Based on the Remuneration Committee's preparatory work, Kesko's Board of Directors makes decisions on the personal remuneration, other financial benefits and the performance bonuses to the Group Management Board members responsible for lines of business. As for the other Group Management Board members, Kesko's Board of Directors makes decisions on the performance bonus principles. The President and CEO makes decisions on the remuneration and financial benefits of the Group Management Board members other than those responsible for lines of business, based on preparatory work by the head of HR, within the limits set by the Chairman of the Board's Remuneration Committee.
Salaries, performance bonuses and fringe benefits are reported on a cash basis. The 2016 earnings on accrual basis are calculated by adding the amount of performance bonus paid in 2017 to the salaries and fringe benefits for 2016.
The salaries, fringe benefits, performance bonuses, share awards and other financial benefits paid to Group Management Board members (excluding Helander) in 2016-2017 are depicted below.
In 2017, €3,528,362, or a total of 40,598 shares (maximum amount 53,000 shares), was paid to Group Management Board (excl. the President and CEO) as share awards based on the 2016 performance period. The commitment period for share awards granted for the 2016 performance period will end on 31 Dec. 2019.
In 2016, €2,149,128, or a total of 28,302 shares (maximum amount 53,000 shares), was paid based on the 2015 performance period.
The euro value of the share awards paid in 2017 and 2016 has been calculated using the trade-weighted average share price on the date of assignment. The share awards paid have been net share awards, in addition to which a cash component has been paid to cover the taxes and tax-like charges. The share award euro amounts depicted in the table comprise the combined total of the net value of the shares and the cash component.
For the 2017 performance period, the Group Management Board (excl. President and CEO) will be paid a share award corresponding to 35,586 shares by the end of April 2018 (Board decision on 31 Jan. 2018). The share award to be paid is a gross share award, from which the applicable withholding tax is deducted and the remaining net amount is paid in shares. The maximum amount of share award to be paid for the 2017 performance period was determined at a total of 76,200 shares. The commitment period for share awards granted for the 2017 performance period will end on 10 Feb. 2021.
Salaries, bonuses and fringe benefits for other Management Board members (excluding Helander)
The old-age pension age of Management Board members who are members of Kesko Pension Fund is 62-63 years. The retirement age of other members according to their service contracts is 63 years, unless the Company and the executive agree on extending the contract beyond the retirement age.
The amount of old-age pension for Management Group members who are members of Kesko Pension Fund is 66% of pensionable earnings for the ten (10) calendar years preceding retirement. The retirement benefits of the other Management Board members are determined based on the Finnish Employees’ Pensions Act (TyEL). Those Management Board members who are not members of Kesko Pension Fund are provided with a defined contribution supplementary pension.
In 2017, three 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. Other Management Board members are provided with a defined contribution supplementary pension. Kesko has not paid pension insurance contributions incurred on executives’ memberships of Kesko Pension Fund for several years, nor in 2017, as the Fund’s investment returns covered the payable supplementary pensions and changes in the pension liability.
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 period of notice is 6 months if the service contract is terminated by the Company, and 6 months if the executive resigns. If the Company terminates the contract for a reason other than a material breach of contract by the executive, and the executive does not retire on an old-age pension or some other pension, the executive is paid, in addition to the salary for the period of notice, a compensation corresponding to the combined amount of 6-18 months' monetary salary and fringe benefits.
Group Management Board composition
In addition to President and CEO Helander, Group Management Board members in 2017 were:
Jorma Rauhala was appointed President of Kesko’s building and technical trade division and deputy to Kesko’s President and CEO on 15 November 2017. Previously, Rauhala acted as President of Kesko’s grocery trade division. Rauhala’s predecessor Terho Kalliokoski’s membership on the Group Management Board ended on 15 November 2017. Ari Akseli was appointed President of Kesko’s grocery trade division on 15 November 2017. Anne Leppälä-Nilsson retired on 31 December 2017. As her replacement, Mika Majoinen was appointed Group General Counsel and a member of the Group Management Board as of 1 January 2018. Lauri Peltola’s membership on the Group Management Board ended on 31 October 2017.