Resolution regarding guidelines for remuneration for senior executives
Adopted at Annual General Meeting 2021.
The remuneration guidelines include the CEO and Group Executive Management (senior executives). The guidelines shall apply to contracted remuneration and changes made to previously contracted remuneration after the guidelines are adopted by the 2021 AGM. The guidelines do not cover remuneration decided on by the AGM. The purpose of these remuneration guidelines is to provide a structure for ensuring that remuneration of senior executives is aligned with the company’s long-term strategy. For information on the company’s business strategy, see afry.com/en/about-us/objectives. The remuneration guidelines are based on the following basic principles:
- Offering competitive remuneration to attract and retain senior executives with the right qualifications. The remuneration levels and the composition of the remuneration components are regularly compared with the levels of comparable companies operating in the same market areas as ÅF Pöyry to ensure competitive remuneration.
- Offering long-term incentive programmes focused on business strategy, long-term goals and sustainability aspects in finance, the environment and as regards employees
- Annual evaluation of individual results and goal achievement as compared to the company’s financial results.
The remuneration guidelines provide scope for applying financial and non-financial short-term incentive structures (STIs) containing social and environmental aspects to further promote sustainability and compliance with the company’s core values: brave, devoted team players. The remuneration guidelines provide management with an incentive to create an innovative and performance-oriented culture, thereby helping to achieve the company’s goal of creating sustainable technology and design solutions for future generations.
Decision-making processes for establishing, reviewing and implementing the guidelines
The Board of Directors has established a Remuneration Committee. The Committee’s tasks include preparing the Board of Directors’ decision on proposed guidelines for remuneration of senior executives. The Board of Directors shall prepare proposed new guidelines at least every four years and submit the proposal for resolution at the AGM. The guidelines shall apply until new guidelines are adopted by the AGM. The Remuneration Committee shall also follow and evaluate programmes for variable remuneration of Group Executive Management, the application of guidelines for remuneration of senior executives, and applicable remuneration structures and remuneration levels in the company.
- To avoid conflicts of interest, the Remuneration Committee consists only of members of the Board of Directors who are independent of the company and its management.
- ÅF Pöyry handles remuneration through well-defined procedures and ensures that the CEO or other senior executives are not in attendance when remuneration issues are discussed, insofar as they are affected by the issues.
Remuneration of senior executives consists of fixed salary, pension and other benefits, as well as short-term cash incentive programmes (STI) and long-term incentive programmes (LTIP).
The fixed salary is set according to local market practice and in accordance with the levels of the country where the individual is employed. The fixed salary is reviewed annually in connection with the performance evaluation and considers the context of the labour market.
Short-term incentive programmes (STI)
The size of short-term cash incentive programs can vary from 0 percent to 60 percent of annual fixed cash salary. Target components, weighting and target levels are set annually by the Board of Directors to ensure that they support the business strategy. The target components, weighting and target levels may vary from year to year to reflect business priorities and usually balance the Group’s financial targets (currently EBITA, EBITA margin, and organic growth in own and upper level unit) and non-financial targets. Details of the target components, weighting and target levels as well as how they support the business strategy are presented in the annual remuneration report.
After the end of the year, the Board of Directors reviews the results and determines to what extent each of the targets has been achieved to determine the final level of payment. As far as financial targets are concerned, the assessment shall be based on the latest financial information published by the company. The Board of Directors may adjust the STI outcome in special circumstances to adjust the remuneration in accordance with the value created for the shareholders and to ensure that the outcome reflects the company’s results fairly.
Long-term incentive programmes (LTIP)
The Board of Directors considers it important to offer long-term incentive programmes to attract and retain key personnel and to give them the opportunity to share in the company’s success. LTIP are also important to ensuring the connection to long-term value for the shareholders. In this way, the remuneration guidelines contribute to the company’s long-term value creation and results.
The long-term incentive programmes that can be offered are share-related or share-price-related programmes and/or long-term cash-based programmes; all are three-year programmes and there is a ceiling for all cash-based programmes. Decisions on share-related and share-price-related programmes are made by the AGM either through separate decisions or by indicating the essential conditions of the programme in the remuneration guidelines.
For senior executives, there are three-year cash-based programmes ("LTI Cash"). The annual outcome of LTI Cash can vary from 0 percent to 50 percent of the annual fixed cash salary. Target components, weighting and target levels are determined annually by the Board of Directors to ensure that they support the business strategy and can vary from year to year to reflect business priorities (at present, average EBITA margin and average growth).
