Digia’s Remuneration Statement 2016
This remuneration statement contains a summary of the financial benefits, remuneration system and associated decision-making procedures pertaining to members of Digia Plc’s Board of Directors, CEO and other executives.
A) Decision-making procedures concerning remuneration
Board of Directors
Digia Plc’s Nomination Committee draws up a proposal for the remuneration to be paid to Board members and the grounds for reimbursement of expenses. The Shareholders' Meeting decides on the remuneration payable to Board members and the grounds for reimbursement of expenses.
CEO and other executives
Digia Plc’s Compensation Committee draws up a proposal for the CEO’s salary, remuneration and other financial benefits. The Compensation Committee works with the CEO to draw up a proposal for the salaries, remuneration and other financial benefits payable to other executives. External experts and market analyses are employed whenever necessary. The Board of Directors decides on the salary, remuneration and other financial benefits payable to the CEO. The Board of Directors decides on the salaries, remuneration and other financial benefits payable to other executives on the basis of the CEO’s proposal.
Digia’s 2016 Annual General Meeting authorised the Board of Directors to decide on a share issue with or without consideration, and also on the granting of special rights (as specified in the Companies Act) for the purpose of, among other things, implementing the company’s share-based incentive scheme. This authorisation is valid for 18 months from the issue date of the authorisation, or until 16 September 2017; Digia’s Board of Directors did not use its authorisation during 2016.
Digia has an agreement with Evli Awards Management Ltd for the coordination of the company's share-based incentive schemes, their associated share management, and the payment of incentives to individuals in accordance with the terms and conditions of the schemes. The share-based incentives paid to the CEO and other executives during the 2016 financial year were paid by Evli Awards Management Ltd in accordance with the aforementioned agreement, using Digia shares that were managed by Evli and acquired (and financed) by Digia for use in incentive schemes for the company’s key personnel.
B) Key remuneration principles
Board remuneration
The 2016 Annual General Meeting decided to pay monthly remuneration of EUR 2,500 to Board members, EUR 3,500 to the Vice Chair and EUR 5,500 to the Chair for their work on the Board. All Board members also receive EUR 500 in fees per Board or Committee meeting. The Shareholders’ Meeting also decided that standard and reasonable costs resulting from Board work would be reimbursed against invoice.
The company does not grant stock options or share-based remuneration for work on the Board.
CEO’s remuneration
Juha Varelius
Juha Varelius was Digia’s CEO until 30 April 2016. Varelius's remuneration package comprised a monthly salary (in accordance with his service contract), a bonus payable on the attainment of set targets, and potential share bonuses payable to the CEO in accordance with the approved share-based incentive scheme.
In addition to his monthly salary, the CEO was entitled to a bonus in accordance with the bonus schemes approved for the Domestic and Qt segments.
- Under the Domestic bonus scheme, the CEO is paid an annual bonus equivalent to 1.5 times his monthly base salary upon the attainment of annual targets tied to net sales and operating profit budgets set by the Board of Directors. 70 per cent of this bonus is tied to the net sales targets and 30 per cent to operating profit targets. If these targets are exceeded, the bonus will increase to a maximum amount equivalent to 4.5 times his monthly base salary. The maximum bonus is payable if the net sales target exceeds by at least 8.2 per cent and the operating profit target by at least 19.3 per cent. Both targets are evaluated biannually, independently and irrespective of each other. However, if operating profit falls below 70.2 per cent of the set target, no bonus is paid, irrespective of the net sales outcome. CEO Varelius was eligible for a bonus under the Domestic bonus scheme while he was CEO of Digia Plc, that is, before he became CEO of Qt Group Plc when the demerger of Qt from Digia came into effect.
