The purpose of Fortum’s long-term incentive system (LTI), i.e. share bonus system, is to support the achievement of the Group’s long-term targets by committing key individuals. The Board of Directors approves the Fortum management members and key individuals entitled to participate in the share bonus system. For the share bonus system 2014–2019 there are currently approximately one hundred participants. Participation in the system precludes the individual from being a member in the Fortum Personnel Fund.
Fortum’s share bonus system is divided into six-year share plans, within which participants have the opportunity to earn
company shares. A new plan commences yearly, if the Board of Directors so decides.
Each share plan begins with a three-calendar- year period, during which participants may earn share rights if the earnings criteria set by the Board of Directors are fulfilled. For the earnings period 2014–2016 the approved key earning criteria are based on earnings per share (EPS), return for shareholders and reputation index.
Share bonus systems
After the earning period has ended and the relevant taxes and other employment-related expenses have been deducted from the gross value of the earned share rights, participants are paid the net balance of the earned rights in the form of shares. The earning period is followed by a subsequent lock-up period, during which participants cannot transfer or dispose of the shares. If the value of the shares decrease or increase during the lock- up period, the potential loss or gain is carried by the participants.
For the Fortum Executive Management Team members, the lock-up period may be shortened to one year on an individual basis if the value of the aggregate ownership of Fortum shares corresponds to a minimum of the annual base salary. For other participants, the share bonus systems lock-up period is changed to one year from Plan 2013–2018 onwards.
The maximum value of shares, before taxation, to be delivered to a participant after the earning period cannot exceed the participant’s annual salary.
Fortum’s current long-term incentive system is in line with the statement on the remuneration of executive management and key individuals in companies with State ownership and the Finnish Corporate Governance Code 2010 for listed companies. PCA Corporate Finance, an independent Finnish financial advisor, has been consulted in matters related to remuneration.