Remuneration

Fortum's AGM 2023 resoved according to the Shareholders' Nomination Board proposal that the fees for the members of the Board of Directors remain unchanged as follows:

The annual fee for the Board work of the Board members is paid in company shares and in cash in such a way that approximately 40% of the amount of the annual fee is payable in shares acquired on behalf and in the name of the Board members, and the remainder in cash. The company pays the costs and the transfer tax related to the purchase of the company shares. The meeting fees and the fixed fees for the Committee work are paid fully in cash.

Update to Fortum's Remuneration Report 2022

Fortum published the Remuneration Report for the company’s governing bodies for 2022 on its website on 3 March 2023, and it was presented to the Annual General Meeting of Fortum held on 13 April 2023 in accordance with the Finnish Companies Act. The AGM resolved to reject the Remuneration Report in an advisory vote. After the meeting, Fortum's new Board reassessed the implementation of the remuneration restrictions imposed by the Bridge financing agreement with the Finnish State last autumn and changed the interpretation made by the previous Board of Directors.

On 2 May 2023, Fortum published a stock exchange release on the matter. After the decision by the new Board, the Remuneration Report that was previously published, and considered by the Annual General Meeting on 13 April 2023, is no longer up to date.

The stock exchange release published by Fortum on 2 May 2023 is summarized below:

Following a discussion at Fortum’s Annual General Meeting on 13 April 2023, the AGM decided to reject the advisory decision on the Remuneration Report for the company’s governing bodies for 2022. Fortum’s newly appointed Board of Directors has now reassessed the implementation of the remuneration restrictions set forth in the Bridge financing arrangement with the Finnish State last fall.

According to the terms of the arrangement, fixed salaries of the Fortum Leadership Team will not be increased in 2022 and 2023, nor will members of the Leadership Team receive short or long-term performance bonuses for those years. These restrictions have been fully implemented already.

On the long-term share incentive plans, the Board has decided that the results of all years will be measured, but no shares can be earned in 2022 and 2023. Thus, the maximum number of shares the members of the Fortum Leadership Team can earn will be cut to 1/3 or 2/3 in accordance with the remuneration restriction. This leads to an outcome of 9% of the pre-restriction maximum in the 2020–2022 plan, with delivery scheduled for the spring of 2024. By comparison, the outcome for other participants in the 2020–2022 plan was 14% and paid in spring 2023. The same principle applies to all other share plans that are ongoing during 2022 and/or 2023.

Fortum's Leadership Team have informed the Board that they will voluntarily waive the shares that are scheduled for delivery in spring 2024.

As such the bridge financing agreement is no longer valid since Fortum has paid the tranche drawn in full. Fortum’s financial standing is solid and there is no need for the bridge financing any longer. Nevertheless, the restrictions on executive pay for the years 2022 and 2023 continue to apply.

Based on the decisions of the Board of Directors and the members of the Fortum Leadership Team, Fortum supplemented and restated the information presented in the 2022 Remuneration Report and presents it in the updated Remuneration Report as well as on this website. Link to Fortum Remuneration Report 2022

On 6 September 2022, Fortum signed a bridge financing arrangement with the Finnish state to cover the collateral needs in the Nordic power commodity market. The arrangement also contains certain restrictions regarding management remuneration. The fixed salaries of Fortum Executive Management as well as the fees to be paid to the Board of Directors will not be increased in 2022 (as of the signing date of the agreement) and 2023. The members of Fortum Executive Management will also not be paid any short or long-term incentives (STI and LTI programmes) that are accumulated in 2022 and 2023.

On 21 September 2022, Fortum, the German Government and Uniper signed an agreement in principle by which Fortum would sell its shares in Uniper SE to the German State. Since March 2020, Fortum had been the majority owner in Uniper SE and Uniper was consolidated as a subsidiary. According to the agreement in principle, Fortum fully divested its ownership in Uniper to the German State which resulted in Fortum losing control of Uniper and deconsolidating Uniper from the third quarter of 2022. The divested businesses included all operations in Fortum’s Uniper segment. The agreement was completed on 21 December 2022. Due to the divestment of Uniper, the ESG targets regarding on-going long-term incentive plans were adjusted in early 2023. Concerning the short-term incentive plan 2022, Fortum’s stand-alone segments reached overall good results, but Uniper being included in the target setting led to the situation where Group’s result did not reach the set threshold level. Therefore the total short-term incentives were cut by 50%.

