Remuneration

Remuneration at Fortum is directed by the Group’s remuneration principles and Fortum’s general compensation and benefits practices as well as guidance set out in the Government Resolution on State-Ownership Policy

Remuneration Governance

The Shareholders’ Nomination Board, the Annual General Meeting of Shareholders (AGM), the Board of Directors and the Nomination and Remuneration Committee are all involved in the preparations and decision-making regarding remuneration at Fortum.

In accordance with the Finnish Corporate Governance Code 2020, the Nomination and Remuneration Committee prepares the Remuneration Policy and the Remuneration Report for Governing Bodies. The Shareholders’ Nomination Board is involved in preparing the Remuneration Policy for the Board of Directors. The Board of Directors submits the Remuneration Policy at least every four years and Remuneration Report annually, starting in 2021, to the AGM.

Upon the recommendation of the Nomination and Remuneration Committee, the Board of Directors approves annually the compensation of the President and CEO within the confines of the Remuneration Policy for the President and CEO. The composition and duties of the Nomination and Remuneration Committee have been described in detail in the Corporate Governance Statement. In order to avoid any conflicts of interest, the Nomination and Remuneration Committee shall consist of non-executive members only. The Nomination and Remuneration Committee has the power in its sole discretion to retain external advisors in assisting in the evaluation of the executive remuneration.

Remuneration Principles

At Fortum, we strive for a performance-focused culture where our people understand:

  • the company, its strategy and performance targets,
  • how they as individuals can impact the results,
  • the link between business performance and remuneration, and
  • the importance of delivering sustainable business results.

This philosophy underpins our remuneration principles which are designed to encourage and recognise high performance and behaviour in line with Fortum’s values. Fortum follows a total compensation approach where all remuneration elements are taken into account when setting and reviewing salaries; base salaries, short- and long-term incentive opportunities as well as different benefits.

Remuneration of the Board of Directors in 2021

The board members were not in an employment relationship or service contract with Fortum and they were not given the opportunity to participate in Fortum’s STI or LTI programmes, nor did Fortum have a pension plan that they could opt to take part in. Travel expenses were compensated to the members of the Board of Directors in accordance with Fortum’s travel policy.

On 28 April 2021, the 2021 AGM confirmed the following annual fees for the members of the Board of Directors:

EUR 2021
Chair 77,200
Deputy Chair 57,500
Chair of the Audit and Risk Committee 1) 57,500
Members 40,400
1) If not Chair or Deputy Chair simultaneously

Every member of the Board of Directors receives a fixed yearly fee and a meeting fee.

In addition, a fee of EUR 600 will be paid for each board meeting and board committee meeting. For members living outside Finland in Europe, the fee for each meeting will be doubled, and for members living outside Europe, the fee for each meeting will be tripled. For members living in Finland, the fee for each board and board committee meeting will be doubled for meetings held outside Finland and tripled for meetings held outside Europe. For board and committee meetings held as a telephone conference, the basic fee will be paid to all members.

Fees paid to the members of the Board of Directors in 2021

EUR thousand Fixed annual fee Meeting fees Total remuneration Board service 2021 Fortum shares owned 31 Dec 2021
Luisa Delgado 27 7 34 28 Apr-31 Dec 0
Essimari Kairisto 57 19 76 1 Jan-31 Dec 0
Anja McAlister, Deputy Chair as of 28 April 2021 52 13 65 1 Jan-31 Dec 0
Teppo Paavola 40 17 58 1 Jan-31 Dec 0
Veli-Matti Reinikkala, Chair as of since 28 April 2021 71 22 92 1 Jan-31 Dec 5,000
Philipp Rösler 40 15 55 1 Jan-31 Dec 0
Annette Stube 40 16 57 1 Jan-31 Dec 0
Former Board members:
Matti Lievonen 26 6 32 1 Jan-28 Apr Not disclosed
Klaus-Dieter Maubach 10 5 15 1 Jan-29 Mar Not disclosed
Eva Hamilton 13 6 19 1 Jan-28 Apr Not disclosed
Total 378 126 504   5,000

