The remuneration policy of the governing bodies was presented to the Annual General Meeting of the Company held March 31, 2020 and approved in the advisory resolution. The remuneration policy defines the principles and decision-making processes for the remuneration of the company’s governing bodies, i.e. the board of directors as well as the managing director and possible deputy managing director. In addition, the Annual General Meeting held March 31, 2020 established a shareholders’ nomination board and approved the charter of the shareholders’ nomination board.
For the year 2020, the Company will prepare a remuneration report in accordance with the Corporate Governance Code 2020 for the annual general meeting.
Board of Directors
The General Meeting resolves annually on the remuneration payable to the Board of Directors as well as the basis for its determination for Board and committee work. The Nomination and Remuneration Committee of the Board of Directors prepares the proposals to the General Meeting relating to the composition of the Board of Directors and the remuneration of the Board of Directors. The recommendation shall be presented after the largest shareholders have been given the opportunity to present views on the composition of the Board.
Chief Executive Officer and Management Team
The Nomination and Remuneration Committee of the Board of Directors prepares the framework for remuneration of the Company’s Chief Executive Officer (the “CEO”) and the management team. The Board of Directors resolves on the remuneration and other benefits of the CEO and the management team operating under the CEO, based on the recommendation by the Nomination and Remuneration Committee.
Valid authorizations concerning remuneration
The Annual General Meeting the Company held on March 31, 2020 authorized the Board of Directors to decide on the repurchase of a maximum of 4 506 513 shares in one or more instalments, and further authorized the Board of Directors to resolve on a share issue of either new shares or own shares held by the Company to implement prospective incentive and remuneration schemes. During 2019, the Board of Directors repurchased a total of 52,000 shares and resolved to issue a total of 35 337 shares as part of the annual fee to members of the Board of Directors based on the corresponding authorizations.
Main Principles of Remuneration
Board of Directors
The fees of the members of the Board of Directors consist of an annual fee paid for the Board membership as well as Committee fees paid either as an annual fee or meetings fees. The fees also vary depending on the member’s role as a Chair or member of the Committee and the Board.
In accordance with the resolution of the Annual General Meeting held on March 31, 2020, the remuneration payable to the Board of Directors is as follows:
- EUR 70,000 for the chairman; and
- EUR 35,000 for each member.
Half of the annual fee of the members of the Board of Directors is intended to be paid in shares of the Company after each quarterly release and the remaining part of the annual fee is paid in cash, which is used to cover taxes arising from the fees. The shares given as remuneration to Board members are not subject to any ownership restrictions or lock-up provisions.
The annual fees payable to the members of the committees of the Board of Directors for the term until the close of the Annual General Meeting of Shareholders in 2020 are the following:
- EUR 12,000 for the Chairman of the Audit Committee
- EUR 10,000 for the Vice Chairman of the Audit Committee
- EUR 6,000 for each member of the Audit Committee
- EUR 8,000 for the Chairman of the Remuneration Committee
- EUR 4,000 for each member of the Remuneration Committee.
The fees of the committees are paid in cash.
In addition, reasonable accrued travel and lodging expenses as well as other potential costs related to Board and Committee work are compensated.
Chief Executive Officer
The remuneration of the CEO comprises a fixed base salary and fringe benefits (such as rights for Company car and phone), an incentive bonus related to the achievement of financial and operational targets as well as a share-based incentive scheme for key employees (see “Short-term and long-term incentives” below). The terms of duty have been agreed upon in writing and the CEO is elected for a term continuing until further notice. According to the agreement, the notice period for the CEO is twelve (12) months. The statutory pension age is applied to the CEO. A 12-month non-compete and non-recruiting obligation are applied to the CEO. The CEO is entitled to a compensation corresponding to his base salary for six (6) months, if he is dismissed by the employer without being in breach of contract. This compensation corresponding to the 6-month salary is not paid if the CEO resigns on his own initiative.
The Company pays the CEO’s statutory pension insurance premiums. The CEO does not have any additional pension agreements with the Company and there are no other agreements, based on which the CEO would be entitled to any additional benefits at the end of his service contract.
The remuneration of the management team comprises a base salary and fringe benefits (such as rights for Company car and phone), an incentive bonus related to the achievement of financial and operational targets as well a share-based incentive scheme for key employees (see “Short-term and long-term incentives” below). The basic salary can consist of hourly wage or monthly wage. Certain management team members are entitled to additional pay in accordance with the collective agreement for commercial sector (FIN: kaupan alan työehtosopimus) for work outside normal working hours.
If the employment relationship of a member of the management team is terminated for a reason not attributable to the Company, a non-compete period of six (6) months is observed as a rule. The member of the management team is entitled to a monthly compensation for such period, corresponding to the average monthly salary paid for normal working hours.
The management team members do not have any additional pension agreements with the Company and there are no other agreements, based on which the members of the management team would be entitled to any additional benefits at the end of their employment relationship.
Short-term and long-term incentives
The variable salary component for the CEO and management team consists of a short-term incentive programme as well as a share-based incentive programme linked to the Company’s long-term targets.