- Under the bonus scheme for the Qt segment, Qt’s net sales growth was the earnings criterion for the bonus payable to the CEO. If this net sales target is achieved, the CEO is paid a bonus equivalent to 40 per cent of his annual base salary. If the target is exceeded, the bonus is increased so that half of each euro in excess of the net sales target is used to pay bonuses (including social security expenses) for the CEO and other personnel in the Qt segment. The maximum bonus for the CEO under the Qt bonus scheme is 120 per cent of his annual base salary. No bonus is paid if the Qt segment’s operating profit fell more than EUR 1 million short of the operating profit budget. The bonus criteria is assessed and any bonuses due are paid biannually. While CEO Juha Varelius was still eligible for the Domestic segment bonus scheme, he was also paid 50 per cent of the aforementioned bonuses under the Qt bonus scheme.
The share-based incentive schemes for the company’s top management were decided at a meeting of the Board of Directors on 12 March 2015, as authorised by the AGM. The Board decided on two separate bonus schemes: one for the Domestic segment and one for the Qt segment.
The Domestic scheme comprises three earning periods, which are the calendar years 2015–2017. The earnings criteria are the consolidated earnings per share and consolidated net sales, according to formulae settled annually by the Board. For each earnings period, the CEO and other key personnel covered by the scheme are entitled to a bonus equivalent to a maximum total of 115,000 Digia Plc shares. All bonuses under this scheme will be paid as a 50/50 combination of shares and cash. The cash portion of the bonus will primarily be used to cover taxes and other comparable costs arising from the scheme. The payment of bonuses from the share-based incentive schemes is subject to the employee in question being employed by the company on the payment date.
Under the Qt share-based incentive scheme in force at the beginning of the year, CEO Varelius was entitled to a minimum bonus equivalent to the value of 36,000 shares, if Digia’s share price were a minimum of EUR 4.50 at the end of the earning period in spring 2018. This bonus will increase in line with the share price: a maximum bonus equivalent to the value of 180,000 shares were payable if Digia’s share price reached at least EUR 8.50. However, the said Qt share-based incentive scheme terminated in accordance with its terms and conditions when Digia's planned demerger took effect in 1 May 2016. Consequently, the scheme’s earnings period also expired prematurely and the bonuses payable to CEO Varelius were evaluated on the basis of Digia’s average trade-weighted share price over a period of two weeks preceding the demerger. The share bonus was paid wholly in cash within one month of the date of demerger.
The share bonus paid to the CEO therefore involved no vesting periods limiting the sale of shares.
Timo Levoranta
Timo Levoranta has been Digia’s CEO as of 1 May 2016. Levoranta's remuneration package comprises a monthly salary (in accordance with his service contract), a bonus payable on the attainment of set targets, and potential share bonuses payable to the CEO in accordance with approved share-based incentive schemes.
- In addition to his monthly salary, CEO Levoranta is entitled to a bonus in accordance with the approved bonus scheme. On the basis of the bonus scheme, the CEO will be paid an annual bonus equivalent to 3 times his monthly base salary upon the attainment of annual targets tied to net sales and operating profit budgets set by the Board of Directors. 70 per cent of this bonus is tied to the net sales targets and 30 per cent to operating profit targets. Upon exceeding the said targets, the bonus shall increase up to a maximum amount equal to nine months base salary. Maximun bonus shall become payable if the net sales target is exceeded by a minimum of 8.2% and the profit target is exceeded by a minimum of 19.3%. Both targets are evaluated biannually independently, irrespective of each other, provided however that in the event the profit remains below 70.2% of the set target, no bonus shall be paid, irrespective of the net sales outcome.
- The Domestic scheme established by Digia Plc’s Board on 12 Mach 2015 comprises three earning periods, which are the calendar years 2015–2017. The earnings criteria are the consolidated earnings per share and consolidated net sales, according to formulae settled annually by the Board. For each earnings period, the CEO and other key personnel covered by the scheme are entitled to a bonus equivalent to a maximum total of 115,000 Digia Plc shares. All bonuses under this scheme will be paid as a 50/50 combination of shares and cash. The cash portion of the bonus will primarily be used to cover taxes and other comparable costs arising from the scheme. The payment of bonuses from the share-based incentive schemes is subject to the employee in question being employed by the company on the payment date. A maximum total of 112,499 shares have been granted as share bonuses from the scheme during the financial period.