In addition to the information provided in the above table, Klaus-Dieter Maubach received compensation of EUR 84,294 for acting as the Chairman of the Supervisory Board of Uniper SE until 29 March 2021. Compensation for acting in Uniper’s Supervisory Board was paid according to the policies in force at Uniper, the annual fee for the Chairman being EUR 210,000

Fees paid to the members of the Board of Directors 2017-2021

EUR thousand 2021 2020 2019 2018 2017
Luisa Delgado 34 - - - -
Essimari Kairisto 76 72 56 42 -
Anja McAlister 65 57 59 60 47
Teppo Paavola 58 45 - - -
Veli-Matti Reinikkala 92 77 58 54 58
Philipp Rösler 55 57 44 - -
Annette Stube 57 42 - - -
Former Board members
Matti Lievonen 32 101 89 80 49
Klaus- Dieter Maubach 15 65 71 54 -
Eva Hamilton 19 55 54 54 54
Minoo Akhtarzand  - - - - 16
Sari Baldauf - - - 20 84
Heinz-Werner Binzel  - - 12 54 57
Kim Ignatius - 21 67 65 67
Tapio Kuula  - - - - 43
Marco Ryan  - - 19 - -
Jyrki Talvitie - - - - 17
Total remuneration, average 50 59 53 54 49
Ordinary member annual fixed fee 40 40 40 40 40
Remuneration of the President and CEO in 2021

The Board of Directors considers various factors when determining the fixed compensation of the President and CEO, including individual contribution, business performance, role, employee pay across Fortum, and alignment with external market levels.

The terms of the service agreement of the President and CEO Markus Rauramo, effective as of 1 July 2020, are in line with Fortum’s Remuneration policy for the governing bodies. In 2021, malus and clawback provisions for the President and CEO were not utilised. As decided by the Board of Directors, the variable elements (STI and LTI pay-outs) were limited to a maximum of 120% of the individual’s annual fixed compensation. Read more about the Remuneration and Terms of the Service Contract of the President and CEO

EUR thousand   Markus Rauramo 2021 Markus Rauramo, accrued 2021, payable in 2022    
Fixed compensation 50% 1,559   -    
Supplementary pension 10% 315   -    
Short-term incentives 5% 163   423*    
Long-term incentives 35% 1,099   555**    
Total remuneration 100% 3,136        
LTI Plan 2018-2020 2019-2021 2020-2022 2021-2023 2022-2024  
Max. number of shares granted (gross) *** 52,000 63,000 85,000 62,000  
Grant date *** 28 Feb 2019 28 Feb 2020 28 Feb 2021 28 Feb 2022  
Share price at grant *** 19.52 19.28 20.69 18.84  
No of shares earned (gross) 48,770 **** - - -  
No of shares delivered (net) 25,921 **** - - -  
Share delivery date 22 March 2021 - - - -  
Share price at delivery 22.54 **** - - -  
Shareholding requirement***** 100% of individual annual fixed compensation 100% of individual annual fixed compensation 100% of individual annual fixed compensation 100% of individual annual fixed compensation 100% of individual annual fixed compensation  

* STI earning based on achievement of performance criteria was EUR 476,000. Payable STI for 2021 is calculated taking into account the change in compensation paid based on Uniper Supervisory Board role as described below.
** Estimated LTI earning, the value of actual LTI earning will be disclosed after publication of the Remuneration Report 2021.
*** Not disclosed; not acting as the President and CEO of Fortum when the event occurred.
**** Share delivery will take place after the publication of the Remuneration Report 2021.
***** President and CEO Markus Rauramo’s Fortum shareholding as of 31 Dec, 2021 was 99,308 shares in total and met the shareholding requirement set for the role.

