Remuneration

Decision-making procedures and main principles of remuneration

The aims of the remuneration system for Orion Corporation’s Board of Directors and executive management are to enhance the Company’s competitiveness and long-term financial success, to achieve the Company’s targets and strategy, and to increase shareholder value.

Remuneration principles concerning the Board of Directors

The remuneration of the members of the Board of Directors is decided on by the Annual General Meeting of the shareholders. The remuneration recommendation to be presented in the invitation to the Annual General Meeting is prepared by the Nomination Committee. 

Remuneration principles concerning the President and CEO

The remuneration of the President and CEO is decided by the Board of Directors. His remuneration comprises a monthly salary, a performance-based bonus and a share-based incentive plan. The performance-based bonuses and the share-based incentive plan are based on predefined targets that are confirmed annually by the Board of Directors. The criteria for performance and results are set so that they promote short-term and long-term financial success. The Board of Directors annually evaluates the performance and financial results against the criteria.

The performance-based bonus of the President and CEO for 2019 can be no more than ten (10) months’ salary. The upper limits of the share-based incentive plan are determined as described in section Share-based incentive plans.

If the service contract of the President and CEO is terminated on the Company’s initiative, the notice period is 6 months. If the service contract is terminated on the initiative of the President and CEO, the notice period is 6 months, unless otherwise agreed. The service ends at the end of the notice period. If the service contract is terminated either on the Company’s initiative or on the initiative of the President and CEO because of a breach of contract by the Company, the President and CEO will be compensated with a total sum corresponding to the monetary salary for 18 months, unless otherwise agreed. No such separate compensation will be paid if the President and CEO resigns at his own request for reasons other than a breach of contract by the Company.

The retirement age of the President and CEO has been agreed to be 60 years, the target level of the pension being 60%. The pension is based on a defined benefit plan.

Remuneration principles concerning other executives

The remuneration of the other members of the Group’s Executive Management Board is decided by the Board of Directors or its Chairman. The remuneration system for these persons comprises a monthly salary, a performance-based bonus and a share-based incentive plan. The performance-based bonuses and share-based incentive plan are based on predefined targets that are confirmed annually. The criteria for performance and results are set so that they promote short-term and long-term financial success. The Board of Directors annually evaluates the performance and financial results against the criteria.

The maximum performance-based bonus of a member of the Executive Management Board cannot exceed the aforementioned maximum performance-based bonus of the President and CEO. The upper limits of the share-based incentive plan are determined as described in section Share-based incentive plans.

The pensions of the other members of the Executive Management Board are determined by the Employees Pensions Act (TyEL). 

Remuneration of the Board of Directors in 2019

According to the decision by the AGM held on 26 March 2019, the remunerations of the Board of Directors are as follows: 
As an annual fee, the Chairman shall receive EUR 84,000, the Vice Chairman shall receive EUR 55,000 and the other members shall receive EUR 42,000 each. As a fee for each meeting attended, the Chairman shall receive EUR 1,200, the Vice Chairman shall receive EUR 900 and the other members shall receive EUR 600 each. The travel expenses of all Board members shall be paid in accordance with previously adopted practice. The aforementioned fees shall also be paid to the Chairmen and to the members of the committees established by the Board, for each committee meeting attended.

Of the annual fee, 60% shall be paid in cash and 40% in Orion Corporation B-shares, which shall be acquired to the members during 26 April - 3 May 2019 from the stock exchange in amounts corresponding to EUR 33,600 for the Chairman, EUR 22,000 for the Vice Chairman and EUR 16,800 for each of the other members. The part of the annual fee that is to be paid in cash corresponds to the approximate sum necessary for the payment of the income taxes on the fees and shall be paid no later than 31 May 2019. The annual fees encompass the full term of office of the Board of Directors.

In addition, the AGM decided that the Company shall pay the transfer tax related to the part of the annual fee of the Board of Directors paid in shares. 

Remuneration report for 2018

Remuneration of the Board of Directors 

According to the decision by the Annual General Meeting in 2018 concerning the annual fees for the term of office of the Board of Directors, the Chairman shall receive EUR 84,000, the Vice Chairman shall receive EUR 55,000 and the other members shall receive EUR 42,000 each. As a fee for each meeting attended, the Chairman shall receive EUR 1,200, the Vice Chairman shall receive EUR 900 and the other members shall receive EUR 600 each. The travel expenses of all Board members shall be paid in accordance with previously adopted practice. The afore-mentioned fees for each committee meeting attended shall also be paid to the Chairmen and to the members of the committees established by the Board.

Of the afore-mentioned annual fees, 60% was paid in cash and 40% in Orion Corporation B-shares, which were acquired to the members during 25 April - 2 May 2018 from the stock exchange in amounts corresponding to EUR 33,600 for the Chairman, EUR 22,000 for the Vice Chairman and EUR 16,800 for each of the other members. The part of the annual fee paid in cash corresponds to the approximate sum necessary for the payment of the income taxes on the fees and was paid on 25 May 2018. The annual fees encompass the full term of office of the Board of Directors. 

There are no particular rules relating to ownership of the shares received by the members of the Board of Directors as fees.

Fees paid to the members of the Board of Directors in the 2018 financial year

 

Total remuneration,

Number of

B-shares

received 

Heikki Westerlund, Chairman

117,537 1,394

Timo Maasilta, Vice Chairman

79,652 913

Sirpa Jalkanen

56,069 697

Ari Lehtoranta

57,269 697

Hilpi Rautelin

56,669 697

Eija Ronkainen

57,268 697

Mikael Silvennoinen

62,668 697

Board of Directors total

487,132

5,792

The figures comprise the fees for the Board meetings and the Committee meetings. 

