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Remuneration report

Board of Directors and its Committees

The Annual General Meeting decides on the remuneration and other financial benefits of the members of Kesko’s Board of Directors and its Committees’ members annually. The remuneration of the members of the Board and its Committees is paid in cash. The Board members do not have share compensation or share-based compensation plans. Nor do they participate in the other compensation plans or pension plans of the Company. Significant shareholders prepare the proposals concerning the Board of Directors, including the proposal for the number of Board members, their remuneration and, as necessary, for the Board members to the General Meeting.

The Annual General Meeting of 4 April 2016 resolved to leave the Kesko Board members' remuneration unchanged and in 2016, it was as follows:


Annual remuneration:

  • Chair of the Board €80,000
  • Deputy Chair of the Board €50,000
  • member of the Board €37,000.

 
In addition, a meeting fee of €500 per meeting is paid for a Board meeting and its Committee's meeting, with the exception that the Chair of a Committee who is not the Chair or the Deputy Chair of the Board is paid €1,000 per Committee meeting.
 
Daily allowances are paid and the reimbursements of travel expenses are paid to the Board and Committee members in accordance with the general travel rules of Kesko.

Annual remuneration and meeting fees paid to Board members for Board and Committee work in 2016 (€)*
Meeting fees
Annual remuneration Board Audit Committee Remuneration Committee Total
Annual remuneration 80,000 5,500 2,000 87,500
Mikael Aro (vpj) 50,000 5,500 3,000 2,000 60,500
Jannica Fagerholm** 27,603 3,500 3,000 34,103
Matti Kyytsönen 37,000 5,500 3,000 45,500
Matti Naumanen** 27,603 3,500 31,103
Anu Nissinen 37,000 5,500 2,000 44,500
Toni Pokela 37,000 5,500 42,500
Tomi Korpisaari*** 6,167 1,000 7,167
Kaarina Ståhlberg*** 6,167 1,500 3,000 10,667
Total 308,540 37,000 12,000 6,000 363,540
* Reported on a cash basis.
** Board member since 4 April 2016.
*** Board member until 29 February 2016.
Valid authorisations of the Board of Directors concerning remuneration and their use

Kesko’s Annual General Meeting of 4 April 2016 authorised the Board to decide on the transfer of own B shares held by the Company in treasury (share issue authorisation 2016). The authorisation cancelled an earlier share issue authorisation with similar content.

Based on the authorisation, the own B shares held by the Company in treasury can be issued for subscription by shareholders in a directed issue in proportion to their existing holdings of the Company shares, regardless of whether they own A or B shares. The shares can also be issued in a directed issue, departing from the shareholder's pre-emptive right, if the Company has a weighty financial reason for it, such as using the shares to develop the Company's capital structure, to finance possible acquisitions, capital expenditure or other arrangements within the scope of the Company's business operations, and to implement the Company's commitment and incentive scheme. Own B shares held by the Company in treasury can be transferred either against or without payment. A share issue can only be without payment, if the Company, taking into account the best interests of all of its shareholders, has a particularly weighty financial reason for it. The authorisation also includes the Board’s authorisation to make decisions concerning any other matters related to share issues. The amount possibly paid for the Company’s own shares is recorded in the reserve of unrestricted equity. The authorisation is valid until 30 June 2020.

The Annual General Meeting of 4 April 2016 also approved the Board's proposal for its authorisation to decide on the acquisition of a maximum of 1,000,000 own B shares of the Company (authorisation to acquire own shares). B shares are acquired otherwise than in proportion to the shareholdings of shareholders with the Company's distributable unrestricted equity at the B share market price quoted in public trading organised by Nasdaq Helsinki Ltd ("the exchange") at the date of acquisition. The shares are acquired and paid in accordance with the rules of the exchange. The acquisition of own shares reduces the amount of the Company's distributable unrestricted equity. B shares are acquired for use in the development of the Company's capital structure, to finance possible acquisitions, capital expenditure and/or other arrangements within the scope of the Company's business operations, and to implement the Company's commitment and incentive scheme. The Board of Directors makes decisions concerning any other issues related to the acquisition of own B shares. The authorisation is valid until 30 September 2017.

