Remuneration


Remuneration Statement

Citycon’s Remuneration Statement has been drafted according to the Finnish Corporate Governance Code 2015 (www.cgfinland.fi/en)  issued by the Finnish Securities Market Association. The Remuneration Statement includes the description of the decision-making procedure concerning the remuneration of the  members of the Board of Directors, the CEO, and any other executives and of the main principles of remuneration as well as the Remuneration Report which discloses the remuneration paid to the members of the Board of Directors, the CEO, and the other members of the Corporate Management Committee during the previous financial period and, for comparison, the remuneration paid during the financial period preceding the reported financial period.

I. Decision-making procedure concerning the remuneration 
 

Decisions on the remuneration payable for Citycon’s Board and Committee work (as well as on the basis for its determination) are made annually by the company’s Annual General Meeting (AGM) on the basis of the Board of Directors' proposal prepared by the Board of Directors’ Nomination and Remuneration Committee. 

Decisions on the remuneration of the CEO and other members of the Corporate Management Committee are made by Citycon’s Board of Directors on the basis of a proposal prepared by the Board of Director’s Nomination and Remuneration Committee.

II. Principles of remuneration


Remuneration of the members of the Board of Directors 

The AGM of 2016 decided on the annual fees of the members of the Board of Directors as follows:

Annual fee in EUR  
Chairman 160,000
Deputy Chairman/men 70,000
Other Board members 50,000
Chairmen of the Board Committees 5,000

 
In addition, the AGM decided that the Chairmen of the Board Committee meetings shall be paid a meeting fee of EUR 800 and other Board and Committee members EUR 600 per meeting. The Chairman of the Board of Directors shall be paid no meeting fees.

The AGM also decided that the members of the Board shall be compensated accrued travel and lodging expenses as well as other potential costs related to Board or Committee work.

A Board member has the possibility to choose not to accept any annual fees and/or meeting fees.

Board members’ remuneration is paid entirely in cash. The Board has, however, issued a recommendation to its members to use a part of the Board members' annual fees to acquire the company's shares. There are no transfer restrictions applicable to acquired shares. 

The Board members do not have an employment or service contract with the company. Furthermore, they do not have share-based remuneration schemes, nor are they included in the company’s other incentive schemes.

Remuneration of the CEO and other executives

The objective of remuneration of the CEO and other members of the Corporate Management Committee is to promote the long-term financial success and competitiveness of the company and the favourable development of shareholder value.

The remuneration of the company’s CEO and other members of the Corporate Management Committee consists of a fixed monetary salary, customary fringe benefits, an annual performance bonus (short-term remuneration scheme) as well as the stock option plan for the Group’s key personnel and the share-based incentive schemes (long-term remuneration schemes). The CEO and the other members of the Corporate Management Committee do not have any individual pension arrangements.

Remuneration of the CEO

The service terms of the CEO are stipulated in a written executive contract approved by the Board of Directors. The remuneration paid to the CEO, pursuant to the CEO’s service agreement, consists of a fixed annual salary, fringe benefits and an annual performance bonus. The amount of the CEO’s annual salary is tied to the consumer price index. The CEO’s fringe benefits comprise company car, housing, telephone and luncheon benefit.

The CEO’s annual salary is EUR  624,255.72 (as per 1 January 2017).

The CEO’s annual performance bonus is awarded at the Board of Director’s discretion. At most, the performance bonus may be a sum representing 80% of the CEO’s fixed annual salary. The amount of the performance bonus is determined by the extent to which the strategy-supporting performance targets set annually by the Board have been reached. The performance targets and their mutual weights are confirmed in five areas: EPRA EPS, net rental income growth, fair value development of the like-for-like properties, progress of investments, divestments and developments, and personal targets. The achievement of the CEO’s performance targets shall be evaluated annually by the Board on the basis of a proposal prepared by the Board of Director’s Nomination and Remuneration Committee. 50% of the amount of the CEO’s performance bonus shall be paid in cash, while the other 50% shall be paid as company’s shares. The performance bonus shall be paid in March of the year following the review period. There are no transfer restrictions related to the proportion of the performance bonus paid as shares.

For the financial year 2016, the CEO’s performance target measures and their mutual weights, as determined by the Board of Directors, are EPRA EPS (weight 20%), net rental income growth (weight 15%), selling, general & administrative expenses (S G & A) management (weight 10%), progress of investments, divestments and developments (weight 25%) and discretionary (weight 30%). The Board may, however, at its discretion and based on its overall performance evaluation, adjust the CEO’s performance bonus amount within the maximum bonus sum stipulated in the CEO’s service agreement.

