Remuneration Statement

The aim of Tieto’s remuneration principles is to attract and retain talent, motivate key people and align the goals of the company’s shareholders and executives in order to enhance the value of the company.

Rules on how the company shall compensate its employees are defined in Tieto’s HR Policy and related rules. The policy is globally applied to all Tieto entities and units to support the company’s strategy, objectives and values.

Remuneration of the Board of Directors is decided by the AGM based on a proposal by the SNB. The RC is responsible for planning the remuneration of the Leadership Team members and preparing the principles underlying the remuneration of Tieto personnel. The Board of Directors decides on the remuneration of the President and CEO and other members of the Leadership Team based on a proposal by the RC.

Remuneration of the Board

According to the decision of AGM 2016, the annual remuneration of the Board of Directors is the following:

  • EUR 83 000 to the Chairman,
  • EUR 52 500 to the Deputy Chairman and
  • EUR 34 500 to the ordinary members of the Board of Directors.

The same fee as to the Board Deputy Chairman will be paid to the Chairman of Board Committee unless the same individual is also the Chairman or Deputy Chairman of the Board. In addition, remuneration of EUR 800 is paid for each Board meeting and each permanent or temporary committee meeting.

Further, the AGM 2016 decided that 40% of the fixed annual remuneration will be paid in Tieto Corporation's shares purchased from the market. No restrictions have been set on Board members concerning how they may assign these shares, but the company recommends that Board members should retain ownership of all the shares they have received as remuneration for as long as they serve on Tieto’s Board.

In addition to the aforementioned share remuneration, the Board members do not belong to or are not compensated with other share-based arrangements, nor do the members have any pension plans at Tieto. Tieto executives or employees are not entitled to compensation for their Board positions or meeting attendance in the Group companies. None of the Board members, except the personnel representatives, have an employment relationship or service contract with Tieto.

 

 

Compensation of individual Board members and Board in 2016 4)
  Annual remuneration Meeting based, EUR
  EUR (60%)5) Shares (40%)6)  
Markku Pohjola (Board and RC Chairman) 49 280 1 391 13 600
Kurt Jofs (Deputy Chairman and ARC Chairman) 7) 31 167 880 14 400
Teuvo Salminen (ARC Chairman) 8) N/A N/A 1 600
Harri-Pekka Kaukonen 9) 20 488 578 11 200
Johanna Lamminen 9) 20 488 578 11 200
Eva Lindqvist 8) N/A N/A 1 600
Sari Pajari 20 488 578 13 600
Endre Rangnes 20 488 578 12 800
Jonas Synnergren 20 488 578 13 600
Lars Wollung 20 488 578 12 800
In total EUR 203 377 Shares 5 739 EUR 106 400
Board of Directors' shareholdings in Tieto 10)    
Name At 31 Dec 2016 At 31 Dec 2015
Markku Pohjola (Board and RC Chairman) 27 391 26 000
Kurt Jofs (Deputy Chairman, ARC Chairman)7) 12 445 11 565
Harri-Pekka Kaukonen 9) 578 N/A
Eva Lindqvist 8) N/A 4 185
Johanna Lamminen 9) 578 N/A
Sari Pajari 3 596 3 018
Endre Rangnes 1 853 1 275
Teuvo Salminen 8) N/A 10 345
Jonas Synnergren 3 596 3 018
Lars Wollung 1 219 641

Remuneration of the Leadership Team

Remuneration of the Leadership Team members consists of

  • base salary and benefits
  • short-term incentives: an annual bonus
  • long-term incentives, such as option or other share-based programmes and pension plans.
Short-term incentives

The purpose of the annual bonuses is to reward for company and individual performance. Tieto’s bonus system is based on company-level and individual measurable targets. Weighting of the reward factors for the President and CEO and other Leadership Team members is described in a separate table. The reward targets are set annually by the Board of Directors.

The bonus for the President and CEO is 50% and for other Leadership Team members 30% of the annual base salary when the performance is at expected level; the maximum bonus for the President and CEO is 100% and for the other Leadership Team members 60%. The amount of bonuses is decided by the Board of Directors after the financial statements have been prepared and the bonuses are then paid by the end of May.

Share-based long-term incentives

Tieto has had two types of share-based long-term incentive arrangements: the Long-Term Incentive Plans and option programmes.

The terms and conditions of all share-based plans are approved by the Board of Directors.

Long-Term Incentive Programme 2012-2014 covered the Leadership Team members and approximately 85 key employees. The first performance period began on 1 January 2012 and the final performance period ended on 31 December 2014. Individual performance periods are followed by a restriction period of two years for the executive management or one year for the other participants, during which the earned shares are not disposable.

