Share-based compensation schemes

Share-based commitment and incentive scheme

In February 2017, Kesko's Board of Directors decided on a long-term share-based commitment and incentive scheme for top management and selected key persons. The scheme consists of three share-based compensation plans, under which the Board can annually decide on the initiation of new share plans. The primary share-based compensation plan is the Performance Share Plan (PSP). There is also an RSP (Restricted Share Pool) plan for special situations. In February 2020, the Kesko's Board of Directors decided to complement the long-term share-based commitment and incentive scheme with a new Key Personnel Share Plan (KPSP).

Share awards based on the plans are paid in Kesko B shares. The recipient of the shares is free to use them once the commitment period of the share plan ends, provided that the person is still employed by Kesko Group.

The purpose of the share-based compensation scheme is to promote Kesko's business and increase the Company's value by aligning the objectives of the shareholders and executives. The plan also aims to commit people to Kesko Group and give them the opportunity to receive Company shares upon fulfilling the objectives set in the share-based compensation scheme.

The maximum gross amount of share award paid for each performance period is 400% of the monetary salary of the last calendar year of the performance period for which the award is paid.

Kesko applies a share ownership recommendation policy to the members of Kesko's Group Management Board. According to the recommendation, each Group Management Board member shall maintain a holding of at least 50% of the net shares they have received under the Company's share-based compensation schemes until their holding of Kesko shares corresponds to at least four times their fixed gross annual salary.

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.

The Performance Share Plan (PSP) is a share-award plan that consists of individual annually commencing share plans, each with a two-year performance period and a two-year commitment period following the payment of the potential share award. Kesko's Board decides annually whether to initiate a new plan. The PSP plan initiated at the start of 2023 consists of a two-year performance period (1 Jan. 2023-31 Dec. 2024) followed by a two-year commitment period (1 Jan. 2025-10 Feb. 2027). The PSP plan initiated at the start of 2024 consists of a two-year performance period (1 Jan. 2024-31 Dec. 2025) followed by a two-year commitment period (1 Jan. 2026-10 Feb. 2028). During the commitment period, the shares cannot be pledged or transferred, but the other rights attached to the shares remain in force. If a person's employment or service relationship terminates prior to the expiry of a commitment period, the person must, as a rule, return the shares under transfer restriction to Kesko or its designate for no consideration. In individual cases, the Board may decide that the person can keep the shares under return obligation, or some of them. If the grantee retires during the commitment period, he/she is entitled to keep the shares and other securities already received. Kesko Group's tax free sales (%), Kesko Group's comparable return on capital employed (ROCE,%) and the absolute total shareholder return (TSR, %) of a Kesko B share are the performance criteria for the PSPs initiated in 2017, 2018, 2019, 2020, 2021, 2022, 2023 and 2024. In addition, the target measuring Kesko's sustainability, will be included as the performance criteria for the 2022, 2023 and 2024 calendar years.

The performance-based share award plan Key Personnel Share Plan (KPSP) consists of individual annually commencing share plans, each with a one-year performance period and a two-year commitment period. Kesko's Board decides annually whether to initiate a new plan. The KPSP initiated at the start of 2023 consists of a one-year performance period (1 Jan. 2023 – 31 Dec. 2023). Performance period is followed by a two-year commitment period, after which shares are paid to the recipients after the financial results release for the 2025 financial year, in March 2026 at the latest. The KPSP initiated at the start of 2024 consists of a one-year performance period (1 Jan. 2024 – 31 Dec. 2024). Performance period is followed by a two-year commitment period, after which shares are paid to the recipients after the financial results release for the 2026 financial year, in March 2027 at the latest. The performance criteria for the KPSP comprise indicators related to Kesko's profitability and the profitability, growth and capital efficiency of the participant's area of responsibility, sustainability and Kesko's share performance.

RSP (Restricted Share Pool) is a secondary share plan for special situations, to be decided upon separately. The plan consists of annually commencing individual share plans that each have a three-year commitment period, after which the potentially promised share awards for an individual plan will be paid to the participants, provided that their employment or service relationship with Kesko Group continues until the payment of the awards.

The maximum number of shares to be granted is 80,000 gross shares per plan for the plans initiated in 2019, 2020, 2021, 2022, 2023 and 2024. The commitment period for the 2021 RSP ended on 15 March 2024, the commitment period for the 2022 RSP on 15 March 2025, the commitment period for the 2023 RSP will end on 15 March 2026 and the commitment period for the 2024 RSP will end on 15 March 2027.

Further information on treasury shares held by the Company is available in the section "Own shares".

The Company has not issued options or other special rights entitling to shares.