Remuneration Statement 2022
Stockmann's Corporate Governace Report 2022
Stockmann's Remuneration Report 2022
Introduction
The remuneration report describes the remuneration of Stockmann plc’s governing bodies in accordance with the requirements of the Finnish Securities Markets Act, the Finnish Limited Liability Companies Act and the Finnish Corporate Governance Code 2020 (“Code”) issued by the Securities Market Association. Stockmann’s remuneration report for 2022 follows the remuneration policy approved by the Annual General Meeting held on 23 March 2022.
The report presents the information regarding the remuneration of the CEO and members of the Board of Directors for the financial year 2022. It also describes the trend in employees’ average salary and the company’s profit over the last five years compared with the remuneration paid to the CEO and the members of the Board of Directors.
Remuneration paid in 2022, and reported here, fully complies with the remuneration structures and principles set in the Remuneration Policy 2022. There was no deviation from the remuneration policy.
Letter from the Chair of the Personnel and Compensation Committee
Year 2022 was remarkable for Stockmann Group. Our greatest achievements were positive annual cash flow, full payment of undisputed restructuring debt and making a decision to improve Lindex logistics efficiency by investing EUR 110 million in omnichannel distribution centre over the next three years. The sale of the Stockmann properties and the payment of the debt lays the foundation for growing the company and achieving a sustainable level of profitability (for both divisions).
In order to attract and retain a highly motivated and competent personnel, Stockmann aims to offer its employees a competitive and market-aligned total rewarding, consisting of a performance-based rewarding system aligned with Stockmann’s short-term targets and long-term financial success. The aim for the remuneration is to contribute to achieving sustainable short- and long-term results, the fulfilment of Stockmann’s strategy, values and long-term interests of the shareholders through motivated and result-oriented employees. The remuneration is based on market level alignment, performance, competence, experience and scope/complexity of the role.
In 2022, the Board of Directors of Stockmann plc decided on the establishment of the share-based long-term incentive scheme targeted to the management and selected key personnel of Stockmann and its subsidiaries. The objectives of the performance share plan are to support the implementation of Stockmann’s strategy, to align the interests of the key personnel with those of Stockmann’s shareholders and to retain management and key personnel. The performance targets based on which the potential share reward under PSP 2022–2024 will be paid are total shareholder return, revenue, EBIT and climate neutrality. The Board of Directors of Stockmann decides on the performance criteria, persons authorized to participate in the performance share plan and the amount of the threshold, target and maximum reward separately for each performance period.
I want to express my deepest gratitude to all Stockmann Group team members for the results and developments we have achieved together in 2022 despite the challenges in the operating environment. With our dedicated people we will continue delivering and focusing on executing on our chosen strategies.
Roland Neuwald
Chair of the Board and Personnel & Compensation Committee
Remuneration and the company’s performance over the last five years
The following section describes the trend in the employees’ average salary and the company’s profit over the last five years compared with the remuneration paid to the CEO and the members of the Board of Directors.
Stockmann’s business has undergone rapid change in recent years. The department store business has been renewed and focused on strategic merchandise areas. In 2018, Stockmann sold the Kirjatalo property located in the centre of Helsinki and in 2019 the Nevsky Centre shopping centre in St Petersburg. In 2021, Stockmann sold its department store property in Tallinn, and in 2022 the department store properties in Riga and Helsinki city centre were sold. According to the restructuring programme, the proceeds were used to repay debts. The Lindex business has been developed in accordance with strategy, and Lindex has continued its internationalisation and the development of its online store. The size of the store network has varied slightly from year to year, and at the end of 2022 there were 436 Lindex stores.
In 2020, the coronavirus pandemic had a significant impact on the Group’s result. Due to the pandemic, the authorities imposed restrictions on travel and people gathering, and issued strong recommendations for remote working, which reduced the number of visitors to stores and resulted in a decline in revenue. The growth of e-commerce was robust but nevertheless insufficient to compensate for the decline in store sales. As a result, the Group’s parent company Stockmann plc applied for corporate restructuring in spring 2020. The District Court of Helsinki confirmed its restructuring programme in February 2021. The restructuring programme is based on the continuation of Stockmann’s department store operations, the sale and lease-back of the department store properties located in Helsinki, Tallinn and Riga and the continuation of Lindex’s business operations as a fixed part of the Stockmann Group.
The restructuring process is proceeding according to plan. Stockman’s all department store properties have been sold and the undisputed restructuring debt and interest-bearing debt has been paid during 2022, except for the bond of EUR 67.5 million. Other measures and undertakings, as specified in Stockmann plc’s restructuring programme, were already completed during 2021. There are still disputed claims regarding the termination of lease agreements that must be settled before the restructuring process can end.
At the beginning of 2022, the group’s result was still significantly affected by the spread of the Omicron variant. Depending on the country, the restrictions and confinement imposed by the authorities also affected operations, the presence of employees and thus remuneration.
The remuneration of Stockmann’s Board members is separate from the remuneration systems applied to the CEO, the Management Team and personnel. The Board members do not participate in Stockmann’s incentive or share option schemes directed to key personnel in order to safeguard the Board members’ independence in the performance of their duties. The Board of Directors’ remuneration is determined by the Annual General Meeting. The Annual General Meeting approved an increase in the remuneration of Board members in 2017, and their remuneration has not changed since then.
The Board of Directors decides on the CEO’s salary and other benefits on the basis of proposals by the Personnel and Compensation Committee. The remuneration of the CEO consists of a fixed salary which includes fringe benefits, as well as performance-based incentives which may include short-term and long-term targets. The remuneration criteria for the CEO in 2022 have been reviewed by the Personnel and Compensation Committee. The Personnel and Compensation Committee, appointed by the Board in 2022, reviewed the remuneration of the CEO in comparison with companies of the same size and structure. The remuneration level of the CEO has changed over the five-year period as the CEO has changed.
