Search form

Srv Company / Investors / Corporate Governance / Remuneration

Remuneration

Salary and remuneration report 24 February 2017

This report on remuneration includes descriptions of the decision-making procedure concerning the remuneration of the Board of Directors of SRV Group Plc, the President & CEO, and other members of the Group’s Corporate Executive Team, as well as the key principles of remuneration. A remuneration report listing the compensation and other financial benefits paid during the financial year 2016 has been drawn up as a part of the report.

The report is updated when the information on remuneration changes significantly. 

Decision-making procedure

Board of Directors

The shareholders of SRV Group Plc 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 HR & Nomination Committee of the Board prepares a proposal on the remunerations of the Members of the Board and the basis for the compensation of expenses annually.

President & CEO and other management

The Board of Directors of SRV Group Plc decides on the terms of employment and other compensation of the President & CEO, Deputy CEO, and other members of the Corporate Executive Team. The Board’s HR & Nomination Committee prepares issues related to the salaries and other benefits of the President & CEO, the Deputy CEO and other members of the Group’s Corporate Executive Team.

The Board of Directors approves the amount of bonuses paid to the President & CEO and the other members of the Corporate Executive Team based on the performance bonus scheme. 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 granting possible equity bonuses within the framework of the authorisation to issue shares granted by the General Meeting at the time. The Annual General Meeting on 22 March 2016 authorised the Board of Directors to decide on the issue of new shares or the reissue of treasury shares and/or the issue of special rights entitling to shares as referred to in Chapter 10, Section 1 of the Limited Liability Companies Act either for or without consideration. Based on the authorisation, the Board of Directors may decide on the issue of shares such that the number of shares issued based on the authorisation, including shares issued on the basis of special rights, is a maximum of 6,049,957 in total.

The authorisation entitles the Board of Directors to decide on all the terms and conditions of a share issue and special rights entitling to shares, including the right to derogate from the pre-emptive subscription right of shareholders, if there is a weighty financial reason for the company to do so.  A directed share issue may be executed without consideration only if there is an especially weighty financial reason for the company to do so, taking the interests of all shareholders into account.

The authorisation may be used, for example, when issuing new shares or conveying shares as consideration in corporate acquisitions, when the company acquires assets relating to its business and for implementing incentive schemes. The authorisation shall be valid for five years from the decision of the Annual General Meeting.

In 2016, the Board of Directors has made the following decisions concerning a targeted share issue without payment in order to implement the incentive scheme: the share issue decision of 25 July 2016 (7,598 shares), the share issue decision of 24 August 2016 (30,168 shares), and the share issue decision of 2 February 2017 (206,476 shares). In addition, the Board of Directors has decided on a targeted share issue without payment based on a previous authorisation to issue shares on 19 February 2016 (11,276 shares). The share issues have been implemented by issuing own shares held by the company.

The Board of Directors also approves all the terms of the personnel incentive and remuneration systems used by the Group. The company’s Board of Directors sets the long-term performance criteria when making the decision on the terms of the long-term incentive scheme. In addition, the Board of Directors decides on the performance criteria related to short-term remuneration annually. The performance criteria set by the Board are based on the Group’s long-term strategy, the annually drawn up action plan as well as the budget. The performance criteria set for remuneration annually clarify the gradual achievement of the long-term goals. The aim of 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.

 

Key principles of remunerations

Board of Directors

The Annual General Meeting (AGM) of SRV Group Plc decided on 22 March 2016 that 
-       the remuneration of the Chairman of the Board is EUR 5,000 per month, 
-       the remuneration of the Vice Chairman is EUR 4,000 per month, and 
-       the remuneration of a Member of the Board is EUR 3,000 per month. 

In addition, a remuneration of EUR 500 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. 

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, and they are not paid in shares of the company as remuneration.

President & CEO

Employment agreement and short-term remunerations

Juha Pekka Ojala, B.Sc. (Eng.), is the President & CEO of SRV Group Plc. A written President & CEO agreement has been drawn up between SRV Group Plc and Juha Pekka Ojala, according to which the salary of the President & CEO consists of the fixed monthly salary, which includes the salary in money and the ordinary fringe benefits (car, meal and mobile phone benefit), as well as the bonuses. The salary of the President & CEO in money is €30,240.00 and the total salary is €31,524.35 per month.

