Base salary and contract
The remuneration of the CEO consists of a base salary, benefits and an annually determined short-term incentive plan. In addition, the CEO participates in long-term incentives comprising performance share plans launched on a yearly basis.
The service contract of the CEO is valid until further notice. He is entitled to a severance payment of twelve (12) months, and the notice period is six (6) months for both parties. CEO Heikki Malinen has the right to retire at the age of 65. He participates in the Finnish TyEL pension system, and there is no supplementary pension plan at place.
Following the excellent results achieved since he took office, the CEO’s monthly gross base salary was raised by 16% to EUR 75,397 in April 2022, totaling EUR 900,322 including short-term benefits for the full year 2022. This reflects the market salary level for this type of responsibilities and this size of a company, and recognizes that the CEO performed well above expectations, bringing in record level results in 2021 and successfully de-risking the company.
|REMUNERATION OF THE CEO in 2022
|Due in 2023||Paid in 2022
||Paid in 2021|
|Base salary and benefits1)||N/A||900,322
|Long-term incentives2)||See long-term incentives tables below||0||0|
1) Excluding post-employment benefits.
2) Paid incentives are entered in the table on the year when they are paid. Usually, they relate to the performance in the previous year(s).
In 2022, the CEO’s short-term incentive earning opportunity remained unchanged at 50% of the annual gross base salary on a target level and 100% on a maximum level. The short-term incentive to be paid in 2023 reflects the achievement of the pre-defined targets for 2022: Group adjusted EBITDA, safety, and strategy implementation. Group adjusted EBITDA broke new record levels. Total Recordable Incident Frequency Rate (TRIFR) reached the ambitious target of 2.0, which is exceptional in this industry. The first phase of the strategy was successfully completed ahead of time, bringing significant improvement in commercial excellence, cost and capital discipline and lean and agile organization, as well as achieving both its financial targets, EUR 250 million EBITDA run-rate improvement and net debt to EBITDA ratio to below 3.0. Altogether, EUR 871,388 of short-term incentives will be paid to the CEO in spring 2023 for 2022, which is 95% of the maximum.
|CEO’S EARNING OPPORTUNITY AND PERFORMANCE MEASURES IN THE SHORT-TERM INCENTIVE PLANS in 2022|
|Earning opportunity in % of gross annual base salary1)||Payout, %||Payout, €|
|Performance measures in 2022||Weight||Achievement||Payout, %||Payout, €|
|Group Adjusted EBITDA in 2022||80%||Maximum||100%||733,800|
|Group safety: Total Recordable Incident
Frequency Rate = 2.0
|Strategy implementation: EUR 250 million EBITDA run-rate improvement and net debt to EBITDA ratio to below 3.0.||10%||Maximum||100%||91,725|
1) Prorated to the different salary levels during 2022, i.e., 3/12 * 819,000 + 9/12 * 950,000 = 917,250 €. The actual base salary paid during 2022 differs from this prorated annual base salary because of accrued holiday pay not yet paid.
The CEO’s long-term incentive earning opportunity is at most 150% of the annual gross base salary at the time of payment. In 2022, the CEO was not paid any long-term incentive, since the threshold level of the Performance Share Plan 2019–2021, return on operating
capital compared to the peers, was not met. However, for the Performance Share Plan 2020–2022, the same performance target was reached, and therefore, the executives participating in the plan will receive 100% of the shares granted at target level. For the CEO, that means 130,451 gross shares.
|Share-based remuneration of the CEO
|Due in 2023||Paid in 2022||Paid in 2021|
|Long-term incentive plan||2020-2022||2019–2021||2018–2020|
|Maximum number of shares granted (gross)||195,677||97,000||43,000|
|Grant date||May 15, 2020||May 15, 2020||May 15, 2020|
|Number of shares earned (gross) 1)||130,451||0||0|
|Number of shares delivered||71,902||0||0|
|Share delivery date||February, 2023||–||–|
|Share price at delivery||Not known yet||–||–|
1) Paid incentives are entered in the table on the year when they are paid. Usually, they relate to the performance in the previous year(s).
|CEO’S EARNING OPPORTUNITY AND PERFORMANCE MEASURES IN THE LONG-TERM INCENTIVE PLANS|
|Earning opportunity||PSP 2020–2022||PSP 2021–2023||PSP 2022–2024|
|Grant date||May 15, 2020||March 15, 2021||March 15, 2022|
|Performance criteria||Return on operating capital compared to a peer group(Q4/2020–Q3/2022)||Return on capital employed(2023)||Return on capital employed,
|Performance criteria||–||–||CO2 emissions per ton of crude steel, 2024 SBTi target|
1) Expressed in percentage of annual gross base salary at the time of grant. In PSP 2020–2022, the levelswere prorated to time in position during the performance period: 32/36 months.
2) Number of gross shares at target level. The number of shares was determined using the share price at thetime of plan approval: EUR 2.66 for PSP 2020–2022, EUR 2.31 for PSP 2021–2023, and EUR 5.57 forPSP 2022–2024
Share ownership recommendation
The members of Outokumpu’s Leadership Team, including the CEO, are expected to own Outokumpu shares they receive in the company’s share-based incentive programs corresponding to at least the value of their annual gross base salary. Half (50%) of the net shares received from the share-based incentive programs must be used to fulfil that ownership recommendation.
|Shareholding of the CEO|
|Shareholding recommendation||100% of individual annual gross base salary||100% of individual annual gross base salary|
|Shares owned on December 31||45,459||45,459|
|Closing share price on December 31, €||4.73||5.50|
|Value of the shares on December 31, €||215,021||250,025|
|Value of the shares in % of annual base salary||23%||31%|