In addition to the information provided in the tables above, President and CEO Markus Rauramo received compensation for acting as the Deputy Chairman of the Supervisory Board of Uniper SE until 29 March 2021, when he was elected as Chairman of the Supervisory Board of Uniper SE. The compensation for acting on Uniper’s Supervisory Board is paid according to the policies in force at Uniper. The annual fee for the Deputy Chairman is EUR 140,000 and for the Chairman EUR 210,000. In connection with the change of this Supervisory Board role, the Board of Directors of Fortum decided that Markus Rauramo’s total compensation would not increase due to the changing role and therefore the excess of the compensation paid based on Deputy Chairman role will be decreased from the Fortum incentive payments.

Performance outcomes

Short-term incentives for 2020, payable in 2021

The outcome of the 2020 Group (excluding Uniper) level comparable operating profit + share of profits from associates and joint ventures (CompOP) was 19% of the maximum. Fortum’s 2020 LTIF for own personnel and contractors declined from the previous year to 2.0, and did not reach the set minimum level.

President and CEO Markus Rauramo had two joint Fortum’s Executive Management (FEM) targets related to operational excellence and the progress in strategic priorities. The individual targets were related to the preparation of the updated strategy for the Fortum Group, including Uniper, as well as the launch of the intensive cooperation across the companies. The results of this work were presented at the Capital Markets Day in December 2020 and included the updated strategy, new financial, climate, and safety targets, as well as targeted cooperation benefits. The outcome of these targets reached the maximum level. The achieved performance based on the individual and team targets was evaluated in connection with the individual performance review and confirmed by the Board of Directors at the beginning of 2021.

The accrued incentives for the year 2020 were paid in April 2021.

Short-term incentives for 2021, payable in 2022

The outcome of the 2021 Group (including Uniper) level comparable operating profit + share of profits from associated and joint ventures (CompOP) was 100% of the maximum. Fortum Group’s (including Uniper) LTIF for 2021 was 1.5 and was 2% of the maximum.

In 2021, President and CEO Markus Rauramo had one joint FEM target related to the progress in strategic priorities and one individual target related to the co-operation with Uniper. The individual target was related to the progress in strategic cooperation areas (Nordic hydro and physical trading optimisation, wind and solar, and hydrogen) and the progress in value creation and strategic portfolio development. The STI outcome of these joint FEM targets and individual targets reached 64% of the maximum.

The accrued incentives for the year 2021 will be paid in April 2022. 

2018–2020 Long-term incentive plan (payable in 2021)

The performance measures for the 2018–2020 LTI plan were TSR measured against a European utilities peer group and EPS. The outcome of the 2018–2020 plan was 67% of the maximum, mainly due to the strong EPS result.

2019–2021 Long-term incentive plan (payable in 2022)

The performance measures for the 2019–2021 LTI plan was TSR measured against a European utilities peer group. The outcome of the 2019–2021 LTI plan was 46% of the maximum.

Remuneration of other Fortum Executive Management in 2021

Remuneration of other Fortum Executive Management (excl. the President and CEO) in 2017-2021

EUR thousand 2021 2020 2019 2018 2017
Fixed compensation 3,727 3,195 3,382 3,101 3,387
Supplementary pension 513 527 586 533 636
Short-term incentives 478 657 631 926 962
Long-term incentives 2,250 3,598 2,360 885 877
Total remuneration 6,968 7,977 6,958 5,445 5,862
Shareholding requirement is 100% of individual annual fixed compensation

In addition to the information provided in the above table, Bernhard Günther and Nora Steiner-Forsberg (since 19 May, 2021) were members of the Supervisory Board of Uniper SE in 2021. Sirpa-Helena Sormunen was a member of Supervisory Board of Uniper SE until 30 April 2021 and Tiina Tuomela until 19 May 2021. The aforementioned received compensation amounting to a total of EUR 260,067 for their roles in the Supervisory Board of Uniper SE in 2021. Compensation for acting in Uniper’s Supervisory Board was paid according to the policies in force at Uniper.

Information on incentive plans

The Group-level metrics and outcomes of the short-term incentive plans 2020 and 2021 are described in the Remuneration report for the governing bodies 2021 on page 4.

