Compensation

Metsä Board’s remuneration principles

Metsä Board’s remuneration is based on the following main principles, which are applicable to the statutory governing bodies of the company as well as all those employed by Metsä Board:

Ensuring sustainable and responsible business operations 

Our remuneration supports the achievement of the company’s vision, strategic and operational goals as well as the goals of sustainable development. We encourage activities in line with the company’s values and interests – responsible profitability, reliability, renewal and cooperation.

Ensuring performance and profitable growth 

With remuneration, we encourage excellent performance and results in both short and long term. We remunerate our people for achieving and exceeding targets and for profitable growth and the increase of shareholder and stakeholder value.

Supporting competence development and renewal

With remuneration we support competence development and the commitment of talent. We encourage continuous improvement, renewal and the creation of conditions needed for future success. In addition to monetary remuneration, we develop personnel’s competencies and offer opportunities for career development. Our leadership is of a high quality and we encourage the personnel’s participation.

Consistency, competitiveness and transparency 

The remuneration is fair and based on clear principles and structures. We offer competitive overall remuneration. We communicate and report on remuneration transparently and according to requirements.

Decision-making process concerning remuneration

The General Meeting decides on the remuneration of the Board of Directors. The Board of Directors’ Nomination and HR Committee presents to the Annual General Meeting proposals on the Board of Directors’ remuneration, taking into account this policy, the company’s financial standing at the time as well as the level of remuneration in other comparable companies, among other things. When necessary, the committee consults the company’s majority shareholder, which exercises a controlling interest at the General Meeting with regard to Board remuneration.

The Board of Directors approves the salary and rewards of the CEO and the principles applicable to the remuneration of other members of the Corporate Management Team. The Board of Directors approves also the structure, target groups and principles of the company’s remuneration systems, as well as selects the performance indicators used and sets related target values. The Board of Directors’ Nomination and HR Committee assists the Board in matters related to the remuneration, terms of employment and rewarding of Management Team members and prepares Board decisions related to management remuneration. The CEO decides on the compensation of other Corporate Management Team members in cooperation with the Chair of the Board and in accordance with the principles approved and guidelines given by the Board.

Remuneration of the Board of Directors

Remuneration of the Board members consists of a fixed annual remuneration and a meeting fee for attending meetings of the Board and its committees. Further, an additional monthly compensation is paid to the Chair of the Audit Committee. The Board members are voluntarily TyEL-insured (Finnish statutory pension system) and travel expenses are compensated in accordance with the Metsä Board’s travel instructions.

The Annual General Meeting 2022 resolved to increase the annual remuneration for the members of the Board of Directors such that:

• the Chair is paid EUR 99,000
• the Vice Chair EUR 85,000
• ordinary members EUR 67,000

The Annual General Meeting resolved that approximately one half of the annual remuneration is paid in the company's B-series shares to be acquired from public trading between 1 and 30 April 2022 while the other half is paid in cash. The amount of the cash consideration corresponds to the estimated withholding tax. The transfer of the shares is restricted for a period of two years following receipt.

In addition, the Annual General Meeting resolved to keep the meeting fees unchanged at EUR 800 for each attended meeting of the Board of Directors and its Committees.

Further, the Annual General Meeting resolved that an additional monthly remuneration of EUR 900 is paid to the Chair of the Audit Committee.

Remuneration of the CEO

The Board of Directors appoints and discharges the CEO and decides on the CEO’s remuneration and the other terms and conditions of the CEO’s engagement based on the Board of Directors’ Nomination and HR Committee’s recommendations and within the framework of the Remuneration Policy.

By decision of the Board of Directors, the CEO is paid a fixed base salary, which is a compensation for the CEO’s responsibilities and is based on the requirements of the position, the CEO’s individual competence and performance as well as prevailing market practice. The monthly salary of CEO Mika Joukio is EUR 42,628 (April 2022). The monthly salary includes car and mobile phone benefits and an extended health, travel and accident insurance coverage.

A short and long-term reward can be paid to the CEO by decision of the Board of Directors. In 2022 the maximum level of remuneration available in the short-term incentive system is, accounting for Metsä Group’s EBIT multiplier, 75% of the fixed annual salary. The reward is based on Metsä Board’s operating result (50% weighting) and the strategic targets defined by the Board of Directors, including sustainability targets (50% weighting) as well as the realisation of Metsä Group’s EBIT multiplier. The potential reward shall be paid in March 2023.

