The ongoing long-term incentive programs and the long-term incentives awarded in 2017-2018 are summarised in the below table.
Ongoing Performance Share Plans
Share-based Incentive Plans 2017
Konecranes establish new long-term incentive plans for the Group key employees and the President and CEO in June 2017. The new share-based incentive plans include a Performance Share Plan 2017 for the Group key employees, a Restricted Share Unit Plan 2017 for selected Group key employees and a Performance Share Plan 2017—2021 for the President and CEO.
The aim of the new incentive plans is to align the objectives of the shareholders and the plan participants, to retain the plan participants at the company, to reward them for achieving Board established targets and to offer them competitive reward plans that are based on earning and accumulating the company’s shares.
Performance Share Plan 2017
The Performance Share Plan includes three performance periods, calendar years 2017—2019, 2018—2020 and 2019—2021. The Board of Directors will resolve on the performance criteria and on the required performance levels for each criterion at the beginning of each performance period.
Performance period 2017—2019
The 2017-2019 plan offers the key employees a possibility to earn reward based on achieving the required performance levels established for the Konecranes Group’s cumulative adjusted Earnings per Share (EPS) during the financial years 2017—2019. Adjustments to the EPS include defined restructuring costs, transaction costs related to the MHPS acquisition, purchase price allocation amortization and other unusual items reported as adjustments by the company. The adjusted EPS includes the gain on the disposal of STAHL CraneSystems.
The rewards to be paid on the basis of the performance period 2017—2019 correspond to an approximate maximum total of 880,000 Konecranes Plc class A shares including also the proportion to be paid in cash. The plan is directed to approximately 260 key employees, including the members of the Group Executive Board and the Senior Management during the performance period 2017—2019. The Board of Directors will be entitled to reduce the rewards payable on the basis of the performance period 2017—2019 if certain reward value cap is reached.
The CEO will have a possibility to earn a total of 48,000 and the other members of the GXB a total of 140,000 Konecranes Plc class A shares including also the proportion to be paid in cash, on the basis of the first performance period 2017-2019 of the Performance Share Plan 2017, if maximum performance level is achieved.
Performance period 2018—2020
The 2018—2020 plan has one criterion: adjusted cumulative EPS of the financial years 2018–2020, including defined restructuring costs, purchase price allocation amortization and certain other unusual items. The plan is directed to approximately 280 key employees, with maximum 710,000 allocated shares. There are two caps on the value of total reward 1) If the reward exceeds 200% of participant’s annual base salary, the exceeding reward will be cut, and 2) If the share price exceeds EUR 56, the exceeding reward will be cut.
Restricted Share Unit Plan 2017
The Restricted Share Unit Plan is directed to selected key employees in Konecranes. The vesting periods will last for 12 to 36 months. The prerequisite for reward payment is that a key employee’s employment or service continues until the end of the vesting period. The rewards to be allocated on the basis of the entire plan will amount to a maximum total of 200,000 Konecranes Plc class A shares including also the proportion to be paid in cash.
Performance Share Plan 2017—2021 for the CEO
The CEO long-term incentive plan consists of one five-year performance period, calendar years 2017—2021. The potential reward from the CEO Plan will be based on the Konecranes Group’s cumulative adjusted Earnings per Share (EPS) during the financial years 2017—2019 and cumulative Earnings per Share (EPS) during the financial years 2020—2021. The rewards to be paid on the basis of the CEO Plan correspond to a maximum total of 200,000 Konecranes Plc class A shares including also the proportion to be paid in cash. However, the shares paid and to be paid as reward, on the basis of the performance periods of the Performance Share Plan 2017, will be deducted from the payable reward.
The CEO will not be entitled to sell shares paid as reward through the Performance Share Plan 2017—2021 for the CEO or the Performance Share Plan 2017 until he owns Konecranes shares worth EUR 750,000.00 in total.
A member of the Group Executive Board or the Senior Management must hold a minimum of 50 per cent of any net shares given on the basis of these plans, until the member’s shareholding in the company in total corresponds to the value of the member’s annual salary and the member’s membership in the Group Executive Board or the Senior Management continues.
The Long-term Incentive Programs ended in 2017-2018
Performance Share Plan 2016
In June 2016, Konecranes launched a new long-term incentive plan 2016 for the key employees of the Konecranes Group. The plan continued the incentive and commitment program for the Konecranes Group key employees. The aim was to combine the objectives of the shareholders and ensure retention during integration planning of Acquisition MHPS and to increase the value of the Company.
Discretionary period 2016–2018
The 2016 plan had two criteria: EBITDA for 2016 and time base. The plan consists of one discretionary period, calendar year 2016.
In the beginning of 2017, the criteria for the plan period was fully met at maximum level and 50 percent of remuneration was paid as shares and 50 percent as cash for taxes. All together 334,239 shares were delivered to participants by the end of August 2017. However, the paid shares could not be sold, transferred, pledged, or otherwise exposed during a restriction period established for the shares. The restriction period began from the reward payment and ended on December 31, 2018.
The members of the GXB, including the President and CEO, have an obligation to continue owning at least 50 percent of the shares they earn annually through the PSP until they own Company shares with a value equal to their annual salary including benefits.
Performance Share Plan 2015
In the beginning of 2015, Konecranes launched a new long-term incentive plan for key employees. The aim was to combine the objectives of the shareholders and the key employees in order to increase the value of the Company, to commit the key employees to the Company, and to offer them a competitive reward plan based on shareholding in the Company. The Board of Directors determined the amount of the maximum reward for each key employee belonging to the target group for the discretionary period.
Discretionary period 2015–2017
The 2015 plan had one criterion: cumulative EPS 2015–2017, excluding restructuring costs. Earned shares were paid out in the first quarter of 2018. All together 49,248 shares were delivered to participants. The members of the GXB, including the President and CEO, have an obligation to continue owning at least 50 percent of the shares they earn annually through the PSP until they own Company shares with a value equal to their annual salary including benefits.
Performance share plans 2017-2018
Employee share savings plan
Konecranes Employee Share Savings Plan (ESSP) is offered to all employees including the management, excepts in countries where it is not possible due to legal or administrative reasons. Participants save a monthly sum of up to 5 percent of their gross salary, which is used to buy Konecranes shares from the market on behalf of the participants. If participants are still in possession of these shares after an approximate three-year holding period, they will receive one matching share for every two initially purchased.
Currently ongoing plan periods began on July 1, 2014, July 1, 2015, September 1, 2016, July 1, 2017 and July 1, 2018. The plan also covers top management. Participation is voluntary for all concerned.