Remuneration for the President and CEO and the Executive Management Team

The table below includes the salaries and fringe benefits, STI and LTI programme payments to the President and CEO and to the Fortum Executive Management during the year. The STI payments are based on the 2015 targets and achieved results. The LTI programme includes the shares delivered during the year 2016.

The STI and LTI programme payments to Fortum Executive Management members, including the President and CEO, amounted to a total of EUR 1,957 thousand (EUR 3,479 thousand in 2015), which corresponds to 0.82% (1.32% in 2015) of the total compensation in the Fortum Group. The figures exclude payments to the employees of the divested electricity distribution business. The table also includes payments made to supplementary pension arrangements for the President and CEO and for Fortum Executive Management.

Salary and Fringe Benefits

The base salary levels are set taking into account the nature of the role, local and international market conditions and individual experience and performance. The salary for the President & CEO, Pekka Lundmark, was EUR 80,000 per month, including free car allowance and phone allowance as fringe benefits.

  President and CEO Other Members of Fortum Executive Management
2016 2015 2016 2015
Thousands of euros Pekka Lundmark Pekka Lundmark (President and CEO since 7 Sep 2015) Timo Karttinen (Interim President and CEO until 6 Sep 2015) Tapio Kuula (President and CEO until 31 Jan 2015)    
Salaries and fringe benefits 982 305 372 279 3,581 3,367
Short-term incentive 30 - n/a 170 233 638
Long-term incentive - - n/a 1,146 1,694 1,526
Supplementary pensions 356 - n/a 25 560 661
Total 1,368 305 372 1,620 6,068 6,192

Short-term incentives

Short-term incentives for 2015 (paid in 2016)

The STI for 2015 for the members of Fortum Executive Management was based on:

Weighting Measure* Outcome
40 % Comparable Operating Profit Below threshold
40 % Free Cash Flow from operations Between threshold and target
5 % Major environmental, health & safety (EHS) incidents Maximum
5 % Lost worksday injury frequency Maximum
5 % Serious accidents Below threshold
5 % Dow Jones Sustainability Index development Between target and maximum
*) in addition to these measures a personal multiplier based on the achievement of personal targets is applied

The STI payments for the Fortum Executive Management were on average 7% of the salary (17% of the maximum). The aggregate STI payment to members of Fortum Executive  anagement for 2015 performance was EUR 0.26 million (EUR 0.8 million in 2014).

In total, EUR 9.6 million (EUR 13.7 million in 2014) was paid as short-term incentives across the Group for the financial year 2015. The amounts reported exclude payments to the personnel of the divested Swedish electricity distribution business. The amount paid decreased compared to the previous year, mainly due to the lower financial performance of the company.

Short-term incentives for 2016 (payable in 2017)

The STI for 2016 for the members of Fortum Executive Management was based on:

Weighting Measure Outcome
40 % Comparable Operating Profit Between target and maximum
20 % Free Cash Flow Between target and maximum
5 % Lost workday injury frequency On target
5 % Serious accidents Below threshold
30 % Individual targets Individually assessed

The outcome of the STI performance measures were above the set target level regarding Group financial targets. The other Group level safety target (Lost workday injury frequency) reached the target level whereas the other one (Serious accidents) did not reach the threshold level. The achieved performance based on the individual targets is evaluated in connection with the individual performance review at the beginning of the year.

The accrued incentives for the year 2016 were paid in April 2017.

Short-term incentives for 2017 (payable in 2018)

As in 2016, the short-term incentive targets for the Fortum Executive Management in 2017 are based on the achievement of divisional targets, Group financial performance as well as individual targets. The STI performance measures and weighting are: 60% Comparable Operating Profit (for division heads 30% Group level and 30% own division), 10% lost workday injury frequency and 30% individual trategic targets.

Long-term incentives

The table sets out the pipeline of recently granted LTI awards, including details of the shares delivered in the reporting period. In December 2016, the Board of Directors approved the amended LTI programme. The share awards will not be subject to a minimum lock-up period but members of the Fortum Executive Management will be required to retain 50% of the shares until they have achieved their required shareholding level of 100% of the annual salary. For other key employees included in the new LTI plan no lock-up period will be applied. Under the 2017–2019 LTI plan, the Board-approved earnings criteria will be based on earnings per share (50%) and relative total shareholder return (50%) measured relative to the European Utilities Group.

LTI plan 2012–2017 2013–2018 2014–2019 2015–2020 2016–2021
Earnings period 2012–2014 2013–2015 2014–2016 2015–2017 2016–2018
Share delivery year 2015 2016 2017 2018 2019
Measures A combination of EBITDA, EPS and share price development A combination of EBITDA, EPS and share price development 50% EPS, 25% TSR & 25% Reputation Index 30% EPS, 30% Return on Net Assets (Group or Divisional), 20% TSR and 20% Group EBITDA 50% EPS and 50% TSR
Payment (% of annual salary) 48% 42% 27%    
Total shares delivered* 213,072 262,989      
Lock-up period 3 years 3 years (FEM), reduced to 1 year if the shareholding requirement is achieved 3 years (FEM), reduced to 1 year if the shareholding requirement is achieved 3 years (FEM), reduced to 1 year if the shareholding requirement is achieved 3 years (FEM), reduced to 1 year if the shareholding requirement is achieved
Shares delivered* to members of Fortum Executive Management:      
Pekka Lundmark1) - - 4,463    
Alexander Chuvaev2) 21,781 27,897 15,480    
Timo Karttinen7) 4,261 6,399 3,626    
Kari Kautinen 2,956 4,014 2,274    
Per Langer 3,751 4,677 2,358    
Risto Penttinen3) n/d4) n/d4) 1,793    
Markus Rauramo 5,029 7,383 4,185    
Matti Ruotsala 6,706 7,443 4,176    
Arto Räty3) - - 0    
Sirpa-Helena Sormunen - - 1,777    
Tiina Tuomela 2,648 3,902 2,563    
Former members of the Fortum Executive Management:      
Tapio Kuula5) 30,2715) - -    
Helena Aatinen6) 2,352 3,188 -    
Mikael Frisk6) 3,926 5,028 -    
Esa Hyvärinen6) 2,384 3,053 -    
*) after deduction of taxes and tax related expenses
1) President and CEO since 7 September 2015. Pekka Lundmark participates in the LTI plans starting from the 2014–2019 LTI plan
2) Share rights will be paid in cash instead of shares after the three-year lock-up period due to local legislation
3) Member of FEM from 1 April 2016
4) Shares delivered before/after the term in the Fortum Executive Management are not disclosed
5) President and CEO until 31 January 2015. Includes the shares Tapio Kuula received from the LTI plans commenced in 2012, 2013 and 2014. The shares are under lock-up until the spring 2018
6) Member of FEM until 31 March 2016
7) Member of FEM until 28 February 2017
 

 

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