Finnair Plc. Stock Exchange Release 8 February 2013 at 09:35 EET
”Remuneration systems play an important role in encouraging employees to work for the long-term benefit of the company and its shareholders” says Harri Sailas, Chairman of Finnair Board of Directors.
“The planned employee share savings plan for Finnair employees adds to our current incentive programs, and aims at supporting their long-term interest and involvement in the development of Finnair’s shareholder value. The long-term incentive program for the management is fully in line with the statement by the Cabinet Committee on Economic Policy regarding the remuneration of executive management and key individuals in state-owned companies in Finland, and it replaces the long-term incentive program that expired at the end of last year.”
The employee share savings plan
Finnair Board of Directors plans to launch an employee share savings plan to be offered for Finnair’s employees in Finland. The aim is thus to increase and encourage long-term employee interest and involvement in Finnair’s success and development of the company’s shareholder value.
According to the plan, Finnair employees would be offered an opportunity to invest a proportion of their salary into Finnair shares. After a defined savings period, the company would award additional shares to the participants.
Finnair Board of Directors estimates it will decide on the plan and its details during the spring 2013.
Finnair also has a Personnel Fund in place for sharing profits with employees, and for 2012, 4.8 million EUR is proposed to be transferred to the Personnel Fund.
The performance share plan
Finnair Board of Directors has approved a new performance share plan for the key personnel of the Finnair Group. The share plan replaces the previous programme which expired at the end of 2012.
Total management remuneration comprises of base salary, variable annual incentives based on individual and company performance and the performance share plan. The purpose of the share plan is to encourage the management to work to increase long-term shareholder value and also to commit the management to the company.
The share plan consists of annually commencing individual plans within which the participants have the opportunity to earn Finnair shares as a long-term incentive reward, if the performance targets set by the Board of Directors are achieved. The commencement of each new plan is subject to a separate approval of Finnair Board of Directors.
Each plan contains a three-year performance period which is followed by a restriction period, during which the participant may not sell or transfer the shares received as a reward. The restriction period is three years for the members of Finnair's Executive Board and one year for other participants. In addition, the CEO and members of Finnair’s Executive Board are required to accumulate and once achieved, to maintain a share ownership in Finnair corresponding to his/her annual base salary as long as he/she holds a position as a member of Finnair's Executive Board.
The performance criteria applied to the first plan for years 2013 – 2015 are the group’s relative operating EBIT margin growth, actual EBIT margin and cost savings in the Group’s European traffic.
The potential reward will be delivered in Finnair shares. The share delivery is split into three share tranches which will be delivered to the participants during the three years following the performance period. In years 2014 and 2015 no shares are delivered, which is partly taken into account in the earnings potential for years 2016 and 2017.
If the targets set for the first plan for years 2013 - 2015 are met, the estimated aggregate gross number of shares to be paid on the basis of this first plan would be 800,000 shares (gross before the payroll tax withholding). It the maximum targets are met, the estimated gross number of shares to be paid would be 1,200,000 shares (gross before the payroll tax withholding). The number of employees eligible to participate in the first plan is approximately 55 persons.
The maximum value of shares delivered to an individual participant based on the share plan in any given year may not exceed 60 % of the employee’s annual base salary.
The details of the share plan are published during spring 2013 on Finnair internet pages.
No new shares will be issued in connection with the above share-based incentive programs and therefore the programs will have no diluting effect. Finnair used Mercer and PCA Corporate Finance as advisors in the planning of these incentive programs.
For more information:
Finnair Media Desk, tel +358 9 818 4020, comms(a)finnair.com
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