In addition to the above authorisations, the Board of Directors has the share issue authorisation decided by the General Meeting of 13 April 2015, which cannot, however, be used for remuneration purposes.

On 3 February 2016, the Board of Directors decided to grant own B shares held by the company as treasury shares, to the persons included in the target group of the 2015 vesting period based on the fulfilment of the vesting criteria of the 2015 vesting period of the Kesko’s three-year share-based compensation plan. This granting of a total of 137,054 own B shares was announced in a stock exchange release on 17 March 2016 and the transfer of 2,670 own B shares was announced in a stock exchange release on 27 April 2016. Under the 2014-2016 share-based compensation plan decided by the Board, a total maximum of 600,000 own B shares held by the company as treasury shares can be granted within a period of three years based on the fulfilment of the vesting criteria. The vesting criteria and the target group are decided by the Board separately for each vesting period. The share-based compensation plan was announced in a stock exchange release on 4 February 2014. A total of 8,256 shares granted based on the fulfilment of the vesting criteria of share-based compensation plans (share-based compensation plans for years 2011-2013 and 2014–2016) had been returned to the Company during the period January-December an accordance with the terms and conditions of the share-based compensation plans. The share returns in 2016 were announced in a stock exchange release on 17 March 2016, 31 March 2016, 27 April 2016, 30 May 2016 and 15 November 2016.

President and CEO

President and CEO Mikko Helander’s personal remuneration, other financial benefits, performance bonus scheme criteria and performance bonuses paid are decided by Kesko's Board of Directors based on the Remuneration Committee's preparatory work. A written managing director's service contract, approved by the Board, is in force between the Company and the President and CEO. Helander has been the Company’s President and CEO and the Chair of the Group Management Board since 1 January 2015.

On 16 December 2014, Kesko Corporation's Board of Directors decided to transfer 8,791 own B shares held by the Company as treasury shares to Mikko Helander, the Company's President and CEO as of 1 January 2015. The share transfer was based on the managing director's service contract signed with Mikko Helander and the transferred shares are part of the agreed total compensation. The shares transferred to Helander carried a restriction period until 1 October 2016, during which the shares were not allowed to be assigned.    

Salaries, fringe benefits, performance bonus

The salaries, fringe benefits and performance bonuses paid to Helander and his other financial benefits in 2015–2016 are presented in the following tables.

Salaries, performance bonuses and fringe benefits in 2015–2016 (€)
2016 2015
Fixed monetary salary 873,600 856,800
Performance bonuses* 420,000 140,000**
Fringe benefits 23,160 21,725
Total 1,316,760 1,018,525
* Performance bonus paid based on the profit for the previous year.
** Service contract since 1 October 2014.
Share-based compensation plan 2015–2016
Share award (pcs) 2016 2015
Maximum 21,000 21,000
Granted 16 086* 11,214
Commitment period (expiry date) 31 Dec 2019 31 Dec 2018
* The Board’s decision in February 2017. Shares for the vesting period 2016 will be granted in March - April 2017 in accordance with the terms and conditions of the plan.
Retirement benefits

President and CEO Mikko Helander's old-age pension age is 63 and the amount of his old-age pension is 60% of his pensionable earnings in accordance with the Employees' Pensions Act (TyEL). The pensionable salary is determined based on his fixed monetary salary, performance bonuses and fringe benefits for the last ten (10) years. The supplementary pension is based on a defined benefit plan. The cost of the supplementary pension for the period, calculated on an accrual basis, was €1.0 million and the related pension asset was €0.6 million as at 31 December 2016. The pension cost of the President and CEO's statutory pension provision was €0.2 million.

Health and life insurance

A health insurance and a life insurance have been taken out for Helander.

Period of notice and termination benefit

Helander’s period of notice is twelve (12) months if the managing director’s service contract is terminated by the Company and six (6) months if Helander resigns. If the Company terminates the contract for a reason other than a material breach of contract by the managing director, and the managing director does not retire on an old-age pension or some other pension, the managing director is paid, in addition to the salary for the period of notice, a compensation corresponding to the combined amount of 12 months' monetary salary and fringe benefits.

