Remuneration

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Summary of key contents of the Remuneration Policy

Decision-making

Fixed remuneration components

Variable remuneration components

Board of Directors Remuneration decided by the General Meeting based on the proposal of the Shareholders’ Nomination Board Fixed annual fee

·     Remuneration may be paid in money or in the company’s shares in part of in full

Meeting fee and other fees paid for attendance at Board and committee meetings and other similar all-day Board assignments

·     Remuneration may be paid in money or in the company’s shares in part of in full

Other remuneration criteria and components as decided by the General Meeting

President and CEO Remuneration decided by the Board of Directors Fixed base salary

Fringe benefits

Pension in accordance with the statutory Finnish employee pension scheme

Short-term performance-based bonus

·     Monetary, max 50% of annual base salary

·     Structure, measurement, target levels and payout decided by the Board of Directors

Long-term performance-based incentive program

·     Monetary or share-based

·     Structure, measurement, target levels and payout decided by the Board of Directors

Group Management Team Remuneration decided by the Board of Directors based on the proposal of the President and CEO Fixed monthly base salary

Fringe benefits

Pension in accordance with the statutory Finnish employee pension scheme

Short-term performance-based bonus

·     Monetary, max 40% of annual base salary

·     Structure, measurement, target levels and payout decided by the Board of Directors

Long-term performance-based incentive program

·     Monetary or share-based

·     Structure, measurement, target levels and payout decided by the Board of Directors

Remuneration principles

Exel Composites’ remuneration principles are developed to promote the company’s strategy, the competitiveness and long-term financial success of the company and to contribute to the development of the company’s shareholder value.

The company’s remuneration schemes aim to increase the long-term commitment of the Board of Directors, the President and CEO and the Group Management Team to promote the interests of the company and its shareholders as well as to motivate and reward key individuals in the achievement of strategic targets.

To ensure alignment of remuneration with the company’s strategy, financial targets and corporate values as well an efficient risk management, the remuneration principles are based on predetermined and measurable performance and result criteria. To ensure a competitive and appropriate remuneration, the remuneration components are compared to the practices of comparable companies.

At Exel Composites the remuneration of employees is based on the company’s strategic targets. Remuneration is a whole that comprises of several different components. In addition to monetary salary paid to all, the employee may be part of a short-term incentive plan or of different incentive or performance rewards. The higher in the organization the role of the employee is, the larger part of his/her remuneration is comprised of different remuneration components. An employee with a Group management role may also be part of a long-term incentive program. Additionally, the employee may be entitled to different fringe benefits such as a car and a phone benefit or a sports and culture benefit.

Decision-making process concerning remuneration

The company’s Board of Directors prepares the company’s remuneration policy. The remuneration policy is presented to the general meeting at least every four years and whenever material changes are proposed. The company is entitled to make other than material changes, such as technical changes or changes required by legislation, without presenting the remuneration policy to the general meeting.

In accordance with internal guidelines followed by the company, the governing bodies and individual persons do not participate in the decision-making process concerning their own remuneration nor in making such decisions where the remuneration or his/her interest conflicts with the company’s interest. The aim thereby is to ensure that the decision-making concerning remuneration is fair and objective.

Remuneration of the Board of Directors and of management

Board of Directors

The remuneration of the Board of Directors may be composed of a fixed annual fees as well as variable remuneration components such as a meeting fee or other fees that are paid for attendance at Board and committee meetings and other similar all-day Board assignments. The Chairman and Vice Chairman of the Board may receive a raised fee or meeting fee. The general meeting may decide also on other remuneration criteria and remuneration components in accordance with the proposal of the Shareholders’ Nomination Board.

The rewards of the Board members may be paid in money or in the company’s shares in part or in full. Board members are encouraged to retain the shares they have received in their ownership for the duration of their Board membership.

President and CEO

The remuneration of the President and CEO comprises a fixed base salary, short-term and long-term incentives and other benefits.

The purpose of the President and CEO’s base salary is to provide a competitive remuneration basis, that allows focus on taking care of the role’s duties and of the implementation of the company’s long-term strategy. The base salary is reviewed annually taking into consideration the company’s result, personal performance and market conditions.

