The Nomination and Compensation Committee reviews the President and CEO’s performance. Based on this review and other relevant facts, the Board determines the total compensation package paid to the President and CEO.
The compensation package includes base salary, fringe benefits, pension scheme, a performance-related bonus scheme and a long term performance related share plan. The President and CEO’s bonus scheme is based on Group Profitability and Growth, and the maximum bonus is 50 percent of the President and CEO’s annual base salary. Additionally, the Board of Directors can, but is not required to, set certain strategic targets that can trigger an additional bonus, which can be a maximum of 50 percent of the President and CEO’s annual base salary.
The new 2012 pension scheme of the President and CEO sets his retirement age at 63 years and the defined contribution payment at 18.6% of his annual salary, excluding performance based compensation (annual or long-term incentives). The new scheme replaces the earlier one, which set the retirement age at 60 and a target pension level 60%.
The annual salary and benefits paid to the President and CEO in 2012 and 2011 are shown in the following table.
As part of his temporary relocation to Singapore, the President and CEO's monthly salary was amended to EUR 40,000.00 a month as of 1st of August 2012. In addition to his monhtly salary, he has standard work-related benefits (e.g. mobile phone) and is compensated for his housing and travelling expenses.
Konecranes has a loan receivable of EUR 221,725.43 from President and CEO Pekka Lundmark, with an interest rate of 12 month euribor + 1 percentage point. The interest rate is adjusted annually on the 5th of November or the respective next banking day.The loan relates to a tax payment resulting from the incentive scheme directed to the President and CEO in 2006. There is a tax appeal pending against the imposed payment and the loan is effective until the appeal process is concluded.
The Konecranes executives established a company named KCR Management Oy in May 2009. KCR Management Oy acquired 517,696 Konecranes Plc shares from the market. The acquisition was financed by capital investments by the executives, in the total approximate amount of EUR 1.3 million, as well as by a loan in the approximate amount of EUR 7.1 million provided by Konecranes Plc. KCR Management Oy was owned by the executives who belonged to the Group Extended Management Team upon the establishment of KCR Management Oy.
According to the agreements governing KCR Management Oy, KCR Management Oy had an obligation to repay the loan granted by Konecranes Plc prematurely in case the share price of Konecranes Plc other than temporarily exceeds a certain level determined in the agreements. This condition was met in December 2010. The Board of Directors of Konecranes Plc decided that the loan will be repaid through a share swap whereby Konecranes Plc acquired all the shares in KCR Management Oy. President and CEO Pekka Lundmark had a 27.9 percent share in KCR Management Oy and as result of the share swap he received 83,606 Konecranes shares (see item 5 in the table above).
KCR Management Oy was merged to Konecranes Plc effective on December 31, 2011.