The maximum amount of the annual bonus corresponds to the President & CEO’s total salary of eight months. 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 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 bonus in the manner it considers best.

The President & CEO has the right to retire at 60 years of age. SRV Group Plc pays an annual pension insurance premium amounting to 20% of the annual salary of the President & CEO, excluding bonuses. The pension insurance is based on contributions, and the company is not responsible for the amount of pension to be paid later. The President & CEO is entitled to a paid-up free policy after the employment relationship ends.

Each party has the right to terminate the employment relationship of the President & CEO with a period of notice of six (6) months. If SRV Group Plc terminates the agreement, an additional severance pay corresponding to the salary of 12 months is paid to the President & CEO.

Long-term remuneration for the President & CEO

Based on the share issue carried out in September 2015, the Board of Directors of SRV Group Plc has revised the amounts and reference prices of the equity bonus rights issued based on the valid share-based incentive scheme so that the value of the benefit based on the system received by those within the scope of the system remains unchanged. The numbers and values valid on the date of the salary and remuneration report have been stated later in this section.

Incentive scheme of the President & CEO 2015–2020

The Board of Directors of SRV Group Plc has made the decision for a share-based incentive scheme for the President & CEO for 2015–2020. Based on the scheme, Juha Pekka Ojala has 720,000 acquisition rights, entitling him to acquire the number of SRV Group Plc shares corresponding to the acquisition rights at a price of EUR 2.6145 per share, or to receive an amount of cash or shares or a combination of these corresponding to the benefit arising from exercising the acquisition rights and based on the development of SRV Group Plc’s share price.

In each instance, the company’s Board of Directors will make a separate decision on the manner of implementation. Under the terms of the scheme, half of the post-tax value thus obtained must be linked to SRV Group Plc’s shares. These shares are subject to a transfer restriction that is valid for two years from receipt of the shares.

The acquisition rights can be exercised in five two-year periods. The acquisition rights holder is entitled to exercise 144,000 acquisition rights during each period. The exercise periods A and B of the scheme have been used, and the remaining periods are: C: 1 January 2017–31 December 2018, D: 1 January 2018–31 December 2019 and E: 1 January 2019–31 December 2020.

The maximum total recognised IFRS cost of the portion given as shares over the lifetime of the incentive scheme 2014–2022 will be approximately EUR 0.5 million. If the benefit arising from exercising the acquisition rights is realised as money or a combination of money and shares, the amount of IFRS cost of the part of the incentive scheme issued as shares will decrease correspondingly, and the amount paid in money is added to the cost. The remunerations paid based on the scheme have been reported in the remuneration report for 2016.

Schemes concerning the years 2011–2016 and 2014–2016

The President & CEO is also within the scope of the share-based incentive schemes of SRV Group for 2011–2016 and 2014–2016.

The exercise periods for the equity bonus rights of the incentive scheme for the years 2011–2016 have ended, and the equity bonus rights have not been used. Based on the share-based incentive scheme concerning the years 2014–2016, Juha Pekka Ojala was entitled to a maximum of 62,400 shares in SRV Group Plc based on the fulfilment of personal goals set for him. The scheme's earnings period has ended, and the remunerations are reported based on payment in the remuneration report for 2017.  

The incentive schemes for the years 2011–2016 and 2014–2016 have been described in more detail later in sections 3.2 a) and 3.2 b).

Other management

Short-term remunerations

The remunerations of the Group’s Corporate Executive Team consist of the fixed monthly salary, the ordinary fringe benefits and the bonuses. 

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. In 2017, the bonus amount of the Group’s Corporate Executive Team is influenced by the achievement of personal goals as follows: personal share max. 0.5 months, Group’s result max. 3 months, and the result of the business area in question max. 3 months.

In addition to the pay for the period of notice, some members of the Corporate Executive Team are entitled to receive a remuneration corresponding to the salary of six (6) months, if the company or its subsidiary dismisses the person in question without the person being guilty of e.g. a gross misdemeanour concerning the company’s business.

