.
Stora Enso’s total remuneration mix consists of:
• Annual fixed salary
• Variable pay components as short-term incentives (cash) and long- term incentives (shares when applicable)
• Long-term employee benefits (pension, medical and health benefits)
• Other benefits (car, housing, etc. when applicable)
The Group Leadership Team annually reviews the performance and potential ratings, as well as the succession planning of its top management in order to secure global principles with local applications.
Stora Enso’s full remuneration policy is presented at storaenso.com/investors/governance/remuneration
Main principles of Board member remuneration
Remuneration of the Board of Directors is decided by the shareholders at the AGM. Remuneration is paid to non-executive members only. The AGM in 2015 resolved in accordance with the proposal of the Shareholders' Nomination Board that the members of the Board of Directors be paid the following annual remuneration for their term of office expiring at the end of the AGM 2016
- for the Chairman of the Board of Directors EUR 170 000
- for the Vice Chairman of the Board of Directors EUR 100 000, and
- for other members of the Board of Directors EUR 70 000 each.
The Board members shall use approximately 40% of their annual Board member remuneration to purchase Stora Enso’s R shares from the public market and the purchases shall be carried out during the two weeks following the AGM. The Company has no formal policy requirements for the Board members to retain shares received as remuneration.
In addition, the AGM decided that the following annual remuneration be paid to the members of the Board Committees:
- for the Chairman of the Financial and Audit Committee EUR 20 000, and
- for the members of the Financial and Audit Committee EUR 14 000 each,
- for the Chairman of the Remuneration Committee EUR 10 000, and
- for the members of the Remuneration Committee EUR 6 000 each,
- for the Chairman of the Sustainability and Ethics Committee EUR 10 000, and
- for the members of the Sustainability and Ethics Committee EUR 6 000 each.
Main principles of Management remuneration
The Group Leadership Team remuneration table on the page 14 includes the remuneration paid to GLT members during the year, including the share awards that vested in that year. The Company recommends and expects the CEO and GLT members to hold Stora Enso shares at a value corresponding to at least one annual base salary. Stora Enso shares received as remuneration are therefore recommended not to be sold until this level has been reached.
The total GLT remuneration in 2015 amounted to EUR 11.0 (EUR 10.7) million. There were 12.8 (9.1) full time equivalent (FTE) GLT members during 2015, and the total compensation per FTE decreased to EUR 858 000 (1 175 000).The total number of GLT members was thirteen (eleven) at year end 2015. Jari Latvanen joined GLT at 1 January, Markus Mannström and Gilles van Nieuwenhuyzen joined on 16 March 2015 and Noel Morrin on 1 April. Two GLT members left during the year, Juha Vanhainen on 15 March and Terhi Koipijärvi on 31 March.
In accordance with their respective pension arrangements, GLT members may retire at sixty-five years of age with pensions consistent with local practices in their respective home countries. Contracts of employment provide for notice of six months prior to termination with severance compensation of twelve months basic salary if the termination is at the Company’s request.
The ordinary annual salary review was effective, as normal, from 1 March. The outcome of the financial targets relating to the Short Term and Long Term Incentive programmes for performance year 2014 were reviewed and confirmed by the Remuneration Committee beginning of 2015.
Shown in Note 21 Employee variable compensation and equity incentive schemes (Financial Report 2015) are details of share awards programmes and incentive schemes for the management and staff of Stora Enso.
Executives other than CEO
Short Term Incentive (STI) programmes for management
GLT members have STI programmes with up to a maximum of 50% of their annual fixed salary, payable the year after the performance period. The STI for 2015 was based 70% on financial measures and 30% on Individual Key Targets for the CEO, CFO and Division Heads, while based 60% on financial measures and 40% on Individual Key Targets for other GLT members.
The financial success metrics in the STI programme are EBITDA and Working Capital Ratio. The Individual Key Targets are based on Stora Enso’s balanced scorecard approach, where they are defined as relevant in the position within the categories of Customer, People, Sustainability and Special Projects.