The Board members are not in an employment relationship or service contract with Fortum and therefore they have not been given the opportunity to participate in Fortum’s STI or LTI programmes, nor has Fortum had a pension plan in which they could have opted to take part. The travel expenses are compensated to the members of the Board of Directors in accordance with Fortum’s travel policy.

On 28 March 2022, the AGM confirmed the following fees for the members of the Board of Directors:

As a new element, the annual fee for the Board work of the Board members was paid in company shares and in cash in such a way that approximately 40% of the amount of the annual fee was payable in shares acquired on behalf and in the name of the Board members, and the remainder in cash. The company paid the costs and the transfer tax related to the purchase of the company shares. The meeting fees and the fixed fees for the Committee work were paid fully in cash.

During 2022, Fortum’s operating environment changed drastically by Russia’s attack on Ukraine and the effects from the consequent European energy crisis, due to which the number of Board meetings increased in 2022 compared to previous year. In 2022, there were a total of 42 Board meetings, while in 2021 the number of meetings was 18 in total. Furthermore, the Board of Directors established temporary committees on liquidity and on geopolitical escalation. The change in the number of Board meetings is reflected in the compensation amounts paid to the members of the Board of Directors in 2022.

In line with the Solidium bridge financing facility with the Finnish State, the fees to be paid to the Board of Directors will not be increased in 2022 (as of the signing date of the agreement) and 2023.

Fees paid to the members of the Board of Directors in 2022

1) The amounts stated in the table also include the fixed annual fees paid in January-March 2022 based on the resolutions of the 2021 Annual General Meeting.

Fees paid to the members of the Board of Directors 2018-2022

1) Excluding annual fixed Committee fee

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 President and CEO Markus Rauramo are in line with Fortum’s Remuneration policy for the governing bodies. The malus and clawback provisions for the President and CEO were not utilised in 2022. As resolved by the Board of Directors, the variable elements in total (STI and LTI pay-outs) are limited to a maximum of 120% of the individual’s annual fixed compensation. The maximum STI is limited to 40% of the annual fixed compensation. In accordance with the Solidium bridge financing facility with the Finnish State, Markus Rauramo will not be paid the short- or long-term incentives (STI and LTI programmes) that accumulated in 2022 and 2023. Read more about the Remuneration and Terms of the Service Contract of the President and CEO

1) In accordance with the Solidium bridge financing facility with the Finnish state, the STI earned in 2022 was not paid.
2) President and CEO Markus Rauramo has decided to waive the LTI rewards from the 2020–2022 and the 2021–2023 LTI plans, thus no LTI rewards shall be paid to Markus Rauramo in 2024.

Summary of granted, earned and paid share-based incentives to the President and CEO

1) The number of shares granted (gross) has been revised taking into account the remuneration restrictions regarding leadership team members in 2022 and 2023. 2020–2022: original maximum number of shares granted and shares pro-rated 1/3; 2021–2023 and 2022–2024: original maximum number of shares granted and shares pro-rated 2/3.
2) President and CEO Markus Rauramo has decided to waive the LTI reward from the 2020–2022 LTI plan, thus no shares shall be delivered to Markus Rauramo in 2024.
3) The outcome of the 2021–2023 LTI plan shall be confirmed in spring 2024. President and CEO Markus Rauramo has decided to waive the LTI reward from the 2021–2023 LTI plan, thus no shares shall be delivered to Markus Rauramo in 2024.
4) The allocation of shares for the 2023-2025 LTI plan will take place after publication of the Remuneration Report 2022.
5) The Fortum shareholding of the President and CEO as of 31 dec, 2022 was 112,739 shares in total meeting shareholding requirement set for the role.

In addition to the information provided in the tables, President and CEO Markus Rauramo received compensation for serving as the Chair of the Supervisory Board of Uniper SE. The compensation for serving on Uniper’s Supervisory Board was paid according to the policies in force at Uniper. The fee for the service as the Chair until 21 December 2022 was EUR 204,247. In connection with the change in this Supervisory Board role in 2021, the Board of Directors of Fortum resolved that Markus Rauramo’s total compensation would not increase due to the changing role, and therefore the excess of the compensation paid based on the Deputy Chair role will be decreased from the Fortum incentive payments. In accordance with the terms of the Solidium bridge financing facility with the Finnish State, the President and CEO will not be paid any short- or long-term incentives that are accumulated in 2022 and 2023. Therefore, the Board of Directors resolved earlier that the agreed deduction will be done from the LTI payment in spring 2024. As Markus Rauramo has decided to waive the LTI rewards from the 2020–2022 and 2021–2023 LTI plans and no LTI rewards shall be paid in 2024, Board of Directors resolved that the agreed deduction will be done from the incentive payments scheduled to be made in spring 2025.