The CEO’s pension benefit and retirement age are in line with the Finnish pension legislation. The CEO does not have any individual pension arrangements.

The CEO’s service agreement is valid for an indefinite duration. The period of notice of the service agreement is six months, both for the CEO and the company. In case of notice by the company, the CEO shall be paid, in addition to the salary payable for the notice period, a severance payment of 1.5 times the CEO’s fixed annual salary at the moment of termination.

The CEO is included both in the stock option plan 2011 and in the company’s performance share plan 2015. A share ownership obligation, under which the CEO is obliged to acquire the company’s shares with 25% of the gross stock option income gained from the exercised stock options, is incorporated into the stock options 2011 granted to the CEO. The acquisition obligation will expire once the CEO owns the company’s shares worth his or her 12 months’ gross salary. Such shares must be held as long as the service contract is in force. 

Remuneration of the Corporate Management Committee

The remuneration for Corporate Management Committee members other than the CEO consists of a fixed monthly salary, customary fringe benefits and an annual performance bonus. The principles applicable to the performance bonus are described below. In addition, members of the Corporate Management Committee are included both in the stock option plan 2011 and in the company’s share plans 2015. A share ownership obligation, under which the members of the Corporate Management Committee are obliged to acquire the company’s shares with 25% of the gross stock option income gained from the exercised stock options, is incorporated into the stock options 2011 granted to the members. The acquisition obligation will expire once the member owns the company’s shares worth 12 months of his or her gross salary. Such shares must be held as long as the employment contract is in force. 

Members of the Corporate Management Committee are covered by the pension systems of their domiciles in accordance with local practices. Members of the Corporate Management Committee do not have any individual pension arrangements. 

Members of the Corporate Management Committee may be paid severance compensation that is separately agreed upon with the members. Typically, the Corporate Management Committee members’ severance compensation equals 6–12 months’ salary.

Short-term remuneration schemes

Citycon has a performance bonus scheme, the content of which is decided annually by the Board of Directors on the basis of a proposal prepared by the Board’s Nomination and Remuneration Committee. The performance bonus scheme covers Citycon’s entire personnel and the company’s CEO, whose performance bonus is determined on the basis of the CEO’s service agreement, as described above.1

In the performance bonus scheme, remuneration is based on the Group’s and business units’ profit and personal performance. The Group’s profit refers to profit before taxes in accordance with IFRS, adjusted for fair value changes and any other extraordinary items as defined by the Board of Directors. Business units’ profit refers to operating profit for like-for-like properties. Like-for-like properties are properties held by the company throughout the 24-month reference period.

In the performance bonus scheme, the performance period is one calendar year. The Board of Directors sets the performance criteria for the performance period annually and decides upon their mutual weights in different business units and in other Group units. Following each performance period, the Board confirms, on the basis of a proposal by the Board’s Nomination and Remuneration Committee, the extent to which the performance criteria have been reached and the amount of performance bonuses to be paid on the basis of this. 

The maximum bonus amount payable based on the annual performance bonus scheme is 60–50% of the gross annual salary for each member of the Corporate Management Committee, excluding the CEO. The performance bonus of a Corporate Management Committee member is determined based on the monetary salary of the last month of the calendar year, the performance of which is the basis of the bonus. Bonuses shall be paid in March of the year following the review period.

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1 Until 31 December 2015 Sektor Gruppen AS (current Citycon Norway AS) has had a separate performance bonus scheme in which the remuneration has been based on Sektor’s net rental growth, renegotiated leases, and personal targets. The maximum bonus amount payable based on the performance scheme have corresponded approximately 20% of the participant’s gross annual salary. The performance period in the performance bonus scheme has been one calendar year. Following Citycon’s acquisition of Sektor Gruppen AS, Sektor’s separate performance bonus scheme has been terminated and as of 1 January 2016 Sektor’s personnel has been included in Citycon’s performance bonus scheme. 

Long-term remuneration schemes   

Decisions on Citycon’s long-term incentive schemes are made by the AGM or the Board of Directors within the scope of the authorisation it has received from the AGM and on the basis of a proposal prepared by the Board’s Nomination and Remuneration Committee. The Board’s valid authorisations can be found here.  

