Our share-based incentive programs offer the possibility of receiving Outokumpu shares as an incentive, provided that the criteria set by the Board for each earnings period are met.
Share-based incentive programs
For key personnel, on top of the short-term incentives, the company's regular long-term incentives consist of the Performance Share Plan (PSP) and Restricted Share Pool (RSP). The objective of the programs is to reward selected employees for good performance which supports Outokumpu's strategy, to engage them and to form part of a competitive compensation package. The purpose of the programs is also to direct the employees' attention to achieving Outokumpu's financial targets and increasing shareholder value over a longer period of time. Outokumpu has currently no active stock option programs.
Outokumpu has also two Matching Share Plans, one for the CEO and one for a limited number of other key management. The plans were introduced to emphasize shareholder value creation, enforce an ownership culture and to incentivize the achievement of the 2020 vision.
Outokumpu’s next plan period 2019–2021 for share-based program
As part of the long-term incentive programs for key employees in Outokumpu, the Board of Directors has in December 2018 approved the commencement of Outokumpu’s share-based program for the period 2019–2021, Performance Share Plan. The plan commences at the beginning of 2019, and the share rewards will be distributed in spring 2022.
The earning criterion for this period measures Outokumpu's profitability and the efficiency with which its capital is employed compared to a peer group. The maximum number of participants in the plan period 2019–2021 is 150 key employees. The maximum number of gross shares (taxes included) that can be allocated is 2,900,000. The share rewards will be distributed in spring 2022 if the performance criterion is met. Applicable taxes will be deducted from gross shares, and the remaining net value will be delivered to the participants in Outokumpu shares.
Performance Share Plan 2012
In 2012, the Board of Directors established a share-based incentive plan, the Performance Share Plan 2012 as part of the remuneration and commitment program for Outokumpu’s key management. The Performance Share Plan consists of annually commencing performance share plans, each of which includes a three-year earnings period, after which any share rewards earned will be delivered to the participants.
The third plan of the Performance Share Plan, covering years 2014–2016, ended on December 31, 2016. The criteria set for the plan consisted of profitability and cash flow improvement as well as the improvement of the return on the capital employed for 2016. Based on the achievement of the targets, the participants received 75.6% of the target number of shares as a reward. After deductions for applicable taxes, altogether 293,761 shares were delivered to 84 persons in March 2017. Of those 293,761 shares, 69,393 shares were delivered to the Leadership Team members. Outokumpu used its treasury shares for the reward payment, which meant that the total number of shares of the company did not change.
Restricted Share Pool 2012
The Board of Directors established in 2012 a Restricted Share Pool program, which is part of the remuneration and commitment program for selected key resources of Outokumpu. It consists of annually commencing plans with a three-year vesting period, after which the allocated share rewards will be delivered to the participants provided that their employment with Outokumpu continues uninterrupted throughout the duration of the plan and until the shares are delivered. Restricted share grants are approved annually by the CEO, with the exception of any allocations to Leadership Team members, which will be approved by the Board of Directors.
The third plan of the Restricted Share Pool 2012, covering years 2014–2016, ended on December 31, 2016. After deductions for applicable taxes, in total 10,557 shares were delivered to two participants of the plan in March 2017. No shares were delivered to Leadership Team members based on the 2014–2016 plan. Outokumpu used its treasury shares for the reward payment, which meant that the total number of shares of the company did not change.
Matching Share Plan for the CEO
The CEO is part of a Matching Share Plan according to which he is entitled to receive in total 1,157,156 gross shares including taxes on the condition that he personally invested EUR 1 million into Outokumpu shares by February 20, 2016. The matching shares will be delivered in four equal instalments at the end of 2016, 2017, 2018 and 2019, respectively.
The third vesting portion, in total 185,077 shares after deduction of the applicable taxes, was delivered to the CEO at the end of December 2018. Under the Matching Share Plan, the CEO is required to keep at least all the shares he has acquired and the first vesting portion paid at the end of December 2016 throughout his service with Outokumpu. If the CEO’s service contract is terminated without any fault or negligence attributable to him, all the unvested matching shares (i.e. shares not yet delivered) will vest at the expiry of the CEO agreement, provided that the ownership requirement for the CEO is fulfilled.
Matching Share Plan for management
The Board of Directors of Outokumpu established in 2016 a Matching Share Plan program for key management for the years 2016–2020 in order to emphasize shareholder value creation, enforce an ownership culture and to incentivize the achievement of the 2020 vision.
According to the plan, the participants have invested an amount corresponding to 30–120% of their annual gross base salary into Outokumpu shares. Outokumpu will match each share acquired by the participant with two gross shares from which the applicable taxes will be deducted and the remaining net number of shares will be delivered to the participant. The matching shares will be delivered in four equal installments at the end of 2017, 2018, 2019 and 2020, respectively. In order to receive the matching shares, the participants are required to keep all of the shares they have acquired until the vesting of each matching share tranche.
The Board of Directors has in December 2018 approved the delivery of the second reward from the Matching Share Plan for Management and third reward to the CEO by the end of December 2018. After deduction for applicable taxes, the total net number of shares delivered will be 466,135, of which 185,077 will be delivered to the CEO. Outokumpu will use its treasury shares for the reward payments, so the total number of shares of the company will not change.
Share rewards paid from the share-based incentive plans
Outokumpu announced in February 2018 that 415,873 shares will be paid as rewards based on the results of the plan 2015–2017 of the Performance Share Plan and 12,139 shares as rewards from the plan 2015–2017 of the Restricted Share Pool, altogether 428,012 share rewards.
According to the share ownership plan of the Outokumpu Group, the members of the Leadership Team are obliged to own Outokumpu shares received under share-based incentive programs to the value of their annual gross base salary. 50% of the net shares received from the Performance Share Plan, Restricted Share Pool and Matching Share Plan programs described above must be used to fulfill the above ownership requirement.