Remuneration Statement 2018

This Remuneration Statement of eQ Plc (eQ) has been drawn up in accordance with the Corporate Governance Code for listed companies that entered into force on 1 January 2016. The entire Code is available on the website of the Securities Market Association at www.cgfinland.fi. eQ Plc’s Board of Directors has reviewed this Remuneration Statement on 6 February 2019.

Board of Directors

Remuneration and other financial benefits of the Board of Directors

Remuneration and other financial benefits of the Board of Directors The Annual General Meeting (AGM) decides on the remuneration of the directors annually. eQ Plc’s major shareholders, who as a rule represent at least half of the number of shares and votes in the company, make a proposal on the number of directors, the directors and their remuneration to the AGM.

The AGM held in 2018 decided that the directors would receive remuneration according to following: Chairman of the Board EUR 3 500 per month (2017: EUR 3 500) and the directors EUR 2 000 per month (2017: EUR 2 000). The AGM also decided that the directors be paid EUR 400 for each Board meeting that they attend. In addition, travel and lodging costs will be compensated in accordance with the company’s expense policy. The remuneration is paid in cash. The members of eQ Plc’s Board of Directors have no share-related rights, nor are they covered by any other remuneration scheme.

CEO and other executives

Decision-making process and main principles of remuneration

eQ's Board of Directors decides annually on the remuneration system of the Group, as well as on the principles of performance-based remuneration and the persons included in the system. The Board of Directors also decides the remuneration of the CEO and, since the remuneration decisions are made by the superior of the concerned person’s superior, the members of the Management Team, based on a proposal by the CEO. In certain special circumstances, the General Meetings of companies belonging to eQ Group may also handle matters pertaining to remuneration systems and remuneration. eQ Plc’s Board reviews annually, in separately defined manner, that eQ Group has complied with the remuneration system. Based on the principle of proportionality, eQ has taken the view that it is not necessary to appoint a separate remuneration committee, taking into consideration the number of directors and eQ’s personnel as well as the nature of eQ Group’s operations. The Compliance Officer reviews annually that eQ Group has complied with the remuneration system defined by the Board and reports directly to eQ Plc's Board.

The risk profile of remuneration and the remuneration system of eQ Group has been estimated to be low overall taking into consideration the size of eQ Group and the scope and nature of its business.

The key guiding principles for eQ Group’s remuneration and its remuneration system are the competitiveness and fairness of the remuneration. The objective of the remuneration system is to encourage and reward personnel for their personal achievements and to encourage them to work in alignment with the following objectives: increase of the shareholder value, improvement of eQ Group’s financial situation and work in alignment with eQ Group’s strategy. On the other hand, the objective of the remuneration system is to support the recruitment of committed, skilled and professionally competitive persons as well to sustain and develop their diverse know-how in alignment with eQ Group’s strategy, objectives, values and long-term interests. The remuneration systems shall be consistent with the measures taken to avoid conflicts of interests.

The main principles of eQ Group’s remuneration systems are:

