KEY REMUNERATION PRINCIPLES
The remuneration of HKScan Oyj (“HKScan” or “Company”) is designed to be aligned with the successful delivery of our long-term strategic target to grow into a versatile food company. Remuneration at all levels of the organization is built on the following principles:
- Ensure the execution of our strategy: The link between remuneration and success in the strategy implementation is our key principle. The remuneration is designed to drive the Company’s long-term financial success, business strategy and positive development of the shareholder value.
- Drive performance and encourage value-based behaviour: We aim to acknowledge and reward good performance and achievements and support value-based behaviour.
- Be attractive and fair: Our remuneration policy, practices, tools and processes are designed to ensure that we are able to attract, retain and motivate the competent workforce and senior management across the complex and long value chain and multiple markets in which we operate. Our remuneration programs are fair, equal and understandable.
- Encourage individual and team accountability: We take accountability and lead our own performance by actively discussing targets and individual development with our manager and by promoting a positive feedback culture.
REMUNERATION OF THE BOARD OF DIRECTORS
According to the decisions made in the Annual General Meeting 2024, the members of the Board of Directors are paid an annual remuneration and committee meeting fees.
The annual remuneration of the Board of Directors are as follows:
- Chairman of the Board EUR 70,000
- Deputy Chair of the Board EUR 37,500
- Board member EUR 30,000
- Deputy Board member EUR 15,000
The annual remuneration of the Committee Chairmen will be paid as follows:
- Chairman of the Audit Committee EUR 15,000
- Chairmen of the Compensation, Working and Special Committees EUR 5,000
According to the decisions made in the Annual General meeting, the annual remuneration to the Board members is paid in Company shares and cash so that 25% of the remuneration will be paid in the Company shares to be acquired on the market on the Board members’ behalf, and the rest will be paid in cash. The shares will be acquired within two weeks after the publication of HKScan Corporation’s interim report 1 January - 30 September 2024 provided that the acquisition of shares can be made according to applicable regulations. In case the acquisition of the shares cannot be made within the said period, the acquisition shall be made without unnecessary delay after the acquisition restriction has ended. If payment in shares cannot be carried out due to reasons related to either the Company or a Board member, annual remuneration shall be paid entirely in cash. The Company will pay any costs related to the transfer of the Company shares.
In addition, a compensation of EUR 650 per a meeting is paid for all the Board members for each attended Board and Board committee meeting, and a compensation of EUR 300 for a meeting or occasion requiring their attendance as a Board member. Travel expenses of the Board members were compensated according to the Company’s travel policy.
REMUNERATION OF THE CEO
The CEO’s remuneration consists of fixed components, such as a monetary base salary and various fringe benefits, supplementary defined contribution pension, variable components including short and long-term incentives, and other financial benefits.
Fixed compensation
The CEO’s fixed base salary is EUR 45,000 per month including a company car and a phone benefit.
Short-term incentives (STI)
The performance period of the CEO’s STI plan is one year. The aim of the STI plan is to align the objectives of the shareholders and CEO for increasing the value of the Company in the short term.
In the financial year 2024, the CEO Ruohola’s STI reward can be a maximum of EUR 150,000. The payment of the STI reward is based on the achievement of key strategic projects set by the Company’s Board of Directors.
Long-term incentives (LTI)
The CEO Juha Ruohola is part of the long-term incentive plan 2019-2021 for the Company’s key employees, which included both a Performance Share Plan and a Restricted Share Plan.
In addition, Juha Ruohola is part of the CEO’s long-term Performance Share Plan 2023-2027.
More information on the long-term incentive plans can be found in the section Long-term incentives.
Other key terms
The CEO’s contract contains a mutual six-month notice period. The CEO is paid the salary for the notice period. If the Company terminates the contract of employment, the Company will pay the CEO a severance payment equal to 12 months’ salary in addition to the salary for the six-month notice period.
The CEO is covered by a supplementary defined contribution pension plan, which provides a retirement benefit based on the accrued savings capital. The supplementary pension plan is financed in full by the employer and the contribution is 20% of annual salary. If the CEO's contract ends before retirement age, he is entitled to retain the accrued savings from the age of 63. The retirement age will be determined by the Finnish statutory pension plan for the CEO.
The CEO should retain at least 50% of all shares received as award from LTI plans until the value of shareholding equals his annual salary. This shareholding should be retained during the validity of service.
REMUNERATION OF THE GROUP EXECUTIVE TEAM
The Board decides, based on the proposal made by the Compensation Committee, on the remuneration principles and remuneration of the Group Executive Team (GET). The remuneration and terms of employment of the GET are decided by the Board on the basis of a proposal from the CEO. The remuneration of the GET members consists of fixed components, such as a monetary base salary and various fringe benefits (such as company car and phone), supplementary defined contribution pension, variable components including short and long-term incentives, and other financial benefits.
Short-term incentives (STI)
GET members are part of the Company’s short-term incentive plan for key roles in accordance with the terms and conditions in force at the time. Group, unit/function and individual targets and their threshold and maximum ranges are defined based on the strategic targets. The achievement of individual performance targets is evaluated annually by the CEO.