The information on average salaries of employees is based on the personnel costs of all Stockmann Group companies, that is, on data covering all employees. The remuneration of employees is less variable than that of the CEO, as a smaller part of their total remuneration is based on variable remuneration elements. However, since all short-term incentive systems are, to a varying extent, linked to the same key figures, the company’s performance also affects the remuneration of employees. The average salary of employees in 2022 is mainly influenced by structural changes in the organisation.
Exemptions and clawback
Under the policy, temporary deviation may be considered if the Board of Directors believes, after careful consideration, that the continuation of compliance with the policy (with regard to the CEO’s remuneration) is no longer appropriate or well justified due to changed circumstances. In the assessment of its long-term interests the company may among other aspects take into account its long-term financial success and performance, its competitiveness, safeguarding the undisturbed continuation of its business and the undisturbed implementation of its business strategy and financial targets and/or the development of the shareholder value.
In 2022, there was no deviation from the remuneration policy. In 2022, the company did not use its right to clawback or cancel paid or unpaid incentives.
Remuneration of members of the Board of Directors
The remuneration to the Board members is paid in cash or company shares. The shares acquired for the Board Members in 2022 cannot be transferred until two years from the date of purchase, or until the term of office of the person in question has ended, depending on which of the occasions takes place first.
During the 2022 financial year, EUR 80 000 was paid in fixed fees to the chair of the Board, EUR 50 000 to the vice chair, and EUR 40 000 each to the other Board members, in accordance with the decisions of the General Meeting of 23 March 2022. 40% of the annual remuneration was paid in company shares and the rest in cash mostly covering the taxes. The Chair of the Board was paid EUR 1 100 and members of the Board of Directors were paid a meeting attendance fee of EUR 600 for each Board meeting.
The Chair and the members of the Board Committees were also paid an attendance fee for the Committee meetings. The Chair of the Audit Committee was paid EUR 1 100 and each member was paid EUR 800 as a meeting attendence fee for each meeting of the Audit Committee, and the Chair and each member of the Personnel and Compensation Committee was paid EUR 600 as a meeting atten-dence for each meeting of the Committee.
During the 2022 financial year the Board members were paid a total of EUR 278 300 (2021: 301 600) in cash and 60 134 (2021: 91 791) of the company’s shares. The value of shares was EUR 132 000 (2021: 132 000) on the dates of share purchases. The total value of the remuneration was EUR 410 300 (2021: EUR 433 600).
Financial benefits pertaining to the post of CEO
Jari Latvanen has been Stockmann plc’s CEO since 19 August 2019.
The remuneration of the CEO Jari Latvanen consists of a fixed salary which includes a fringe car and phone benefit, as well as a performance pay system with short-term and long-term targets. The performance pay is tied to financial and other objectives related to the implementation of the strategy. The earning period for the short-term performance pay is a calendar year and the maximum pay-out is 60% of the fixed base salary.
In 2022 the Board of Directors of Stockmann plc decided on the establishment of the share-based long-term incentive scheme targeted to the management and selected key personnel of Stockmann and its subsidiaries. The performance targets based on which the potential share reward under PSP 2022–2024 will be paid are total shareholder return, revenue, EBIT and climate neutrality. CEO’s maximum reward for the ongoing long term incentive plan for performance period 2022-2024 is 212 000 shares including a cash portion intended to cover taxes and tax-related costs arising from the reward. The possible reward is paid in 2025.
In 2022, CEO Jari Latvanen was paid a total remuneration of EUR 604 315. The fixed salary consists of EUR 479 635 in cash and EUR 16 080 in fringe benefits. In addition, he was paid a performace pay of EUR 108 600 from short-term targets due to Lindex’s good result development and Stockmann’s succesful execution of the restructuring programme. The CEO was not given shares or share options as part of remuneration.
Latvanen’s pension accumulates and the retirement age is determined in accordance with Finnish employment pension legislation. The pension will accrue on the basis of the Employees’ Pensions Act. A separate voluntary pension is not paid.
If the company terminates the CEO agreement, the notice period will be 6 months, in addition to which the CEO will be entitled to a severance payment equivalent to 9 months’ pay. If the CEO terminates his agreement, the notice period will be 6 months.
Financial benefits pertaining to other Management Team members
For members of the Group’s Management Team other than the CEO, a total of EUR 1 476 994 was paid in fixed salaries in 2022 (2021: EUR 1 299 769). The fixed salary consists of EUR 1 447 907 in cash and EUR 29 087 in fringe benefits.
The Group Management Team members have a performance pay tied to the Group’s financial and other objectives related to the implementation of the strategy. The earning period for the short-term performance pay is a calendar year, and the performance pay may amount to no more than 30% of the fixed base salary. Due to the performance in 2021, performance pay of EUR 458 147 was paid in 2022 (2020: EUR 308 127).
Stockmann plc does not currently have any share option programmes.
The retirement age of the Management Team members is 63 or 65, depending on the particular executive agreement in question. Two of the Management Team members had an earnings-related pension insurance taken by the company as of the end of 2022. The costs of the insurances in 2022 amounted to EUR 303 670 (2021: 160 912).
The notice period for the Management Team members are mostly 6 months from both sides. If the company terminates the agreement, the Management Team members are in addition entitled to a severance payment equivalent to 3 or 6 months’ pay depending on their agreement in question.
