A. Decision-making procedure
Elisa's General Meeting of Shareholders annually decides on the remuneration of Board members on the basis of the proposal prepared by the shareholders' nomination board.
The salaries and other remuneration of the CEO and other members of the Executive Board, as well as their long-term incentive plans, are decided by the Board of Directors. The Board of Directors also decides on the short-term incentive plan for the CEO. In addition, the Board decides on the maximum limits of the short-term incentive plan for the Executive Board. The Compensation and Nomination Committee prepares the aforementioned matters to be decided by the Board with the assistance of independent external experts, as necessary. The CEO decides on the targets for the short-term incentive plan for the Executive Board.
On 31 March 2016, Elisa's General Meeting of Shareholders authorised the Board to decide on a share issue and the issue of special rights giving entitlement to shares and the acquisition of treasury shares and the aquisition of company's own shares. The authorisations are valid until
30 June 2017, and the Board may also use them for remuneration.
B. Main principles of remuneration
Remuneration of Board members
Board members are paid monthly remuneration fees and meeting remuneration fees for attending Board and committee meetings. The monthly remuneration fees (minus tax withheld at the calculated rate of 60%) are used to purchase Elisa shares every quarter, and Elisa covers the possible transfer tax. At the Annual General Meeting of 2016, it was decided to pay the following remuneration fees to Board members:
- monthly remuneration fee for the Chairman of EUR 9,000 per month
- monthly remuneration fee for the Chairwoman and Deputy Chairman of the Audit Committee of EUR 6,000 per month
- monthly remuneration fee for the members of EUR 5,000 per month
- meeting remuneration fee of EUR 500 per meeting for each participant.
Elisa's shareholders' nomination board requires that members of the Board have shareholdings in the company. A four-year assignment limit applies to shares acquired with the remuneration fees during the first quarter of 2014 and prior to it; this limit will, however, end earlier if the term of office of the member of the Board ends.
The Chairman of the Board of Directors is not paid any remuneration fees for attending the meetings of Elisa's shareholders' nomination board.
Remuneration of the CEO and the Executive Board
Chief Executive Officer
The total salary of the CEO consists of a fixed monetary salary and taxable benefits. The fixed salary totals EUR 515,700.00 per year (not including bonus holiday pay), and the taxable fringe benefits total EUR 12,300.00 per year. The total remuneration of the CEO includes also short- and long-term incentive bonuses.
Short- and long-term incentive plans
The CEO is paid a performance-based bonus based on financial targets set by the company's Board of Directors. The target period of this short-term incentive plan is six months, and any bonuses are paid every six months.
The long-term incentive plan of the CEO consists of share-based incentive plans. The key targets of the currently valid share-based incentive plan are described in the section 'Share-based incentive plans for key personnel'. The maximum bonus limits are described in Table 1.
Pensions and terms and conditions related to contract termination
According to the CEO's contract, the contractual relationship with the CEO ends with a pension when he turns 60 years of age. The supplementary pension is based on a defined contribution plan. Elisa's CEO is entitled to a paid-up pension.
The period of notice for the CEO is six months from Elisa's side and three months from the CEO's side. Should the contract be terminated by Elisa, the CEO is entitled to receive a severance payment that equals the total salary of 24 months minus his salary for the period of notice.
Other members of Elisa’s Executive Board
Members of the Executive Board are paid a total salary that includes a fixed monetary salary and taxable benefits. In addition, members of the Executive Board fall within the scope of the short- and long-term incentive plans. The fixed monetary salary of members of the Executive Board totals EUR 1,743,900.00 per year, and the taxable fringe benefits total EUR 44,100.00 per year (the figures do not include bonus holiday pay, the CEO's salary and taxable fringe benefits).
Short- and long-term incentive plans
As a short-term incentive for Elisa's Executive Board, Elisa pays a performance-based bonus, which is based on achieving the financial and operational targets in the scorecards of Elisa and its units. The target period is six months, and any performance-based bonus is paid every six months.
Elisa's Executive Board also falls within the scope of the company's long-term incentive plan, i.e. the share-based incentive plan (see 'Share-based incentive plans for key personnel'). The maximum limits for bonuses are stated in Table 1.