The President and CEO’s pension is determined in accordance with the statutory Finnish employee pension scheme (TyEL) that links the benefits directly to the President and CEO’s earnings. The President and CEO’s retirement age is 63 years. The President and CEO has no separate pension agreement.

The terms of service of the President and CEO are determined in a written service contract approved by the Board of Directors. According to the service contract of the President and CEO, the notice period is six months. In case of termination by the company a severance pay corresponding to 12 months’ salary may be paid in addition to salary during the notice period.

Based on current remuneration schemes, the payment of potential rewards when the employment has been terminated depends on the reason for the termination of employment. In principle no reward will be paid based on current remuneration schemes when the employment is terminated by the employee or by the company. In case the employment is terminated based on certain specifically defined reasons, part of the reward may be paid based on the terms of current remuneration schemes.

Group Management Team

The remuneration of members of the Group Management Team comprises a fixed monthly base salary, fringe benefits, a short-term performance-based bonus as well as a long-term performance-based incentive program. There are no additional pension schemes for the Group Management Team members.

Variable remuneration of the President and CEO and Group Management Team

Short-term incentive programs

The President and CEO, Group Management Team and other selected key individuals in the Group are entitled to a short-term performance based annual bonus. The objective of the annual performance-based bonus plan is, on an annual basis, to commit the management to achieving the company’s most important financial and other performance targets that support the company’s strategy.

The structure, measurement and target levels of the annual performance-based bonus plan are determined, set and may vary depending on the decision of the Board of Directors at a given time. The targets of the President and CEO are primarily based on the Group financial performance and operational targets.

The maximum annual performance-based bonus for the President and CEO is 50% of his/her annual base salary. For the other members of the Group Management Team the maximum annual bonus is 40% of their respective annual salary. The bonus is paid out in money.

Long-term incentive programs

The President and CEO, Group Management Team and other selected key individuals in the Group may be part of Exel Composites’ long-term incentive programs, which may be monetary or share-based. The objectives of the programs are to align the interests of the management with those of the company’s shareholders and, thus, to promote shareholder value creation, to commit the management to achieving the company’s strategic targets and to retain the company’s key individuals.

The structure, measurement and target levels of the long-term incentive programs are determined, set and may vary depending on the decision of the Board of Directors at a given time. The Board of Directors may decide on one or several structures.

The reward of the programs is based on key performance figures and other measurable criteria decided by the Board of Directors. The criteria may measure absolute or proportional performance.

In case of interleaving incentive programs within the limits of a remuneration plan, the Board of Directors decides on the start, conditions of the earning period and the length of each individual incentive program. No reward will be paid to an executive if his or her employment or service with the company ends before the reward payment unless the executive is leaving the company due to retirement or unless the Board decides otherwise. The programs may also include a lock-up period, until the end of which the restriction on leaving the company is extended.

The company maintains a share ownership recommendation policy that concerns the members of the Group Management Team. Each member of the Group Management Team is expected to accumulate and maintain a minimum share ownership in Exel Composites representing in value the executive’s annual base salary. Each member of the Group Management Team is expected to retain at least 50% of shares received under incentive programs until the recommended share ownership level is reached. The members of the Group Management Team are not expected to invest own funds for accumulating his/her share ownership.

The 2021 plan

is part of a share-based long-term incentive program for the earning period 2021-2023 and is targeted at approximately 20 executives. The President and CEO and the members of the Group Management Team are included in the target group of the 2020 incentive program. The potential share-based performance reward on the adjusted operating profit (EBIT) and the total shareholder return of the company’s share (TSR). The potential share reward is payable in 2024. The maximum number of shares to be paid under this individual plan is 100,000 shares.

Release 18 February 2021

The 2020 plan

is part of a share-based long-term incentive program for the earning period 2020-2022 and is targeted at approximately 20 executives. The President and CEO and the members of the Group Management Team are included in the target group of the 2020 incentive program. The potential share-based performance reward on the adjusted operating profit (EBIT) and the total shareholder return of the company’s share (TSR). The potential share reward is payable in 2023. The maximum number of shares to be paid under this individual plan is 125,000 shares.

Release 18 February 2020 

The 2019 plan

is part of a share-based long-term incentive program for the earning period 2019-2021 and is targeted at approximately 20 executives. The President and CEO and the members of the Group Management Team are included in the target group of the 2019 incentive program. The potential share-based performance reward on the adjusted operating profit (EBIT) and the absolute total shareholder return of the company’s share (TSR). The potential share reward is payable in 2022. The maximum number of shares to be paid under this individual plan is 196,000 shares.

