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Main principles of remuneration

Stora Enso remuneration principles – general overview
Stora Enso aims to provide a level of remuneration that motivates, encourages, attracts and retains employees of the highest calibre. To maximise the effectiveness of the remuneration policy, careful consideration will be given to aligning the remuneration package with shareholder interests and best market practice.

A fundamental element in the remuneration principles is the concept of pay-for-performance, and an important aspect of Stora Enso’s approach to remuneration is to look at the total remuneration provided to employees. Stora Enso’s total remuneration mix consists of:
• annual fixed salary
• variable pay components as short-term incentives (cash) and longterm incentives (shares when applicable)
• long-term employee benefits (pension, medical and health benefits)
• other benefits (car, housing, etc. when applicable)
 
Regular external benchmarking is crucial to ensure that compensation levels are competitive with the external marketplace. The marketplace is defined as those peer companies with whom Stora Enso competes for recruiting talents and retention of current employees for similar positions. The market will vary depending on functional area and level of the positions concerned.
 
Compensation Review is an annual process with the aim to ensure that Stora Enso employees are being rewarded in accordance with our Remuneration Policy and local regulations, such as labour laws and collective agreements.
 
The Group Leadership Team annually reviews the performance and potential ratings, as well as the succession planning of its top management in order to secure global principles with local applications.
Board member remuneration principles
Remuneration of the Board of Directors is decided annually by the shareholders at the AGM. The AGM in 2018 resolved in accordance with the proposal of the Shareholders' Nomination Board that the members of the Board of Directors be paid the following annual remuneration for their term of office expiring at the end of the AGM 2019

• for the Chairman of the Board of Directors EUR 175 000
• for the Vice Chairman of the Board of Directors EUR 103 000, and
• for other members of the Board of Directors EUR 72 000 each.

The Board members shall use approximately 40% of their annual Board member remuneration to purchase Stora Enso’s R shares from the public market and the purchases shall be carried out during the two weeks following the AGM. The Company has no formal policy requirements for the Board members to retain shares received as remuneration. In addition, the AGM decided that the following annual remuneration be paid to the members of the Board Committees:

• for the Chairman of the Financial and Audit Committee EUR 20 600, and
• for the members of the Financial and Audit Committee EUR 14 400 each,
• for the Chairman of the Remuneration Committee EUR 10 300, and
• for the members of the Remuneration Committee EUR 6 200 each,
• for the Chairman of the Sustainability and Ethics Committee EUR 10 300, and
• for the members of the Sustainability and Ethics Committee EUR 6 200 each.
CEO remuneration principles
The CEO has been employed since 1 August 2012 and assumed the position as CEO on 1 August 2014. He has a notice period of six months with a severance payment of twelve months salary on termination by the company but with no contractual payments on any change of control. The CEO's benefits include pension provisions. The CEO’s pension plan consists of collectively agreed pension plan in Sweden (ITP2) and a defined contribution (DC) top up pension plan. Contributions to the DC plan in the interval 20–30 Income Base Amounts (IBA; one IBA was 61 500 SEK in 2017) is 23%, contributions above 30 IBA is 35% for the salary the CEO had prior to assuming this position and 39% on the salary increase amount received when assuming the position as CEO. The retirement age is sixty-five years. 
Short Term Incentive (STI) programme for CEO
The CEO is entitled to a STI programme decided by the Board each year giving a maximum of 75% of annual fixed salary. The STI for 2016 and 2017 was based 70% on financial measures and 30% on Individual Key Targets.
Long Term Incentive (LTI) programmes for CEO
The CEO participates in 2015, 2016 and 2017 share based LTI programmes. The programmes have three year targets and vest in one portion after three years. Three quarters (75%) of the opportunity is in Performance Shares, where shares will vest in accordance with performance criteria proposed by the Remuneration Committee and approved by the Board of Directors. One quarter (25%) of the opportunity is in Restricted Shares, for which vesting is only subject to continued employment.

GLT remuneration principles

GLT members in Stora Enso receive a monthly salary, which in addition to a salary payment includes customary fringe benefits, such as mobile phones and cars. GLT members further have the possibility to receive yearly awards in the Company’s short term and long term incentive programmes for management. In accordance with their respective pension arrangements, GLT members may retire at sixty-five years of age with pensions consistent with local practices in their respective home countries. Contracts of employment provide for notice of six months prior to termination with severance compensation of twelve months basic salary if the termination is at the Company’s request.
Short Term Incentive (STI) programmes for management
GLT members have STI programmes with up to a maximum 40% or 50% of their annual fixed salary, payable the year after the performance period. 70% of the STI for 2016 and 2017 was based on financial measures and 30% on Individual Key Targets. The financial performance metrics in the STI programme are EBITDA and Working Capital Ratio. The Individual Targets are based on a balanced scorecard approach within the categories of Customer, People, Sustainability and Special Projects.

Long Term Incentive (LTI) programmes for management
Since 2014, the LTI programmes have had three-year targets and vest in one portion after three years. The absolute maximum vesting level is 100% of the number of shares granted. Three quarters (75%) of the opportunity under the 2017 programme is in Performance Shares, where the shares are vested in accordance with performance criteria proposed by the Remuneration Committee and approved by the Board of Directors. One quarter (25%) of the opportunity under the 2017 programme is in Restricted Shares, for which vesting is only subject to continued employment. The financial success metric in the Performance Share programme is 3-year EVA (Economic Value Added) for the Stora Enso group.
 
CEO remuneration 
​Component
​Annual SalaryEUR 913 000 in 2017
​Short-term incentive​The CEO is entitled to a STI programme decided by the Board each year giving a maximum of 75% of annual fixed salary.
​Long-term incentive​Outstanding LTI programmes include the yearly programmes of 2015, 2016 and 2017. The CEO has the potential to receive a maximum of 81 401 shares in the 2017 programmes that will be settled 2020.
​Other benefits

Benefits include mobile phone, car and insurance.

​Pension

Retirement age is 65. Pension plan consists of collectively agreed pension plan in Sweden (ITP2) and a defined contribution (DC) top up pension plan.

​Termination of assignment

Notice period of six months with a severance payment of twelve months salary on termination by the company but with

no contractual payments on any change of control.


 

GLT remuneration
​Component

Annual salary

GLT members receive a monthly salary. In total for all GLT members EUR 3 583 000 in 2017.​

Short-term incentive

​GLT members are eligible for STI with up to a maximum of 50% of their annual fixed salary, payable the year after the performance period.

Long-term incentive

​Outstanding LTI programmes include the yearly programmes of 2015, 2016 and 2017. The GLT members can potentially receive total grant of maximum 269 386 shares in the 2017 programmes that will be settled 2020.

Other benefits

Benefits include mobile phones, cars and insurances.

Pension

GLT members may retire at sixty-five years of age with pensions consistent with local practices in their respective home countries.

Termination of assignment

Contracts of employment provide for notice of six months prior to termination with severance compensation of twelve months’ basic salary if the termination is at the Company’s request.

 Share based compensation plan 2017.PNG