Long Term Incentive (LTI) programmes for management
Since 2009 Stora Enso has launched new share programmes each year. The 2009 to 2013 Performance Share programmes vested in portions over three years, based on annually defined targets set by the Remuneration Committee. The 2014 and 2015 programmes have three year targets and vest in only one portion after three years. In Performance Share programmes launched since 2012, the absolute maximum vesting level is 100% of the number of shares awarded. Three quarters (75%) of the awards under the 2015 programme is in Performance Shares, where shares will vest in accordance with performance criteria determined by the Remuneration Committee of the Board. One quarter (25%) of the award under the 2015 programme is in Restricted Shares, for which vesting is subject to continued employment.
Under the 2015 Performance Share programme, GLT members (in GLT at year end) received awards of 435 054 shares assuming the maximum vesting level during the three-year vesting period (2015–2017) is achieved.
The fair value of employee services received in exchange for share-based compensation payments is accounted for in a manner that is consistent with the method of settlement either as cash-settled or equity settled as described in more detail in Note 21 (Financial Report 2015). For the equity settled part, it is possible that the actual cash cost does not agree with the accounting charges as the share price is not updated at the time of the vesting. The figures in the Group Leadership Team Remuneration table refer to individuals who were executives at the time of settlement.
During the year, the number of shares settled on executives (GLT members at settlement date) from previous awards derived from Restricted Share programmes and Performance Share programmes amounted to 171 570 having a cash value at the 1 March 2015 (15 April 2015 for one GLT member) settlement date of EUR 1 492 913 based on the share price at that date.
Chief Executive Officer – Karl-Henrik Sundström
The CEO has been employed since 1 August 2012 and assumed the position as CEO on 1 August 2014. His contract was approved by the Board on his appointment. It has a notice period of six months with a severance payment of twelve months salary on termination by the company but with no contractual payments on any change of control. Benefits include a company car and pension provisions. The CEO’s pension plan consists of collectively agreed pension plan in Sweden (ITP2) and a defined contribution (DC) top up pension plan. Contributions to the DC plan in the interval 20–30 Income Base Amounts (IBA; one IBA was 58 100 SEK in 2015) is 23%, contributions above 30 IBA is 35% for the salary the CEO had prior to assuming this position and 39% on the salary increase amount received when assuming the position as CEO. The retirement age is sixty-five years.
Local housing (actual costs)
Short Term Incentive programme
Long Term Incentive programme
Mandatory company plans
Stora Enso voluntary plans
1) The CEO participates in the Swedish Executive Pension Plan where pension accruals are unfunded for all participants, the liability is calculated and insured in accordance with Swedish legislation. The unfunded liability for the CEO amounts to EUR 1 113 thousand.
Short Term Incentive (STI) programme for CEO
The CEO is entitled to a STI programme decided by the Board each year giving a maximum of 75% of annual fixed salary. The STI for 2015 was based 70% on financial measures and 30% on Individual
Long Term Incentive (LTI) programmes for CEO
The CEO participates in a number of share based LTI programmes. The 2013 Performance Share programme vest in portions over three years, based on annually defined targets set by the Remuneration Committee. The 2014 and 2015 programmes have three year targets and vest in only one portion after three years. Three quarters (75%) of the awards under the 2014 and 2015 programmes are in Performance Shares, where shares will vest in accordance with performance criteria determined by the Remuneration Committee of the Board. One quarter (25%) of the award under the 2014 and
2015 programmes are in Restricted Shares, for which vesting is only subject to continued employment.
The CEO received an award under the 2015 LTI programme of 105 912 shares. The grant value EUR 908 725 is based on the share price at grant date and assuming maximum vesting level during the three-year vesting period is achieved. The CEO received shares from previous awards of Restricted Share programmes and Performance Share programmes, which amounted to 43 290 shares having a
cash value at the 1 March 2015 settlement date of EUR 371 428
based on the share price of EUR 8.58 at that date.