The potential reward for the performance period 2020–2022 regarding the performance share plan 2020–2024 is based on the development of Metsä Board Group’s (50%) and Metsä Group’s (50%) return on capital employed (ROCE, %), as determined by the Board of Directors. The Board of Directors is entitled to reduce the rewards fully or partly if defined earnings or equity ratio criteria are not met, or if the reward should exceed the maximum reward limit defined for the CEO. On maximum level the reward potential of the CEO is 210% of the CEO’s annual base salary (the reward limit is 270% of the CEO’s annual base salary). The reward consists of a proportion to be paid in Metsä Board Corporation’s series B shares and a cash proportion. The cash proportion refers to an amount used to cover the taxes to be withheld from the reward. The proportion paid in shares refers to the net reward after the withholding of taxes and other expenses payable for the reward. The potential reward shall be paid in March 2023. The reward payment is followed by an approximately two-year restriction period, during which the CEO is not allowed to sell or otherwise transfer the shares received. Should the CEO’s service terminate during the performance or restriction period, the CEO shall principally lose the right to reward.

The Board can discharge the CEO without a specific reason. The CEO can also resign from his assignment. The mutual term of notice is six months. The Board may, however, decide to discharge the CEO without a period of notice. When the service contract of the CEO is terminated by the Board, the CEO is entitled to receive a severance pay equal to the CEO’s 12-month salary.

The CEO is covered by the Finnish Employees’ Pensions Act, which provides for a pension compensation based on service years and earnings. CEO Mika Joukio is also entitled to the supplementary defined benefit pension insurance, with a retirement age of 62. According to the supplementary pension insurance the maximum level of pension is 60% of the CEO’s total salary under the Employees’ Pensions Act, calculated on the basis of a five-year-period preceding the moment of retirement. In case the CEO’s service with the Company terminates before his retirement, the CEO is entitled to a free policy.

Remuneration of the CEO in 2022

In 2021 the maximum level of remuneration available in the short-term incentive system was, accounting for Metsä Group’s EBIT multiplier, 75% of the fixed annual salary. The reward was based on Metsä Board’s operating result (50% weighting) and the strategic targets defined by the Board of Directors, including sustainability targets (50% weighting) as well as the realisation of Metsä Group’s EBIT multiplier. The short-term incentive of EUR 327,155 based on performance in 2021 was paid to the CEO in March 2022.

The reward for the performance period 2019–2021 regarding the performance share plan 2017–2021 was based on the development of Metsä Board Group’s (50%) and Metsä Group’s (50%) return on capital employed (ROCE, %), as determined by the Board of Directors. Minimum levels had also been set for the operating result and equity ratio. The realisation of the performance period 2019–2021 was 70,0% based on which the CEO received 52,500 Metsä Board Corporation’s series B shares in March 2022. The long-term incentive paid to the CEO regarding the performance period 2019–2021 was EUR 954,226 in total. The amount of reward was limited. The reward of the CEO (including both shares and cash) can be 200% of the CEO’s annual base salary at the maximum. The reward payment is followed by an approximately two-year restriction period during which the CEO is not entitled to transfer or dispose of the shares received.

Remuneration of the CEO in 2021

The base salary, including fringe benefits, paid to the CEO in 2021 was EUR 518,981 in total.

In 2020 the maximum level of remuneration available in the short-term incentive system was, accounting for Metsä Group’s EBIT multiplier, 75% of the fixed annual salary. The reward was based on Metsä Board’s operating result (50% weighting) and the strategic goals defined by the Board of Directors (50% weighting) as well as the realisation of Metsä Group’s EBIT multiplier. The short-term incentive of EUR 135,341 based on performance in 2020 was paid to the CEO in March 2021.

The reward for the performance period 2018–2020 regarding the performance share plan 2017–2021 was based on the development of Metsä Board Group’s (50%) and Metsä Group’s (50%) return on capital employed (ROCE, %), as determined by the Board of Directors. Minimum levels had also been set for the operating result and equity ratio. The realisation of the performance period 2018–2020 was 59,0% based on which the CEO received 44,250 Metsä Board Corporation’s series B shares in March 2021. The long-term incentive paid to the CEO regarding the performance period 2018–2020 was EUR 874,336 in total. The amount of reward was limited. The reward of the CEO (including both shares and cash) can be 200% of the CEO’s annual base salary at the maximum. The reward payment is followed by an approximately two-year restriction period during which the CEO is not entitled to transfer or dispose of the shares received.

A total of EUR 7,902 of deferred long-term incentive for the performance period 2015–2017 was paid to the CEO in April 2021 in accordance with the terms and conditions of the performance share plan.

The CEO is covered by the supplementary defined benefit pension arrangement. In 2021 the payment of the supplementary defined benefit pension arrangement was EUR 402,967. In addition, the CEO was paid a special reward of EUR 30,000 in 2021 for a project related to the divestment of a 30% share in the Husum pulp mill to Norra Skog.