Long-Term Incentive Plan (LTI) 2015-2017 covers Leadership Team members and approximately 130 key employees. The plan consists of Performance Shares and Restricted Shares. The performance period is three years from 1 January 2015 till 31 December 2017. If the set performance metrics and other requirements are met the shares are delivered to the participants in spring 2018.

Long-Term Incentive Plan (LTI) 2016-2018 covers Leadership Team members and approximately 120 key employees. The plan consists of Performance Shares and Restricted Shares. The performance period is three years from 1 January 2016 till 31 December 2018. If the set performance metrics and other requirements are met the shares are delivered to the participants in spring 2019.

The authorizations required by the Board to repurchase the company’s own shares and to issue shares shall be proposed to be approved at the AGM on an annual basis. In connection with authorizing the Board to issue shares, the AGM 2016 decided that no more than 700 000 shares, corresponding to less than 1% of all of the shares in the company, may be issued as part of share-based incentive programs. Key principles of Tieto’s share plans, such as the basis and size of rewards, are described on the company’s website at www.tieto.com/ Investors.

Tieto has not established new option plans since AGM 2009. The last option programme 2009 expired when the subscription period for the 2009C series ended on 31 March 2016.

Pension plans

Tieto operates a number of different pension plans in accordance with national requirements and practices. In addition to statutory pension plans, the Leadership Team members are provided with additional pension schemes.

Most of the additional schemes are classified as defined contribution plans.11) In contribution-based plans, the payments to the plans are recognized as expenses for the period to which they relate. After the payment of the contribution, the company has no further obligations in respect of such plans.

In the arrangements for most Finnish members of additional pension plans, annual payments to the plans managed by a pension insurance company amount to 15% or 23% of the participant's annual base salary. The accumulated pension, including return on capital investment, is paid to the participant during a period starting at the age of 60–70, as individually decided by the participant. The annual expenditure related to the pension plans of the President and CEO and CFO amounts to 23% of their annual base salary, while that of other Finnish Leadership Team members covered by the additional pension plans amounts to 15% of their annual base salary. The company provides Leadership Team members based outside Finland with individual pension plans according to local practices.

President and CEO 
Kimmo Alkio  
Salary EUR 600 000/year (EUR 50 000/month) including car benefit. Total EUR 600 000.
Benefits EUR 3 146
Bonus 2016 Not yet determined (EUR 299 894 paid in 2016 for performance in 2015).
Basis of bonus Target 50% of base salary based on the Group's external revenue, profit, TCV and strategy implementation when achievements meet the targets.
Maximum 100% of base salary based on the Group's external revenue, profit, TCV and strategy implementation when achievements exceed the targets.

Weighting of the reward factors
• Profit of the company 30%
• External revenue of the company 20%
• TCV 20%
• Strategy implementation 30%
Additional success-based incentive An additional success-based incentive can be paid to the President and CEO in 2020. The incentive is subject to Tieto reaching in 2019 challenging profitability targets (EBIT) set by the Board of Directors in accordance with the company’s renewed strategy and financial objectives.

The maximum gross number of shares to be earned is 50 000, however not exceeding EUR 3 million. The payable incentive includes Tieto’s shares and a cash proportion for covering taxes and tax-related costs arising from the reward.
Long-Term Incentive Programme 2012–2014 In spring 2015, a total of 12 742 shares were transferred as a reward from Performance Periods 2014 and 2012–2014 to the President and CEO. The shares are under transfer restriction according to the terms of the programme. Current value of the shares under lock-up amounts to EUR 330 273.12)
Share-Based Reward Plan In January 2017, a total of 4 256 shares were transferred based on the plan run until the end of  2016. The fair value of these shares amounted to EUR 110 316.13)
Long-Term Incentive Plan 2015-2017 Entitled to 20 000 Performance Shares if the target levels of the performance metrics are met, 40 000 shares at maximum. The performance period of the plan is 2015-2017. The fair value of these allocations amounts to EUR 451 008. 14)
Long-Term Incentive Plan 2016-2018 Entitled to 20 000 Performance Shares if the target levels of the performance metrics are met, 40 000 shares at maximum. The performance period of the plan is 2016-2018. The fair value of these allocations amounts to EUR 575 424.14)
Share ownership guideline The recommended minimum investment in the company’s shares corresponds to the executive's one-time annual gross base salary.
Expenditures related to share-based incentives EUR 350 661
Retirement age 63
Pension expenditure In 2016, EUR 283 741.

In addition to the statutory pension provision: a defined contribution pension plan where the expenditure is 23% of the annual base salary.15)
Period of notice If the agreement is terminated by Tieto, the period of notice is twelve months.

If the agreement is terminated by the President and CEO, the period of notice is six months.
Severance payment If the agreement is terminated by Tieto, the company shall pay a severance payment equivalent to the base salary and the short-term target incentive for six months in addition to the salary for the notice period.

