Remuneration

Summary of key contents of the Remuneration Policy

Decision-making

Fixed remuneration components

Variable remuneration components

Board of Directors Remuneration decided by the General Meeting based on the proposal of the Shareholders’ Nomination Board Fixed annual fee

·     Remuneration may be paid in money or in the company’s shares in part of in full

Meeting fee and other fees paid for attendance at Board and committee meetings and other similar all-day Board assignments

·     Remuneration may be paid in money or in the company’s shares in part of in full

Other remuneration criteria and components as decided by the General Meeting

President and CEO Remuneration decided by the Board of Directors Fixed base salary

Fringe benefits

Pension in accordance with the statutory Finnish employee pension scheme

Short-term performance-based bonus

·     Monetary, max 50% of annual base salary

·     Structure, measurement, target levels and payout decided by the Board of Directors

Long-term performance-based incentive program

·     Monetary or share-based

·     Structure, measurement, target levels and payout decided by the Board of Directors

Group Management Team Remuneration decided by the Board of Directors based on the proposal of the President and CEO Fixed monthly base salary

Fringe benefits

Pension in accordance with the statutory Finnish employee pension scheme

Short-term performance-based bonus

·     Monetary, max 40% of annual base salary

·     Structure, measurement, target levels and payout decided by the Board of Directors

Long-term performance-based incentive program

·     Monetary or share-based

·     Structure, measurement, target levels and payout decided by the Board of Directors

Remuneration principles

Exel Composites’ remuneration principles are developed to promote the company’s strategy, the competitiveness and long-term financial success of the company and to contribute to the development of the company’s shareholder value.

The company’s remuneration schemes aim to increase the long-term commitment of the Board of Directors, the President and CEO and the Group Management Team to promote the interests of the company and its shareholders as well as to motivate and reward key individuals in the achievement of strategic targets.

To ensure alignment of remuneration with the company’s strategy, financial targets and corporate values as well an efficient risk management, the remuneration principles are based on predetermined and measurable performance and result criteria. To ensure a competitive and appropriate remuneration, the remuneration components are compared to the practices of comparable companies.

At Exel Composites the remuneration of employees is based on the company’s strategic targets. Remuneration is a whole that comprises of several different components. In addition to monetary salary paid to all, the employee may be part of a short-term incentive plan or of different incentive or performance rewards. The higher in the organization the role of the employee is, the larger part of his/her remuneration is comprised of different remuneration components. An employee with a Group management role may also be part of a long-term incentive program. Additionally, the employee may be entitled to different fringe benefits such as a car and a phone benefit or a sports and culture benefit.

Decision-making process concerning remuneration

The company’s Board of Directors prepares the company’s remuneration policy. The remuneration policy is presented to the general meeting at least every four years and whenever material changes are proposed. The company is entitled to make other than material changes, such as technical changes or changes required by legislation, without presenting the remuneration policy to the general meeting.

In accordance with internal guidelines followed by the company, the governing bodies and individual persons do not participate in the decision-making process concerning their own remuneration nor in making such decisions where the remuneration or his/her interest conflicts with the company’s interest. The aim thereby is to ensure that the decision-making concerning remuneration is fair and objective.

Remuneration of the Board of Directors and of management

Board of Directors

The remuneration of the Board of Directors may be composed of a fixed annual fees as well as variable remuneration components such as a meeting fee or other fees that are paid for attendance at Board and committee meetings and other similar all-day Board assignments. The Chairman and Vice Chairman of the Board may receive a raised fee or meeting fee. The general meeting may decide also on other remuneration criteria and remuneration components in accordance with the proposal of the Shareholders’ Nomination Board.

The rewards of the Board members may be paid in money or in the company’s shares in part or in full. Board members are encouraged to retain the shares they have received in their ownership for the duration of their Board membership.

President and CEO

The remuneration of the President and CEO comprises a fixed base salary, short-term and long-term incentives and other benefits.

The purpose of the President and CEO’s base salary is to provide a competitive remuneration basis, that allows focus on taking care of the role’s duties and of the implementation of the company’s long-term strategy. The base salary is reviewed annually taking into consideration the company’s result, personal performance and market conditions.