Pensions and terms and conditions related to contract termination
The contractual relationship with the company of members who started on Elisa's Executive Board before 2013 will terminate when the member turns 62 years of age. They have a defined contribution supplementary pension plan concluded with a pension insurance company, which includes a paid-up pension. The right to a pension will start at the age of 62.
The period of notice for members of the Executive Board is six months from Elisa's side and three months from the member's side. Should the contract be terminated by Elisa, the member of the Executive Board has the right to receive an amount corresponding to nine months' total salary from Elisa.
Table 1. Maximum limits for the bonuses under the short- and long-term incentive plans.
| ||Short-term incentive plan || |
Long-term incentive plans
| || || || || || |
| ||Performance- |
based bonus scheme
2015 and 2016, %*
Share based incentive commitment plan 2011, shares
Earnings periods 13.12.2016 - 13.12.2017 and 13.12.2016 - 13.12.2018
|Share-based incentive plan 2011, |
incentive plan 2014, shares (maximum) Earnings period 2015–2017
|Share-based incentive plan 2014, |
Earnings period 2016–2018
|Share-based incentive plan 2014, shares (maximum) Earnings period 2017-2019 ||Share-based incentive plan 2014, |
Earnings period 2017–2019
|CEO ||90% ||5,000 and 5,000 ||83,000 ||55,000 ||42,000 ||45,000 ||45,000 || |
|Other members of the Executive Board || |
|- ||268,000 ||160,000 ||125,000 ||132,000 ||132,000 || |
* The maximum limits are presented as percentages of the fixed earnings for the target period
**Average for the other members of the Executive Board
Share-based incentive plans for key personnel
Share-based incentive plan 2014
On 11 December 2014, Elisa’s Board of Directors decided to implement two new, share-based incentive plans for key personnel in the Elisa Group. The plan is designed to align the goals of shareholders and key personnel in increasing the value of the company, to secure the commitment of key employees to the company and to offer them a competitive compensation plan that is based on holding shares in the company. The target group of the incentive plan covers no more than 200 employees.
There are three 3-year earnings periods in the share-based incentive plan, the calendar years of 2015–2017, 2016–2018 and 2017–2019. Elisa's Board of Directors will decide on the plan's performance criteria and their targets at the beginning of each earnings period.
Any bonus from the the plan from the earnings periods 2015–2017 and 2016–2018 will be based on earnings per share (EPS), the revenues of new business operations and other key targets.
The bonuses to be paid through the incentive plan for the earnings period 2015–2017 will equal at most the value of around 700,000 shares in Elisa (including the portion payable in cash). Any bonus for the 2015–2017 earnings period will be paid in 2018, partly in company shares and partly in cash.
The bonuses to be paid through the share-based incentive plan for the earnings period 2016–2018 will equal at most the value of around 480,000 shares in Elisa (including the portion payable in cash). Any bonus for the 2016–2018 earnings period will be paid in 2019, partly in company shares and partly in cash.
The bonuses to be paid through the share-based incentive plan for the earnings period 2017–2019 correspond to the value of an approximate maximum total of 495,664 Elisa shares (including the proportion to be paid in cash). The potential reward on the basis the performance period 2017–2019 will be paid partly in shares and partly in cash in 2020.
The cash payments are intended to cover any taxes and tax-like costs arising from the bonus for the participant. As a rule, no bonus is paid if a key person's employment ends before the bonus payment.
Share-based incentive plan 2011
On 19 December 2011, Elisa’s Board of Directors decided to implement a share-based incentive plan for key personnel in the Elisa Group.
The performance-based incentive plan includes three earnings periods: the calendar years of 2012−2014, 2013−2015 and 2014−2016. The bonuses will equal at most the value of some
3.3 million shares in Elisa. The Board of Directors will decide on the performance criteria and their targets at the beginning of each earnings period. The first earnings period of 2012–2014 was realised as share-based bonuses in 2015 and the second earnings period of 2013–2015 in 2016.