Remuneration of the President and CEO

The salary, fees, fringe benefits and performance-based bonuses paid to the President and CEO in 2018 totalled EUR 1,346,660 (1,565,562 in 2017), comprising EUR 484,300 (473,287) in salary and fringe benefits, and EUR 862,360 (1,092,275) in performance-based bonuses for 2017. EUR 356,930 (471,011) of the total bonuses corresponds of the value of the 13,457 (10,000) Orion Corporation B shares received by the President and CEO on 1 March 2018 as part of the Company’s long-term share-based incentive plan. The price per share of these shares was EUR 26.5238 (47.1011), the volume-weighted average quotation of the B share on 1 March 2018.

The 2017 payment for the supplementary pension benefit was EUR 569,476. The 2018 advance payment for the supplementary pension benefit was EUR 607,402.

Remuneration of other executives

The salaries, fees, fringe benefits and performance-based bonuses paid for 2018 to the members of the Executive Management Board, excluding the President and CEO, totalled EUR 4,052,676 (5,049,746) comprising EUR 1,635,290 (1,740,361) in salaries and fringe benefits and EUR 2,417,385 (3,309,385) in performance-based bonuses.

Management remunerations total

The salaries, remunerations, fringe benefits and bonuses paid to the members of the Board of Directors of Orion Corporation, the President and CEO and the other members of the Group’s Executive Management Board for 2018 totalled EUR 5,886,470 (7,075,139 for 2017).

Authorisations of the Board of Directors concerning remuneration

The Board of Directors has an authorisation confirmed by the Annual General Meeting held on 22 March 2016 to decide on a share issue in which shares held by the Company can be conveyed in a targeted issue as part of the Company’s incentive system. The terms of the authorisation have been published in a stock exchange release on 22 March 2016. 

Share-based incentive plans

The Group has share-based incentive plan in force, which commenced in 2016, for key persons of the Group. The plan includes earning periods and the Board of Directors has annually decided on the beginning and duration of the earning periods in 2016, 2017 and 2018. The Board of Directors has decided on the earning criteria and targets to be established for them at the beginning of each earning period. Two earning periods, calendar year 2016 and calendar years 2016-2018, commenced upon implementation of the plan. Two earning periods, calendar year 2017 and calendar years 2017-2019, commenced in 2017. Two earning periods, calendar year 2018 and calendar years 2018-2020, commenced in 2018. The reward under the plan for the earning periods 2016, 2017 and 2018 is based on the Orion Group's operating profit and for the earning periods 2016-2018, 2017-2019 and 2018-2020 on the total return on Orion Corporation B shares.

The target group of the plan consists of no more than 50 people. The total maximum amount of rewards to be paid based on the plan is 500,000 Orion Corporation B shares and a cash payment corresponding to the value of the shares. By 31 December 2018, a total of 133,724 Orion Corporation B shares had been paid as rewards under this plan.

The key terms of the 2016 incentive plan are provided in a stock exchange release dated 2 February 2016.

 

The plan that commenced in 2013 is no longer valid and the last rewards were paid in 2018. The plan included earning periods and the Board of Directors annually decided on the beginning and duration of the earning periods in 2013, 2014 and 2015. The Board of Directors decided on the earning criteria and targets to be established for them at the beginning of each earning period. Two earning periods, calendar year 2013 and calendar years 2013−2015, commenced upon implementation of the plan. Two earning periods, calendar year 2014 and calendar years 2014−2016, commenced in 2014. Two earning periods, calendar year 2015 and calendar years 2015−2017, commenced in 2015. The reward under the plan for the earning periods 2013, 2014 and 2015 was based on the Orion Group’s operating profit. The reward under the plan for the earning periods 2013−2015, 2014−2016 and 2015−2017 was based on the total return on Orion Corporation B share.

The target group of the plan consisted of approximately 35 people. A total of 407,677 Orion Corporation B shares were paid as rewards under this plan.

The key terms of the 2013 incentive plan are provided in a stock exchange release dated 5 February 2013.
 

Under the plan, shares received based on one-year earning periods cannot be transferred during the restricted period determined in the plan. There is no restricted period for the three-year earning periods. The value of reward to be paid based on the plan during one calendar year is a key person's gross annual salary multiplied by 1.75, in the maximum, at the date of the reward payment. 

Earning periods currently in effect

2018

2018-2020

2017−2019

2016-2018

Start date of earning period

 1 Jan 2018 1 Jan 2018  1 Jan 2017 1 Jan 2016

End date of earning period

 31 Dec 2018 31 Dec 2020  31 Dec 2019 31 Dec 2018

End date of restricted period

 31 Dec 2020      

Grant date of share rewards

14 Mar 2018

14 Mar 2018  30 Mar 2017 23 Feb 2016
Fair value of shares at granting, EUR 1)  26.73 26.73  48.83 29.16
Fair value of reward at grant date, EUR 1)   4.45  14.82 8.67

1) The fair value of the rewards per share on the granting date has been determined with the Binary “asset or nothing call” evaluation model.

 

The rewards under the plan shall be paid partly in the form of the Company’s B shares and partly in cash. Rewards, under the plans commenced in 2013 and 2016, have been paid and potential future rewards, under the plan commenced in 2016, shall be paid as follows:

Earning period

Reward paid on / potential reward to be paid in

2013

3 March 2014

2014

2 March 2015

2013-2015

1 March 2016

2015

1 March 2016

2014−2016

1 March 2017

2016

1 March 2017

2015−2017

1 March 2018

2017

1 March 2018

2016−2018

2019

2018

2019

2017-2019

2020

2018-2020

2021

In the Financial Statements 2018 of the Orion Group, the share-based incentive plans are dealt with in Note 4 Employee benefits and auditor’s remuneration.