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. Significant shareholders prepare proposals concerning the Board of Directors, including the proposal for the remuneration of Board members.
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.
Board of Directors
The remuneration of the members of the Board of Directors and its Committees comprises annual and meeting fees decided by the General Meeting. Previously, fees to members of Kesko’s Board were paid in cash. However, Kesko’s Annual General Meeting of 11 April 2018 resolved to change the remuneration structure of Board members so that approximately 30% of the annual fees are paid in shares in the Company and the remainder in cash. A Board member cannot transfer shares obtained as remuneration for Board work until either three years have passed from the day the member has received the shares or until their membership on the Board has ended, whichever comes first. The purpose of the change is to commit the Board members to the long-term development of the Company. Meeting fees are paid in cash. Daily allowances and the reimbursements of travel expenses are paid to the Board members in accordance with the general travel rules of Kesko. Members of the Board do not participate in the other remuneration schemes or pension plans of the Company.
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. In addition, a health insurance, life insurance and leisure travel insurance have been taken out for President and CEO Helander. 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.
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 8,000 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. The targets for Group Management Board members responsible for divisions stress the division’s comparable operating profit, return on capital employed (ROCE %) and business-specific sales or market share indicator. For the other Group Management Board, members profit targets include the Group’s return on capital employed (ROCE %) and 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 70% of the performance bonus is tied to the fulfilment of financial targets.
The maximum performance bonus of Kesko's President and CEO corresponds to 67% 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 based on the fixed monetary salary of the last month of the calendar year the performance of which is the basis for the bonus.
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.
Read more: Share-based compensation schemes