Any bonuses for the earnings periods of 2012−2014, 2013–2015 and 2014–2016 will be based on increases in new business revenue in the Consumer Customer and Corporate Customer segments and on Elisa's earnings per share (EPS). For the realised earnings period of 2012–2014, bonuses were paid in February 2015, partly in the company's shares and partly in cash, and for the earnings period 2013–2015 in January 2016. Any implementation of the future earnings periods will follow the same principle. The portion payable in cash will cover the taxes and tax-like costs arising from the bonus. As a rule, no bonus is paid if a key person's employment ends before the bonus payment. The target group of the share-based incentive plan consists of about 160 people, and the bonuses will equal at most the value of around one million shares in Elisa, including the portion payable in cash.
Share-based incentive commitment plan 2011
On 19 December 2011, Elisa's Board of Directors decided to implement a share-based incentive commitment plan that covers the years 2012–2018. Any bonus will be paid only if a key person's employment is valid when the bonus is due to be paid. The bonuses to be paid through this incentive plan will equal at most the value of around 0.5 million shares in Elisa, including the portion payable in cash.
On 11 December 2014, Elisa's Board of Directors decided to adopt the share-based incentive plan in question with periods of one year and two years. The share-based bonus of the first commitment period was paid in November 2015 and of the second commitment period in November 2016.
On 16 December 2016, Elisa's Board of Directors decided on new earning periods for the Restricted Stock Plan. The lock-up period of the rewards to be granted on the basis of the plan consists of one-year and two-year periods.
C. REMUNERATION REPORT 2015
Board of Directors
The monthly remuneration fees for Board members, the number of shares acquired and the meeting remuneration fees for the Board and its Committees are presented in the table below.
Table 2. Remuneration fees of Board members in 2016
| ||Position on the Board ||Fixed monthly remuneration fees, total, EUR* ||Meeting remuneration fees, EUR*** ||Committee meeting remuneration fees, EUR*** ||Total remune ration fees, EUR || |
Elisa's shares acquired with fixed monthly remuneration fees, number of shares*
|Share-holdings of the Board on 31 Dec 2016, number of shares** |
|Raimo Lind ||Chairman || |
|1,500 || |
|1,311 ||14,493 |
|Mika Vehviläinen ||Deputy Chairman || |
|1,500 || |
|874 ||4,578 |
|Clarisse Berggårdh ||Member || |
|552 ||572 |
|Petteri Koponen ||Member || |
|1,500 || |
|727 ||2,181 |
|Leena Niemistö ||Member |
|7,500 ||1,500 || |
|727 || |
|Seija Turunen ||Member, |
Chair of the Audit Committee
|874 ||2,404 |
|Jaakko Uotila ||Member || |
|727 ||3,508 |
|Total || || |
* The monthly remuneration fees (minus tax withheld at the calculated rate of 60%) have been used for purchases of Elisa shares every quarter.
** Shareholdings on 31 December 2016 also include the shares owned by the related parties of Board members and persons closesly associated. The shares purchased by the current members of Elisa's Board of Directors on 30 December 2016 were not registered in the members' book-entry accounts before 3 January 2017 and are thus not included in the figures below. Up-to-date information on changes in the shareholdings are available on Elisa's Management Transactions releases.
*** Based on the number of meetings.
CEO and the Executive Board
Table 3. Salaries and financial benefits paid to the CEO and the company's other Executive Board members in 2016
| ||Monetary salaries, EUR || |
Taxable fringe benefits, EUR
|Total value of the share-based bonus, EUR || |
|Part of the share-based bonus paid in shares, number of shares |
|CEO || |
|947,863.27 * || |
|Other members of Elisa's Executive Board || |
|Total || |
* According to the stock exchange prices of the assignment dates of 29 January 2016 and 7 November 2016
** According to the stock exchange price of the assignment date of 29 January 2016
The CEO's accrued supplementary pension for his 60th and 61st years of age was covered by a provision of EUR 214,884 on the balance sheet, and for the 62nd year of age with an insurance premium that equalled EUR 156,700.39. With regard to the Executive Board, annual supplementary pension insurance premium totalled EUR 130,623.93.