The aim of the long-term incentive schemes is to align the objectives of the shareholders and the key employees in order to increase the value of the company in the long term, to commit the key employees, and to offer them competitive remuneration schemes based on their earning and accumulating the company’s shares. 

Citycon has the following long-term incentive schemes currently in use for the Group’s key personnel, including the CEO and other Corporate Management Committee members: the performance share plan 2015, the restricted share plan 2015 and the stock option plan 2011.  

Performance share plan 2015   

Citycon’s performance share plan 2015 was approved by the Board of Directors, authorised by the AGM, on 10 February 2015. The performance share plan 2015 includes three three-year performance periods, calendar years 2015–2017, 2016–2018, 2017–2019. The performance share plan is directed to Citycon group’s key personnel, including the CEO and other members of the Corporate Management Committee, as determined by the Board for each performance period.   

The Board will decide on the plan’s performance criteria and required performance levels for each criterion at the beginning of each performance period on the basis of a proposal prepared by the Board’s Nomination and Remuneration Committee. The potential reward of the plan from the performance periods 2015–2017 and 2016–2018 will be based on the total shareholder return of Citycon’s share (TSR) (weight 100%).    

As a consequence of the rights issue carried out in June-July 2015 and to allow inclusion of new key employees into the plan in February 2016, the Board of Directors of the company adjusted the amount of the maximum reward under the performance share plan 2015 in accordance with the terms and conditions of the plan. Based on these adjustments that became effective as of 14 July 2015 and 10 February 2016, the maximum total number of shares that can be granted under the performance share plan 2015 is 4,300,000 shares.  A maximum total of 1,271,499 shares can be granted on the basis of the performance period 2015–2017 and a maximum total of 1,521,280 shares on the basis of the performance period 2016-2018.   

After the end of each performance period, the Board of Directors confirms the results of the performance criteria and the number of shares granted based on them. The potential reward from the performance period 2015–2017 and 2016–2018 will be paid partly in the company’s shares and partly in cash by the end of March 2018 and by the end of March 2019, respectively. The cash proportion is intended to cover taxes and tax-related costs arising from the reward to the participant. As a rule, no reward will be paid from the plan, if a participant’s employment or service ends  before the end of  calendar year 2017. Should a participant’s employment or service end during calendar years 2018 or 2019, the participant shall be entitled to the reward accrued by the end of employment or service.  

The terms and conditions of the performance share plan 2015 can be found here.    

 Restricted share plan 2015    

The Board of Directors decided on the restricted share plan 2015 on 10 February 2015. The rewards from the restricted share plan 2015 may be allocated in 2015–2017. The reward will be based on a valid employment or service contract of a key employee upon the reward payment, and it will be paid partly in the company’s shares and partly in cash after the end of a two-year or a three-year vesting period.   

The plan is directed only to selected key employees, including the members of the Corporate Management Committee. The rewards to be paid on the basis of the plan correspond to the value of an approximate maximum total of 500,000 Citycon shares (also including the cash proportion to be used for taxes and tax-related costs).   

The terms and conditions of the restricted share plan 2015 can be found  here.    

Stock option plan 2011    

Citycon has currently one stock option plan in force, stock option plan 2011, covering 9  members of the company’s key personnel including, among others, the CEO and certain members of the Corporate Management Committee. Citycon’s Board of Directors decided on the stock option plan 2011 on 3 May 2011.   

Stock options 2011 could be granted during years 2011–2015 and they can be exercised for share subscription during years 2012–2018. The maximum total number of stock options that could be distributed was 7,250,000. If the stock options had been fully distributed, they would entitle their owners to subscribe for a maximum total of 14,622,525 new shares in the company or existing shares held by the company. Based on the stock options 2011 distributed as of 31 December 2015 the maximum total of 12,474,526 new shares in the company or existing shares held by the company can be subscribed.  

Further information on the stock option plan 2011, as well as the terms and conditions of the stock options 2011, are available here.   

Share and stock option holdings of the CEO and other executives   

The share and stock option holdings of the CEO and other members of the Corporate Management Committee are reported annually in the Corporate Governance Statement.

As of 3 July 2016, the CEO’s and other Corporate Management Committee members’ transactions in Citycon shares and stock options are published through a stock exchange release and subsequently available on  Citycon’s webpage

III. Remuneration Reports

Remuneration Report 2016
Remuneration Report 2015 and Addition to the Remuneration Report 2015