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 and related Rules. 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 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 2015, the annual remuneration of the Board of Directors is the following:

  • EUR 83 000 to the Chairman,
  • EUR 52 500 to the Deputy Chairman and
  • EUR 34 500 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, the AGM 2015 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 2015 5)
  Annual remuneration Meeting based, EUR 6)
  EUR (60%) 7) Shares (40%) 8)  
Markku Pohjola (Board and RC Chairman) 33 200 1 543 17 600
Kurt Jofs (Deputy Chairman) 21 000 976 15 200
Teuvo Salminen (ARC Chairman) 21 000 976 17 600
Eva Lindqvist 13 800 641 12 800
Sari Pajari 13 800 641 13 600
Risto Perttunen 9) N/A N/A 2 400
Endre Rangnes 13 800 641 11 200
Jonas Synnergren 13 800 641 17 600
Lars Wollung 10) 13 800 641 11 200
In total EUR 144 500 Shares 6 700 EUR 119 200
 
Board of Directors' shareholdings in Tieto    
Name At 31 Dec 2015 At 31 Dec 2014
Markku Pohjola (Board and RC Chairman) 26 000 23 949
Kurt Jofs (Deputy Chairman) 11 565 10 589
Teuvo Salminen (ARC Chairman) 10 345 9 369
Eva Lindqvist 4 185 3 544
Sari Pajari 3 018 2 377
Risto Perttunen 9) N/A 6 344
Endre Rangnes 1 275 634
Jonas Synnergren 3 018 2 377
Lars Wollung 10) 641 N/A

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 30% of the annual base salary when the performance is at expected level; the maximum bonus for President and CEO is 100% and for other Leadership Team members 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 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 are followed by a restriction period of two year for the executive management or one year for the other participants, during which the earned shares are not disposable.

Long-Term Incentive Plan (LTI) 2015 covers Leadership Team members and approximately 130 key employees. The plan consists of Performance Shares and Restricted Shares. The performance period is three years from 1 January 2015 till 31 December 2017. If the set performance metrics and other requirements are met the shares are delivered to the participants in spring 2018.

The authorizations required by the Board to perform repurchase of 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 company’s website www.tieto.com/Investors.

Tieto has not established 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 reward individual performance. The current programmes cover the Leadership Team and around 95 employees. Further information about Tieto’s option programmes is available on 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, the Leadership Team members are provided with additional pension schemes.

Most of the 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 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.

President and CEO 
Kimmo Alkio  
Salary EUR 550 000/year (EUR 45 833/month) including car benefit. Total EUR 550 000.
Benefits EUR 2 409
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 10 688 treasury shares and a cash payment.
Bonus 2015 Not yet determined (EUR 265 000 paid in 2015 for performance of year 2014).
Basis of bonus Target 50% of base salary based on the Group's external revenue, profit, TCV and strategy implementation when achievements meet the targets.

Maximum 100% 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%
Long-Term Incentive Programme 2012–2014 The reward to be paid to the President and CEO at target corresponds to 50% annual gross salary and at maximum 120% annual gross salary.

In spring 2015 a total of 12 742 shares were transferred as a reward from Performance Period 2014 and 2012-2014 to the President and CEO. The shares are under transfer restriction according to the terms of the programme. The fair value of the rewards paid in 2015 amount to EUR 636 028 12).

Further information is available on company’s website www.tieto.com/Investors.
Share-based reward plan Entitled to a total of 9 200 shares if the criteria set for the plan is met. The plan will run until the end of 2016. The fair value of these allocations amounts to EUR 227 424.13)
Long-Term Incentive Plan 2015 Entitled to 20 000 Performance Shares if the target levels of the performance metrics are met, 40 000 shares at maximum. Performance period of the plan is 2015-2017.The fair value of these allocations amounts to EUR 494 400. 14)
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 315 896
Retirement age 63
Pension expenditure In 2015, EUR 221 000.

In addition to the statutory pension provision: a defined contribution pension plan where the expenditure is 23% of the annual base salary.15)
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 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 merge, 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 above mentioned outcome of the most recent long-term incentive plan after twelve months after such an acquisition or a merge.

If the agreement is terminated by the President and CEO, except in the event of the above mentioned over 50% take over or the merge, the severance payment shall not be paid.
 

Updated information on the shares and options held by the President and CEO is available on company’s website 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) 16)
Total salaries EUR 2 945 502
Total benefits EUR 131 200
Special payments EUR 0
Total bonuses 2015 Not yet determined (EUR 565 077 paid in 2015 for performance year 2014).
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, bonus is based on
• company and/or
• own Industry Group or Service Line -related performance criteria (operative margin, external revenue and other operational targets)
Options 2009 C option program: right to subscribe 2 500 shares
• The fair value of the option rights is EUR 39 000 17).
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.

In spring 2015 a total of 22 305 shares were transferred as a reward from Performance Period 2014 and 2012-2014 to the Leadership Team members. The shares are under transfer restriction according to the terms of the programme. The fair value of the rewards paid in 2015 amount to EUR 1 140 483.18)

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 23 900 shares if the criteria set for the plan is met. The plan will run until the end of 2016. The fair value of these allocations amounts to EUR 590 808 19).
Long-Term Incentive Plan 2015 Leadership Team members are entitled to 90 000 Performance Shares if the maximum levels of the performance metrics are met and 7 600 Restricted Shares. Performance period of the plan is 2015-2017. The fair value of these allocations is EUR 2 412 672. 20)
Expenditures related to share-based incentives (including option programmes) EUR 765 371
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 2015, in total EUR 1 032 783.

CFO: In addition to the statutory pension provision: a defined contribution pension plan where the expenditure is 23% of the annual base salary 21).

Most other Leadership Team members based in Finland with no pension plans implemented earlier: In addition to the statutory pension provision: defined contribution pension plans where the expenditure is 15% of the annual base salary 21).

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 2015 Shares at 31 Dec 2014 Options at 31 Dec 2015 Options at 31 Dec 2014
Kimmo Alkio 39 403 15 973 0 30 000
Håkan Dahlström 1 000 1 000 0 0
Kolbjørn Haarr 22) N/A 1 171 N/A 39 000
Lasse Heinonen 13 278 8 731 2 500 15 000
Per Johanson 4 465 1 079 0 0
Ari Järvelä 4 956 2 478 0 9 000
Ari Karppinen 10 504 6 539 0 8 000
Satu Kiiskinen 3 398 1 000 0 0
Katariina Kravi 3 550 1 090 0 0
Antti Vasara 23) N/A 4 640 N/A 0
 

The compensation of the whole Leadership Team in 2015 is also summarized in note 7 of the financial statements. Remuneration statement is available on company’s website www.tieto.com/Investors.