In the financial year 2024, the maximum amount of the STI reward is 40% of the annual base salary, however, the amount can be no more than 100,000 euros. The performance measures are based on Group and/or Business Unit/function comparable EBIT (70% weight) and individual targets (30% weight). Based on their area of responsibility, each GET member has one individual performance criterion that is tied to one of the Company’s key sustainability target, such as lost-time accident rate (LTIR). A possible reward will be paid in spring 2025.
Long-term incentives (LTI)
Long-term incentive plans aim to retain key skills and motivate executives to increase shareholder value over the long term.
The GET members are part of the Company’s long-term incentive plans 2018-2020 and 2019-2021 for key employees.
More information on the long-term incentive plans can be found in the section Long-term incentives.
Other key terms
The notice period for the GET members is 6 months if the Company terminates the contract, and 3 or 6 months if the GET member terminates the contract. In addition to the notice period, the severance payment equals to 6 or 12 months’ salary, if the Company terminates the contract.
The GET members are covered by a supplementary defined contribution pension plan, which provides a retirement benefit based on the accrued savings capital. The supplementary pension plan is financed in full by the employer and the contribution is 20% of annual salary. If the GET member’s contract ends before retirement age, he is entitled to retain the accrued savings from the age of 63. The retirement age will be determined by the Finnish statutory pension plan for the GET members.
To support and protect the GET members in the performance of their duties, the Company provides them with health insurance, life and disability insurance, business travel insurance, and liability insurance.
The Board recommends that the members of GET would hold 50% of all the shares received from LTI plan until the value of share ownerships correspond to their annual salaries. This share ownership should be held during the validity of employment.
GET remuneration in 2023
Remuneration paid to the members of Group Executive Team (EUR).
|
Fixed annual salary (including vacation pay and taxable benefits) |
1,761,644 |
|
Short-term incentive payment (based on financial year 2022) |
0 |
|
Long-term incentive payment |
110,057 |
|
Supplementary pension contributions |
323,305 |
|
Other one-time compensation |
110,574 |
|
TOTAL |
2,305,581 |
LONG-TERM INCENTIVE PLANS
The Company has the following long-term incentive plans in force for key employees of the Group: Performance Share Plan 2018-2020, Performance Share Plan 2019-2021 and Restricted Share Plan 2019-2021. In addition, the Board decided on 3 April 2023 on a Performance Share Plan 2023-2027 for the CEO.
Long-term incentive plan 2018-2020 and 2019-2021
The performance/vesting periods of the Company’s long-term incentive plans 2018-2020 and 2019-2021 for key employees have ended. The performance criteria and outcomes under the long-term incentive plans are presented in the table below.
|
Long-term incentive plan |
Performance period and criteria |
Maximum number of shares granted, gross |
Outcome |
|
PSP 2018-2020 |
2018: EBIT and EPS 2019-2020: Operative Cash Flow |
910,400 |
2018: 0% 2019-2020: 75% |
|
PSP 2019-2021 |
2019-2020: Operative Cash Flow 2021: EBIT |
1,322,200 |
2019-2020: 75% 2021: 0% |
|
RSP 2019-2021 |
2019-2021: ROCE |
881,500 |
2019-2021: 100% |
The Board decided on 7 April 2021 to change the payment schedules of LTI 2018-2020 and LTI 2019-2021 to ensure that the reward payments are aligned with the Company’s long-term performance and shareholder returns. According to the new payment schedule, 50% of the rewards earned from LTI 2018-2020 and LTI 2019-2021 were paid between 2021 and 2023 while the remainder of the GET rewards were deferred and will be paid between 2024 and 2025. The deferred rewards will be paid based on the minimum requirements set by the Board on the Company’s total shareholder return (TSR) and profitability. The Board has set a maximum limit on the cost of deferred rewards.
The minimum requirements for the deferred rewards for 2024 were not met and thus, no deferred rewards will be paid in 2024. The deferred rewards for 2025 will be paid if the minimum requirements set by the Board are met. All LTI plans include the requirement of continuance of service upon award payment in order to be qualified to receive the potential award.
Long-term incentive plan 2023-2027
In April 2023 the Company announced a new Performance Share Plan for the CEO with one five-year performance period covering the financial years 2023-2027. The potential rewards based on the plan will be paid in three instalments, by the end of May 2026, May 2027 and May 2028. The rewards of the plan are based on EBIT 2023 (10% weight), EBIT 2024 (10% weight), EPS during 2023-2027 (50% weight) and the Company’s debt service capacity during 2023-2027 (30% weight). The achievement level of the earning criterion based on EBIT 2023 was 77%.
The rewards payable based on the performance period 2023-2027 correspond to the value of 1,944,445 HKScan Corporation shares in maximum total, including the cash portion. The reward payable on the basis of the Performance Share Plan will be capped if the limits set by the Board for the reward payable for the performance period 2023-2027 are reached.
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