Markus Rauramo participated in the 2022 savings period of the forShares Employee Share Savings (ESS) programme. Rauramo has also participated in the 2020 ESS programme in which the holding period of the purchased shares ended at the end of 2022. Based on the participation in the ESS programme in 2020 and the number of ESS shares held on 31 December 2022, the President and CEO earned a total of 280 matching shares (gross). The delivery of the net number of matching shares (149 shares in total) took place in March 2023.

Performance outcomes

Short-term incentives for 2021

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 (including Uniper) LTIF for 2021 was 1.5, which was 2% of the maximum.

In 2021, President and CEO Markus Rauramo had one joint Fortum Executive Management (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 the 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 the individual targets reached 64% of the maximum.

The earned incentives for the year 2021 were paid in April 2022 based on the decision by the Board of Directors made in March 2022. 

Short-term incentives for 2022

Group (including Uniper) level comparable operating profit + share of profits from associated and joint venture (CompOP) 2022 did not reach the set minimum level. The outcome of Fortum Group’s severity rate per total recordable injuries and completion of the safety leadership trainings for 2022 was 57% and the weighted outcome was 5.7%.

In 2022, President and CEO Markus Rauramo had two joint FEM targets and one individual target. These targets related to the structural changes in Fortum Group, various strategic projects and the review of Fortum Group strategy. The STI outcome of these joint FEM and individual targets reached 44% of the maximum.

n accordance with the Solidium bridge financing facility with the Finnish State, President and CEO Markus Rauramo was not paid the short-term incentives earned in 2022. In case the short-term incentives had been paid, 50% of the total outcome would have been cut because Group’s result did not reach the set threshold level.

2019–2021 Long-term incentive plan

The performance measure for the 2019–2021 LTI plan was the relative TSR measured against a European utilities peer group. The outcome of the 2019–2021 LTI plan was 46% of the maximum. The share delivery took place in March 2022 based on the decision by the Board of Directors made in March 2022.

2020–2022 Long-term incentive plan

The performance measures for the 2020–2022 LTI plan were the relative TSR measured against a European utilities peer group and the ESG target. The ESG target related to the reduction of Fortum’s CO2 emissions and the reduction of coal-based power generation capacity aligned with Fortum’s strategy.

In accordance with the Solidium bridge financing facility with the Finnish State, President and CEO Markus Rauramo will not be paid any long-term incentives accumulated in 2022. Therefore the maximum number of shares granted was pro-rated taking into account the remuneration restriction for year 2022. The outcome of the performance measures for the 2020–2022 LTI plan was measured normally taking into account the whole three-year earning period. The outcome of the relative TSR was 0% and the outcome of ESG target was 14%, resulting in an overall outcome of 14% of the maximum for the 2020–2022 LTI plan. Taking into account the pro-ration, the final earning led to 9% of the original maximum number of shares granted.

President and CEO Markus Rauramo has decided to waive the LTI reward from the 2020–2022 LTI plan, thus no LTI reward shall be paid to Markus Rauramo in 2024.

2021–2023 Long-term incentive plan

The performance measures for the 2021–2023 LTI plan are the relative TSR measured against a European utilities peer group and the ESG target, which is linked to the reduction of Fortum’s coal-based power generation capacity in line with Fortum’s coal-exit path.

In accordance with the Solidium bridge financing facility with the Finnish State, President and CEO Markus Rauramo will not be paid any long-term incentives accumulated in 2022 and 2023. Therefore the maximum number of shares granted was pro-rated taking into account the remuneration restrictions for years 2022 and 2023. The outcome of the performance measures for the 2021–2023 LTI plan shall be measured normally taking into account the whole three-year earning period. The outcome of the 2021-2023 LTI plan shall be confirmed in spring 2024. President and CEO Markus Rauramo has decided to waive the LTI reward from the 2021–2023 LTI plan, thus no LTI reward shall be paid to Markus Rauramo in the spring of 2024.

Remuneration of other Fortum Executive Management (excl. the President and CEO) in 2018-2022

The figures in the table above include the following change in Fortum Executive Management in 2022: Alexander Chuvaev, the head of Fortum Russia division and the CEO of subsidiary PAO Fortum, stepped down from Fortum Executive Management as of 1 September 2022.

