Vapo Oy’s name changed to Neova Oy May 6, 2021. The Business ID remains unchanged. Read more

 

Remuneration of Senior Management

Neova Group Remuneration Report 2020

Neova’s principles for the remuneration of the company’s governing bodies, i.e. the Supervisory Board, the Board of Directors, and the CEO, are defined in the remuneration policy for governing bodies (the “Remuneration Policy”). This report presents the remuneration of the Supervisory Board, the Board of Directors, and the CEO. In addition, this report presents the remuneration terms of other management. This report has been prepared based on the Finnish Corporate Governance Code 2020 (the “Code”) issued by the Securities Markets Association and, the Prime Minister’s office’s guidelines for state owned companies.

Overview of five-year development

The most significant change in the operational environment of the Neova Group during the last five years has been the sharp decline of the energy peat sales. Energy peat sales has been the most profitable business of the group. In 2016 the Group sold appr. 10 TWh energy peat compared to appr. 6 TWh in 2020. To compensate for the effects of declining revenues coming from energy peat, the group has invested more than 100 million euro to businesses outside the energy peat industry. The biggest investments have been targeted to the international substrate business and to activated carbon production. At the same time the group has improved its operational efficiency by renewing its organization and by many operational efficiency programs. In addition, it has got significant revenues (more than 30 million euro) from land sales. Due to the sharp decline of energy peat demand the group was forced to do significant write-offs (altogether more than 140 million euro) in its energy assets in 2019 and 2020. These non-recurring write-offs have not impacted comparable EBITDA which has remained solid and annually above 74 million euro during 2018-2020 in spite of energy peat rapid decline

Remuneration of the Board of Directors has remained on the same level during the past five years. Variance in annual remuneration level is based on the number of Board of Directors’ meetings or committee meetings during each year.

CEO’s remuneration consists of fixed annual salary including fringe benefits and short term and long-term incentive programs (STI and LTI) and pension plan. Fixed annual salary was increased in 2019, no increases have been made in 2020. Annual variance in remuneration is mainly due to outcome of short, or long-term incentive programs.

Development of remuneration of Neova Group personnel over the past five years has been counted as average headcounts and salaries of all operating countries. Salary market development is annually benchmarked in all countries. Overall development of basic salary mainly follows the development of country level market salaries and is compliant with Neova Group Compensation Policy and existing collective bargaining agreements, which are applied within Neova Group. Part of the variance in development between years comes from variable pay, such as short term and long-term incentives.

Decision-making procedure concerning remuneration

Neova Oy’s Annual General Meeting appoints the members of the Supervisory Board and the Board of Directors and their compensation annually.

Neova’s Board of Directors decides on the basic salary and other benefits of the CEO, which shall be in line with the Remuneration Policy of the company.

Neova’s Board of Directors also decides on the basic salary and other benefits of the Group Management Team as well as their short-term and long-term incentive schemes based on a proposal issued by the Board’s Personnel Committee.

Neova’s Board of Directors approves the Remuneration Policy that defines key remuneration principles, among other things. The Remuneration Policy is subject to advisory vote by the Annual General Meeting.

Key remuneration principles and fees paid to the members of the Supervisory Board and Board of Directors

The Supervisory Board, Members and fees paid in 2020

The fees paid to the members of the Supervisory Board are paid entirely in cash. The term of the members ends at the conclusion of the next  Annual General Meeting. The members of Neova’s Supervisory Board are not included in share-based incentive schemes and they are not in an employment relationship with Neova.

The Chairman of the Supervisory Board is paid a meeting fee of EUR 800, the Vice Chairman EUR 600, and the other members EUR 500 per meeting. No changes to the fees have been made during 2020.

The Supervisory Board

The Board of Directors, Members and fees paid in 2020

The fees paid to the members of the Board of Directors are paid entirely in cash. The term of the members ends at the conclusion of the next Annual General Meeting. The members of Neova’s Board of Directors are not included in any share-based incentive schemes and they are not in an employment relationship with Neova.

The Chairman of the Board of Directors is paid EUR 2,750, the Vice Chairman EUR 1,900, and the other members EUR 1,550 per month. A meeting fee of EUR 500 is paid for both Board and Board committee meetings. No changes to the fees have been made during 2020. Members of the board of directors of the subsidiaries employed by Neova are not paid separately for their membership.


The Board of Directors

Key remuneration principles of CEO and other management

In accordance with the Remuneration Policy approved by the Board of Directors dealt with at the Annual General Meeting, the fixed salary of the CEO and the members of other management is defined as a total monthly salary that includes fringe benefits. They are also included in short-term and long-term incentive programs.

