Remuneration in 2017
In 2017, the President and CEO was paid a total salary of EUR 583,257 (2016: 581,486 and EUR 22,000 for the period as a Board member), including a housing benefit and a health insurance benefit. In addition, she was paid EUR 538,884 (2016: -) based on the 2016 short-term incentive plan.
In addition to the salary and payment based on the short-term incentive plan paid in 2017, the President and CEO earned a short-term incentive representing 135% of the target level incentive (EUR 486,000), to be paid in April 2018.
On the basis of the Performance Share Plan 2016-2018 the President and CEO earned during 2016 a share reward at maximum level (= 150% of on-target reward) totalling 225,000 gross shares. The net shares based on the Performance Share Plan 2016-2018 will be transferred to her in spring 2019 provided that the pre-set conditions are met. On the basis of the Performance Share Plan 2017-2019 the President and CEO earned a share reward at maximum level (= 150% of on-target reward) totalling 225,000 gross shares during 2017. The net shares based on the Performance Share Plan 2017-2019 will be transferred to her in spring 2020 provided that the pre-set conditions are met. The gross shares will be reduced by such a number of shares equalling the taxes arising from the receipt of shares.
Total remuneration paid to other EMG members in 2017 totalled EUR 4.3 million (2016: 2.4), of which 42% (2016:10%) was paid based on the variable short-term and long-term incentive plans.
An itemised statement on remuneration is available in Note 33 of the Financial Statements 2017.
Remuneration Statement 2017 is available here.
Decision-making procedures concerning remuneration
Board of Directors
Sanoma’s Annual General Meeting (AGM) determines the remuneration of the members of the Board of Directors (Board) and Board committees. The HR Committee prepares the proposal on the Board members remuneration to the AGM.
The President and CEO
The remuneration and fringe benefits (total salary), short term incentives and pension benefits of the President and CEO and members of the Executive Management Group (EMG) as well as long-term incentives granted for Sanoma’s senior executives are prepared by the HR Committee and approved by the Board.
The President and CEO and EMG members do not receive separate remuneration for their management group membership or other internal management positions, such as Board memberships in the Group companies.
Authorisations related to remuneration
The AGM held on 21 March 2017 authorised the Board to decide on the repurchase of maximum of 16,000,000 Company’s own shares. The authorisation is effective until 30 June 2018 and terminates the corresponding authorisation granted by the AGM on 12 April 2016.
The shares shall be repurchased with funds from the Company’s unrestricted shareholders’ equity, and the repurchases shall reduce funds available for distribution of profits. The shares shall be repurchased either through a tender offer made to all shareholders on equal terms or in other proportion than that of the current shareholders at the market price of the repurchase moment on the Nasdaq Helsinki Ltd. The shares shall be repurchased to develop the Company’s capital structure, to carry out and finance potential corporate acquisitions or other business arrangements, be used as a part of the Company’s incentive programme or to be conveyed further for other purposes, retained as treasury shares, or cancelled.
Main principles of remuneration
Board of Directors
The AGM 2017 resolved to continue to pay the following monthly remuneration to members of the Board:
- EUR 8,500 to Chairman
- EUR 6,500 to Vice Chairman and
- EUR 5,500 to members.
The meeting fees are:
- For Board members who reside outside Finland: EUR 1,000 / Board meeting where the member was present;
- For the Chairmen of Board’s Committees: EUR 2,000 / Committee meeting participated;
- For Committee members who reside outside Finland: EUR 2,000 / Committee meeting where the member was present and EUR 1,000 / Committee meeting participated; and
- For Committee members who reside in Finland: EUR 1,000 / Committee meeting participated.
The President and CEO or a person serving the company under a full time employment or service agreement receives no fee for Board membership. Upon resignation of the President and CEO Susan Duinhoven from the Board at the AGM 2017 there are no such persons.
The President and CEO and members of the EMG
The remuneration of the President and CEO and member of the EMG consists of the total salary, short term incentives, performance shares, restricted shares and pension benefits. The Board aims to have a substantial part of the total remuneration dependent on the performance of the company.