In addition to the information provided in the table above, Bernhard Günther and Nora Steiner-Forsberg also served as members of the Supervisory Board of Uniper SE until 21 December 2022. They received compensation for their roles in the Supervisory Board of Uniper SE amounting to a total of EUR 213,205.

In accordance with the terms of the Solidium bridge financing facility with the Finnish State, Fortum Executive Management will not be paid the short-term incentives earned in 2022 (In case the short-term incentives earned in 2022 had been paid, 50% of the total outcome would have been cut because Group’s result did not reach the set threshold level) and 2023, and their salaries will not be increased in 2022 (as of the signing date of the agreement) and 2023. Furthermore, the FEM members will not be paid the long-term incentives accumulated in 2022 and 2023. Therefore the maximum number of shares granted was pro-rated taking into account the remuneration restrictions for years 2022 and 2023. The outcome of the performance measures for the 2020–2022 and 2021-2023 LTI plans are measured normally, taking into account the whole three-year earning period. The overall outcome of the 2020–2022 LTI plan was 14% of the maximum. The outcome of the 2021–2023 LTI plan shall be confirmed in spring 2024. Leadership Team members have decided to waive the LTI rewards from the 2020–2022 and 2021–2023 LTI plans, thus no LTI rewards shall be paid to Leadership Team members in 2024.

All five of the current FEM members (excl. the President and CEO) who were employed by the company in 2020 participated in the 2020 Employee Share Savings (ESS) programme in which the holding period of the shares purchased ended at the end of 2022. Based on the participation in the ESS programme in 2020 and the number of ESS shares held on 31 December 2022, the FEM members earned a total of 611 matching shares (gross). The delivery of the net number of the matching shares (361 shares in total) took place in March 2023.

Information on incentive plans

The Group-level metrics and outcomes of the short-term incentive plans 2021 and 2022 are described on Fortum Remuneration 2022 on page 6.

For 2023, the Group-level STI targets are based on the achievement of the Group financial performance, divisional targets, as well as individual or team targets (as in 2022). The STI performance measures are comparable operating profit + share of profits from associates and joint ventures (50% weight), the ESG target (20% weight), and individual or team targets (30% weight). The ESG target consists of the customer satisfaction index (10% weight) and the safety target, which includes management safety leadership training (5% weight) as well as identification and completion of key safety actions to improve the safety culture (5% weight). The growing importance of the ESG targets in the incentive schemes has been taken into account, thus the weight of the ESG target has been increased by 10% compared to the STI structure for 2022 and the weight of the financial target (CompOP) has been decreased respectively. In addition, ESG targets are encouraged to be included as part of the individual/team targets whenever feasible in the role. In the Remuneration policy for the governing bodies approved in 2020, the weight of the financial target in STI structure is set at 60% of the maximum. This will be taken into account when reviewing the Remuneration policy during 2023. The reviewed Remuneration policy will be submitted to AGM 2024.

Fortum’s LTI programme consists of the annually commencing LTI plans with a three-year performance period. The relative TSR measured against a peer group of European utilities, has been the financial target in the LTI programme since 2019. Fortum introduced an ESG related target as part of the LTI target setting for the first time in the 2020–2022 LTI plan. The ESG target in that plan was related to the reduction of Fortum’s CO2 emissions and the reduction of coal-based power generation capacity aligned with Fortum’s strategy. Due to the divestment of Uniper, the ESG target was adjusted accordingly.

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. The ESG target was adjusted in early 2023 due to the divestment of Uniper.

In the 2022–2024 LTI plan, the ESG target is related to the reduction of the 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 remained as a measure in the plan. The ESG target was adjusted in early 2023 due to the divestment of Uniper.

In the 2023–2025 LTI plan, the ESG target is linked to emission reduction targets based on the climate science (SBTi 1.5°C) and related to emissions in Europe, and Fortum’s reputation index development among key stakeholders. The relative TSR measured against a peer group of European utilities remains as a measure in the plan.

Fortum has decided that it will pursue a controlled exit from the Russian market, with potential divestments of its Russian operations as the preferred path. Thus Russia is not included in target setting regarding the ongoing incentive plans.

