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 for how the company shall compensate its employees are defined in Tieto's HR Policy. The policy is globally applied at 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 of Tieto 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 2014, the annual remuneration of the Board of Directors is the following:

  • EUR 72 000 to the Chairman,
  • EUR 48 000 to the Deputy Chairman and
  • EUR 31 500 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 a Board Committee unless the same individual is also the Chairman or Deputy Chairman of the Board. In addition, a remuneration of EUR 800 is paid for each Board meeting and for each permanent or temporary committee meeting.

Further, AGM 2014 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 the Board in 20141

  Annual remuneration Meeting based, EUR3
  EUR (60%)4 Shares (40%)5  
Markku Pohjola (Board and RC Chairman) 43 200 1 449 24 800
Kurt Jofs (Deputy Chairman) 28 800 966 23 200
Teuvo Salminen (ARC Chairman) 28 800 966 20 800
Eva Lindqvist 18 900 634 15 200
Sari Pajari 18 900 634 20 000
Risto Perttunen 18 900 634 20 000
Endre Rangnes 18 900 634 18 400
Ilkka Sihvo 2 N/A N/A 1 600
Jonas Synnergren 18 900 634 20 800
In total EUR 195 300 Shares 6 551 EUR 164 800

 

Board of Directors’ shareholdings in Tieto
Name At 31 Dec 2014 At 31 Dec 2013
Markku Pohjola (Board and RC Chairman) 23 949 22 500
Kurt Jofs (Deputy Chairman) 10 589 9 623
Teuvo Salminen (ARC Chairman) 9 369 8 403
Eva Lindqvist 3 544 2 910
Sari Pajari 2 377 1 743
Risto Perttunen 6 344 5 710
Endre Rangnes6 634 N/A
Jonas Synnergren 2 377 1 743

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 performance that surpasses expectations. 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 as well as other Leadership Team members is 30% of the annual base salary when the performance measures up to the expected level; the maximum bonus is 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 two types of share-based long-term incentive arrangements: the Long-Term Incentive Programme and option programmes.

The terms and conditions of the share-based plans are approved by the Board of Directors. Long-Term Incentive Programme 2012-2014 currently covers the Leadership Team members and approximately 105 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.

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. Key principles of Tieto's share plans, such as the basis and size of rewards, are described on the company's website (www.tieto.com/Investors).

Tieto has not established any new option plans since AGM 2009. The terms and conditions of option programmes (2009 A, 2009 B and 2009 C) were approved by the AGM and option allocations were approved by the Board of Directors with a view to rewarding individual performance. The current programmes cover the Leadership Team and around 150 employees. Further information about Tieto's option programmes is available on the company's website (www.tieto.com/Investors).

Pension plans

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

Most of the additional schemes are classified as defined contribution plans.7 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 participants 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.

7The exception is the scheme of one member who is covered by a fund-based pension system previously adopted by Tieto.

Remuneration of the President and CEO

The table below summarizes the remuneration and the main terms and conditions of the President and CEO's employment. 

President and CEO 
Kimmo Alkio  
Salary From January to March EUR 500 000/year (EUR 41 667/month) and from April to December EUR 550 000/year (EUR 45 833/month) including car benefit. Total EUR 537 500.
Additional success-based incentive Tieto paid in January 2015 to the President and CEO an additional success-based incentive. The incentive was based on reaching, by the end of 2014, the challenging targets set by the Board of Directors in accordance with the company’s strategic and financial objectives. The initial bonus was set at EUR 1 000 000. Based on the results, the Board of Directors approved a bonus of EUR 500 000, which consisted of 10 688 treasury shares and a cash payment.
Bonus 2014 Not yet determined (EUR 0 paid in 2014 for performance year 2013).
Basis of bonus Target 30% of base salary based on the Group's external revenue, profit, TCV and strategy implementation when achievements meet the targets
  Maximum 60% 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%
Options 2009 C option programme: right to subscribe for 30 000 shares.
 
