Remuneration for the President and CEO and the Executive Management Team

The table below includes the salaries and fringe benefits as well as 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 2016 targets and achieved results. The LTI payments includes the shares delivered during the year 2017.

The STI and LTI programme payments to Fortum Executive Management members, including the President and CEO, amounted to a total of EUR 2,246 thousand (EUR 1,957 thousand in 2016), which corresponds to 0.73% (0.82% in 2016) of the total compensation in the Fortum Group. 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 and CEO, Pekka Lundmark, was EUR 80,000 per month, including free car allowance and phone allowance as fringe benefits.

Thousands of euros President and CEO Other Members of Fortum Executive Management
2017 2016 2017 2016
Salaries and fringe benefits 998 982 3,387 3,581
Short-term incentive 271 30 962 233
Long-term incentive 136 - 877 1,694
Supplementary pensions 229 356 636 560
Total 1,634 1,368 5,862 6,068

The figures include actual payments and shares delivered during 2017. The amounts differ from those presented in the consolidated financial statements ( Note 10.4). The financial statements include costs accrued for the year 2017, part of which will be paid later.

Short-term incentives

Short-term incentives for 2016 (paid 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 STI payments for the Fortum Executive Management were on average 28% of the salary (70% of the maximum). The aggregate STI payment to members of Fortum Executive Management for 2016 performance was EUR 1.23 million (EUR 0.26 million for 2015).

In total, EUR 16.6 million (EUR 9.6 million for 2015) was paid as short-term incentives across the Group for the financial year 2016. The amount paid increased compared to the previous year, mainly due to better realisation of the set financial targets.

Short-term incentives for 2017 (payable in 2018)

The STI for 2017 for the members of Fortum Executive Management was based on:

Weighting Measure Outcome
60 % Comparable Operating Profit Between target and maximum
10 % Lost workday injury frequency Below treshold
30 % Individual targets Individually assessed

The outcome of the Group level Comparable Operating Profit was above the set target level. The Group level Lost workday injury frequency 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 2017 are paid out in April 2018.

Short-term incentives for 2018 (payable in 2019)

As in 2017, the short-term incentive targets for the Fortum Executive Management in 2018 are based on the achievement of divisional targets, Group financial performance as well as individual targets. The STI performance measures and weighting are: 40% Comparable Operating Profit, 20% Operational Free Cash Flow, 10% lost workday injury frequency and 30% individual targets.

Long-term incentives

The Board of Directors approved the amended LTI programme in December 2016. 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 are based on earnings per share (50%) and relative total shareholder return (50%) measured against the European Utilities Group. Under the plan, the maximum gross number of shares to be delivered after the earnings period in 2020 is 580,120 shares (based on participant status on 31 December 2017). In December 2017, the Board of Directors approved the same earnings criteria, i.e. earnings per share (50%) and relative total shareholder return (50%) for the 2018–2020 LTI plan.

The table sets out the pipeline of recently granted LTI awards, including details of the shares delivered in the reporting period.

LTI plan 2013–2018 2014–2019 2015–2020 2016–2021 2017-2019
Earnings period 2013–2015 2014–2016 2015–2017 2016–2018 2017-2019
Share delivery year 2016 2017 2018 2019 2020
Number of participants (31 Dec 2017) 76 85 98 105 90
Number of shares delivered 1) 241,699 153,956 74,948    
Measures 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 50% EPS and 50% TSR
Payment (% of annual salary) 42% 27% 26 %    
Shares delivered to members of Fortum Executive Management 2)      
Pekka Lundmark 3) - 4,463 6,453    
Alexander Chuvaev 4) 27,897 15,480      
Kari Kautinen 4,014 2,274 2,059    
Per Langer 4,677 2,358 1,621    
Risto Penttinen 5) n/d 6) 1,793 1,767    
Markus Rauramo 7,383 4,185 2,103    
Arto Räty 5) - - -    
Mikael Rönnblad 7) - - -    
Sirpa-Helena Sormunen - 1,777 1,879    
Tiina Tuomela 3,902 2,563 2,117    
Former members of the Fortum Executive Management      
Helena Aatinen 8) 3,188 n/d 6) n/d 6)    
Mikael Frisk 8) 5,028 n/d 6) n/d 6)    
Esa Hyvärinen 8) 3,053 n/d 6) n/d 6)    
Timo Karttinen 9) 6,399 3,626 n/d 6)    
Matti Ruotsala 10) 7,443 4,176 n/d 6)    
1) For the 2013–2018 and 2014–2019 LTI plans, the number of shares delivered after deduction of taxes and tax related expenses. For the 2015–2020,
2016–2021, and 2017–2019 LTI plans the shares will be delivered after the three year earnings period, subject to the achievement of the earnings criteria
2) After deduction of taxes and tax related expenses
3) President and CEO since 7 September 2015. Pekka Lundmark participates in the LTI plans starting from the 2014–2019 LTI plan
4) Due to local legislation, share rights will be paid in cash instead of shares after the three-year lock-up period
5) Member of FEM from 1 April 2016
6) Shares delivered before or after the term in the Fortum Executive Management are not disclosed
7) Member of FEM from 15 May 2017
8) Member of FEM until 31 March 2016
9) Member of FEM until 28 February 2017
10) Member of FEM until 31 October 2017

 

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