Remuneration of other Corporate Management Team

The CEO decides on the compensation of other Corporate Management Team members in cooperation with the Board Chair and in accordance with the principles approved and guidelines given by the Board.

A fixed base salary is paid to the other Corporate Management Team members. Base salary is a compensation for the executive’s responsibilities and is based on the requirements of the position, the executive’s individual competence and performance as well as prevailing market practice. Base salary may include car and mobile phone benefits and an extended health, travel and accident insurance coverage.

A short and long-term incentive can be paid to the other Corporate Management Team members by decision of the Board of Directors. In 2022 the maximum level of remuneration available in the short-term incentive system is, accounting for Metsä Group’s EBIT multiplier, 50% or 62,5% of the fixed annual salary. The reward is based on Metsä Board’s operating result (30% or 50% weighting) and the targets of the own responsibility area, including sustainability targets (50% or 70% weighting) as well as the realisation of Metsä Group’s EBIT multiplier. The potential reward shall be paid in March 2023.

The potential reward for the performance period 2020–2022 regarding the performance share plan 2020-2024 is based on the development of Metsä Board Group’s (50%) and Metsä Group’s (50%) return on capital employed (ROCE, %), as determined by the Board of Directors. The Board of Directors is entitled to reduce the rewards fully or partly if defined earnings or equity ratio criteria are not met, or if the reward should exceed the maximum reward limit defined for the each Corporate Management Team member individually. On maximum level the reward potential of other Corporate Management Team members is 100% of the executive’s annual base salary (the reward limit is 130% of the executive’s annual base salary). The reward consists of a proportion to be paid in Metsä Board Corporation’s series B shares and a cash proportion. The cash proportion refers to an amount used to cover the taxes to be withheld from the reward. The proportion paid in shares refers to the net reward after the withholding of taxes and other expenses payable for the reward. The potential reward shall be paid in March 2023. The reward payment is followed by an approximately two-year restriction period, during which other Corporate Management Team member is not allowed to sell or otherwise transfer the shares received. Should other Corporate Management Team member’s employment terminate during the performance or restriction period, the executive shall principally lose the right to reward.

The period of notice of other Corporate Management Team members is six months. Termination of employment due to reasons not attributable to the executive entitles members of the Corporate Management Team to receive, as a rule, severance pay equal to their six (6) month salary. Other Corporate Management Team members have no extraordinary pension arrangements which would deviate from applicable pension legislation.

Remuneration of other Corporate Management Team in 2022

In 2021 the maximum level of remuneration available in the short-term incentive system was, accounting for Metsä Group’s EBIT multiplier, 50% or 62,5% of the fixed annual salary. The reward was based on Metsä Board’s operating result (30% or 50% weighting) and the targets of the own responsibility area (50% or 70% weighting) as well as the realisation of Metsä Group’s EBIT multiplier. The short-term incentive of EUR 559,041 based on performance in 2021 was paid to the other Corporate Management Team members in March 2022.

The reward for the performance period 2019-2021 regarding the performance share plan 2017–2021 was based on the development of Metsä Board Group’s (50%) and Metsä Group’s (50%) return on capital employed (ROCE, %), as determined by the Board of Directors. Minimum levels had also been set for the operating result and equity ratio. The realisation of the performance period 2019-2021 was 70,0% based on which the members of the Corporate Management Team received 55,329 Metsä Board Corporation’s series B shares in March 2022. The long-term incentives paid to the other Corporate Management Team members regarding the performance period 2019–2021 were EUR 1,022,174 in total. The amount of reward was limited. The reward of other Corporate Management Team members (including both shares and cash) can be 100% of the executive’s annual base salary at the maximum. The reward payment is followed by an approximately two-year restriction period during which other Corporate Management Team member is not entitled to transfer or dispose of the shares received.

A total of EUR 96,730 of deferred long-term incentives for the performance period 2015–2017 were paid to one member of other Corporate Management Team in April 2022 in accordance with the terms and conditions of the performance share plan and the decision of the Board of Directors.

Remuneration of other Corporate Management Team in 2021 (in euros)

In 2020 the maximum level of remuneration available in the short-term incentive system was, accounting for Metsä Group’s EBIT multiplier, 50% or 62,5% of the fixed annual salary. The reward was based on Metsä Board’s operating result (30% or 50% weighting) and the targets of the own responsibility area (50% or 70% weighting) as well as the realisation of Metsä Group’s EBIT multiplier. The short-term incentive of EUR 202,052 based on performance in 2020 was paid to the other Corporate Management Team members in March 2021.

