Remuneration
Remuneration at SRV
The principles of remuneration at SRV Group Plc (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 personnel to keep improving their performance.
The remuneration of the company’s governing bodies – that is, the Board of Directors, President & CEO and Deputy to the CEO, if any – 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 plans for the company’s governing bodies and Corporate Executive Team as well as the decision-making procedure for remuneration 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. SRV’s Shareholders’ Nomination Board prepares a proposal on the remuneration of the company’s Board of Directors to the Annual General Meeting.
SRV’s Annual General Meeting decided on 27 March 2023 that the following annual fees would be paid to the members of the Board:
- Chair EUR 72,000,
- Vice Chair EUR 48,000,
- Board member EUR 36,000, and
- Chair of the Audit Committee EUR 48,000, if he/she does not simultaneously act as Chair or Vice Chair of the Board of Directors.
In addition, a remuneration of EUR 700 per meeting of the Board and the committees is paid to the Chair, the Vice Chair and the members of the Board. Travel expenses arising from performing the duties of a member of the Board of Directors are paid according to the company’s travel policy.
The aforementioned annual fees will be paid in SRV Group Plc’s shares and in cash, with approximately 40 per cent 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 for Board members within two weeks from the publishing of the interim report for the first quarter of 2023, or as soon as it is possible in accordance with applicable legislation. The shares are not subject to a restriction 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 plans.
- Remuneration of the President & CEO
SRV’s Board of Directors decides on the remuneration to be paid to the President & CEO. The President & CEO’s remuneration consists of fixed components, such as a basic salary and fringe benefits, and variable components, such as short- and long-term incentives and other financial benefits.
Amount of fixed remuneration and main terms of employment
SRV’s President & CEO is Saku Sipola, M.Sc. (Tech.), effective as from 1 September 2019. The President & CEO is paid a basic monthly salary. The basic salary includes fringe benefits (car, meal and mobile phone benefits). The basic salary of the President & CEO in 2023 is EUR 456,000.
The company is responsible for providing pension insurance for the President & CEO in accordance with the legislation in force.
The President & CEO or the company may terminate the President & CEO’s contract with a notice of termination. If the President & 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 President & CEO is entitled to a short-term incentive plan (performance bonus). The maximum amount of the annual performance bonus of the President & CEO corresponds to his/her basic salary for eight months. In accordance with the company’s Remuneration Policy, the bonuses paid under the short-term incentive plan may account for no more than two-thirds of the President & CEO’s fixed annual compensation.
The Board of Directors decides on the criteria for the performance bonuses of the President & CEO on an annual basis. The main emphasis will be on financial objectives, but some of the objectives can also be non-financial. The Board assesses the President & CEO’s performance in relation to these performance bonus criteria at the end of the review period. The review period is the financial year. Performance bonuses, if any, are paid in April of the year following the review period.
The Board of Directors may also decide on other financial benefits for the President & CEO. These financial benefits may include, for example, additional insurance or one-off payments, such as a sign-on bonus, severance pay upon dismissal, or a separate bonus for safeguarding the company’s interests under special circumstances, decided by the Board. A one-time payment shall account for no more than half of the amount of fixed annual compensation.
Long-term remuneration for the President & CEO
The President & CEO may be entitled to a long-term incentive plan, which is typically share-based. The determination principles of the incentive plan
typically include financial and/or strategic objectives. An incentive plan may be based solely on the increase in the value of the company’s share, in which case the incentive plan
may grant subscription or acquisition rights for shares at a predetermined price. Acquisition rights are divided into different exercise periods that are no longer than two years. The acquired shares are subject to a transfer restriction (restriction period)
that remains in effect for at least two years after the acquisition of the shares. The relative proportion of remuneration accounted for by the share appreciation-based plan depends on the future growth in the value of the company’s share.
Completed incentive plans
Incentive plan 2019-2026
In June 2019, the Board of Directors of SRV decided on a share-based incentive plan for the President & CEO for 2019–2026. The terms of the plan were amended following the rights issue carried out in 2020.
Under the plan, the President & CEO was 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. The acquisition rights had three exercise periods: 1 March 2022-28 February 2023, 1 March 2023-31 August 2024 and 1 September 2024-31 August 2026. During the first and second exercise periods, the President & CEO was entitled to exercise 300,000 acquisition rights and during the third period 400,000 acquisition rights. Under the terms of the plan, the acquired shares would have been subject to a transfer restriction, valid for two years from the acquisition of the shares.
On 1 February 2023, the Board of Directors decided to cancel the incentive plan 2019-2026 and annul the acquisition rights granted to the President & CEO under it. The Board concluded that keeping the incentive plans in place could no longer be justified in view of the financial arrangements made by the company to strengthen the balance sheet in 2022 and the effect of these arrangements on, among other things, the number of shares in the company. At the time of the Board’s decision to cancel the plan, the President & CEO had not exercised any of the acquisition rights he had been granted under the plan.