Since 2020, Fortum has also had 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 threeyear plan period in accordance with the customary LTI plan, but the plan is excluded from the performance targets. On 31 December 2022, the amount of the shares allocated was 28,500 in the RSP 2020–2022, 14,500 in the RSP 2021–2023 and 15,700 in the RSP 2022–2024. The delivery of the shares regarding RSP 2020–2022 took place in March 2023.

1) Leadership Team members have decided to waive the LTI rewards from the 2020–2022 and 2021–2023 LTI plans. Therefore, no shares shall be delivered to Leadership Team members in 2024.
2) The number of shares granted presents the situation on 31 December 2022 (the remuneration restrictions regarding the FEM members in 2022 and 2023 have also been taken into account).
3) The share delivery was taken place after the publication of the Remuneration Report 2022.
4) The allocation of the shares for the 2023–2025 LTI plan will take place after the publication of the Remuneration Report 2022.

Number of shares delivered to the Fortum Executive Management

1) Leadership Team members have decided to waive the LTI rewards from the 2020–2022 and 2021–2023 LTI plans. Therefore, no shares shall be delivered to Leadership Team members in 2024.
2) Per Langer stepped down from the Leadership Team as of 31 March 2023.
3) The estimated number of the shares after deduction of the local taxes and tax related expenses. Due to local legislation, share rights were paid in cash instead of shares.

In addition to the information provided in the table above, Nebahat Albayrak has participated in the RSP 2020-2022. In accordance with the RSP terms and conditions, a total of 2,677 shares (net) were delivered to Nebahat Albayrak in March 2023.

Members of Fortum Leadership Team 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.

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

Regarding the present Fortum Leadership Team valid as of 31 March, 2023, the retirement age is typically determined in accordance with the local legislation, in Finland in accordance with the Finnish Employees’ Pension Act. This applies also to the President and CEO. Additionally, for three executives the retirement age is 63. In Finland Fortum Leadership Team members (excl. two executives who are in the Fortum Pension Fund) have supplementary defined benefit pension plan. The premium of the supplementary defined benefit pension plan is 20% of the annual base salary. If executive’s contract is terminated before the retirement age, the executive who has the supplementary defined benefit pension plan is entitled to retain the funds that have accrued in the pension arrangement up to that time.

Members of the Fortum Leadership Team outside Finland participate in pension systems based on statutory pension arrangements and market practices in their local countries.

Short-term incentives (STI)

Fortum’s STI programme is designed to support the achievement of the company’s annual financial, strategic and sustainability targets. 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 performance measures, weightings and targets for Leadership Team are set by the Board of Directors. The amount of incentives depends on the achievement of Group’s financial result as well as the achievement of unit and individual targets. The maximum STI is limited to 40% of the annual fixed compensation. The Board of Directors regularly reviews the performance of the President and CEO and other Fortum Leadership Team members.

Remuneration of other personnel is based on the targets of Group, unit or function and individual and team targets. Targets are set in Development Discussions held at the beginning of the year. Rewards for short-term incentive programmes are paid in cash.

In addition to the short-term incentive programme, other variable reward mechanisms can be used in limited, precisely defined cases. Such mechanisms can be, for example, project and recognition fees.

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 Leadership Team 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 Leadership Team 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.

Since 2020, Fortum has also had 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 the performance targets.

Employee Share Savings programme – forShares

The purpose of Fortum’s Employee Share Savings programme, forShares, is to motivate employees to invest in Fortum shares and retain ownership in the company. The programme consists of annually commencing savings periods, and the annual launch of each period is separately resolved by the Board of Directors. The participants of the ESS programme will invest a part of their monthly salary, and based on this investment they will, as a gross reward, be granted matching shares for the purchased savings shares after approximately three years from the beginning of the savings period.

Based on the decision by the Board of Directors, the matching ratio for the 2022 and 2023 savings periods is 2:1. The employee participation rate in the 2022 savings period was 45% of the eligible employees and 35% in the 2023 savings period.

Due to the restrictions regarding management remuneration as a part of the terms of the Solidium bridge financing facility with the Finnish State, Fortum assessed and concluded that Fortum Leadership Team does not participate in the ESS programme 2023 (excl. new Leadership Team members who have started in Fortum Leadership Team as of 31 March 2023).

The holding period for the shares purchased under the 2020 ESS programme ended at the end of 2022. The participants have earned matching shares (gross) according to the terms and conditions of the programme. The matching ratio for the 2020 savings period was 2:1. The delivery of the net number of the matching shares took place in the spring of 2023.

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 2022 totalled EUR 4.3 million (EUR 0.42 million in 2021).