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 on how the company shall compensate its employees are defined in Tieto’s HR Policy and related rules. The policy is globally applied to 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 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 2017, the annual remuneration of the Board of Directors is the following:

  • EUR 91 000 to the Chairman,
  • EUR 55 000 to the Deputy Chairman and
  • EUR 36 000 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 the Board Committee unless the same individual is also the Chairman or Deputy Chairman of the Board. In addition, remuneration of EUR 800 is paid for each Board meeting and each permanent or temporary committee meeting.

Further, the AGM 2017 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 Board in 2017 4)
  Annual remuneration Meeting based, EUR
  EUR (60%) 5) Shares (40%) 6)  
Kurt Jofs (Chairman and RC Chairman) 7) 54 609 1 266 22 400
Harri-Pekka Kaukonen (Deputy Chairman and ARC Chairman) 33 010 765 20 000
Timo Ahopelto 9) 21 628 500 17 600
Johanna Lamminen 21 628 500 16 800
Sari Pajari 21 628 500 16 000
Endre Rangnes 21 628 500 20 000
Jonas Synnergren 21 628 500 25 600
Jonas Wiström 9) 21 628 500 12 800
Markku Pohjola (former Board and RC Chairman) 8) - - 3 200
Lars Wollung 10)     1 600
In total EUR 217 385 5 031 shares EUR 156 000
Board of Directors' shareholdings in Tieto 11)    
Name Dec 2017 At 31 Dec 2016
Kurt Jofs (Chairman, RC Chairman) 7) 13 711 12 445
Harri-Pekka Kaukonen (Deputy Chairman and ARC Chairman) 1 343 578
Timo Ahopelto 9) 500 N/A
Johanna Lamminen 1 078 578
Sari Pajari 4 096 3 596
Endre Rangnes 2 353 1 853
Jonas Synnergren 4 096 3 596
Jonas Wiström 9) 500 N/A
Markku Pohjola (former Board and RC Chairman) 8) N/A 27 391
Lars Wollung 10) N/A 1 219

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 for company and individual performance. 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 is 50% and for other Leadership Team members 40% of the annual base salary when the performance is at expected level; the maximum bonus for the President and CEO is 100% and for the other Leadership Team members 75%. 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 had two types of share-based long-term incentive arrangements: the Long-Term Incentive Plans and option programmes.

The terms and conditions of all share-based plans are approved by the Board of Directors.

Long-Term Incentive Programme 2012–2014 covered the Leadership Team members and approximately 85 key employees. The first performance period began on 1 January 2012 and the final performance period ended on 31 December 2014. Individual performance periods were followed by a restriction period of two years for the executive management or one year for the other participants, during which the earned shares were not disposable. In February 2017 the final restriction period ended.

Long-Term Incentive Plan (LTI) 2015–2017 covers Leadership Team members and approximately 140 key employees. The plan consists of Performance Shares and Restricted Shares. The performance period is three years from 1 January 2015 to 31 December 2017. If the set performance metrics and other requirements are met the shares will be delivered to the participants in spring 2018.

Long-Term Incentive Plan (LTI) 2016–2018 covers Leadership Team members and approximately 140 key employees. The plan consists of Performance Shares and Restricted Shares. The performance period is three years from 1 January 2016 to 31 December 2018. If the set performance metrics and other requirements are met the shares will be delivered to the participants in spring 2019.

Long-Term Incentive Plan (LTI) 2017–2019 covers Leadership Team members and approximately 140 key employees. The plan consists of Performance Shares and Restricted Shares. The performance period is three years from 1 January 2017 to 31 December 2019. If the set performance metrics and other requirements are met the shares will be delivered to the participants in spring 2020.

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. In connection with authorizing the Board to issue shares, the AGM 2017 decided that no more than 700 000 shares, corresponding to less than 1% of all of the shares in the company, may be issued as part of share-based incentive programmes. Key principles of Tieto’s share plans, such as the basis and size of rewards, are described on the company’s website at www.tieto.com/ Investors.

Tieto has not established new option plans since AGM 2009. The last option programme 2009 expired when the subscription period for the 2009C series ended on 31 March 2016.

Pension plans

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

Currently, all additional schemes are classified as defined contribution plans.11) 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 participant's 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.

11) Last fund-based pension scheme was closed in August 2017.

President and CEO 
Kimmo Alkio  
Salary EUR 600 000/year (EUR 50 000/month) including car benefit. Total EUR 600 000.
Benefits EUR 3 235
Bonus 2017 Not yet determined (EUR 179 053 paid in 2017 for performance in 2016).
Basis of bonus Target 50% of base salary based on the Group's external revenue and profit, PDS external revenue and profit and strategy implementation when achievements meet the targets.
Maximum 100% of base salary based on the Group's external revenue and profit, PDS external revenue and profit and strategy implementation when achievements exceed the targets.

Weighting of the reward factors
• Profit of the company and PDS 30%
• External revenue of the company and PDS 40%
• Strategy implementation 30%
Additional success-based incentive An additional success-based incentive can be paid to the President and CEO in 2020. The incentive is subject to Tieto reaching in 2019 challenging profitability targets (EBIT) set by the Board of Directors in accordance with the company’s renewed strategy and financial objectives.