Group Management Board

Group Management Board members’ salaries, performance bonuses and fringe benefits in 2015–2016 (€)*
Fixed monetary salary Performance bonuses Fringe benefits Total
2016 2015 2016 2015 2016 2015 2016 2015
Mikko Helander, Ch. 873,600 856,800 420,000 140,000 23,160 21,725 1,316,760 1,018,525
Group Management Board** 2,012,999 1,777,640 369,250 371,750 151,977 126,478 2,534,226 2,275,868
Total 2,886,599 2,634,440 789,250 511,750 175,137 148,203 3,850,986 3,294,393
* Salaries, performance bonuses and fringe benefits are reported on a cash basis. The 2015 earnings on accrual basis are calculated by adding the amount of performance bonus paid in 2015 to the salaries and fringe benefits for 2016.
** Excluding President and CEO Helander.
Share-based payments to Group Management Board members in 2014–2016 (pcs)
2016 2015 2014
Maximum To be granted** Maximum Granted Maximum Granted
Mikko Helander, Ch. 21,000 16,086 21,000 11,214 -*** -***
Group Management Board* 53,000 40,598 53,000 28,302 48,000 16,812
Total 74,000 56,684 74,000 39,516 48,000 16,812
* Excluding President and CEO Helander.
** The Board’s decision in February 2017. The shares for the 2016 vesting period will be granted in March–April 2017 in accordance with the terms and conditions of the plan.
*** Service contract since 1 October 2014.
Vesting period 2016 2015 2014
End of commitment period 31 Dec 2019 31 Dec 2018 31 Dec 2017

On 16 December 2014, Kesko Corporation's Board of Directors decided to transfer 8,791 own B shares held by the Company as treasury shares to Mikko Helander, the Company's President and CEO as of 1 January 2015. The share transfer was based on the managing director's service contract signed with Mikko Helander and the transferred shares are part of the agreed total compensation. The shares transferred to Helander carried a restriction period until 1 October 2016, during which the shares were not allowed to be assigned.

Retirement benefits in 2016

The statutory pension provision of the members of the Group Management Board is provided through a pension insurance company. In 2016, four Group Management Board members were members of Kesko Pension Fund and their supplementary pensions are determined based on its rules and their personal service contracts. Their supplementary pensions are based on a defined benefit plan. The retirement benefits of the other Group Management Board members are determined based on the general provisions applicable to employees’ pensions in Finland (TyEL, the Employees’ Pensions Act). The retirement benefits of President and CEO Helander are reported in more detail in the section on him. Kesko has not paid pension insurance contributions incurred on executives’ memberships of Kesko Pension Fund for several years, nor in 2016, as the Fund’s investment earnings covered the payable supplementary pensions and changes in the pension liability.

Group Management Board members' retirement benefits, periods of notice and termination benefits in 2016*
Old-age pension age (years) Pension as percentage of pensionable salary (%) Period of notice Termination benefit**
Mikko Helander 63 60 6/12 mo*** 12-mo salary
Jorma Rauhala 62 66 6 mo 6-mo salary
Terho Kalliokoski 62 66 6 mo 12-mo salary
Pekka Lahti 62 66 6 mo 18-mo salary
Jukka Erlund in accordance with TyEL**** in accordance with TyEL**** 6 mo 6-mo salary
Matti Mettälä 62 66 6 mo 12-mo salary
Anne Leppälä-Nilsson in accordance with TyEL**** in accordance with TyEL**** 6 mo 18-mo salary
Lauri Peltola in accordance with TyEL**** in accordance with TyEL**** 6 mo 6-mo salary
Anni Ronkainen in accordance with TyEL**** in accordance with TyEL**** 6 mo 6-mo salary
* As at 31 December 2016.
** If given notice by the employer. Termination benefit includes monetary salary and fringe benefits.
*** The period of notice is twelve (12) months if the managing director’s service contract is terminated by the Company and six (6) months if the President and CEO resigns.
**** TyEL = the Employees' Pensions Act.