A fixed monthly salary refers to an individual’s total monthly salary determined based on the level of competence required for the position as well as the individual’s experience and performance.

The Group CEO and other management may be eligible for a car benefit, mobile phone benefit and medical insurance as part of their total remuneration.

Neova’s Board of Directors decides annually or within any other timeline as may be the case for any given program on the performance indicators and targets for the short-term and long-term incentive schemes of the CEO, other management and any other individual or unit as may be relevant. They are aimed at supporting the achievement of the company’s strategic targets, including sustainability.

The incentive bonuses are paid in cash in accordance with the payment schedule of the incentive program in question. The bonuses paid under the various incentive schemes cannot under any circumstances exceed 80% of the fixed annual salary. Based on a proposal by the CEO, the Board of Directors decides on the achievement of the targets set relative to the performance indicators and the amount of remuneration.

Short-term variable pay

The CEO’s and other management’s short-term variable pay is based on the possibility of earning an annual incentive bonus. The amount of incentive pay depends on the achievement of the financial and operational targets set at the beginning of the financial year. Neova Group’s senior management is divided into two incentive pay groups that determine the maximum incentive pay percentage for each individual. The incentive pay group is determined based on the competence requirements of the position and its impact on the Group’s business.

At least 70% of the incentive pay is based on financial targets and the remainder on operational targets and sustainability. The payment of incentive bonuses is also subject to the achievement of a certain minimum level in terms of the financial targets.

The maximum incentive pay corresponds to 40% of the annual salary for the CEO of Neova Group and the director of the Grow&Care division and 30% of the annual salary for the other members of other management.

Long-term variable pay

The CEO’s and other management’s long-term incentive scheme currently in force is a five-year plan 2019-2023, which consists of four two-year earnings periods (2019-2020, 2020-2021, 2021-2022, 2022-2023) The incentive scheme provides the participants with the opportunity to earn a monetary bonus for achieving earning criteria set separately for each earning period by the Board of Directors. The Board decides on the earning criteria and targets for each earning period. Targets consist of financial and other strategic targets, which includes sustainability target. The Board sets a starting level, target level and maximum level for the target for each earning criteria.

The maximum incentive pay corresponds to 40% of the annual salary for the CEO of Neova Group and the director of the Grow&Care division and 30% of the fixed annual salary for the other members of other management.

Pension plans

The Group CEO and the other management are covered by a pension scheme pursuant to the Employees’ Pensions Act. In addition, those members of other management whose managerial employment agreement entered into effect before 23 November 2017 are entitled to a defined contribution collective supplementary pension insurance to which the employer contributes an amount equivalent to 10% of their fixed annual salary (12 x monthly salary) every year. The company has an agreement with a pension insurance company on said supplementary pension rights. The supplementary pension program for senior management was closed on 23 November 2017. Members of other management appointed after the aforementioned date will no longer have the right to a supplementary pension as part of their contract terms.

Terms and compensation for termination of employment

The contractual period of notice of the Group’s CEO is six months. In the event that the contract is terminated by the company, the CEO shall have the right to a lump sum compensation for termination, corresponding to the CEO’s fixed monthly salary for six months.

If the CEO resigns, the period of notice is six months. Irrespective of the aforementioned provisions, the CEO’s contract shall be terminated without separate notice at the end of the month in which the CEO reaches the lower limit for old-age pension stipulated by the Employees’ Pensions Act. The current lower limit is 65 years. The period of notice for the other members of the Group Management Team is three months. In the event that their contract is terminated by the company, the members of the Group Management Team shall have the right to a lump sum compensation for termination, corresponding to their total salary for three months. For contracts that entered into effect before 2013, the compensation for termination of members of the Group Management Team corresponds to nine months’ fixed monthly salary.

Options and other share-based incentive schemes

The company does not have option plans or other share-based incentive schemes.

Compensation of CEO in 2020

The CEO’s fixed monthly salary including fringe benefits and CO2 compensation of leased car is EUR 30,100. 

The contract includes a short term incentive bonus, which may not exceed 40% of the annual salary, linked to annual targets set by the Board of Directors. In 2020 CEO received short term incentive payment equaling to 22,8% of full year’s fixed annual salary (excluding EUR 1,200 CO2 compensation) based on the previous financial year’s achievement.

The CEO may furthermore receive an incentive bonus for reaching long-term targets. The bonus is based on a five-year plan for the years 2019-2023, which consists of four (4) two-year earnings periods. The Board of Directors decides on the earnings criteria and targets for each earnings period. In 2020 CEO was paid the last payouts of FY2017-FY2018 Neova Group LTI programs achievement, equaling to 15,4% of the fixed annual salary (excluding EUR 1,200 CO2 compensation).