The Executive Vice Presidents of SRV Group, who have been employed by SRV Group on 15 December 2010, are within the scope of the pension system, based on which they are entitled to retire at 60 years of age. The additional pension is based on contributions, and the policyholder is not responsible for the amount of pension to be paid later. The annual insurance premium amounts to 20% of the annual salary of the insured parties, excluding possible bonuses. The insured parties are entitled to a paid-up free policy after the employment relationship ends, if their employment relationship ends for a reason other than the occurrence of pension. 

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.

Long-term remunerations

Members of the Group’s Corporate Executive Team are within the scope of the share-based incentive schemes acting as long-term incentive schemes. Based on the share issue carried out in September 2015, the Board of Directors of SRV Group Plc has revised the amounts and reference prices of the equity bonus rights issued based on the valid share-based incentive scheme so that the value of the benefit based on the system received by those within the scope of the system remains unchanged. The numbers and values valid on the date of the salary and remuneration report have been stated later in this section.

System for the years 2011–2016

In 2011, the Board of Directors of SRV Group Plc decided on a long-term share-based incentive scheme for the Group’s key personnel. In 2016, the incentive scheme covered approximately 50 key personnel of the Group. The scheme was in force from 2011 to 2016, and its reward level was tied to the increase in the value of SRV Group Plc’s shares. The exercise periods for the right to receive a bonus have ended, and no bonuses have been paid based on the system.

System for the years 2014–2016

In 2014, the Board of Directors of SRV Group Plc approved a new share-based incentive scheme for the Group's key personnel. The scheme covered 26 key SRV personnel. Key indicators in the scheme were the Group’s operating profit and return on equity. In addition, other business-specific indicators specified for 2014–2016 affected the bonus earned. The purpose of the scheme was to align the objectives of shareholders and key personnel in order to increase the company's value, and to enhance key personnel's commitment to the company.

When the indicators were fulfilled, the bonus would be paid, partly in the company's shares and partly in cash. This scheme allowed the conveyance of a maximum of 588,000 SRV Group Plc shares to key employees, and a cash payment for tax purposes corresponding to the value of the conveyed shares.

Personnel covered by the scheme must hold at least half of the shares received on the basis of the scheme until 31 December 2017 and at least half until 31 December 2018. If a key employee's employment ends during the above restriction period, he/she must hand over all shares to the company without compensation.

The earnings period of the scheme has ended. On 2 February 2017, SRV Group Plc decided on a targeted share issue without payment based on the realisation of the scheme, based on which the company conveys 206,476 of its own shares. The remunerations are reported based on payment in the remuneration report for 2017.  

System for the years 2017–2019

On 2 February 2017, the Board of Directors of SRV Group Plc approved a new share-based incentive scheme for the Group's key personnel. The scheme covers 40 key SRV personnel. The purpose of the scheme is to align the objectives of shareholders and key personnel in order to increase the company's value, and to enhance key personnel's commitment to the company. The key indicators for the scheme’s earnings period of 2017–2019 are the improvement of the Group’s profit percentage and the return of the Group’s own capital and capital employed. In addition, other business-specific indicators specified for 2017–2019 will affect the bonus earned. The scheme’s objectives are focused especially on the year 2019.

When the indicators are fulfilled, the bonus will be paid, partly in the company's shares and partly in cash. This scheme allows the conveyance, without consideration, of a maximum of 1,000,000 SRV Group Plc shares to key employees, and a cash payment for tax purposes corresponding to the value of the conveyed shares. The total recognised IFRS value of shares conveyed over the lifetime of the incentive scheme, 2017–2019, will be approximately EUR 5.5 million, to which the cash payments will be added.

Personnel covered by the scheme must hold at least half of the shares received on the basis of the scheme until 31 December 2020 and at least half until 31 December 2021. If a key employee's employment ends during the above restriction period, he/she must hand over all shares to the company without compensation.

Other incentive schemes

In addition, SRV Group Plc had previously made a share incentive agreement with one member of the Group’s Corporate Executive Team. The exercise period for the final 120,000 acquisition rights of the scheme ended on 31 July 2016. The acquisition rights entitled the Corporate Executive Team member to subscribe for or acquire a number of shares in SRV Group Plc corresponding to his/her acquisition rights at the price of EUR 4.00 per share, or receiving a sum of money corresponding to the benefit gained by exercising the acquisition rights in accordance with the company’s decision. The shares acquired based on the scheme are subject to a transfer restriction that is valid for two years from receipt of the shares. The remuneration paid based on the scheme has been taken into account in the remuneration report for 2016.
 