The President and CEO’s pension is determined in accordance with the statutory Finnish employee pension scheme (TyEL) that links the benefits directly to the President and CEO’s earnings. The President and CEO’s retirement age is 63 years. The President and CEO has no separate pension agreement.

The terms of service of the President and CEO are determined in a written service contract approved by the Board of Directors. According to the service contract of the President and CEO, the notice period is six months. In case of termination by the company a severance pay corresponding to 12 months’ salary may be paid in addition to salary during the notice period.

Based on current remuneration schemes, the payment of potential rewards when the employment has been terminated depends on the reason for the termination of employment. In principle no reward will be paid based on current remuneration schemes when the employment is terminated by the employee or by the company. In case the employment is terminated based on certain specifically defined reasons, part of the reward may be paid based on the terms of current remuneration schemes.

Group Management Team

The remuneration of members of the Group Management Team comprises a fixed monthly base salary, fringe benefits, a short-term performance-based bonus as well as a long-term performance-based incentive program. There are no additional pension schemes for the Group Management Team members.

Variable remuneration of the President and CEO and Group Management Team

Short-term incentive programs

The President and CEO, Group Management Team and other selected key individuals in the Group are entitled to a short-term performance based annual bonus. The objective of the annual performance-based bonus plan is, on an annual basis, to commit the management to achieving the company’s most important financial and other performance targets that support the company’s strategy.

The structure, measurement and target levels of the annual performance-based bonus plan are determined, set and may vary depending on the decision of the Board of Directors at a given time. The targets of the President and CEO are primarily based on the Group financial performance and operational targets.

The maximum annual performance-based bonus for the President and CEO is 50% of his/her annual base salary. For the other members of the Group Management Team the maximum annual bonus is 40% of their respective annual salary. The bonus is paid out in money.

Long-term incentive programs

The President and CEO, Group Management Team and other selected key individuals in the Group may be part of Exel Composites’ long-term incentive programs, which may be monetary or share-based. The objectives of the programs are to align the interests of the management with those of the company’s shareholders and, thus, to promote shareholder value creation, to commit the management to achieving the company’s strategic targets and to retain the company’s key individuals.

The structure, measurement and target levels of the long-term incentive programs are determined, set and may vary depending on the decision of the Board of Directors at a given time. The Board of Directors may decide on one or several structures.

The reward of the programs is based on key performance figures and other measurable criteria decided by the Board of Directors. The criteria may measure absolute or proportional performance.

In case of interleaving incentive programs within the limits of a remuneration plan, the Board of Directors decides on the start, conditions of the earning period and the length of each individual incentive program. No reward will be paid to an executive if his or her employment or service with the company ends before the reward payment unless the executive is leaving the company due to retirement or unless the Board decides otherwise. The programs may also include a lock-up period, until the end of which the restriction on leaving the company is extended.

The company maintains a share ownership recommendation policy that concerns the members of the Group Management Team. Each member of the Group Management Team is expected to accumulate and maintain a minimum share ownership in Exel Composites representing in value the executive’s annual base salary. Each member of the Group Management Team is expected to retain at least 50% of shares received under incentive programs until the recommended share ownership level is reached. The members of the Group Management Team are not expected to invest own funds for accumulating his/her share ownership.

The 2022 plan

is part of a share-based long-term incentive program for the earning period 2022-2024 and is targeted at approximately 20 executives. The President and CEO and the members of the Group Management Team are included in the target group of the 2022 incentive program. The potential share-based performance reward on the adjusted operating profit (EBIT) and the total shareholder return of the company’s share (TSR). The potential share reward is payable in 2025. The maximum number of shares to be paid under this individual plan is 100,000 shares.

Release 15 February 2022

The 2021 plan

is part of a share-based long-term incentive program for the earning period 2021-2023 and is targeted at approximately 20 executives. The President and CEO and the members of the Group Management Team are included in the target group of the 2021 incentive program. The potential share-based performance reward on the adjusted operating profit (EBIT) and the total shareholder return of the company’s share (TSR). The potential share reward is payable in 2024. The maximum number of shares to be paid under this individual plan is 100,000 shares.