For 2022, the Group-level STI targets are based on the achievement of Group financial performance, divisional targets, as well as individual or team targets (as in 2021). The STI performance measures are comparable operating profit + share of profits from associates and joint ventures (60% weight), safety target with two measures (10% weight), and individual or team targets (30% weight). The safety target consists of severity rate per total recordable injuries, including Uniper, and execution of safety leadership training, excluding Uniper, both with equal 5% weight. For the members of FEM, the financial measure is comparable operating profit (Fortum, excluding Uniper) + share of profits from associates and joint ventures added with Uniper’s adjusted EBIT.

Fortum’s LTI programme consists of annually commencing LTI plans with a three-year performance period. Fortum introduced an ESG (Environmental, Social, Governance) related target as part of LTI target setting for the first time in the 2020–2022 LTI plan. The ESG target in that plan is related to actions driving the reduction of Fortum’s CO2 emissions and reduction of coal-based power generation capacity aligned with Fortum’s strategy. A financial target, relative TSR measured against a peer group of European utilities, has remained as a measure in the LTI plan.

In the 2021–2023 LTI plan, the set ESG target was linked to the reduction of Fortum’s coal-based power generation capacity in line with Fortum’s coal-exit path, with a minimum level requiring exceeding the communicated ambition level. The relative TSR remained as a measure in the LTI plan, selected gas companies were added to the existing peer group comprising selected European utility companies.

In the 2022–2024 LTI plan, the ESG target is related to the reduction of absolute CO2 emissions in the European fossil fleet, based on a fossil fleet review addressing the Group’s European generation portfolio and a pathway developed to reach Fortum Group’s 2030 and 2035 climate targets. The relative TSR measured against a peer group consisting of European utilities and gas companies also remains as a measure in the plan.

Since 2020 Fortum also has a restricted share plan (RSP) as a supplement to the LTI programme. In the RSP, a maximum number of shares can be allocated for a three-year plan period in accordance with the customary LTI plan, but the plan is excluded from performance targets. In the restricted share plan for 2020–2022, a total of 25,800 shares have been allocated, in the plan for 2021–2023 the number of allocated shares is 14,500. The table below presents the key figures of Fortum LTI plan.

LTI Plan 2018-2020 2019-2021 2020-2022 2021-2023 2022-2024
Earnings period 2018-2020 2019-2021 2020-2022 2021-2023 2022-2024
Share delivery year 2021 2022 2023 2024 2025
Measures TSR 50%/EPS 50% TSR 100% TSR 80%/ESG 20% TSR 80%/ESG 20% TSR 80%/ESG 20%
Outcome 67%        
No of shares granted 607,620 608,051 626,475 754,000 577,400
No of shares forfeited 104,420 *      
No of shares delivered 221,880 *      
No of participants 105        
Grant date 28 Feb 2018 28 Feb 2019 28 Feb 2020 28 Feb 2021 28 Feb 2022
Share price at grant 18.05 19.52 19.28 20.69 18.84
Share price at delivery 22.54 *      

* The share delivery will take place after the Remuneration Report 2021 publication.

Number of shares delivered to the Fortum Executive Management

LTI Plan 2018-2020 2019-2021 Shares owned 31 Dec 2021
Nebahat Albayrak - * 0
Alexander Chuvaev 20,013** * 54,602
Eveliina Dahl - * 806
Bernhard Günther - * 0
Per Langer 4,555 * 48,971
Simon-Erik Ollus 3,046 * 3,854
Markus Rauramo 25,921 * 99,308
Mikael Rönnblad 5,985 * 16,454
Nora Steiner-Forsberg - * 374
Total 59,520 * 224,369
Former FEM members      
Arun Aggarwal 5,304 - -
Risto Penttinen 4,906 - -
Arto Räty 4,476 - -
Sirpa-Helena Sormunen 4,992 - -
Total 19,678 - -

* The share delivery will take place after the Remuneration Report 2021 publication.
** The estimated number of shares after deduction of local taxes and tax-related expenses. Due to local legislation, share rights will be paid in cash instead of shares.

