The key management of KONE Corporation consists of the Board of Directors and the Executive Board.
KONE Corporation’s Board of Directors determines the terms and conditions of employment of the full-time Chairman of the Board and of the President and CEO, and these are defined in their respective written contracts. The Nomination and Compensation Committee prepares proposals to be made to the Annual General Meeting regarding the nomination of Board members and their compensation and makes decisions regarding senior management appointments and compensation. The Committee also decides on the compensation systems to be used.
KONE has a share-based incentive plan for the company’s senior management (President and CEO, members of the Executive Board and other top management), consisting of approximately 40 individuals. The potential reward is based on the annual growth in both sales and earnings before interest and taxes (EBIT). The reward is to be paid as a combination of class B shares and cash equivalent of the taxes and similar charges that are incurred. The plan prevents participants from transferring the shares during the fifteen-month period following the termination of each fiscal year. As part of the share-based incentive plan, a long-term target for the management´s ownership has been set. In April 2012, a total of 208,295 class B shares were granted to the management as a reward due to the achievement of the targets for the year 2011. A total of 17,900 class B shares were returned to the company during the financial year. In April 2013, a total of 210,240 class B shares will be granted to the management due to the achievement of the targets for the year 2012.
KONE Corporation had two stock option programs during the financial period 2012. The purpose of the stock options is to encourage long-term efforts by key personnel to increase shareholder value and their commitment to the company by offering them an internationally competitive incentive program. The company’s Board Members, President and CEO and members of the Executive Board are not included in the stock option programs.
|Compensation paid to the key management, MEUR
|| Jan 1-Dec 31, 2012
||Jan 1-Dec 31, 2011|
|Salaries and other remuneration
|Compensation recognized as an expense for members of the Board of Directors and
the President and CEO (EUR thousand)
| Jan 1 - Dec 31, 2012
||Jan 1 - Dec 31, 2011|
|Herlin Antti, Chairman of the Board 1)
|Alahuhta Matti, President and CEO, member
of the Board 1)
1) For the financial year 2012 in addition Antti Herlin’s accrued bonus is EUR 468,488 and Matti Alahuhta’s accrued bonus is EUR 649,980. These will be paid during 2012. In April 2012, the share-based payment for the financial year 2011 received by Matti Alahuhta was EUR 2,031,483.
The Annual General Meeting of KONE Corporation in February 2012 confirmed the fees of the members of the Board as follows (annual fees in EUR):
| Annual fees
| Chairman of the Board
| Vice chairman
| Deputy member
It was also confirmed that a meeting fee of EUR 500 is paid for each meeting of the Board and its committees. Board members’ travel expenses and daily allowances are compensated in accordance with the company’s travel expense policy.
The compensation for the Chairman of the Board, Antti Herlin, consists of a basic salary and a yearly bonus decided by the Board on the basis of the Group’s financial result. The yearly bonus may not exceed 100 percent of the recipient’s annual salary. In 2012, Antti Herlin’s base salary was EUR 468,488. In addition, his accrued bonus for 2012 totaled EUR 468,488. He was also paid EUR 60,000 as compensation for serving as Chairman of the Board. A regularly updated table on Antti Herlin’s holdings of shares is available here. The Chairman’s retirement age and pension are determined in accordance with Finland’s Pensions Act. No separate agreement regarding early retirement has been made.
The compensation for the President and CEO, Matti Alahuhta, consists of a base salary and a yearly bonus decided annually by the Board on the basis of the Corporation’s key targets. The yearly bonus may not exceed 100 percent of the recipient’s annual salary. In 2012, Matti Alahuhta’s base salary was EUR 722,200. In addition, his accrued bonus for 2012 totaled EUR 649,980. He was also paid EUR 36,500 as compensation for serving on the Board. A regularly updated table on Matti Alahuhta’s holdings of shares is available here. He is also included in the share-based incentive plan for the Group’s senior management. The potential bonus is based on the growth in KONE’s net sales and operating profit. In April 2012, on the basis of the incentive plan, Matti Alahuhta received a bonus of EUR 2,031,483, which consisted of 22,380 KONE class B shares together with a cash bonus to cover taxes and similar charges arising from the receipt of shares. The corresponding bonus accrued from 2012 and due for payment in April 2013 is 24,000 KONE class B shares together with an estimated cash bonus to cover taxes and similar charges arising from the receipt of shares.
As part of Matti Alahuhta’s contract, he had the possibility to retire in June 2012 at the age of 60. Mr. Alahuhta did not exercise this possibility but continued as KONE Corporation’s President and CEO also after June 2012, having the possibility to retire following his term of notice in his service contract. Alahuhta´s retirement pension is 60% of his average monthly salary during his last seven years of earnings. Should his employment contract be terminated before retirement, he has the right to the equivalent of 18 months’ salary, which includes the salary for a six-month term of notice.
The compensation for the members of the Executive Board comprises a base salary and a yearly bonus, based on the Group’s annual result and the achievement of personal targets. The bonus amount is determined by the Nomination and Compensation Committee and may not exceed 50 percent of the annual salary.A regularly updated table on the Executive Board members’ holdings of shares is available here. The members of the Executive Board are included in the share-based incentive plan for senior management. In April 2012, on the basis of the incentive plan, the members of the Executive Board received a bonus of 98,450 KONE class B shares together with a cash bonus equal to the amount required to cover taxes and similar charges arising from the receipt of shares. The corresponding bonus accrued from 2012 and due for payment in April 2013 is 98,400 KONE class B shares together with an estimated cash bonus equal to the amount of taxes and similar charges. No separate agreement regarding early retirement has been made for the members of the Executive Board. The compensation for the termination of the employment contract prior to retirement is a maximum of 15 months’ salary, which includes the salary for a six-month term of notice.
The performance and economic criteria of the senior management’s compensation both in terms of the annual bonus plans and the long-term share-based incentive programs are defined and their progress monitored regularly in a manner that ensures that long-term strategic targets are reached.
The Board members and the President and CEO do not have any other financial benefits.
This Remuneration Statement represents a statement recommended by the Finnish Corporate Governance Code 2010 (Recommendation 47).
More information on KONE’s corporate governance principles is available in the Corporate Governance Statement.
Remuneration statement 2011
(Updated on January 25, 2013)