If someone acquires ownership of over 50% of the company´s shares or the company is merged with another company as a merging company and if the agreement is terminated by either party within nine months after such acquisition or merger, the company shall pay a severance payment equivalent to the base salary and the short-term target incentive for six months and the monetary value of the maximum amount of shares granted to him in the most recent long-term incentive plan in addition to the salary for the notice period. Should the CEO stay in the company after an acquisition or a merge, he is entitled to the abovementioned outcome of the most recent long-term incentive plan after twelve months after such an acquisition or a merger.

If the agreement is terminated by the President and CEO, except in the event of the abovementioned over 50% takeover or merger, the severance payment shall not be paid.
 

Updated information on the shares and options held by the President and CEO is available on the company’s website at www.tieto.com/Investors under the insider register.

Remuneration of Leadership Team members

The table below summarizes the remuneration of the Leadership Team members.

Leadership Team (excluding the President and CEO)
Total salaries EUR 2 678 598
Total benefits EUR 97 936
Special payments EUR 0
Total bonuses 2016 Not yet determined (EUR 723 465 paid in 2016 for performance in 2015).
Basis of bonus The basis of the bonus as well as target and maximum amounts for bonuses vary between the Leadership Team members. The purpose of the bonus is to reward for company performance and individual performance.

These two form the overall performance evaluation (OPE). OPE for each LT member is confirmed by the Board.

CFO: in addition to individual performance measurement, the bonus is based on company performance, measured by the following factors
• Profit of the company
• External revenue
• Cash flow improvement

Other LT members: in addition to individual performance measurement, the bonus is based on
• company and/or
• own Industry Group- or Service Line-related
performance criteria (operative margin, external revenue and other operational targets)
Long-Term Incentive Programme 2012–2014 The reward to be paid to other members of the Leadership Team on the basis of the Long-Term Incentive Programme 2012–2014 at target corresponds to 30–40% of the annual gross salary and at maximum 60–80% of the annual gross salary.

A total of 2 744 shares were delivered in 2016 to LT members (excl. CEO) for Performance Periods 2014 and 2012-2014. The value of the total rewards paid in 2016 was EUR 159 179.

A total of 20 776 shares are under transfer restriction according to the terms of the programme. The current value of the shares under lock-up is EUR 538 514.16)
Share-Based Reward Plan In January 2017, a total of 10 760 shares were transferred to the Leadership Team members based on the plan run until the end of 2016. The fair value of these shares amounted to EUR 278 900.17)
Long-Term Incentive Plan 2015–2017 Leadership team members are entitled to 97 600 Performance Shares if the maximum levels of the performance metrics are met and 12 000 Restricted Shares. Performance period of the plan is 2015–2017. The fair value of these allocations is EUR 1 411 500.18)
Long-Term Incentive Plan 2016–2018 Leadership Team members are entitled to 94 000 Performance Shares if the maximum levels of the performance metrics are met and 10 000 Restricted Shares. The performance period of the plan is 2015–2017. The fair value of these allocations is EUR 1 611 446.18)
Expenditures related to share-based incentives (including option programmes) EUR 1 082 137
Share ownership guideline The recommended minimum investment in the company's shares corresponds to the executive's one-time annual gross base salary.
Retirement age According to applicable local regulations.
Pension expenditure In 2016, in total EUR 1 349 766.
CFO: In addition to the statutory pension provision: a defined contribution pension plan where the expenditure is 23% of the annual base salary. 19)
Most other Leadership Team members based in Finland with no earlier pension plans: In addition to the statutory pension provision, defined contribution pension plans where the expenditure is 15% of the annual base salary. 19)
The company provides Leadership Team members based outside Finland with individual pension plans according to local practices.
Severance payment Various terms, amounts corresponding to the periods of notice.
 
Shareholdings of the Leadership Team 20)
  Shares at 31 Dec 2016 Shares at 31 Dec 2015 Options at 31 Dec 2016 Options at 31 Dec 2015
Kimmo Alkio 28 715  39 403 0 0
Håkan Dahlström 3 042 1 000 0 0
Lasse Heinonen 15 778 13 278 0 2 500
Per Johanson 4 465 4 465 0 0
Ari Järvelä 4 956 4 956 0 0
Ari Karppinen 10 504 10 504 0 0
Satu Kiiskinen 3 398 3 398 0 0
Katariina Kravi 3 550 3 550 0 0
Tom Leskinen 100 N/A 0 N/A
Cristina Petrescu 702 N/A 0 N/A
         
The compensation of the whole Leadership Team in 2016 is also summarized in note 9 of the financial statements. The remuneration statement is available on the company’s website at www.tieto.com/Investors.

20) Corporations over which the CEO exercises control did not have shares nor share-based rights on 31 December 2016. Tieto has defined only the Board members and CEO as persons discharging managerial responsibilities. Hence, the company does not have information on the potential corporations of the rest of the Leadership Team.