Release 15 February 2019

The 2018 plan

is part of a share-based long-term incentive program for the earning period 2018-2020 and is targeted at approximately 15 executives. The President and CEO and the members of the Group Management Team are included in the target group of the 2018 incentive program. The potential share-based performance reward on the adjusted operating profit (EBIT) and the absolute total shareholder return of the company’s share (TSR). The potential share reward is payable in 2021. The maximum number of shares to be paid under this individual plan is 122,000 shares.

Release 22 March 2018

Deferral and possible clawback of remuneration

The company’s Board of Directors is in exceptional situations entitled to restrict or reject the payment of performance rewards when considered in the interest of the company by the Board of Directors. In addition, the Board of Directors is in limited exceptional situations of misuse entitled to clawback an already paid reward.

Remuneration elements agreed prior to the presentation of this remuneration policy

The Board of Directors reserves the right, without limitation by this remuneration policy, to pay all rewards, benefits and compensations (including using judgment in their payout and amount) that the company has already decided on, agreed to or committed to before this remuneration policy was presented to the annual general meeting.

Requirements of temporary deviation

It is possible to deviate temporarily from the company’s remuneration policy in certain situations and in order to ensure the company’s long-term interest. These situations include for example a change of the President and CEO, a corporate arrangement and changes in regulations. Deviation from the remuneration policy requires approval by the Board of Directors. The deviation may concern any part of remuneration and any component presented in this remuneration policy.

Monitoring of the materialization of the remuneration policy

The Shareholders’ Nomination Board monitors and evaluates the materialization of the remuneration policy for the Board of Directors and how the remuneration policy supports the achievement and implementation of the company’s strategic targets. The Board of Directors monitors and evaluates the Group’s remuneration schemes, including the materialization of the remuneration policy for the President and CEO and the competitiveness of the remuneration schemes and how the materialized remuneration supports the achievement of the company’s strategic targets and long-term financial success.

Remuneration Report 2020

Development of Group remuneration

EUR thousand

2020

2019

2018

2017

2016

Remuneration of the Board of Directors 173 175 164 169 164
Remuneration of the President and CEO 376 324 390 363 453
Remuneration of the company’s employees on average 1) 2) 46 47 45 46 48
Revenue 2) 108,595 103,784 96,608 86,255 73,079
Adjusted operating profit 2) 9,708 7,160 5,018 6,319 2,621

1) Personnel expenses divided by number of employees on average.
2) Exel Composites acquired Diversified Structural Composites in North America in April 2018 and Nanjing Jianhui in China in April 2017.

 

Remuneration of the Board of Directors in 2020

The AGM held in 2020 confirmed the following compensation for Board members for the year 2020:

  • Chairman: Annual remuneration of EUR 43,000 (previous year EUR 41,000) and additionally EUR 1,500 (1,500) for attendance at Board and committee meetings and other similar all-day Board assignments.
  • Board member: Annual remuneration of EUR 20,000 (19,000) and additionally EUR 1,000 (1,000) for attendance at Board and committee meetings and other similar all-day Board assignments. For committee meetings, the meeting fee for the committee chairman shall be EUR 1,500.

Travel expenses and other out-of-pocket expenses due to Board work shall be compensated in accordance with the Company’s established practice and travel rules.

According to a decision of the AGM held in 2020, 60% of the yearly remuneration was paid in cash and 40% in Exel Composites Plc shares, which were acquired directly for and on behalf of the members of the Board of Directors from the stock exchange market in amounts corresponding to EUR 17,200 for the Chairman and EUR 8,000 for each of the other members. Should the term of any member of the Board of Directors come to an end for whatever reason before the next Annual General Meeting, such member of the Board of Directors will have to return to the Company the remuneration or equivalent amount in cash already received but not yet earned at that point in time.