The maximum gross number of shares to be earned is 50 000, however not exceeding EUR 3 million. The payable incentive includes Tieto’s shares and a cash proportion for covering taxes and tax-related costs arising from the reward.
Long-Term Incentive Programme 2012–2014 A total of 12 742 shares were released from lock-up in February 2017 according to the terms of the programme.
Share-Based Reward Plan In January 2017, a total of 4 256 shares were transferred based on the plan run until the end of 2016. In addition a cash portion was paid corresponding to a value of 4 944 shares. The total value of paid gross reward was EUR 240 474.
Long-Term Incentive Plan 2015-2017 Entitled to 20 000 Performance Shares if the target levels of the performance metrics are met, 40 000 shares at maximum. The performance period of the plan is 2015-2017. The fair value of these allocations amounts to EUR 504 012. 12)
Long-Term Incentive Plan 2016-2018 Entitled to 20 000 Performance Shares if the target levels of the performance metrics are met, 40 000 shares at maximum and 5 000 Restricted Shares. The performance period of the plan is 2016-2018. The fair value of these allocations amounts to EUR 337 740.12)
Long-Term Incentive Plan 2017-2019 Entitled to 20 000 Performance Shares if the target levels of the performance metrics are met, 40 000 shares at maximum. The performance period of the plan is 2017-2019. The fair value of these allocations amounts to EUR 410 484.12)
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 EUR 399 081
Retirement age 63
Pension expenditure In 2017, EUR 277 593.

In addition to the statutory pension provision: a defined contribution pension plan where the expenditure is 23% of the annual base salary.13)
Period of notice If the agreement is terminated by Tieto, the period of notice is twelve months.

If the agreement is terminated by the President and CEO, the period of notice is six 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 target incentive for six months in addition to the salary for the notice period.

If someone acquires ownership of over 50% of the company´s shares or the company is merged with another company as a merging company and if the agreement is terminated by either party within nine months after such acquisition or merger, the company shall pay a severance payment equivalent to the base salary and the short-term target incentive for six months and the monetary value of the maximum amount of shares granted to him in the most recent long-term incentive plan in addition to the salary for the notice period. Should the CEO stay in the company after an acquisition or a merge, he is entitled to the abovementioned outcome of the most recent long-term incentive plan after twelve months after such an acquisition or a merger.

If the agreement is terminated by the President and CEO, except in the event of the abovementioned over 50% takeover or merger, the severance payment shall not be paid.
 

Updated information on the shares and options held by the President and CEO is available on the company’s website at www.tieto.com/Investors under the insider register.

Remuneration of Leadership Team members

The table below summarizes the remuneration of the Leadership Team members.

Leadership Team (excluding the President and CEO)
Total salaries EUR  2 789 836
Total benefits EUR 122 444
Special payments EUR 477 137 (Severance pay)
Total bonuses 2017 Not yet determined (EUR 420 914 paid in 2017 for performance in 2016).
Basis of bonus Target 40% of base salary, maximum 75% of the base salary. The purpose of the bonus is to reward for company performance and individual performance.
These two form the overall performance evaluation (OPE). OPE for each LT member is confirmed by the Board.

CFO: in addition to individual performance measurement, the 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 and/or
• own Industry Group- or Service Line-related performance criteria (operative margin, external revenue and other operational targets)
Long-Term Incentive Programme 2012–2014 A total of 20 776 shares were released from lock-up in February 2017 according to the terms of the programme
Share-based reward plan January 2017, a total of 8 731 shares were transferred to the Leadership Team members based on the plan run until the end of 2016. In addition a cash portion was paid, corresponding to a value of 10 269 shares. The total value paid gross reward amounted to EUR 496 632.
Long-Term Incentive Plan 2015-2017 Leadership team members are entitled to 80 100 Performance Shares if the maximum levels of the performance metrics are met and 12 500 Restricted Shares. Performance period of the plan is 2015–2017. The fair value of these allocations is EUR 1 334 034.14)
Long-Term Incentive Plan 2016-2018 Leadership Team members are entitled to 90 000 Performance Shares if the maximum levels of the performance metrics are met and 10 000 Restricted Shares. The performance period of the plan is 2016–2018. The fair value of these allocations is EUR 1 019 715.14)
Long-Term Incentive Plan 2017–2019 Leadership Team members are entitled to 92 000 Performance Shares if the maximum levels of the performance metrics are met and 11 000 Restricted Shares. The performance period of the plan is 2017–2019. The fair value of these allocations is EUR 1 270 942.14)
Expenditures related to share-based incentives EUR 1 102 133
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 2017, in total EUR 1 058 548.
CFO: In addition to the statutory pension provision: a defined contribution pension plan where the expenditure is 23% of the annual base salary. 15) Most other Leadership Team members based in Finland with no earlier pension plans: In addition to the statutory pension provision, defined contribution pension plans where the expenditure is 15% of the annual base salary. 15)
The company provides Leadership Team members based outside Finland with individual pension plans according to local practices.
Severance payment Various terms, amounts corresponding to the periods of notice.
 
Shareholdings of the Leadership Team 20)
  Shares at 31 Dec 2017 Shares at 31 Dec 2016 Options at 31 Dec 2017 Options at 31 Dec 2016
Kimmo Alkio 32 971 28 715 0 0
Håkan Dahlström 3 042 3 042 0 0
Lasse Heinonen 17 767 15 778 0 0
Per Johanson   N/A 4 465 N/A 0
Ari Järvelä 6 945 4 956 0 0
Ari Karppinen 21)  N/A 10 504 N/A 0
Satu Kiiskinen 5 366 3 398 0 0
Katariina Kravi 5 476 3 550 0 0
Tom Leskinen 100 100 0 0
Cristina Petrescu 702 702 0 0
Christian Segersven 22) 0 N/A 0 N/A
 
The compensation of the whole Leadership Team in 2017 is also summarized in note 9 of the financial statements. The remuneration statement is available on the company’s website at www.tieto.com/Investors.