There should be a long-term cash-based incentive programme for the CEO. The purpose of the incentive programme, which is produced by the Board’s remuneration committee, is to link a larger portion of the CEO’s remuneration to the company’s share’s long-term value growth, thus further linking the CEO’s interests with the shareholders’. According to the terms and conditions of the programme, the company will pay a cash amount to the CEO based on the share price trend if the CEO is still employed by the company after the measurement period ends. The share price trend (adjusted for intervening consolidation or splitting of shares, preferential rights issues or similar events) shall be above 0 percent at a minimum and 30 percent at a maximum during the measurement period 1 April 2021 – 31 March 2024. Payment will be made on a linear basis if the share price increases between the minimum and maximum level. If the minimum is not reached, no payment will be made and if the maximum is reached, the CEO will receive SEK 7.5 million (gross before tax) corresponding to a total cost to the company of SEK 9,856,500 (including social security fees).
Details of each programme and how they support the business strategy are presented in the annual remuneration report. After the end of the programme, the Board of Directors reviews the results and determines to what extent each of the goals has been achieved to determine the final level of payment.
Variable remuneration in exceptional circumstances
Additional variable cash remuneration may be paid in exceptional circumstances, provided that such extraordinary arrangements are made only at the individual level either for the purpose of recruiting or retaining executives, or as remuneration for extraordinary performance over and above the person’s ordinary duties. Such remuneration may not exceed an amount equal to 50 percent of the executive’s fixed annual cash salary. Decisions on such remuneration shall be made by the Board of Directors as proposed by the Remuneration Committee.
The pension benefits provided reflect relevant market practice and may be adjusted from year to year. Senior executives are covered by pension benefits that reflect market practice in each country of employment, but defined contribution pension plans are preferred. No pension benefits shall be dependent on future employment and may amount to a maximum of 50 percent of the executive’s fixed annual cash salary.
Benefits are provided in accordance with reasonable levels in the country where the individual is employed. The benefits can be adjusted from year to year. Other benefits may include company car, health insurance, private accident and life insurance, as well as business travel insurance and liability insurance. Such benefits may amount to a maximum of 10 percent of the executive’s fixed annual cash salary. Regarding employment conditions that are governed by rules other than Swedish, in so far as pension benefits and other benefits are concerned, appropriate adjustments may be made to comply with such compulsory rules or standard local practice, whereby the general purpose of these guidelines should be met as far as possible. Additional benefits and remuneration may be offered in certain circumstances, such as relocation in accordance with the company’s policy for international transfers. The CEO is entitled to participate in programmes that can be offered to other employees at any given time, such as anniversary gifts etc. Further information on the benefits provided during a given year is available in the annual remuneration report.
Termination and severance pay
The notice period for the CEO is 12 months when notice is given by the company and 6 months if notice is given by the CEO. If the company terminates the CEO, the CEO shall be offered severance pay corresponding to up to 12 months’ salary. For other senior executives, the notice period is never longer than for the CEO. Regarding employment conditions that are governed by rules other than Swedish, appropriate adjustments may be made to comply with such compulsory rules or standard local practice, whereby the general purpose of these guidelines should be met as far as possible. The Board of Directors is entitled to decide whether payment should be tied to ongoing incentive programmes for individuals who depart the company and how payment should be handled in the event of leave. Any assessments will be presented in the annual remuneration report.
Salary and terms of employment for employees
In preparing the Board of Directors’ proposal for these remuneration guidelines, salaries and terms of employment for the company’s employees have been considered by the Remuneration Committee using information on employees’ total remuneration, the components of the remuneration as well as the rate of increase and increase over time of remuneration and have been part of the Remuneration Committee’s and the Board of Directors’ supporting information for evaluating the reasonableness of the guidelines and their limitations. The development of the distance between remuneration of senior executives and remuneration of other employees will be presented in the remuneration report.
Right to recover remuneration and waive the guidelines
The Board of Directors is entitled to withhold or recover payments within the framework of short- and long-term incentive programmes due to exceptional circumstances or if false information is given regarding financial results. That type of decision is explained (how the circumstances are defined and how actions are taken) in the annual remuneration report.
The Board of Directors may decide to temporarily deviate from the guidelines, in whole or in part, if there are special reasons for this in an individual case and a departure is necessary to meet the company’s long-term interests, including its sustainability, or to ensure the company’s financial viability. As stated above, it is part of the Remuneration Committee’s tasks to prepare the Board of Directors’ decision on remuneration issues, which includes decisions on deviations from the guidelines.