  • The remuneration systems support eQ Group's long-term goals, such as improving the profitability of the business in a long term, sufficient capital adequacy, return on investments and cost efficiency.
  • Remuneration must be designed to prevent unsound risk-taking. The remuneration system shall not encourage to such risk-taking that is contradictory to the rules of the group or the funds managed by it or to the interests of the clients.
  • The Board decides on the payment of the performance bonuses based on the systems. The decision will be made annually after the end of the incentive period.
  • A performance bonus will not be paid and it may be recovered as unfounded, partly or in full, if it is found that the person concerned has acted contrary to eQ's internal guidelines, laws, or regulations or guidelines issued by authorities.
  • eQ may also refrain from paying out remuneration, if eQ Group’s solvency, capital expenses or liquidity or their foreseeable future development do not make payment possible.
  • In principle, the share of the variable remuneration may not exceed 100% of the total fixed remuneration of the recipient. However, if a General Meeting of the company that is the employee’s employer so expressly decides, the variable remuneration can amount to 200% of the total fixed remuneration.
  • eQ Group has decided that the maximum amount of the variable remuneration is EUR 500 000 per person annually.
  • When paying out variable remuneration, the company shall take into consideration at least the risks that it is aware of when making the assessment, and future risks, eQ Group’s capital expenditure and necessary liquidity. The total amount of the remuneration to be paid out may not be so large that it would restrict the consolidation of eQ Group’s capital base.
  • The remuneration of persons engaged in supervisory operations may not be directly dependent on the result of the business unit that they supervise. The remuneration of persons engaged in supervisory operations depends on the achievement of their personal goals and performance. The remuneration of persons engaged in supervisory operations is supervised by eQ Plc’s Board of Directors.
  • As a rule, the Group does not undertake to pay any absolute remuneration. This is only possible, if eQ Plc’s Board makes a decision about it for especially substantial reasons, and even in this case the absolute remuneration may only apply to the first year of employment.
  • Payments relating to premature termination of a contract shall be based on long-term results and shall not lead to rewarding of failed performance.
  • Employees of the eQ Group may not use financial instruments or insurance in order to hedge the risk related to the remuneration payment.

eQ Group’s remuneration system consists of an annual bonus system.

All employees of eQ Group are in principle covered by the annual bonus system. The amount of the annual bonus is determined based on the achievement of personal goals and the result of the own business unit and eQ Group. The share of eQ Group’s result is the higher, the more the person concerned is able to influence the result of the Group. As the variable remuneration payable by the company is dependent on the result of the Group, the amount of the annual bonus to be paid out depends on the Group's financial situation and success. eQ Plc’s Board decides on the amount and distribution of the annual bonuses taking into consideration, e.g. the above presented main principles of remuneration.The Board may decide that the annual bonus can be paid, in part or in full, in financial instruments.

It is the responsibility of the Board of eQ Plc to identify the employees whose professional conduct has a significant impact on the risk profile of the eQ Group. The Board conducts an annual assessment in order to identify such persons. Identification of these employees is part of the practical implementation of the eQ Group’s remuneration principles.

If the variable remuneration of such persons mentioned above exceeds EUR 50 000 at annual level,  at least 50 per cent of the variable remuneration will be deferred so that it is paid during the following three (3) years (even payments each year). 50 per cent of the deferred remuneration is linked to the development of eQ Plc’s share price during the deferral period. eQ Plc’s Board shall annually decide on the interest possibly payable to the remaining part of the deferred remunaration. If the variable remuneration does not exceed EUR 50 000 at annual level, payment shall not in principle, be deferred. The Board may decide that the variable remuneration of other employees (other than such employees whose professional conduct has a significant impact on the risk profile of the eQ Group) can also be deferred.

Remuneration and other financial benefits of the CEO

The Board of Directors appoints the CEO and decides on the CEO’s salary, benefits and other terms related to the CEO’s service. The terms of the CEO’s service have been specified in writing in the CEO’s service contract approved by the Board. Both parties may give notice on this contract with a period of notice of two (2) months. When notice is given by the company for whatever reason or if the contract is terminated through mutual agreement by the company and the CEO, the CEO is entitled to a severance pay corresponding to his or her overall remuneration for six (6) months preceding the termination of the contract, which is paid on the day when the contract is terminated.

The remuneration of the CEO consists of a fixed monthly salary in cash (monthly salary and fringe benefits) and an annual performance bonus. It is important for the company that the salary of the CEO is competitive, as the commitment of the CEO and sufficient incentives are central with regard to the company's success. The Board of Directors decides on the CEO’s remuneration. The retirement age and pension of the CEO are determined in accordance with the Finnish Employees Pensions Act. The CEO does not have a supplementary pension scheme.

In 2018, the CEO was paid an overall remuneration of EUR 622 314 (2017: EUR 450 037), the share of variable remuneration being EUR 262 007 (2017: EUR 202 947).