Remuneration received by the Board of Directors in 2020

(EUR thousands)

Name and position

Annual fixed fees 2020

Meeting

fees 2020

Other

fees 2020

Total

fees 2020

Total

fees 2019

Reima Kerttula
Chairman (as of 17 March 2016, member until 17 March 2016)
43 14 0 57 62
Petri Helsky
Member (as of 17 March 2016)
20 8 1 29 29
Helena Nordman-Knutson
Member (as of 4 April 2017)
20 9 0 29 29
Jouko Peussa
Member (as of 17 March 2016)
20 9 0 29 28
Kirsi Sormunen
Member (as of 20 March 2020)
20 8 0 28 0
Maija Strandberg
Member (until 20 March 2020)
0 1 0 1 27
Total
123
49
1
173
175

 

The Board of Directors convened nine times in 2020.

Exel Composites has no such incentive program by which the Company rewards the Board members with shares or option rights. The Board members are neither entitled to a short-term performance-based bonus.

Remuneration of the President and CEO and Group Management Team in 2020

Financial benefits paid to President and CEO and Group Management Team in 2020

(EUR thousands)

Fixed annual base salary

Fringe benefits

Performance-based bonus based on 2019 results

Long-term compensation paid in 2020*

Total 2020

Total 2019

President and CEO 316 0 37 23 376 324
Group Management Team 926 11 82 36 1,054 914
Total
1,242
11
118
58
1,430
1,237

* The earning period of the long-term compensation paid in 2020 was 2017-2019.

 

Financial benefits earned by President and CEO and Group Management Team in 2020

(EUR thousands)

Fixed annual base salary

Fringe benefits

Estimated performance-based bonus based on 2020 results

Estimated long-term compensation to be paid in 2021*

Total 2020

President and CEO 316 0 93 14 423
Group Management Team 926 11 228 22 1,187
Total
1,242
11
321
36
1,610

* Earning period of the long-term compensation to be paid in 2021 includes years 2018-2020.

 

Incentive programs

Exel Composites’ short-term incentive program covers all employees. Office employees receive a monthly salary and an annual bonus tied to the achievement of annually established goals emphasizing growth and profitability. Production employees are also eligible for incentive compensation. Their annual bonus is mainly based on factory profitability and production related performance indicators.

The Group has long-term incentive programs for the President and CEO and the Group Management Team and selected key employees of the company. The aim of the programs is to combine the objectives of the shareholders and the executives in order to increase the value of the company, to commit the executives to the company and to offer the executives a competitive reward program. The Board of Directors makes the decision on the program annually.

On 31 December 2020 the Group had three share-based long-term incentive programs:

The 2018 plan is part of a share-based long-term incentive program for the earning period 2018-2020 and is targeted at approximately 15 executives. The President and CEO and the members of the Group Management Team are included in the target group of the 2018 incentive program. 75% of the potential share-based performance reward is based on cumulative adjusted operating profit (EBIT) and 25% on total shareholder return of the company’s share (TSR). The potential share reward is payable in 2021. The maximum number of shares to be paid under this individual plan is 122,000 shares, of which President and CEO’s share is 33,973 shares. Estimated payout (to be confirmed in March 2021) is 6,832 shares.

The 2019 plan is part of a share-based long-term incentive program for the earning period 2019-2021 and is targeted at approximately 20 executives. The President and CEO and the members of the Group Management Team are included in the target group of the 2019 incentive program. 75% of the potential share-based performance reward is based on cumulative adjusted operating profit (EBIT) and 25% on total shareholder return of the company’s share (TSR). The potential share reward is payable in 2022. The maximum number of shares to be paid under this individual plan is 196,000 shares, of which President and CEO’s share is 50,000 shares.

The 2020 plan is part of a share-based long-term incentive program for the earning period 2020-2022 and is targeted at approximately 20 executives. The President and CEO and the members of the Group Management Team are included in the target group of the 2020 incentive program. 75% of the potential share-based performance reward is based on cumulative adjusted operating profit (EBIT) and 25% on total shareholder return of the company’s share (TSR). The potential share reward is payable in 2023. The maximum number of shares to be paid under this individual plan is 125,000 shares, of which President and CEO’s share is 32,000 shares.