Release 18 February 2021

The 2020 plan

is part of a share-based long-term incentive program for the earning period 2020-2022 and is targeted at approximately 20 executives. The President and CEO and the members of the Group Management Team are included in the target group of the 2020 incentive program. The potential share-based performance reward on the adjusted operating profit (EBIT) and the total shareholder return of the company’s share (TSR). The potential share reward is payable in 2023. The maximum number of shares to be paid under this individual plan is 125,000 shares.

Release 18 February 2020 

The 2019 plan

is part of a share-based long-term incentive program for the earning period 2019-2021 and is targeted at approximately 20 executives. The President and CEO and the members of the Group Management Team are included in the target group of the 2019 incentive program. The potential share-based performance reward on the adjusted operating profit (EBIT) and the absolute total shareholder return of the company’s share (TSR). The potential share reward is payable in 2022. The maximum number of shares to be paid under this individual plan is 196,000 shares.

Release 15 February 2019

Deferral and possible clawback of remuneration

The company’s Board of Directors is in exceptional situations entitled to restrict or reject the payment of performance rewards when considered in the interest of the company by the Board of Directors. In addition, the Board of Directors is in limited exceptional situations of misuse entitled to clawback an already paid reward.

Remuneration elements agreed prior to the presentation of this remuneration policy

The Board of Directors reserves the right, without limitation by this remuneration policy, to pay all rewards, benefits and compensations (including using judgment in their payout and amount) that the company has already decided on, agreed to or committed to before this remuneration policy was presented to the annual general meeting.

Requirements of temporary deviation

It is possible to deviate temporarily from the company’s remuneration policy in certain situations and in order to ensure the company’s long-term interest. These situations include for example a change of the President and CEO, a corporate arrangement and changes in regulations. Deviation from the remuneration policy requires approval by the Board of Directors. The deviation may concern any part of remuneration and any component presented in this remuneration policy.

Monitoring of the materialization of the remuneration policy

The Shareholders’ Nomination Board monitors and evaluates the materialization of the remuneration policy for the Board of Directors and how the remuneration policy supports the achievement and implementation of the company’s strategic targets. The Board of Directors monitors and evaluates the Group’s remuneration schemes, including the materialization of the remuneration policy for the President and CEO and the competitiveness of the remuneration schemes and how the materialized remuneration supports the achievement of the company’s strategic targets and long-term financial success.

Remuneration Report 2021

Development of Group remuneration

EUR thousand

2021

2020

2019

2018

2017

Remuneration of the Board of Directors 180 173 175 164 169
Remuneration of the President and CEO 471 438 324 390 363
Remuneration of the company’s employees on average 1) 2) 49 46 46 47 45
Revenue 2) 134,365 108,595 103,784 96,608 86,255
Adjusted operating profit 2) 6,029 9,708 7,160 5,018 6,319
Total shareholder return, % 3) 12.2 19.1 69.2 -36.1 33.5

1) Personnel expenses divided by the number of employees on average.
2) Exel Composites acquired Diversified Structural Composites in North America in April 2018 and Nanjing Jianhui in China in April 2017. The joint venture Kineco Exel Composites India was established in October 2021.
3) 1 January – 31 December, dividends re-invested.

Remuneration of the Board of Directors in 2021

The AGM held in 2021 confirmed the following compensation for Board members for the year 2021:

  • Chairman: Annual remuneration of EUR 43,000 (previous year EUR 43,000) and additionally EUR 1,500 (1,500) for attendance at Board and committee meetings and other similar all-day Board assignments.
  • Board member: Annual remuneration of EUR 20,000 (20,000) and additionally EUR 1,000 (1,000) for attendance at Board and committee meetings and other similar all-day Board assignments.
  • For committee meetings, the meeting fee for the committee chairman shall be EUR 1,500.

Travel expenses and other out-of-pocket expenses due to Board work shall be compensated in accordance with the Company’s established practice and travel rules.

According to a decision of the AGM held in 2021, 60% of the yearly remuneration was paid in cash and 40% in Exel Composites Plc shares, which were acquired directly for and on behalf of the members of the Board of Directors from the stock exchange market in amounts corresponding to EUR 17,200 for the Chairman and EUR 8,000 for each of the other members. Should the term of any member of the Board of Directors come to an end for whatever reason before the next Annual General Meeting, such member of the Board of Directors will have to return to the Company the remuneration or equivalent amount in cash already received but not yet earned at that point in time.

