The remuneration of Terrafame’s management is based on a fixed base salary, in addition to which short-term and long-term incentive schemes have been established for the CEO, other Leadership Team and certain key people, such as heads of production.
Decision-making order
Terrafame’s management consists of the Board of Directors and the Leadership Team. Terrafame’s Annual General Meeting decides on the fees paid to the members of the Board and its possible committees. The Board decides on the CEO’s salary, other remuneration and targets related to remuneration, as well as compensation paid on the termination of the employment relationship. Based on a proposal by the CEO, the Board decides on the remuneration of the members of the Leadership Team and the targets related to their remuneration in accordance with the one-over-one principle.
Incentive schemes
Short-term incentive (STI) scheme for the management and other key people
Targets related to Terrafame’s production development, financial performance and safety serve as indicators in the incentive scheme. In addition, personal goals are set for each person covered by performance-based remuneration.
The targets of the incentive scheme have been selected so that their achievement significantly supports the company’s long-term development and success.
Long-term incentive (LTI) scheme for the management and other key people
Terrafame has a long-term incentive scheme for the company’s management and other key people. The rewards for the programmes will be paid provided that the performance targets set by the Board of Directors are achieved. The targets set for the LTI programmes can be related to production and financial profitability as well as sustainability. Their purpose is to support Terrafame’s development and success and the achievement of its strategic goals over the long term.
The scheme consists of individual performance-based programmes starting yearly. Each programme includes a three-year performance period and the payment of any rewards in cash after the performance period. The start of each individual programme is subject to a separate decision by the Board of Directors.
- The first programme (LTI 2019–2021) within the scheme started at the beginning of 2019, and any rewards will be paid in the spring of 2022.
- The second programme (LTI 2020–2022) within the scheme started at the beginning of 2020, and any rewards will be paid in the spring of 2023.
- The third programme (LTI 2021–2023) within the scheme started at the beginning of 2021, and any rewards will be paid in the spring of 2024.
- The fourth programme (LTI 2022-2024) within the scheme started at the beginning of 2022. Any rewards under it will be paid in the spring of 2025.4
- The fifth programme (LTI 2023–2025) within the scheme started at the beginning of 2023. Any rewards under the programme will be paid in the spring of 2026
Terrafame’s long-term incentive scheme complies with the guidelines issued by the state as a shareholder.
Remuneration of the Board of Directors
The Annual General Meeting (AGM) decides on the remuneration payable to the Board Members. Subject to as in each case decided by the AGM the Board remuneration may consist of the elements described below.
The remuneration of the Board Members may consist of a fixed fee for the term of office and meeting fees paid for each meeting attended. The fees may vary based on e.g. specific role or position in the Board or its committees, specific tasks designated to individual Board Members or the geographical location of the meeting. The fees are paid in cash. Travel expenses of independent Board Members are compensated in accordance with Company policy.
The Board Members have no share incentive plans, share-based compensation plans or pension plans. In order to safeguard the Board Members’ independence in the performance of their duties, they are also excluded from the remuneration plans and incentive schemes of the executive management and other personnel.
In accordance with the above and subject to as in each case decided by the AGM there shall be no variable remuneration paid to the Board Members or any performance-based compensation. None of the above-described remuneration elements which may become payable to Board Members are regarded as variable remuneration.
The Chair of the Board is paid an annual fee of EUR 72,000. The annual remuneration of a member of the Board is EUR 36,000. The Chair and members of the Board are also paid a meeting fee of EUR 600 based on meeting attendance.
Remuneration of CEO
The remuneration of the CEO aims at providing competitive rewards in line with market practice within the confines of the company's Remuneration Policy. The fixed compensation elements consist of the fixed base salary and fringe benefits. Incentives as variable compensation elements emphasize pay-for-performance and the achievement of Terrafame’s short- and long-term goals thus aligning the interests of the CEO with the interest of Terrafame’s shareholders.
Seppo Voutilainen has been appointed as Terrafame Ltd’s CEO in March 2024. Voutilainen acted as Terrafame’s interim CEO since January 2024. The CEO's employment is valid until further notice. The CEO’s fixed base salary is EUR 25,000 per month. The CEO does not have any fringe benefits other than mobile phone, opportunity to charge an electric car in the workplace and internet connection at home.
The short-term performance based performance fee of the CEO will have a target reward of 20 per cent and a maximum remuneration opportunity of 40 per cent of total fixed annual salary.
The CEO is involved in the company's three-year rolling long-term incentive scheme, in which the following programs have been initiated:
- The first program of the scheme, LTI 2019-2021, began at the beginning of 2019 and any rewards due under it will be paid in spring 2022.
- The second programme of the scheme, LTI 2020-2022, began in early 2020 and any rewards due under it will be paid in spring 2023.
- The system's third program, LTI 2021-2023, began at the beginning of 2021, and any rewards due under it will be paid in spring 2024.
- The fourth programme of the scheme, LTI 2022-2024, began from the beginning of 2022 and any premiums under it will be paid in spring 2025.
- The fifth programme (LTI 2023–2025) within the scheme started at the beginning of 2023. Any rewards under the programme will be paid in the spring of 2026.
The rewards under the programmes will be paid provided that the performance targets set by the Board of Directors are achieved. The targets set for the LTI programmes are related to production, financial profitability and sustainability. Their purpose is to support Terrafame’s development and success and the achievement of its strategic and corporate sustainability goals over the long term.
CEO's pension, retirement age and redundancy pay
The retirement age of the CEO and his/her pension is determined based on statutory pension. The CEO does not have a defined contribution or other similar supplementary pension plan.
The period of notice for the CEO is six months at the maximum. The aggregate severance package of the CEO, including the salary for the notice period and the severance pay, may be up to the equivalent of twelve months’ salary.
The treatment of rewards based on ongoing STI and LTI plan(s) will depend on the circumstances of the CEO’s departure. In case of retirement or death or in case of termination at the initiative of the Company, the CEO may be entitled to the STI and LTI reward(s) or a portion there of as determined by the Board based on the rules of the respective incentive scheme. If the CEO terminates his/her contract at his/her own initiative, the unvested rewards are as a main rule forfeited.
Remuneration of the other members of the Leadership Team
Salary
Fixed monthly salary.
The members of the Leadership Team do not have any fringe benefits other than mobile phone and internet services
Performance bonuses
The maximum amount of performance bonuses for the members of the Leadership Team is a sum corresponding to three (3) months’ salary.
The members of the Leadership Team are also covered by the company’s long-term incentive scheme
Pension
The retirement age of the members of the Leadership Team is determined in accordance with the pension laws, and the amount of their pension is determined in line with the employer’s pension insurance (TyEL).
The members of the Leadership Team are not covered by a contribution-based pension plan or any other additional pension plans.
Conditions for termination of employment
The members of the Management Team have a notice period of three months or in accordance with the Employment Contracts Act.
If the employer terminates the contract, the maximum amount of compensation corresponds to three months’ salary. No other compensation is paid based on the termination of employment.
Incentive schemes
The other members of the Leadership Team are covered by Terrafame’s incentive schemes in accordance with their current terms and conditions.
Fees and other benefits
Salaries and fees for the 2023 calendar year were paid to the Leadership Team, excluding the CEO, as follows:
| Salaries and fees of the other members of the Management Team | 2023 |
|---|---|
| Fixed base salary | 808,220 |
| Performance bonuses | 130,171 |
| Total | 938,391 |