The 2017 program, the earning period of which ended in 2019, was based on a long-term monetary incentive program and was targeted at 16 executives for the earning period 2017-2019. The President and CEO and the members of the Group Management Team were included in the target group of the 2017 incentive program. 75% of the potential share-based performance reward was based on cumulative operating profit (EBIT) and 25% on total shareholder return of the company’s share (TSR). The maximum number of shares to be paid under this individual plan in 2020 was 153,700 shares, of which President and CEO’s share was 42,800 shares. In 2020, a total reward of 21,331 shares (9,850 in shares and 11,481 in cash) was paid out under the 2017 plan to 16 executives. The President and CEO’s share of the reward was 6,079 (3,039 in shares and 3,040 in cash). The shares were acquired at an average price of EUR 3.77 per share on 17 March 2020.

The profit and loss of 2020 includes EUR 88 thousand of costs related to these incentive programs.

The administration of the share-based incentive plan and the acquisition of shares are conducted through an arrangement made with Evli Awards Management Oy (EAM) as per the decision of the Board of Directors on 12 June 2017 and according to the stipulations of the Companies Act for financing the purchase of own shares (the Finnish Companies Act, Chapter 13,Section 10, Subsection 2) relating to incentive plans. As a part of this arrangement EAM founded EAM EXL1V Holding Oy (Holding company) which acquires the shares with Exel’s funding and according to the agreement. These shares will be delivered to the employees according to the Exel’s share plan terms and conditions. The Holding company is owned by the EAM in legal terms, but according to the agreement Exel has control over the company and acts as the principal, whereas EAM is an agent through the Holding company. This control arising from contractual terms means, that the Holding company is consolidated into the group’s IFRS financial statements as a structured entity.

No reward will be paid to an executive based on the 2018, 2019 and 2020 programs described above, if his or her employment or service with the Company ends before the reward payment unless the executive is leaving the Company due to retirement or unless the Board decides otherwise. The programs also include a one-year lock-up period, and the restriction on leaving the Company is extended to the end of the lock-up.

Authorizations by the AGM

Repurchase and/or the acceptance as pledge of the company’s own shares

On 20 March 2020 the Annual General Meeting authorized the Board of Directors to repurchase and/or accept as pledge of the company’s own shares as follows:

The amount of own shares to be repurchased and/or accepted as pledge on the basis of the authorization shall not exceed 600,000 shares in total, which corresponds to approximately 5.0 per cent of all the shares in the company. Only the unrestricted equity of the company can be used to repurchase own shares based on the authorization.

Own shares can be repurchased at a price formed in public trading on the date of the repurchase or otherwise at a price formed on the market.

The Board of Directors decides on how own shares will be repurchased and/or accepted as pledge. Shares can be repurchased using, inter alia, derivatives. Own shares can be repurchased otherwise than in proportion to the shareholdings of the existing shareholders (directed repurchase). The Board of Directors shall decide on other terms of the share repurchase and/or acceptance as pledge.

Shares may be repurchased to be used as consideration in possible acquisitions or in other arrangements that are part of the company’s business, to finance investments, as part of the company’s incentive program or to be retained, otherwise conveyed or cancelled by the company.

The authorization cancels the authorization given to the Board of Directors by the General Meeting 2019 to decide on the repurchase and/or acceptance as pledge of the company’s own shares.

The authorization is effective until the end of the next Annual General Meeting, however no longer than until 30 June 2021.

Exel Composites held 67,150 own shares at the end of 2020, which have been repurchased to be used as part of the company’s incentive program.

Issuance of shares and special rights entitling to shares

On 21 March 2019 the Annual General Meeting authorized the Board of Directors to decide on the issuance of shares and special rights entitling to shares referred to in Chapter 10, Section 1 of the Companies Act as follows:

The amount of shares to be issued on the basis of the authorization may be a maximum of 1,189,684 new shares, which corresponds to approximately 10.0 per cent of all shares in the company, and/or a maximum of 600,000 Company’s own shares.

The Board of Directors decides on all the conditions of the issuance of shares and of special rights entitling to shares. The issuance of shares and of special rights entitling to shares may be carried out in deviation from the shareholders’ pre-emptive rights (directed issue).

The shares to be issued based on the authorization can be used as consideration in possible mergers and acquisitions and other business arrangements, to finance investments or as a part of the Company’s incentive program for personnel.

The authorization cancels the authorization given to the Board of Directors by the General Meeting on 17 March 2016 to decide on the issuance of shares as well as special rights entitling to shares.

The authorization is effective until 30 June 2022.

These authorizations were not exercised in 2020.