Remuneration at SRV
The principles of remuneration at SRV Group Plc (hereinafter SRV or the company) are based on promoting the financial success and profitability of the company and the implementation of its strategy. The purpose of remuneration is to promote the long-term financial success of the company and to provide direction and incentives for the achievement of strategic, operational and financial objectives. Remuneration seeks to motivate and commit employees to keep improving their performance.
The remuneration of the company’s governing bodies – that is, the Board of Directors, CEO and deputy to the CEO – is based on the Remuneration Policy that was ratified by SRV’s Annual General Meeting of 26 March 2020 on the basis of the proposal of the Board of Directors.
The company’s Remuneration Policy and Remuneration Reports for previous years (as from 2020) are available online at https://www.srv.fi/en/investors/cg/remuneration/. The current remuneration schemes for the company’s governing bodies and Corporate Executive Team are presented below. The description is updated when the information on remuneration changes significantly.
- Remuneration of the Board of Directors
The shareholders of SRV decide on the remunerations paid to the members of the Board on their work in the Board and the committees and their determination principles at the Annual General Meeting. The Shareholders’ Nomination Board of SRV prepares proposals related to the remuneration and other benefits of the members of the Board of Directors.
The Annual General Meeting of SRV decided on 28 March 2022 that
- the annual remuneration of the Chairman of the Board is EUR 72,000
- the annual remuneration of the Vice Chairman is EUR 48,000,
- the annual remuneration of a member of the Board is EUR 36,000 and
- the annual remuneration of the Vice Chairman of the Audit Committee is EUR 48,000 in case he/she does not act as Chairman or Vice Chairman of the Board of Directors at the same time
In addition, a remuneration of EUR 700 per meeting of the Board and the committees is paid to the Chairman, the Vice Chairman and the members. Travel expenses arising from performing the duties of a member the Board of Directors are paid according to company’s travel policy.
The annual fees will be paid in SRV Group Plc’s shares and in cash, with approximately 40% of the remuneration paid in shares. After the transfer of shares, the remaining amount is to be paid in cash. The company will acquire the shares in the name and on behalf of the Board members. The company is responsible for the costs arising from the acquisition of the shares. The shares are to be acquired within two weeks from the publishing of the interim report for the first quarter of 2022, or as soon as it is possible in accordance with applicable legislation. The shares are not subject to commitment period or other transfer restrictions.
None of the members of the Board is in an employment relationship with the company, and therefore they do not receive financial benefits related to an employment relationship from the company. The members of the Board are not within the scope of the company’s share-based incentive schemes.
- Remuneration of the CEO
Amount of fixed remuneration and main terms of employment
SRV’s President & CEO is Saku Sipola, M.Sc. (Tech.), CEO effective as from 1 September 2019. The CEO is paid a basic monthly salary. The basic salary includes fringe benefits (car, meal and mobile phone benefits). The basic salary of the CEO in 20212 is EUR 454,250.
The company is responsible for providing pension insurance for the CEO in accordance with the legislation in force. The CEO or the company may terminate the CEO’s contract with a notice of termination. If the CEO terminates the contract, the period of notice is six months. If SRV terminates the contract, the period of notice is 12 months.
Short-term remuneration for the President & CEO
The maximum amount of the annual performance bonus of the President & CEO corresponds to his/her total salary for eight months. The Board of Directors sets annual targets for the CEO at the beginning of each financial year.
The starting point is that when the profits calculated after the SRV Group’s financing costs correspond to the budget approved by the Board of Directors for the financial year, and when the President & CEO otherwise fulfils his or her duties in a way that meets the goals set on the President & CEO, the performance bonus amount corresponds to the total salary of four months. However, the Board has the right to decide the amount, payment or lack of payment of the performance bonus in the manner it considers best.
Long-term remuneration for the President & CEO
Incentive Plan 2019-2026
In June 2019, the Board of Directors of SRV decided on a share-based incentive scheme for the President & CEO for 2019–2026. In December 2020, the Board of Directors decided on changes to the CEO’s incentive scheme due to the rights issue carried out in 2020.
Under the scheme, the CEO has been given 1,000,000 acquisition rights, entitling him to acquire the number of SRV shares corresponding to the acquisition rights at a price of EUR 0.55 per share. Under the scheme, new shares or treasury shares in the possession of the company can be issued. In each instance, the company’s Board of Directors will make a separate decision on the manner of implementation.
The acquisition rights can be exercised in three exercise periods, the first of which begins on 1 March 2022 and ends on 28 February 2023, the second begins on 1 March 2023 and ends on 31 August 2024, and the third begins on 1 September 2024 and ends on 31 August 2026. During the first and second exercise periods, the acquisition rights holder is entitled to exercise 300,000 acquisition rights and during the third period 400,000 acquisition rights. Under the terms of the scheme, the acquired shares are subject to a transfer restriction, which is valid for two years from the acquisition of the shares.