The company may terminate the CEO’s service contract with six months' notice. Upon such termination, the CEO will receive remuneration for the notice period and severance pay equalling six months’ regular monthly salary. The CEO's retirement age is as stipulated by law, and the CEO is not covered by any separate pension agreements with the company.
Management incentives
On 31 December 2016, Digia’s top management consisted of ten people: the CEO, CFO, General Counsel, Commercial Director, CTO, and five other SVPs/VPs. You can read more about top management on the company’s website: www.digia.com/en/investors/governance/ceo-and-management.
The total remuneration package for these executives comprises a monthly salary and a bonus payable on the attainment of set targets. The earnings criteria and terms and conditions governing the bonus for members of Digia’s Management Team are the same as those governing the bonus for the CEO, except that the maximum annual bonus for Management Team members is equivalent to six (6) months' base salary. Top management is also covered by the Domestic segment’s share-based incentive scheme which is described above.
The retirement age of all executives is as stipulated by law, and no one has a supplementary pension agreement with the company.
C) Remuneration report
Board remuneration
The following remuneration were paid to members of Digia’s Board of Directors for Board and Committee work during the 2016 financial year:
| EUR |
2016 |
| Martti Ala-Härkönen |
31,750 |
| Päivi Hokkanen |
41,000 |
| Robert Ingman |
53,500 |
| Pertti Kyttälä |
76,500 |
| Seppo Ruotsalainen |
40,000 |
|
Leena Saarinen*
|
12,500 |
| Tommi Uhari |
11,500 |
| Kai Öistämö* |
11,500 |
| Total |
278,250 |
| * Board member until 16 March 2016 |
|
CEO’s remuneration
The CEO was paid the following as salary and other benefits during the 2016 financial year:
Juha Varelius, until 30 April 2016
| EUR |
2016 |
| Salary (including fringe benefits) |
92,784 |
| Bonuses |
66,629 |
| Share-based incentive |
138,946 |
| Monetary bonus from shares |
138,953 |
| Total |
437,312 |
Timo Levoranta, as of 1 May 2016
| EUR |
2016 |
| Salary (including fringe benefits) |
251,347 |
| Bonuses |
35,095 |
| Share-based incentive |
0 |
| Monetary bonus from shares |
0 |
| Total |
286,442 |
Management incentives
Other executives were paid the following as salary and other benefits during the 2016 financial year:
| EUR |
2016 |
| Salary (including fringe benefits) |
881,777 |
| Bonuses |
218,263 |
| Share-based incentive |
124,047 |
| Monetary bonus from shares |
200,623 |
| Total |
1,424,710 |
The management group included on 31 December 2016 the following members:
- Samuli Aho, Vice President, Management Team Member since 1 May 2016
- Tommi Flink, Vice President, Management Team Member since 1 May 2016
- Tuula Haataja, CFO, Management Team Member since 19 August 2013
- Juhana Juppo, CTO, Management Team Member since 19 September 2016
- Mika Kervinen, General Counsel, Management Team Member since 1 May 2016
- Tom Puusola, Senior Vice President, Management Team Member since 1 January 2012
- Marko Saarinen, Senior Vice President, Management Team Member since 1 July 2016
- Erkki Talvela, Commercial Director, Management Team Member since 1 May 2016
- Teemu Virtanen, Vice President, Management Team Member since 1 May 2016
Auditor and auditor’s fees
Digia has one official auditor, who must be an Authorized Public Accountant. The auditor is elected until further notice.
The Annual General Meeting elects the auditor and decides on their fees.
KPMG Oy Ab, a firm of Authorised Public Accountants, is the Group’s auditor. Virpi Halonen, Authorised Public Accountant, has been chief auditor since 12 March 2015.
2016 Auditor's fees
| EUR 1,000 |
2016 |
| Audit |
95 |
| Other statutory assignments |
- |
| Tax counselling |
- |
| Other services |
108 |
| Total |
203 |
