Remuneration Statement 2011 

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 2011, a total of 219,000 class B shares were granted to the management as a reward due to the achievement of the targets for the year 2010. A total of 3,000 class B shares was returned to the company during the financial year. In April 2012, a total of 210,980 class B shares will be granted to the management due to achievement of the targets for the year 2011.

KONE Corporation had during the financial period 2011 two stock option programs. 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.

1)   For the financial year 2011 in addition Antti Herlin’s accrued bonus is EUR 397,277 and Matti Alahuhta’s accrued bonus is EUR 649,980. These will be paid during 2012. In April 2011, the share-based payment for the financial year 2010 received by Matti Alahuhta was EUR 2,064,516.

The Annual General Meeting of KONE Corporation in March 2010 confirmed the fees of the members of the Board as follows:

Annual fees EUR
Chairman of the Board 54,000
Vice chairman 44,000
Member 33,000
Deputy member 16,500

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, Antti Herlin, consists of a basic salary and a yearly bonus, which is defined by the Board and based on the Corporation’s financial result. This bonus may not exceed 100 percent of his annual salary. In 2011, Antti Herlin’s basic salary was EUR 468,488. In addition, his accrued bonus for the accounting period January 1–December 31, 2011 was EUR 397,277. He was also paid EUR 60,500 as remuneration for serving as Chairman of the Board. A regularly updated table on Antti Herlin’s holdings of shares is available here. The Chairman of the Board’s pension and retirement age are determined in accordance with the retirement age legislation in force. No separate agreement regarding early retirement has been made.

 The compensation for the President and CEO, Matti Alahuhta, consists of a basic salary and yearly bonus, defined by the Board on the basis of the Corporation’s annual result and other key targets. This bonus may not exceed 100% of his annual salary. Matti Alahuhta’s basic salary for 2011 was EUR 722,200. In addition, his accrued bonus for the accounting period January 1–December 31, 2011 totaled EUR 649,980. He was also paid EUR 36,000 as remuneration 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 company’s senior management. The potential reward is based on the annual growth in KONE’s sales and operating profit. In April 2011, on the basis of the incentive plan, he received a bonus of total value of EUR 2,064,516 including 25,000 KONE class B shares together with a cash bonus to cover the taxes and similar charges arising from the receipt of the shares. The corresponding bonus accrued from 2011 and to be paid in April 2012 is 22,380 KONE class B shares and a cash bonus to cover the taxes and similar charges arising from the receipt of the shares. As part of his service contract, he has the possibility to retire at the age of 60 in June 2012. Mr. Alahuhta will not exercise this possibility but will continue as the President & CEO also after June 2012, when he has 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 the past seven earning years. 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 6-month term of notice. 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 6-month term of notice.

The compensation for the members of the Executive Board comprises a fixed basic salary and bonus, based on the annual result of the Group and the achievement of personal targets. The bonus amount is determined by the Nomination and Compensation Committee and may not exceed 50% of the annual salary. A regularly updated table on the Executive Board members’ holdings of shares and options is available here. The Executive Board members are included in the share-based incentive plan. In April 2011, on the basis of the incentive plan, the members of the Executive Board received a bonus of total 110,000 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 2011 and to be paid in April 2012 is 98,450 KONE class B shares and a 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. Compensation for termination of the employment contract prior to retirement is a maximum of 15 months’ salary, which includes the salary for a 6-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.