Incentive Plan 2021–2025
The President and CEO also participates in the share-based Long-term Incentive Plan 2021-2025, decided by SRV’s Board of Directors on 29 March 2021, and in the One-off Long-Term Incentive Plan 2021-2022.
The first two periods of the Long-Term Incentive Plan 2021-2023 have begun. The potential reward from the performance period 2021–2023 ans 2022-2024 will be based on the Group’s Total Shareholder Return (TSR) in relation to a separately selected reference group, level of the company’s indebtedness and share price increase. The maximum remuneration of the President and CEO for each performance period corresponds to the value of approximately 450,000 shares in the company (gross amount, of which the proportion to be paid as withholding tax will be deducted). The potential rewards will be paid in 2024 and 2025. The potential share reward to the President and CEO is subject to transfer restriction, which requires the shares to be held for two years from their reward.
The One-off Long-Term Incentive Plan arrangement has one two-year performance period, calendar years 2021–2022. The potential reward from the performance period 2021-2022 will be based on the Group’s operative cash flow and the Group’s Total Shareholder Return (TSR) during the two-year period. The maximum remuneration of the President and CEO corresponds to the value of approximately 450,000 shares in the company (gross amount, of which the proportion to be paid as withholding tax will be deducted). The potential reward will be paid in 2023. The potential share reward to the President and CEO is subject to transfer restriction, which requires the shares to be held for two years from their reward.
- Remuneration of the other members of the Corporate Executive Team
Decision-making process for remuneration
SRV’s Board of Directors decides on the remuneration of the members of the Corporate Executive Team and other terms and conditions of employment. The Board’s HR & Nomination Committee prepares issues related to the salaries and other benefits of the members of the Group’s Corporate Executive Team for the Board of Directors.
The aim of SRV’s short-term remuneration is to strengthen the commitment of the management and the personnel to the Group’s goals. In addition, the aim of long-term remuneration is to ensure that competent and motivated personnel are invested in the Group and its goals, thereby ensuring e.g. that the management stays in the employment of the Group.
The Board of Directors approves the amount of performance bonuses paid to the members of the Corporate Executive Team based on the performance bonus scheme. Performance bonuses may be approved for payment after the fulfilment of the criteria set for the earnings period has been assessed.
The Board of Directors decides on the Group’s long-term incentive schemes. The Board of Directors sets the long-term bonus criteria when making the decision on the terms of the long-term incentive scheme. The Group’s long-term incentive schemes are typically share-based. The Board of Directors decides on granting possible equity bonuses within the framework of the authorisation to issue shares granted by the General Meeting at the time.
Principles of remuneration for the Corporate Executive Team
A senior executive of the company appointed by the Board serves as the deputy to the CEO as their secondary job. With the role being a secondary job, the company does not pay a separate fee for it. The principles of the remuneration of the deputy to the CEO correspond to the principles of the remuneration of other Corporate Executive Team members. The remuneration of the deputy to the CEO is described below as part of the remuneration of the other members of the Corporate Executive Team.
The remuneration of the members of the Corporate Executive Team consists of fixed remuneration (monthly salary including customary fringe benefits) and variable remuneration (short- and long-term incentives).
In addition to the pay for the period of notice, members of the Corporate Executive Team are entitled to receive a remuneration corresponding to the salary for three to six months if the company or its subsidiary dismisses the person in question without the person being guilty of, for instance, a gross misdemeanour concerning the company’s business.
There are no other agreements based on which the members of the company’s Corporate Executive Team would be entitled to additional benefits after the end of the employment relationship.
The members of the Group’s Corporate Executive Team are within the scope of the Group’s annual performance bonus scheme. The maximum bonus amount for the members of the Group’s Corporate Executive Team corresponds to the total salary of five or six months. The Board of Directors approves the principles and the performance and result criteria of the performance bonus scheme as well as the maximum bonus amounts for one year at a time.
The members of the Group Corporate Executive Team belong to the share-based Long-Term Incentive Plan 2021-2025 and the One-off Long-Term Incentive Plan 2021-2022 decided by SRV’s Board of Directors on March 29, 2021. The performance periods of the plans and the criteria for determining the remuneration are described above under the section on the long-term remuneration of the President and CEO. The maximum remuneration of the members of the Group Corporate Executive Team for each performance period varies corresponding to the value of approximately 180,000 to 270,000 company shares in each scheme. There is no commitment period for the possible share reward of the members of the Group Corporate Executive Team.
Bonuses paid during the previous financial year
In 2021, a total of EUR 2,473,865.98 as salaries including fringe benefits was paid to the members of the Corporate Executive Team of SRV Group (excluding the CEO); out of this, the share of fringe benefits was EUR 111,661.24. Members of the Corporate Executive Team were paid a total of EUR 209,925.00 as performance bonuses for the previous year in 2021.