Remuneration statement describes Stora Enso’s main principles of remuneration and the remuneration paid to members of the Board of Directors, Chief Executive Officer (CEO) and other members of the Group Leadership Team (GLT). First part of the report describes Stora Enso’s remuneration decision-making procedure and remuneration policy. The second part describes the implementation in 2017 (Remuneration Report).
The Remuneration statement has been prepared in accordance with the Finnish Corporate Governance Code (the “Code”). The Code is available at cgfinland.fi. Stora Enso also complies with the Swedish Corporate Governance Code (“Swedish Code”), with the exception of the deviations listed in Appendix 1 of the Corporate Governance Report. The deviations are due to differences between the Swedish and Finnish legislation, governance code rules and practices, and in these cases Stora Enso follows the practice in its domicile. The Swedish Code is issued by the Swedish Corporate Governance Board and is available at corporategovernanceboard.se.
The shareholders at the AGM decide annually on the remuneration of the Board members (including the remuneration of the members of Board committees). The proposals for the AGM concerning the remuneration for the Chair, Vice Chair and members of the Board as well as the remuneration for the Chair and members of the committees of the Board are prepared by the Company’s Shareholders’ Nomination Board, which is composed of representatives of the main shareholders of the Company as well as Board member representatives and described in more detail in the Corporate Governance Report.
The Board appoints the CEO and approves his/her remuneration as well as the compensation of other GLT members. The Board’s Remuneration Committee prepares remuneration related matters and proposals for the Board and is further responsible for ensuring that management compensation policies are aligned with the Company’s objectives and shareholder interest.
Stora Enso remuneration principles – general overview
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 longterm incentives (shares when applicable)
• long-term employee benefits (pension, medical and health benefits)
• other benefits (car, housing, etc. when applicable)
Regular external benchmarking is crucial to ensure that compensation levels are competitive with the external marketplace. The marketplace is defined as those peer companies with whom Stora Enso competes for recruiting talents and retention of current employees for similar positions. The market will vary depending on functional area and level of the positions concerned.
Compensation review is an annual process with the aim to ensure that Stora Enso employees are being rewarded in accordance with our Remuneration Policy and local regulations, such as labour laws and collective agreements.
The GLT 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.
Remuneration of the Board of Directors is decided annually by the shareholders at the AGM. The AGM in 2019 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 2020:
• for the Chair of the Board of Directors EUR 192 000
• for the Vice Chair of the Board of Directors EUR 109 000, and
• for other members of the Board of Directors EUR 74 000 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 Chair of the Financial and Audit Committee EUR 20 600, and
• for the members of the Financial and Audit Committee EUR 14 400 each,
• for the Chair of the Remuneration Committee EUR 10 300, and
• for the members of the Remuneration Committee EUR 6 200 each,
• for the Chair of the Sustainability and Ethics Committee EUR 10 300, and
• for the members of the Sustainability and Ethics Committee EUR 6 200 each.
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 2017 and 2018 was based 70% on financial measures and 30% on Individual Key Targets.
GLT members in Stora Enso receive a monthly salary, which in
addition to a salary payment includes customary fringe benefits, such
as mobile phones and cars. GLT members further have the possibility
to receive yearly awards in the Company’s short term and long term
incentive programmes for management.
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.
GLT members have STI programmes with up to a maximum 50%
or 60% of their annual fixed salary, payable the year after the
performance period. 70% of the STI for 2017 and 2018 was based on
financial measures and 30% on Individual Key Targets.
The financial performance metrics in the STI programme are EBITDA and Working Capital Ratio. The Individual Targets are based on a balanced scorecard approach within the categories of Customer, People, Sustainability and Special Projects.
The LTI programmes have three-year targets and vest in one portion
after three years.The absolute maximum vesting level is 100% of
the number of shares granted. The opportunity under the 2018
programme is in Performance Shares, where the shares vest in accordance with performance criteria proposed by the Remuneration Committee and approved by the Board of Directors.
The financial success metric in the Performance Share programme is 3-year EVA (Economic Value Added) and EPS (Earnings per Share) for the Stora Enso Group.