Remuneration

The Annual General Meeting 2023 confirmed an annual compensation of EUR 220,000 for the Chairman of the Board, EUR 125,000 for the Vice Chair and EUR 110,000 for Board Members. Of the annual remuneration, 40 percent will be paid in class B shares of KONE Corporation and the rest in cash. In addition, the General Meeting confirmed a separate annual compensation to the members of the board committees: Chair of the Audit Committee: EUR 20,000 and members of the Audit Committee: EUR 10,000, and Chair of the Nomination and Compensation Committee: EUR 20,000 and members of the Nomination and Compensation Committee: EUR 10,000. The annual compensation of the members of the board committees is paid in cash. In addition, it was resolved that compensation is not paid to a Board Member who is employed by the company.

The Vice Chair of the Board, Jussi Herlin has a separate employment contract for his role as Executive Vice Chair of the Board at KONE. The employment-based compensation for Jussi Herlin consists of a base salary and an annual bonus decided by the Board on the basis of the Group’s financial result. The annual bonus may not exceed 100 percent of the recipient’s annual base salary. In 2022, Jussi Herlin’s base salary was EUR 125,600. In addition, he received a bonus of EUR 26,166, which was earned in 2021. There will be no bonus payout in 2023 as the performance criteria for 2022, tied to the Group’s financial performance, were not met.

The Executive Vice Chair’s retirement age and pension are determined in accordance with Finland’s Pensions Act. No separate agreement regarding early retirement has been made.

The President and CEO’s compensation consists of a base salary and an annual bonus determined by the Board on the basis of the Corporation’s key targets. The annual bonus may not exceed 150 percent of the recipient’s annual salary.

Henrik Ehrnrooth’s annual base salary is EUR 750,000. In addition, he received a bonus of EUR 835,350, which was earned in 2021. His accrued bonus for 2022 totaled EUR 465,675. The performance criteria applied to this annual short-term incentive is based on financial, strategic and individual performance. The bonus will be paid in 2023.

Henrik Ehrnrooth is included in the long-term share-based incentive plan for the Group’s senior management. The maximum number of shares available for earning for the President and CEO for the 2021 share-based incentive plan is 53,541 KONE class B shares (gross before deduction for applicable taxes). The final outcome and any potential share awards under the share-based incentive plan for the year 2021 will be confirmed in January 2024, depending on the performance during the years 2021, 2022 and 2023. The maximum number of shares available for earning for the President and CEO for the 2022 share-based incentive plan is 58,243 KONE class B shares (gross before deduction for applicable taxes). The final outcome and any potential share awards under the share-based incentive plan for the year 2022 will be confirmed in January 2025, depending on the performance during the years 2022, 2023 and 2024. The performance criteria applied to the 2021 and 2022 performance years are based on a combination of annual sales growth and adjusted EBIT margin, as well as improvements in sustainability. The sustainability performance condition is a combination of reductions in carbon footprint, as well as diversity and inclusion and safety related targets.

Henrik Ehrnrooth’s retirement age and pension are determined in accordance with Finland’s Pensions Act. No separate agreement regarding early retirement has been made. 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 an annual bonus, based on financial targets and strategy execution, as well as individual performance. The bonus amount is determined by the Nomination and Compensation Committee and may not exceed 75 percent of the annual salary.

The members of the Executive Board are included in the long-term share-based incentive plan for senior management. The maximum number of shares available for earning for the Executive Board for the 2021 share-based incentive plan is 233,794 KONE class B shares (gross before deduction for applicable taxes). The final outcome and any potential share awards under the share-based incentive plan for the year 2021 will be confirmed in January 2024, depending on the performance during the years 2021, 2022 and 2023. The maximum number of shares available for earning for the Executive Board for the 2022 share-based incentive plan is 285,391 KONE class B shares (gross before deduction for applicable taxes). The final outcome and any potential share awards under the share-based incentive plan for the year 2022 will be confirmed in January 2025, depending on the performance during the years 2022, 2023 and 2024.

If the participant's employment or service relationship with KONE Group terminates before the end of the performance period, the participant, as a rule, forfeits the share award without compensation. As part of the performance share plan for the senior management, a long-term target for their ownership has been set. For the Executive Board members, the long-term ownership target is that the members have an ownership of KONE shares corresponding to at least five years’ annual base salary.

The total amount of base salary paid to the Executive Board members (excl. President and CEO) was EUR 5.1 million in 2022. The total amount paid to the Executive Board members (excl. President and CEO) based on the annual short-term incentive and the share-based incentive plan was EUR 2.3 million.

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.

KONE has a long-term share-based incentive plan to support long term value creation and align interests of shareholders and management. Measuring performance over three years, the share plan emphasizes profitable growth and sustainability. Incorporating sustainability measures alongside financial metrics ensures a strong focus in driving transformation and achieving our sustainability ambitions.

The long-term incentive plan consists of annually commencing individual share plans, each with a three-year rolling performance period. The plans vest and are delivered in one portion after three years, based on the accumulated outcomes for the three-year performance period. The number of shares earned by participants under the share-based incentive plans are determined on gross basis with deduction for taxes made when applicable before delivery of the shares to the participants. The arrangements initiated prior to 2022 included both cash and equity settled arrangements. Curernt arrangements are equity settled only. The target group and targets within the plan as well as possible rewards are decided upon annually by the Board. The company's Board Members are not included in the plan. If the participant's employment or service relationship with KONE Group terminates before the end of the performance period, the participant, as a rule, forfeits the share award without compensation. A long-term target for share ownership has been set as part of the plan for the senior management of KONE.

In addition to the above, KONE operates a restricted share plan that serves as a complementary long-term share plan to be used as a commitment instrument for retention and recruitment purposes for top management (excl. the President and CEO) and other selected key persons. The restricted share plan does not have a performance condition. The plan has a commitment period up to three years, after which the potentially granted share awards for an individual plan will be paid to the participant in KONE class B shares, provided that their employment or service relationship with KONE Group is in force at the time of payment.

Long-term share-based incentive plan 2022

The 2022 long-term incentive plan is targeted to approximately 55 members of top management, including the President and CEO, members of the Executive Board and other top management as well as approximately 525 other selected key personnel of KONE Group. The performance criteria applied to the 2022 long-term incentive plan are based on annual growth in sales, adjusted EBIT margin and improvements in sustainability. The sustainability performance condition is a combination of reductions in carbon footprint, and targets related to diversity, equity and inclusion as well as safety.

Information about the previous years’ performance share plans can be found from the remuneration reports.

Option programs

KONE no longer has option programs in place. More information on the previous option rights can be found from the published stock exchange releases.

KONE Remuneration Policy