Remuneration and other financial benefits of the other executives

The Board of Directors decides on the remuneration system of the Management Team based on the CEO's proposal. The remuneration system consists of a fixed salary in cash (monthly salary and fringe benefits) and an annual performance bonus. Management Team members do not receive remuneration when acting as Board members in the subsidiaries of eQ Plc. The notice period of Management Team members varies between 1 to 3 months. In addition to eQ Plc’s CEO, only the CEO of eQ Asset Management Ltd has the right to a severance pay corresponding to six (6) months’ overall salary. The other members of the Management Team do not have severance pays decided on in advance. The retirement age and pension of the Management Team members are determined in accordance with the Finnish Employees Pensions Act. The Management Team members do not have supplementary pension schemes.

In 2018, the other Management Team members than the CEO were paid an overall remuneration of EUR 1 291 714 (2017: EUR 946 138 ), the share of the variable remuneration being EUR 634 827 (2017: EUR 363 736)

Other relevant persons

In 2018, other relevant persons (Finnish Act on Credit Institutions 610/2014, Chapter 8) than the Management Team members were paid an overall remuneration of EUR 623 974 (2017: 240 599), the share of the variable remuneration being EUR 182 479 (2017: 45 194).

Option schemes

eQ Group has three option schemes, option schemes 2010, 2015 and 2018, based on which eQ Group has issued option rights and option subscription rights to key persons. The aim is long-term commitment to the company. In connection with the issue of option rights, the Board of Directors defines, in the terms and conditions of each option scheme, the principles that will be applied to their ownership. The terms and conditions of option schemes 2010, 2015 and 2018 contain no special terms related to ownership.

Option scheme 2010

Based on option scheme 2010, Janne Larma, CEO, has been granted, as part of the engagement system, 450 000 option rights. All of the options granted had been exercised by the end of 2018.

Mikko Koskimies, member of the Management Team, has been granted, as part of the engagement system, 200 000 option rights and Staffan Jåfs, member of the Management Team, 250 000 option rights. Of the options granted, altogether 425 000 had been exercised by the end of 2018.

Option scheme 2015

Based on option scheme 2015, the CEO and other members of the Management Team have been granted option rights as part of the engagement system as follows:

 

Name

Task in the organisation

Number of options

Janne Larma

CEO, eQ Plc

100 000

Staffan Jåfs

Head of Private Equity, eQ Asset Management Ltd

100 000

Mikko Koskimies

CEO, eQ Asset Management Ltd

100 000

Antti Lyytikäinen

CFO, eQ Plc

75 000

Juha Surve

Group General Counsel, eQ Asset Management Ltd

75 000

Option scheme 2018

Based on option scheme 2018, the CEO and other members of the Management Team have been granted option rights as part of the engagement system as follows:

 

Name

Task in the organisation

Number of options

Janne Larma

CEO, eQ Plc

100 000

Staffan Jåfs

Head of Private Equity, eQ Asset Management Ltd

100 000

Mikko Koskimies

CEO, eQ Asset Management Ltd

100 000

Antti Lyytikäinen

CFO, eQ Plc

75 000

Juha Surve

Group General Counsel, eQ Asset Management Ltd

75 000

In accordance with the terms of the option program 2018, the Board of Directors decides in March 2019 upon the confirmation of the subscriptions made in connection with the issuance of options.

Board authorisations regarding remuneration

The AGM of 2018 authorised the Board of Directors to decide on a share issue or share issues and/or the issuance of special rights entitling to shares referred to in Chapter 10 Section 1 of the Limited Liability Companies Act, comprising a maximum total of 5 000 000 new shares to be used for the company’s incentive schemes, for instance. The authorisation comprises the Board’s right to decide on all matters related to the issuance of shares or option rights, including the recipients of the shares or option rights and the amount of the consideration to be paid. The authorisation also covers the right to issue shares and options to selected persons or without consideration.

Updated 6 March 2018