Compensation report
1. Introduction by the Chairman of the Nomination and Compensation Committee
Dear Shareholders,
I am pleased to present to you the 2018/19 compensation report, which describes how our compensation system links to the company strategy and business results, and how it aligns with the interests of our shareholders, rewarding performance in the context of the business and the market. It also explains how we in the Nomination and Compensation Committee (NCC) carried out our objectives and responsibilities in the financial year.
All efforts of employees, the Management Board, and the Board of Directors during the financial year have again been focused on achieving the ambitious targets we set ourselves.
Our compensation framework is continuously reviewed, with adaptations made as and when deemed appropriate, taking into consideration our ongoing dialog with our shareholders and with proxy advisors, and reflecting our business strategy as well as relevant market trends and best practice. This review is to ensure our compensation framework is attractive, effective in achieving what we need, and sustainable. Transparency is key for us and we continuously work on improving clarity of disclosure.
During the reporting year, following last years’ amendments to the Executive Equity Award Plan (EEAP), the previous introduction of claw-back and forfeiture provisions on the Variable Cash Compensation (VCC), as well as the update of the share ownership guidelines, the NCC focused on overseeing implementation and execution. It also conducted a compensation benchmark review for both the Board of Directors and the Management Board, as well as deciding on the following changes:
- Board of Directors: Disclosure of the restricted shares based on their tax value is discontinued with this compensation report, and future overall Board of Directors compensation will be reduced to approximately offset this change in reporting.
- Management Board: We pursue a pragmatic, moderate course in our compensation approach, making changes only if and when they are deemed necessary and appropriate. Such changes are generally in line with those across the organization, with exceptions in cases such as a change to a position. There were therefore no major changes made to the Management Board compensation components beyond those disclosed in the 2017/18 compensation report, including the one-time transition arrangement in February 2019 under the EEAP.
Further details are provided below in this compensation report.
As announced on February 15, 2019, Anssi Vanjoki does not stand for re-election at the AGM 2019. At the beginning of the 2018/19 financial year, and as outlined in the last compensation report, Arnd Kaldowski took over as Chief Executive Officer (CEO) from Lukas Braunschweiler, who in turn became a member of the Board of Directors. Other changes at the Management Board level were announced but will only be effective for the 2019/20 financial year.
The NCC continued to perform its regular activities throughout the year, such as succession planning for positions on the Board of Directors and the Management Board, performance goal setting at the beginning of the financial year and performance assessment at its end, determination of compensation for members of the Management Board, and preparation of the compensation report and of the say-on-pay votes at the AGM.
As outlined in this compensation report, the total compensation awarded to the members of the Board of Directors for the term of office is expected to be within the limit approved by the AGM 2018. The compensation awarded to the members of the Management Board is also within the limit approved by the AGM 2017.
At the AGM 2019, you will have the opportunity to express your opinion on our compensation principles and system by way of a consultative vote on this compensation report. We will also ask for your approval on the maximum aggregate compensation amounts for the Board of Directors for the next term of office and for the Management Board for the 2020/21 financial year.
Transparency remains high on our agenda and building further on prior year improvements we continue to enhance disclosure of targets and achievements under the VCC and the EEAP.
On behalf of the Board of Directors, I would like to thank you for your continued support. We hope that you find this report informative and we remain confident that our compensation system rewards for performance in a balanced and sustainable manner, and aligns well with our shareholders’ interests. We look forward to our continued dialogue and to meeting you at the AGM.
Yours sincerely,
Robert Spoerry
Chairman of the Nomination and Compensation Committee
