The base salaries and fringe benefits reflect the performance and individual job responsibilities, experience, skills and knowledge of the Konecranes President and CEO and other Group Executive Board members.
Konecranes salaries are set according to the relevant local market in each country. Globally Konecranes targets itself to be at the median of the chosen markets in terms of base salary. There is variance between countries and some employee groups.
At Konecranes, Managers review their employees’ salaries annually in context to the Konecranes Rewards Philosophy, ensuring that possible increases are allocated effectively to reward individual employees based upon their performance and contributions. The Annual Salary Review Process also applies to Group Executive Board members and Senior Management who report directly to the CEO, reviewed by the Board of Directors.
The Konecranes Group reward structure includes an incentive plan. Konecranes short-term incentives are designed to support the Company’s financial success and the employees’ commitment to fulfilling set targets on a semi-annual or annual basis depending on the year. Participants, in addition to Senior Management, are decided locally based on 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 achievements against preset 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 need to be based on financial performance and for executives (examples such as business area/unit or service region/subregion management) 70–100 percent of the annual incentive is typically based on financial performance.
The size of the incentive opportunity is defined by a person’s position in the organization, and location. The actual payout is based on the combination of personal and financial performance. The local and global market needs to guide the use of incentives in each location individually.
Konecranes incentive schemes are always based on written documentation. Quantitative performance criteria are used rather than qualitative personal assessments, whenever possible.
The President and CEO’s annual incentive is based on the comparison of financial performance of the Company and the expectations of 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 related to Group and if applicable for the person, business area performance and to the individual’s performance against preset targets. The annual variable pay percentage is based on the individual’s responsibilities and is at maximum 50 to 75 percent of the individual’s annual base salary (2/3 from 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 reward them for achieving set targets.
In 2017 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 reward in shares. For practical reasons part of the earned share reward is paid in cash to ensure that the participants can pay the necessary taxes for the reward. The actual reward payment is based on the performance of the Company against the preset criteria – if a threshold level for the criteria is not met, rewards will not be awarded.
Konecranes long-term incentive plans include ownership obligations that pose restrictions to named plan participants selling shares paid as reward. The members of the Konecranes Group Executive Board, including the President and CEO, have an obligation to continue owning at least 50 percent of the shares they earn annually through the Performance Share Plan until their ownership of 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.
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 schemes 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.