Share-based commitment and incentive schemes
Share-based commitment and incentive scheme 2017–2020
In February 2017, Kesko’s Board of Directors decided on a new long-term share-based commitment and incentive scheme for top management for 2017-2020. The scheme consists of three share-based compensation plans, under which the Board can annually decide on the initiation of new share plans. The primary share-based compensation plan is the Performance Share Plan (PSP). There is also a transitional Bridge Plan for 2017 and an RSP (restricted share pool) plan for special situations. Once the transfer restriction of each share plan ends, the recipient of the shares is free to use them, provided that the person is still employed by Kesko Group.
The purpose of the share-based compensation plan is to promote Kesko's business and increase the Company's value by aligning the objectives of the shareholders and executives. The plan also aims to commit people to Kesko Group and give them the opportunity to receive Company shares upon fulfilling the objectives set in the share-based compensation plan.
The maximum gross amount of share award paid for each performance period is 400% of the monetary salary of the last calendar year of the performance period for which the award is paid.
The PSP consists of rolling four-year share plans, each with a two-year performance period followed by a two-year commitment period. The Board of Directors of Kesko Corporation decides annually whether to initiate a new plan. The PSP that began at the start of 2017 consists of a two-year performance period (1 Jan. 2017–31 Dec. 2018) followed by a two-year commitment period (1 Jan. 2019–10 Feb. 2021).
The transitional 2017 Bridge Plan has a one-year performance period, followed by a three-year commitment period. Apart from that, the rules are the same as for the PSP. The Bridge Plan that began at the start of 2017 consists of a one-year performance period (1 Jan. 2017–31 Dec. 2017) followed by a three-year commitment period (1 Jan. 2018–10 Feb. 2021).
RSP (restricted share pool) is a secondary share plan for special situations, to be decided upon separately. It has a fixed share allocation decided on an individual level, and a commitment period that ends three years after the plan is initiated.
Kesko applies a share ownership recommendation policy to the members of Kesko's Group Management Board. According to the recommendation, each Group Management Board member shall maintain a holding of at least 50% of the net shares they have received under the Company's share-based compensation schemes until their holding of Kesko shares corresponds to at least their fixed gross annual salary.
At its discretion, the Board may decide not to pay a share award or to recover an award that has already been paid, if the recipient has been found guilty of malpractice or an action in breach of Kesko’s ethical or responsibility principles or guidance that, as a whole, cannot be considered insignificant, or if there are weighty grounds for assuming that the recipient is guilty of such acts.
In 2014-2016, Kesko operated a share-based compensation plan decided by the Board and intended for the Group's management personnel and other named key personnel. Under the plan, a total maximum of 600,000 own B shares held by the Company as treasury shares could be granted over the three-year period.
The share-based compensation plan had three performance periods: the calendar years 2014, 2015 and 2016. Kesko's Board decided the target group and the performance criteria separately for each performance period based on the Remuneration Committee's proposal. The award possibly paid after each performance period was based on the fulfilment of the performance criteria decided by the Board for the performance period.
The criteria for the 2014-2016 performance periods were Kesko's basic earnings per share (EPS) excluding non-recurring items, the growth percentage of Kesko Group's sales exclusive of tax, and the percentage by which the total shareholder return of a Kesko B share exceeded the OMX Helsinki Benchmark Cap index.
The award possibly paid for a performance period was paid partly in Kesko B shares and partly in cash. The cash component was used to pay the taxes and tax-like charges incurred by the award.
A commitment period of three calendar years following each performance period is attached to the shares awarded as remuneration, during which the shares must not be transferred. If a person's employment or service relationship terminates prior to the end of the commitment period, they must return the shares subject to transfer restriction to Kesko or its designate without consideration. The return obligation does not apply if the grantee retires or dies during the commitment period.
Further information on treasury shares held by the company is available in section "Own shares".
The company has not issued options or other special rights entitling to shares.