EUR thousand

Board meetings (attendance/total)
2021

Annual fixed fees
2021

Meeting
fees
2021

Other fees
2021

Total fees
2021

Total fees
2020

Reima Kerttula
Chairman (as of 17 March 2016, member until 17 March 2016)
10 / 10 43 15 0 58 57
Petri Helsky
Member (as of 17 March 2016)
10 / 10 20 10 1 31 29
Helena Nordman-Knutson
Member (as of 4 April 2017)
10 / 10 20 10 0 30 29
Jouko Peussa
Member (as of 17 March 2016)
10 / 10 20 10 0 30 29
Kirsi Sormunen
Member (as of 20 March 2020)
10 / 10 20 10 1 31 28
Maija Strandberg
Member (until 20 March 2020)
0 / 0 0 0 0 0 1

Total

123

55

2

180

173

 

Exel Composites has no such incentive program by which the Company rewards the Board members with shares or option rights. The Board members are neither entitled to a short-term performance-based bonus.

Remuneration of the President and CEO and Group Management Team in 2021

President and CEO Riku Kytömäki

Group Management Team

EUR thousand

2021

2020

2021

2020

Fixed annual base salary 325 316 959 926
Fringe benefits 0 0 11 11
Short-term incentives Based on 2021 performance (estimate, to be paid in 2022) Based on 2020 performance
(paid in 2021)
Based on 2021 performance (estimate, to be paid in 2022) Based on 2020 performance
(paid in 2021)
  total 44 98 108 243
  % of annual base salary 13 31 11 26
  % of maximum level 27 62 28 66
Long-term incentives Based on 2019-2021 performance (estimate, to be paid in 2022) Based on 2018-2020 performance
(paid in 2021)
Based on 2019-2021 performance (estimate, to be paid in 2022) Based on 2018-2020 performance
(paid in 2021)
  total 101 24 170 41
  % of annual base salary 31 7 18 4
  % of maximum level 25 8 25 9

Total

471

438

1,248

1,221

 

Variable remuneration

Exel Composites’ short-term incentive program covers all employees. The President and CEO, the Group Management Team and office employees alike are entitled to a performance-based annual bonus in addition to their fixed salary. The performance measures of the annual bonus plan are tied to the achievement of annually established goals emphasizing growth and profitability as well as possible individual targets. Production employees are also eligible for short-term incentive compensation. Their annual bonus is mainly based on factory profitability and production related performance measures.

The Group has long-term incentive programs for the President and CEO, the Group Management Team and selected key employees of the company. The aim of the programs is to combine the objectives of the shareholders and the executives, to increase the value of the company, to commit the executives to the company and to offer the executives a competitive reward program. The Board of Directors decides on the program and the performance measures annually.

Earning opportunity and performance measures for short-term incentives

Weight, %

Minimum level

Target level

Maximum level 1)

Achievement, % of maximum level

Based on 2021 performance
(estimate, to be paid in 2022)
  Adjusted operating profit,
EUR million
60 8.8 10.0 11.9 0
  Gross margin, EUR million 20 38.2 40.7 44.4 35
  Revenue, EUR million 20 108.2 116.8 128.9 100
  Earning opportunity 15%
of maximum
60%
of maximum
100%
of maximum
Based on 2020 performance
(paid in 2021)
  Adjusted operating profit,
EUR million
80 7.2 9.4 11.9 65
  Gross margin, EUR million 20 36.2 39.5 42.4 61
  Earning opportunity 15%
of maximum
60%
of maximum
100%
of maximum

1) Maximum earning opportunity is 50% of annual base salary for the President and CEO and 40% of annual base salary for the rest of the Group Management Team.