The reward for the performance period 2018–2020 regarding the performance share plan 2017–2021 was based on the development of Metsä Board Group’s (50%) and Metsä Group’s (50%) return on capital employed (ROCE, %), as determined by the Board of Directors. Minimum levels had also been set for the operating result and equity ratio. The realisation of the performance period 2018-2020 was 59,0% based on which the members of the Corporate Management Team received 47,645 Metsä Board Corporation’s series B shares in March 2021. The long-term incentives paid to the other Corporate Management Team members regarding the performance period 2018–2020 were EUR 953,396 in total. The amount of reward was limited. The reward of the other Corporate Management Team members (including both shares and cash) can be 100% of the executive’s annual base salary at the maximum. The reward payment is followed by an approximately two-year restriction period during which executives are not entitled to transfer or dispose of the shares received.

In addition to the CEO, one member of other Corporate Management Team was paid a special reward of EUR 30,000 in 2021 for a project related to the divestment of a 30% share in the Husum pulp mill to Norra Skog. Moreover, a total of EUR 208,595 of deferred long-term incentives for the performance period 2015–2017 were paid to one member of other Corporate Management Team in April 2021 in accordance with the terms and conditions of the performance share plan and the decision of the Board of Directors.

Long-term remuneration

Performance share plan 2017-2021

The Board of Directors resolved in January 2017 to continue the performance share plan for management. The purpose of the plan was to align the objectives of shareholders and executives in order to increase the value of Metsä Board, to commit the executives to perform the mutual strategy, and to offer them a competitive reward plan based on share ownership. The plan consisted of three performance periods, which were calendar years 2017–2019, 2018–2020 and 2019– 2021. At the beginning of each performance period, the Board decided on the performance criteria and defined performance targets. The potential reward from the plan for the performance periods was based on the development of Metsä Board Group’s (50%) and Metsä Group’s (50%) return on capital employed (ROCE, %), as determined by the Board of Directors. Minimum levels were further determined for operating result and equity ratio.

The reward was paid in the spring first following the end of the performance period. The amount of the reward was limited. If the reward exceeded the executive’s annual salary (or in case of the CEO, the CEO’s annual salary multiplied by two), the exceeding part was not paid. A performance period is followed by an approximately two-year restriction period during which an executive is not entitled to transfer or dispose of the shares received. If an executive terminates his/her employment or service contract during the restriction period, the executive is obliged to return the shares already earned. If the Company terminates the employment or service contract (other than due to reasons attributable to the executive) during the restriction period or the contract is agreed to be terminated, the executive may keep the shares subject to the transfer restriction and the said restriction discontinues.

The reward was paid in Metsä Board Corporation’s series B shares. On top the Company paid in money an amount covering the applicable withholding tax and related payments resulting from the reward. The plan covered Corporate Management Team members as well as other key employees of Metsä Board.

Performance share plan 2020-2024

The Board of Directors of Metsä Board has resolved in January 2020 to continue the performance share plan directed to group executives. The purpose of the plan is to align the objectives of the shareholders and executives in order to increase the value of Metsä Board, to commit the executives to perform the mutual strategy and to offer them a competitive reward plan based on share ownership. The plan 2020–2024 consists of three performance periods, which are calendar years 2020–2022, 2021–2023 and 2022–2024.

The Board of Directors determines the performance criteria and related target levels at the beginning of each performance period. Reaching the targets set for the performance criteria shall determine the proportion of the maximum reward payable to the executives. The potential rewards for the performance periods 2020–2022, 2021-2023 and 2022-2024 are based on the development of Metsä Board Group’s (50%) and Metsä Group’s (50%) return on capital employed (ROCE, %), as determined by the Board of Directors. The Board of Directors is entitled to reduce the rewards fully or partly if defined earnings or equity ratio criteria are not met, or if the reward should exceed the maximum reward limit defined for each executive individually. On maximum level the reward potential of the CEO is 210% of the CEO’s annual base salary and the reward potential of other Corporate Management Team members is 100% of executive’s annual base salary. In addition, the reward limit has been set and the reward of the CEO can be 270% of the CEO’s annual base salary at the maximum and the reward of other Corporate Management Team members 130% of their annual base salary at the maximum.

The reward consists of a proportion to be paid in Metsä Board Corporation’s series B shares and a cash proportion. The cash proportion refers to an amount used to cover the taxes to be withheld from the reward. The proportion paid in shares refers to the net reward after the withholding of taxes and other expenses payable for the reward. The potential reward shall be mainly paid in the spring following the end of the performance period. The performance period is followed by an approximately two-year restriction period, during which executives are not allowed to sell or otherwise transfer the shares received. Should an executive’s employment end during the performance or restriction period, the executive shall principally lose the right to reward.

The plan covers Corporate Management Team members as well as other key employees of Metsä Board.