The CEO is entitled to statutory pension benefits as well as a defined contribution group pension scheme for senior management. The amount paid into the CEO’s defined contribution pension plan corresponds to 10% of fixed annual salary (12 x monthly salary).

Remuneration of Neova Group Management Team (excl. CEO) 2020

Decision-making procedure concerning remuneration of Group Management Team

Neova’s Board of Directors decides on the basic salary and other benefits of the Group Management Team (other management) as well as their short-term and long-term incentive schemes based on a proposal issued by the Board’s Personnel Committee.

Neova’s Board of Directors approves the Remuneration Policy that defines key remuneration principles, among other things. The Remuneration Policy is subject to advisory vote by the Annual General Meeting.

Key remuneration principles

The fixed salary of other management is defined as a total monthly salary that includes fringe benefits. They are also included in short-term and long-term incentive programs.

A fixed monthly salary refers to an individual’s total monthly salary determined based on the level of competence required for the position as well as the individual’s experience and performance.

Other management may be eligible for a car benefit, mobile phone benefit and medical insurance as part of their total remuneration.

Neova’s Board of Directors decides annually or within any other timeline as may be the case for any given program on the performance indicators and targets for the short-term and long-term incentive schemes of other management as may be relevant. They are aimed at supporting the achievement of the company’s strategic targets, including sustainability.

The incentive bonuses are paid in cash in accordance with the payment schedule of the incentive program in question. The bonuses paid under the various incentive schemes cannot under any circumstances exceed 80% of the fixed annual salary. Based on a proposal by the CEO, the Board of Directors decides on the achievement of the targets set relative to the performance indicators and the amount of remuneration.

Short-term variable pay

Short-term variable pay is based on the possibility of earning an annual incentive bonus. The amount of incentive pay depends on the achievement of the financial and operational targets set at the beginning of the financial year.

At least 70% of the incentive pay is based on financial targets, such as EBITDA, and business related financial targets, and the remainder on operational targets and sustainability. Focus on Sustainability target in 2020 was in safety. The payment of incentive bonuses is also subject to the achievement of a certain minimum level in terms of the financial tar-gets, which was exceeded in 2020.

The maximum incentive pay corresponds to 40% of the annual salary for the director of the Grow&Care division and 30% of the annual salary for the other members of other management. In 2020 average achievement of STI targets for other management was 19.2% of annual fixed salary.

Long-term variable pay

Long-term incentive scheme currently in force is a five-year plan 2019-2023, which consists of four two-year earnings periods (2019-2020, 2020-2021, 2021-2022, 2022-2023). The incentive scheme provides the participants with the opportunity to earn a monetary bonus for achieving earning criteria set separately for each earning period by the Board of Directors. The Board decides on the earning criteria and targets for each earning period. Targets consist of financial and other strategic targets, which includes a sustainability target. The Board sets a starting level, target level and maximum level for the target for each earning criteria.

The maximum incentive pay corresponds to 40% of the annual salary for the director of the Grow&Care division and 30% of the annual salary for the other members of other management.

In 2020 those members of other management, who were included in the FY2017-FY2018 Neova Group LTI programs, were paid the last payouts of the respective programs’ achievement, equaling to 15.4% of the fixed annual salary.

The first tranche, 2019-2020, of the currently ongoing LTI program 2019-2023 ended at the end of December 2020. Average achievement of those eligible for respective earnings period in other management was 18% of the annual fixed salary.

Pension plans

Other management is covered by a pension scheme pursuant to the Employees’ Pensions Act. In addition, those members of other management whose managerial employment agreement entered into effect before 23 November 2017 are entitled to a defined contribution collective supplementary pension insurance to which the employer contributes an amount equivalent to 10% of their total annual salary (12 x monthly fixed salary) every year. The company has an agreement with a pension insurance company on said supplementary pension rights. The supplementary pension program for senior management was closed on 23 November 2017. Members of other management appointed after the aforementioned date will no longer have the right to a supplementary pension as part of their contract terms.

Terms and compensation for termination of employment

The period of notice for other management is three months. In the event that their contract is terminated by the company, the members of other management shall have the right to a lump sum compensation for termination, corresponding to their fixed salary for three months. For contracts that entered into effect before 2013, the compensation for termination of members of other management corresponds to nine months’ fixed salary.

 

 
 

Follow us

LinkedIn Facebook Instagram Twitter