In the short-term incentive (STI) plan, the key principles are that the financial and non-financial targets are tailored to each executive’s areas of influence. The STI is at maximum 150% of reward at the target level value and the payment is subject to reaching threshold Group EBIT.
In the Performance Share Plans (a long-term incentive, LTI), the performance is measured based on the criteria set by the Board for each plan. The LTI is at maximum 150% of the reward on target level. The plan is based on a one year performance followed by two-year vesting period and share delivery is conditional upon continued employment until the moment of transferring shares or a good leaver ground.
The HR committee commissions regular benchmarks of the remuneration of the Board and the EMG against its Finnish and European peers.
Short-term incentive plans
The short-term incentives are determined on the basis of achieving financial and non-financial objectives set annually. The weighting of the objectives and the maximum amount of the incentives vary according to the position of the person in question. Short-term incentives are paid in April following the year of determination.
The criteria in the short-term incentive plan in 2017 were based on achieving financial targets of operational EBIT, free cash flow, net sales as well as objectives related to Sanoma’s employee satisfaction objective.
In 2018 the short-term incentive for the President and CEO is 66.7% of her salary at target level and 100% at maximum level. For other EMG members, the short-term incentive varies from 40% to 50% of salary at target level and from 60% to 75% at maximum level. The criteria in the short-term incentive plan for 2018 are based on achieving financial targets of operational EBIT (earnings before interest and taxes), free cash flow and net sales as well as Sanoma’s employee satisfaction objective.
Long-term incentive plans
The share-based incentive plans introduced at Sanoma offer the Group’s management an opportunity to receive Sanoma shares after a vesting period of two to three years, provided that the conditions set for receiving the shares are met.
Shares in the Restricted Share Plans are delivered to the participants provided that their employment with Sanoma continues uninterrupted throughout the duration of the plan until the shares are delivered. In addition to the continuous employment condition, vesting of the Performance Shares is subject to meeting (partially or fully) the Group’s performance targets set by the Board for annually commencing new plans.
Performance Share Plan
Sanoma has adopted a Performance Share Plan in 2013. The Performance Share Plan is targeted to the President and CEO, EMG members and other key managers of the Group. The conditions and the issuance of the Performance Shares are decided by the Board in accordance with the HR Committee’s proposal. In general, Performance Shares vest over a -three year period. Vesting is subject to meeting of the Group’s performance targets set by the Board for annually commencing new plans.
In the Performance Share Plans, the number of granted shares is expressed as a gross number of shares at target level. Number of shares at target level is earned in case the performance measures are reached at target level. In addition to target level, minimum and maximum levels are set for the performance measures. In case the minimum level of the performance measures is not reached, no share reward will be earned nor paid based on the Performance Share Plan. Should the minimum level of the performance measures be reached, the earned share reward is 25% of the number of shares at target level. Should the maximum level of performance measures be reached, the earned share reward is 150% of the number of shares at target level. The scale is linear between minimum and target level, and target and maximum level.
Sanoma has launched five Performance Share Plans during years 2013-2017. Details of the plans are available in Remuneration Statement 2017.
Restricted Share Plan
Sanoma has adopted a Restricted Share Plan in 2014. The Restricted Share Plan is targeted to the President and CEO, EMG members and other key managers of the Group. The conditions and the issuance of the Restricted Shares are decided by the Board in accordance with the HR Committee’s proposal. In general, Restricted Shares vest over two and three year periods after which the allocated shares will be delivered to the participants provided that their employment with Sanoma continues uninterrupted throughout the duration of the plan until the shares are delivered.
The first plan commenced at the beginning of 2014 and the shares based on the first plan were delivered in March 2016. The second plan commenced at the beginning of 2015, and 50% of the shares based on it were delivered in March 2017, whereas 50% will be delivered in 2018. The third plan commenced at the beginning of 2016, and 50% of the shares based on it will be delivered in 2018 and 50% in 2019. The fourth plan commenced at the beginning of 2017 and the shares based on it will be delivered in 2019.