Pensions

Members of Fortum Executive Management in Finland participate in the Finnish TyEL pension system, which provides for a retirement benefit based on earnings in accordance with the prescribed statutory system.

In the Finnish pension system earnings are based on base pay, annual bonuses, and taxable fringe benefits, but gains realised from the LTI plans are not included. Members of the Fortum Executive Management outside Finland participate in pension systems based on statutory pension arrangements and market practices in their local countries.

In addition to the statutory pensions, the members of the Fortum Executive Management have supplementary pension arrangements. The Group principle is that all new supplementary pension arrangements for the President and CEO as well as the Fortum Executive Management are defined contribution plans.

The retirement age for the President and CEO is determined in accordance with the Finnish Employees’ Pension Act. For the other members of the Fortum Executive Management, the retirement age varies between 62 and 65. For the members of the Fortum Executive Management, the maximum supplementary pension premium is 25% of the annual base salary. For members joining the Fortum Executive Management after the end of the year 2016 as well as for those current members to whom the premium has been below 20% of the annual salary, the pension premium is 20% of the annual base salary as of 1 January 2017. For the President and CEO, the pension premium is 20% of the annual base salary. Finnish members of the Fortum Executive Management, who joined Fortum prior to 1 January 2009, are entitled to a supplementary defined benefit pension plan. This currently applies to only one member of the Fortum Executive Management and in this case, the pension is provided by Fortum’s Pension Fund.

Incentive schemes

Short-term incentives (STI)

Fortum’s STI programme is designed to support the achievement of the company’s financial and other relevant targets on an annual basis. As the main principle, all employees are covered by the programme or alternatively by a business-specific or a comparable local variable pay arrangement.

The STI programmes are designed to reward for achievement of the company, division, unit, function, team, and individual performance. The STI target and maximum incentive potential %:s (on top of base salary) depend on the position and reflect the possibility to influence company performance. The incentive potential %:s may vary to reflect the local market practice as well as specific the nature of the position.

The Group performance measures, weightings, and targets for the selected measures are set annually by the Board of Directors to ensure that they continue to support the strategy.

Long-term incentives (LTI)

The purpose of Fortum’s long-term incentive programme is to support the delivery of sustainable long-term performance, align the interests of management with those of shareholders, and support in committing and retaining key individuals.

Fortum’s LTI programme provides participants with the opportunity to earn company shares. Under the LTI programme and subject to the decision of the Board of Directors, a new LTI plan commences annually.

The Board of Directors approves the participation of the Fortum Executive Management members in each annually commencing LTI plan. Subject to a decision by the Board of Directors the President and CEO is authorised to decide on individual participants and potential maximum awards for other participants than the Fortum Executive Management in accordance with the nomination guidelines approved by the Board of Directors. Participation in the LTI plan precludes the individual from being a member in the Fortum Personnel Fund.

Fortum’s LTI programme consists of annually commencing LTI plans with a three-year performance period. Performance measures, weightings, and targets are set by the Board of Directors to ensure that they support the strategy and typically include financial or share-price related, and sustainability measures. Following the end of the performance period the Board of Directors reviews the performance and determines the extent to which each of the targets has been achieved, to determine the final pay-out level. The LTI is allocated based on a maximum number of shares.

Employee share savings programme – forShares

The purpose of Fortum’s employee share savings programme, forShares, is to motivate employees to invest and retain ownership in the company. The programme consists of annually commencing savings periods, during which employees can save a proportion of their salaries and the accrued savings can be used for the purchase of Fortum shares. After a holding period, the participants will be granted matching shares for the purchased savings shares. Based on the decision by the Board of Directors, the matching ratio for the 2021 and 2022 savings periods is 2:1. The participation rate in the 2021 savings period was 43% of the eligible employees and in the 2022 savings period 45%.

Fortum Personnel Fund

Fortum employees in Finland, who do not participate in the long-term incentive programme are eligible for the Fortum Personnel Fund. The amount paid annually to the Personnel Fund is based on the achievement of the annual targets. The payments to the fund in 2021 totalled EUR 0.42 million (EUR 1.7 million in 2020).

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