The base salaries and fringe benefits of the Konecranes President and CEO and other Group Executive Board members reflect the performance and individual job responsibilities, experience, skills and knowledge.
Konecranes salaries are defined according to the relevant local market in each country. In terms of base salary, Konecranes aims to be globally at the median of the chosen markets. Base salaries vary between countries and employee groups.
At Konecranes, Managers evaluate their employees’ salaries annually against the Konecranes Rewards Philosophy, ensuring that possible salary increases are allocated effectively to individual employees based on their performance and contribution. The Annual Salary Review Process also applies to Group Executive Board members and senior management who report directly to the CEO and is completed by the Board of Directors.
The Konecranes Group remuneration structure includes an incentive plan. Konecranes short-term incentives are designed to support the Company’s financial success and the employees’ commitment to achieve set targets on a semi-annual or annual basis, depending on the year. Participants, in addition to Senior Management, are decided locally based on the market practice.
Konecranes incentives are typically based on the financial results of the Konecranes Group, business area, business unit and/or a smaller unit, and the employee’s personal performance in comparison to set targets. Incentive criteria may vary but are usually based on the Konecranes Group’s five key performance areas: safety, customer, people, growth, and profitability. Currently, a minimum of 50 percent of all employees’ targets shall be based on financial performance. As for executives, such as business area/unit management or service region/sub-region management, 70–100 percent of the annual incentive is typically based on financial performance.
The amount of the incentive opportunity is defined by the employee’s position in the organization and the geographical location. The actual pay-out is based on the combination of personal and financial performance. The local and global market needs guide the use of incentives in each geographical location, separately.
Konecranes incentive schemes are always based on writ- ten documentation. Quantitative performance criteria are used rather than qualitative assessments, whenever possible.
The President and CEO’s annual incentive is based on the comparison of financial performance of the Company and the expectations set out by the Board of Directors for the applicable year. The maximum incentive opportunity for the President and CEO is 85 percent of the annual base salary.
The Group Executive Board members’ annual variable pay is based on the Group’s financial performance and on business area performance, if applicable for the person, and on the individual’s performance against predefined targets. The annual variable pay percentage is based on the individual responsibilities and is at maximum 50 to 75 percent of the individual annual base salary (2/3 of the maximum being the target level).
The aim of Konecranes long-term incentive plans, i.e. the Performance Share Plans, is to align the objectives of shareholders and Konecranes’ key employees to increase the value of the Company, to commit key employees to the Company and to reward employees for achieving set targets.
In 2018 Konecranes had four active Performance Share Plans. Konecranes Performance Share Plans have a three-year performance period, during which the plan participants may earn rewards according to the realization of the criteria set in the beginning of the performance period. The exception to this is the 2016 Performance Share Plan which, due to the ongoing corporate transaction process with Terex Corporation at that time, has a one-year performance period and 2 years’ holding period. In 2017, the Board of Directors issued an additional Performance Share Plan for the CEO with a five- year performance period.
Each Performance Share Plan period defines a maximum remuneration in shares. For practical reasons, part of the earned share remuneration is paid in cash to ensure that the participants can pay the necessary taxes for the share-based compensation. The actual remuneration payment is based on the performance of the Company against the predefined criteria – if a threshold level for the criteria is not met, long-term incentives will not be paid.
Konecranes long-term incentive plans include ownership obligations that pose restrictions to named plan participants selling shares received as remuneration. The members of the Konecranes Group Executive Board, including the President and CEO, have an obligation to continue to own at least 50 percent of the shares earned annually through the Performance Share Plan until their ownership of the Company shares equals their annual salary. Since 2017, the CEO is not entitled to sell shares paid as reward through the Performance Share Plan until he owns Konecranes shares worth EUR 750,000 in total.
Ongoing and recently ended performance share plans
Employee Share Savings Plan
In 2012, Konecranes launched an Employee Share Savings Plan for all employees, including the Management, except in those countries where the plan could not be offered for 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.
The Finnish statutory pension system covers the Finnish Konecranes Group Executive Board members. The non-Finnish members participate in pension systems in their local countries. In addition to statutory pensions, Konecranes provides supplementary contribution-based pension benefit to the President and CEO.
The pension scheme for the President and CEO sets his defined contribution at 20 percent of his annual salary, excluding performance-based compensation (annual or long-term incentives).
The Finnish members of the Group Executive Board participate in a defined group pension insurance scheme, which can be withdrawn from at the age of 60. However, the retirement age is set according to the Finnish Employees Pensions Act (TyEL). The Finnish Group Executive Board members have life insurance and disability insurances. The non-Finnish members participate in a contribution-based pension plan and have local insurance cover.