The short-term incentives (“STI”) consist of an annual bonus program with performance targets. The Board of Directors decides annually on the performance criteria and the determination of the STI based on the proposal of the Nomination and Remuneration Committee. For 2019, the performance targets were based 75 % on the 2019 sales target and 25 % on the 2019 comparable EBITDA target. The Board may also in its absolute discretion resolve on separate one-off compensations (bonus) from time to time.
On May 16, 2018 the Company announced that the Board of Directors of the Company had resolved to launch a share-based incentive scheme for key management consisting of a matching share plan for three matching periods 2018-2020, 2019-2021 and 2020-2022 (“LTI” or “Matching Share Plan 2018-2020”).
The aim of the plan is to align the objectives of the shareholders and the key employees in order to increase the value of the Company in the long-term, to encourage the key employees to personally invest in the Company's shares, to retain the key employees at the Company, and to offer them a competitive share-based reward plan, which is based on the acquisition, obtaining and accumulation of the Company’s shares
In the Matching Share Plan 2018-2020, the participant receives a fixed amount of matching shares against an investment in Verkkokauppa.com Oyj's shares. The Matching Share Plan 2018-2020 includes three matching periods, calendar years 2018-2020, 2019-2021 and 2020-2022. The Board will resolve annually on the commencement and details of each matching period. The prerequisite for receiving reward on the basis of this plan is that a person participating in the plan allocates freely transferable Company shares held by him or her or acquires Company shares up to the number determined by the Board of Directors. Furthermore, the payment of reward is based on the participant's employment or service upon the reward payment.
The rewards from the Matching Share Plan 2018-2020 will be paid partly in the Company's shares and partly in cash in 2021, 2022 and 2023. The cash proportion is intended to cover taxes and tax-related costs arising from the reward to the participant. As a rule, no reward will be paid, if a participant's employment or service ends before the reward payment.
In the first matching period, which commenced 2018, the participant receives one matching share for each allocated share, up to a set amount, free of charge after a three-year vesting period, provided that the other conditions stipulated for the receipt of the share-based incentive by the terms of the plan are still satisfied at the time. The rewards to be paid on the basis of the matching period 2018-2020 correspond to the value of an approximate maximum total of 85,000 Verkkokauppa.com Oyj shares (including also the proportion to be paid in cash).
On February 13, 2020, the Company announced a performance matching share plan for the CEO and each of the members of the management team that would span the calendar years 2020-2022. Due to this, the third Matching Period 2020-2022 of the Matching Share Plan 2018-2020 will not be implemented, and the second matching period will thus remain the final matching period of the said Matching Share Plan.
Board of Directors
The remuneration paid to the Board of Directors for Board and Committee work and other tasks during 2018 was as follows:
|Name||Position||Board and Committee work||Other benefits from the Company||Number of shares obtained as remuneration 1)||Total (EUR)|
|Christoffer Häggblom||Chairman||84,000 (69,500)||-||10,097 (5,107)||84,000 (69,500)|
|Robert Burén1)||Member||35,000 (29,250)||-||5,048 (2,552)||35,000 (29,250)|
|Mikael Hagman||Member||35,000 (27,750)||-(19,220 2))||5,048 (2,552)||35,000 (46,970)|
|Kai Seikku||Member||51,000 (42,250)||-||5,048 (2,552)||51,000 (42,250)|
|Samuli Seppälä 3)||Member||45,000 (54,250)||- (514 3))||5,048 (2,552)||45,000 (54,764)|
|Arja Talma||Member||45,000 (32,250)||-||5,048 (2,552)||45,000 (32,250)|
|Total||295,000 (255,250)||- (19,734)||17,867||274,984|
1) Value of said shares included in the remuneration for Board and Committee work
2) Remuneration as an advisor of the Company.
3) Remuneration as CEO of the Company until March 22, 2018.
Chief Executive Officer and Management Team
For the financial period 2019, the base salary of the Company’s CEO Panu Porkka was EUR 419,389.63 including fringe benefits (As of March 22, 2018 EUR 317,347.83). In addition, during the financial period 2019, he received a short-term incentive payout of EUR 109,320 (EUR 90,000). The CEO and the management team is covered by the Company’s short-term incentive programme and share-based incentive programmes. The payout of the incentives under the first matching period of the Matching Share Plan 2018-2020 occurs in 2021.
The remuneration paid to the CEO and the management team in 2019 (2018 in brackets) is detailed in the following table:
|Remuneration paid during 2018, EUR||CEO Panu Porkka||Other members of the management team (in aggregate) 1)|
|Basic salary including fringe benefits||419,390 (317,348)||1,227,423 (822,3162))|
|Incentive bonus||109,320 (90,000)||30,154 (-)|
|Total||519,710 (407,348)||1,257,578 (822,316)|
1) Mikko Forsell, Miika Heinonen, Vesa Järveläinen, Kalle Koutajoki, Seppo Niemelä, Taina Suorsa and Henrik Weckström. Figures also include the remuneration paid to Jussi Tallgren during 2019. Tallgren left his position in August 20, 2019.
2) 2018 figure also includes remuneration paid to Tommi Jylhä-Vuorio as well as Timo Halonen, Esa Hjerppe and Markus Pätilä until the establishment of the Extended Management Team.
The Board of Directors’, CEO’s and the management team’s holdings of shares are presented in the Corporate Governance Statement 2019.