  • In accordance with the director’s agreement, the options 2009 C allocated to the President and CEO had a transfer restriction until 2 January 2015.
• The fair value of the option rights is EUR 330 000.8
  Terms and conditions of the option programmes are available on the company’s website (www.tieto.com/Investors)
Long-Term Incentive programme 2012-2014
 
The reward to be paid to the President and CEO at target corresponds to 50% of his annual gross salary and at maximum 120% of his annual gross salary.
In spring 2013 a total of 4 006 shares were transferred as a reward from Performance Period 2012 to the President and CEO. The shares are under transfer restriction according to the terms of the programme. The fair value of these allocations amounts to EUR 581 250.9
Further information is available on the company’s website (www.tieto.com/Investors).

No shares were delivered in 2014 from Performance Period 2013.
Share-based reward plan Entitled to a total of 9 200 shares if the criteria set for the plan are met. The plan will run until the end of 2016. The fair value of these allocations amounts to EUR 197 892.10
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 (including option programmes)
EUR 328 868
Retirement age 63
Pension expenditure In 2014, EUR 217 526
  In addition to the statutory pension provision: a defined contribution pension plan where the expenditure is 23% of the annual base salary.11
Period of notice If the agreement is terminated by Tieto, the period of notice is 12 months.
  If the agreement is terminated by the President and CEO, the period of notice is 6 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 incentive for 6 months in addition to the salary for the notice period of 12 months.
  If the agreement is terminated by the President and CEO, the severance payment shall not be paid.

 

Leadership Team (excluding the President and CEO)
Total salaries EUR 2 541 108
Total benefits EUR 134 983
Special payments EUR 496 364
Total bonuses 2014 Not yet determined (EUR 0 paid in 2014 for performance year 2013).
Basis of bonus The basis of 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 overall performance evaluation (OPE). OPE for each LT member is confirmed by the Board.
  CFO: in addition to individual performance measurement, 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-related and/or
• own Industry Group- or Service Line-related performance criteria (operative margin, external revenue and other operational targets)
Options 2009 B option programme: right to subscribe for 10 000 shares.
  • The fair value of the option rights is EUR 76 200.12
  2009 C option programme: right to subscribe for 46 125 shares.
  • The fair value of the option rights is EUR 507 37513
  Terms and conditions of the option programmes are available on the company’s website. 
  See the insider register on the company’s website for updated information on the options held by each member. 
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.
The rewards from Performance Period 2012 were paid in spring 2013 and in spring 2014. A total 8 057 are in the possession of current LT members (excl. CEO) and under transfer restriction according to the terms of the programme.  The fair value of these allocations amounts to EUR 1 069 006.14

  No shares were delivered from Performance Period 2013.
  Further information is available on the company’s website (www.tieto.com/Investors).
Share-based reward plan Leadership Team members are entitled to a total of 26 300 shares if the criteria set for the plan are met. The plan will run until the end of 2016. The fair value of these allocations amounts to EUR 565 713.15
Expenditures related to share-based
incentives (including option programmes)
EUR 803 204
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 2014, in total EUR 1 015 004.
  CFO: In addition to the statutory pension provision: a defined contribution pension plan where the expenditure is 23% of the annual base salary.16
  Most other Leadership Team members based in Finland with no prior pension plans: In addition to the statutory pension provision, defined contribution pension plans where the expenditure is 15% of the annual base salary.16
The company provides Leadership Team members based outside Finland with individual pension plans according to local practices.
Period of notice Various terms, between 6 and 12 months.
Severance payment Various terms, amounts corresponding to the periods of notice.

 

Shareholdings of the Leadership Team        
  Shares at 31 Dec 2014 Shares at 31 Dec 2013 Options at 31 Dec 2014 Options at 31 Dec 2013
Kimmo Alkio 15 973 15 973 30 000 60 000
Håkan Dahlström17 1 000 N/A 0 N/A
Kolbjørn Haarr 1 171 0 39 000 46 000
Lasse Heinonen 8 731 8 731 15 000 18 000
Per Johanson 1 079 1 079 0 8 000
Ari Järvelä 2 478 2 478 9 000 15 000
Ari Karppinen 6 539 6 539 8 000 28 000
Satu Kiiskinen 1 000 0 0 0
Katariina Kravi 1 090 1 090 0 0
Antti Vasara 4 640 3 000 0 0

The compensation of the whole Leadership Team in 2014 is also summarized in note 7 of the financial statements. The remuneration statement is available on the company's website (www.tieto.com/Investors).