Incentive plan 2021-2025
The President & CEO participated in the long-term share-based incentive plan 2021-2025 that had been decided on by the Board of Directors on 29 March 2021.
The first two earning periods of the incentive plan 2021-2025 were 2021-2023 and 2022-2024. Any incentives paid as part of the earning periods 2021–2023 and 2022-2024 would have been based on the company’s total shareholder return (TSR) in relation to a separately selected reference group, the company’s indebtedness and the increase in share price. The maximum incentives of the President & CEO for each earning period would have corresponded to the value of about 450,000 SRV shares (gross amount from which withholding taxes would have been deducted). It was intended that any incentives would have been paid in 2024 and 2025. The potential equity bonus of the President & CEO would have been subject to a transfer restriction whereby he must have held these shares for a period of two years after being awarded.
The Board of Directors decided to cancel the incentive plan 2021-2025 on 1 February 2023. The Board concluded that keeping the incentive plans in place could no longer be justified in view of the financial arrangements made by the company to strengthen the balance sheet in 2022 and the effect of these arrangements on, among other things, the number of shares in the company. Due to the cancellation of the plan, no incentives will be paid for the 2021-2023 and 2022-2024 earning periods that had commenced.
One-off incentive plan 2021-2022
The President & CEO participated in the one-off long-term incentive plan 2021-2022 decided on by the Board of Directors on 29 March 2021.
The incentive plan had one two-year earning period, the calendar years 2021-2022. On 1 February 2023, the Board of Directors confirmed the incentives to be paid to the individuals covered by incentive plan in respect of the 2021–2022 earning period. The incentives are based on the Group’s operative cash flow and the company’s total shareholder return (TSR) over a two-year period. Changes in the company’s number of shares resulting from SRV’s reverse share split on 4 July 2022 were taken into account in calculating the amounts of incentives in accordance with the terms and conditions of the incentive plan. The Board also resolved, in accordance with the terms of the incentive plan, to pay the entirety of the incentives due to the individuals covered by the plan in cash.
The maximum incentives of the President & CEO under the plan amounted to about 450,000 SRV shares (gross amount from which withholding taxes will be deducted) before accounting for the reverse share split on 4 July 2022 and 11,250 SRV shares (gross amount from which withholding taxes will be deducted) after accounting for the reverse share split. Converted to cash, the amount of plan incentives to be paid to the President & CEO is EUR 20,362 (gross amount from which withholding taxes will be deducted). The plan incentives will be paid to the President & CEO in April 2023.
- Remuneration paid to the other members of the Corporate Executive Team and the Deputy to the CEO
SRV’s Board of Directors decides on the remuneration of the members of the Group’s 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.
Fixed remuneration and main terms of employment
The remuneration of the members of the Group’s Corporate Executive Team consists of fixed remuneration (monthly salary including customary fringe benefits) and variable remuneration (short- and long-term incentives and other financial benefits). The members of the Corporate Executive Team do not have supplementary pensions or insurance.
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.
If necessary, 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.
Variable remuneration
The members of the Group’s Corporate Executive Team are within the scope of the Group’s annual performance bonus plan. The maximum performance bonus amount for the members of the Group’s Corporate Executive Team corresponds to the basic salary for five or six months. The Board of Directors approves the principles and the performance and result criteria of the performance bonus plan as well as the maximum bonus amounts for one year at a time. The Board of Directors also approves the amount of performance bonuses paid to the members of the Corporate Executive Team based on the performance bonus plan. Performance bonuses may be approved for payment after the fulfilment of the criteria set for the earning period has been assessed. Performance bonuses, if any, are paid in April of the year following the review period.
The Board of Directors decides on the Group’s long-term incentive plans. The Board of Directors sets the long-term bonus criteria when making the decision on the terms of the long-term incentive plan. The Group’s long-term incentive plans 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.
Members of the Group’s Corporate Executive Team participated in the share-based long-term incentive plan 2021-2025 decided on by SRV’s Board of Directors on 29 March 2021 that was cancelled on 1 February 2023 and in the now-ended one-off long-term incentive plan 2021-2022. The earning periods of the plans, the determination principles of the incentives, and the decisions concerning the cancellation of the share-based long-term incentive plan 2021-2025 and incentives payable under the one-off long-term incentive plan 2021-2022 are described above under the section on the long-term remuneration of the President & CEO. The maximum incentives of the Corporate Executive Team members for each earning period varied, amounting to the value of about 180,000–270,000 SRV shares (gross amount from which withholding taxes will be deducted) in both plans before accounting for the reverse share split. The equity bonuses for Corporate Executive Team members are not subject to a restriction period.
Remuneration paid during the previous financial year
In 2022, a total of EUR 2,185,587 as salaries including fringe benefits was paid to the members of the Corporate Executive Team of SRV Group (excluding the President & CEO); out of this, the share of fringe benefits was EUR 143,813. In 2022, the members of the Corporate Executive Team (excluding the President & CEO) were paid a total of EUR 158,491 as performance bonuses for the previous year.