Remuneration report

This remuneration report has been published in connection with the salary and remuneration report. The remuneration report describes the remuneration and other financial benefits paid to the Board of Directors, the President & CEO, and the other members of the Group’s Corporate Executive Team during the previous financial year, i.e. financial year 2016.

 

Board of Directors

According to a decision of the Annual General Meeting on 22 March 2016, a remuneration of EUR 5,000 per month was paid to the Chairman of the Board, a remuneration of EUR 4,000 per month to the Vice Chairman and a remuneration of EUR 3,000 per month to the other Members of the Board starting from the Annual General Meeting of 2016.  In addition, a remuneration of EUR 500 per meeting of the Board and the committees is paid to the Chairman, the Vice Chairman and the Members. The travel expenses arising from performing the duties of a member the Board of Directors are paid according to company’s travel policy. 

Information on the remunerations paid to the people acting as Members of the Board during the financial year 2016 has been compiled in the table below:

 

2016 Monthly remuneration  Meeting remuneration Total
Ilpo Kokkila (Chairman) 60,000 11,000 71,000
Olli-Pekka Kallasvuo (Vice Chairman) 48,000 10,500 58,500
Minna Alitalo 36,000 11,500 47,500
Arto Hiltunen 36,000 11,000 47 000
Timo Kokkila 36,000 11,000 47 000
Risto Kyhälä 36,000 11,000 47 000
       

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, and they are not paid in shares of the company as remuneration.

 

President & CEO

In 2016, President & CEO Juha Pekka Ojala was paid a total of EUR 397,834.68 in salary and fringe benefits; the share of benefits was EUR 15,858.80. In addition, in 2016 the President & CEO was paid EUR 158,314.40 as bonuses for the previous year. The company or its subsidiaries have not paid other remunerations to the President & CEO.

In 2016, the President & CEO was conveyed a total of 41,444 shares as remunerations based on the President & CEO’s incentive scheme of 2015–2020; their value at the time of conveyance was EUR 170,711.60 in total (conveyance in two instalments: period A, 11,276 shares/19 February 2016, and period B, 30,168 shares/24 August 2016). In addition, an amount of money corresponding to the value of the shares was paid to pay taxes and other similar payments, or a total of EUR 170,711.60 in 2016. Therefore, the salary and remunerations of the President & CEO in 2016 amounted to EUR 897,572.28 in total. 

For 2016, the company has paid EUR 75,990.91 in voluntary pension payments on behalf of the President & CEO.

Other management

In 2016, a total of EUR 2,011,022.33 as salaries including fringe benefits was paid to the members of the Corporate Executive Team of SRV Group other than the CEO; out of this, the share of fringe benefits was EUR 147,701.43. In addition, in 2016 the members of the Corporate Executive Team were also paid a total of EUR 233,996.85 as bonuses for the previous year.

In 2016, under a share-based incentive scheme agreed upon with one of the members of the Group’s Corporate Executive Team, 7,598 shares were conveyed as remuneration; their value at the time of conveyance was EUR 34,798.84 in total. In addition, an amount of money corresponding to the value of the shares (EUR 35,101.16) was paid to pay taxes and other similar payments.

In 2016, the company paid a total of EUR 60,115.81 in contributions for the pension schemes of members of the Group’s Corporate Executive Team other than the President & CEO.

Information on the remunerations paid to the people acting as the President & CEO and members of the Group’s Corporate Executive Team during the financial year 2016 has been compiled in the table below:
 

2016 Fixed monthly salaries[1] 

 

Bonuses[2] 

 

Share-based remunerations[3]  Total
President & CEO 397,834.68 158,314.40 341,423.20 897,572.28
Other members of the Group’s Corporate Executive Team in total 2,011,022.33 233,996.85 69,900.00 2,314,919.18
         

[1] The fixed monthly salary includes the fringe benefits.

[2] Short-term remunerations determined based on the performance during the year preceding the year of payment. Bonuses are recorded in the table at the year of payment based on payment.

[3] Share-based remunerations contain the monetary value of equity bonuses at the time of conveyance, including the monetary share of the remuneration for the payment of taxes. Equity bonuses are recorded in the table at the year of payment based on payment.