Remuneration

26.03.2024

Kesko Corporation's ("Kesko") Annual General Meeting 26 March 2024 approved the Company's Remuneration Policy for Governing Bodies.

Remuneration Policy for governing bodies in Kesko Corporation

Decision-making procedure concerning remuneration

The Annual General Meeting decides on the remuneration and other financial benefits of the members of Kesko Corporation's (“Kesko”) Board of Directors and its Committees annually.

Based on the Remuneration Committee's preparatory work, Kesko's Board of Directors makes decisions on the remuneration of the President and CEO and the Group Management Board members responsible for lines of business. As for the other Group Management Board members, Kesko's Board of Directors makes decisions on the performance bonus principles and share awards. Other decisions regarding remuneration are made by the President and CEO, based on preparatory work by the head of HR, within the limits set by the Chairman of the Board's Remuneration Committee.

The Board of Directors decides on the principles of Kesko’s remuneration schemes and monitors the realisation of the remuneration schemes of the President and CEO and the other Group Management Board members. The Board also decides, within the limits of the authorisation granted by the General Meeting, on the distribution of shares and terms and conditions thereof, under the share compensation or share-based compensation schemes.

Main principles of remuneration

President and CEO and other Group Management Board

General

The remuneration scheme for the President and CEO and the other Group Management Board members consists of a fixed monetary salary (monthly salary), fringe benefits (free car and mobile phone benefit), a performance bonus based on criteria decided annually (short-term incentive and commitment scheme), a share compensation scheme (long-term commitment and incentive scheme) and retirement benefits for management. Group Management Board members have leisure-time accident insurance cover and an employer-subsidised exercise and cultural benefit. In addition, a health insurance and leisure travel insurance have been taken out for President and CEO Rauhala. Termination benefits have been agreed upon with the President and CEO and the other Group Management Board members.

The total remuneration for Kesko’s President and CEO and the other Group Management Board members is compared to that of similar positions in other large companies in Finland. Remuneration elements are compared to those of peer companies to ensure the competitiveness and appropriateness of total remuneration for each position.

Commitment and incentive schemes

Performance bonus scheme (short-term commitment and incentive scheme)

Kesko employs annually determined performance bonuses for short-term remuneration. The Board of Directors confirms the terms and conditions of performance bonuses and the Group level performance bonus criteria annually. The scheme covers around 6,000 employees, including the President and CEO and the Group Management Board. The performance bonuses are paid after the completion of the annual financial statements by the end of April following the year of determination.

Kesko's Board and Remuneration Committee monitor and evaluate the fulfilment of the performance and profit criteria and their impact on the Company’s long-term financial success.

One performance bonus criteria for all Group Management Board members is the Group’s comparable operating profit and economic profit. The targets for Group Management Board members responsible for divisions stress the division’s comparable operating profit and business-specific sales or market share indicator. For the other Group Management Board members profit targets include the Group’s sales target, in addition to the Group’s operating profit target. Each member of the Group Management Board furthermore has individual targets. The performance bonus criteria and their weights vary depending on duties. At least 80% of the performance bonus is tied to the fulfilment of financial targets.

The maximum performance bonus of Kesko's President and CEO corresponds to 100% of his monetary salary for the calendar year, excluding fringe benefits. For the other Group Management Board members, depending on the profit impact of their position, the maximum performance bonus corresponds to 33-50% of their monetary salary for the calendar year, excluding fringe benefits. When determining the performance bonus for a Group Management Board member, monetary salary for the calendar year is determined using the actual annual salary of the Group Management Board member.

If exceptional events and events with significant impacts on operations take place during the financial year, or if the market situation or the Company’s productivity trend so requires, the application, target setting and payment rules of the performance bonus scheme can be changed by a decision of Kesko Corporation’s Board also in individual cases.

According to the rules of the performance bonus scheme, the period of service or comparable activity in a Group company shall have lasted continuously for at least four calendar months during the calendar year for which the bonus is paid. A performance bonus is not paid to a person whose employment relationship or service contract terminates before the date of payment.

At its discretion, the Board may decide not to pay a performance bonus, or decide to recover a bonus that has already been paid if the bonus recipient has been found guilty of malpractice or an action in breach of Kesko’s ethical or responsibility principles or guidance that, as a whole, cannot be considered insignificant, or if there are weighty grounds for assuming that the recipient is guilty of such acts.

Share-based commitment and incentive scheme (Long-term commitment and incentive scheme)

Kesko employs a share-based commitment and incentive scheme for long-term remuneration.