Earning opportunity and performance measures for long-term incentives

Weight, %

Minimum level

Target level

Maximum level

Achievement, % of maximum level

Based on 2019-2021 performance
(estimate, to be paid in 2022)
  Adjusted operating profit,
EUR million
75 25.2 28.5 31.8 0
  Total shareholder return, % 25 15 50 85 100
  Earning opportunity 25%
of target shares
100%
of target shares
200%
of target shares
Based on 2018-2020 performance
(paid in 2021)
  Adjusted operating profit,
EUR million
75 24.0 27.0 30.0 0
  Total shareholder return, % 25 15 50 85 33
  Earning opportunity 25%
of target shares
100%
of target shares
200%
of target shares

 

On 31 December 2021 the Group had three share-based long-term incentive programs:

The 2019 plan is part of a share-based long-term incentive program for the earning period 2019-2021 and was targeted at approximately 20 executives. The President and CEO and the Group Management Team were included in the target group of the 2019 incentive program. 75% of the potential share-based performance reward is based on cumulative adjusted operating profit (EBIT) and 25% on total shareholder return of the company’s share (TSR). The potential share reward is payable in 2022. The maximum number of shares to be paid under this individual plan is 196,000 shares, of which President and CEO’s share is 50,000 shares. The estimated payout (to be confirmed in March 2022) is 49,000 shares in total.

The 2020 plan is part of a share-based long-term incentive program for the earning period 2020-2022 and is targeted at approximately 20 executives. The President and CEO and the Group Management Team are included in the target group of the 2020 incentive program. 75% of the potential share-based performance reward is based on cumulative adjusted operating profit (EBIT) and 25% on total shareholder return of the company’s share (TSR). The potential share reward is payable in 2023. The maximum number of shares to be paid under this individual plan is 125,000 shares, of which President and CEO’s share is 32,000 shares.

The 2021 plan is part of a share-based long-term incentive program for the earning period 2021-2023 and is targeted at approximately 20 executives. The President and CEO and the Group Management Team are included in the target group of the 2021 incentive program. 75% of the potential share-based performance reward is based on cumulative adjusted operating profit (EBIT) and 25% on total shareholder return of the company’s share (TSR). The potential share reward is payable in 2024. The maximum number of shares to be paid under this individual plan is 100,000 shares, of which President and CEO’s share is 25,600 shares.

The 2018 program, the earning period of which ended in 2020, was based on a long-term monetary incentive program and was targeted at 17 executives for the earning period 2018-2020. The President and CEO and the members of the Group Management Team were included in the target group of the 2018 incentive program. 75% of the potential share-based performance reward was based on cumulative operating profit (EBIT) and 25% on total shareholder return of the company’s share (TSR). The maximum number of shares to be paid under this individual plan in 2021 was 122,000 shares, of which President and CEO’s share was 33,973 shares. In 2021, a total reward of 10,287 shares (3,813 paid in shares and 6,474 in cash) was paid out under the 2018 plan to 17 executives. The President and CEO’s share of the reward was 2,780 shares (1,390 in shares and 1,390 in cash). The share rewards were paid in March 2021. The shares were acquired at an average price of EUR 8,51 per share on 18 March 2021.

The profit and loss of 2021 includes EUR 50 thousand of costs related to these incentive programs.

The administration of the share-based incentive plan and the acquisition of shares are conducted through an arrangement made with Evli Awards Management Oy (EAM) as per the decision of the Board of Directors on 12 June 2017 and according to the stipulations of the Companies Act for financing the purchase of own shares (the Finnish Companies Act, Chapter 13, Section 10, Subsection 2) relating to incentive plans. As a part of this arrangement EAM founded EAM EXL1V Holding Oy (Holding company) which acquires the shares with Exel’s funding and according to the agreement. These shares will be delivered to the employees according to Exel’s share plan terms and conditions. The Holding company is owned by the EAM in legal terms, but according to the agreement Exel has control over the company and acts as the principal, whereas EAM is an agent through the Holding company. This control arising from contractual terms means, that the Holding company is consolidated into the Group’s IFRS financial statements as a structured entity.

No reward will be paid to an executive based on the 2019, 2020 and 2021 programs, if his or her employment or service with the company ends before the reward payment unless the executive is leaving the company due to retirement or unless the Board decides otherwise. The programs also include a one-year lock-up period, and the restriction on leaving the Company is extended to the end of the lock-up.