Remuneration


Remuneration Statement

Citycon Oyj’s Remuneration Statement has been drafted according to the Finnish Corporate Governance Code 2015 (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 Oyj’s Board members for the Board and Committee work 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 2018 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 Chairmen of the meetings of the Board’s Committees shall be paid a meeting fee of EUR 800 and other Board and Committee members EUR 600 per meeting, with the exception of the Chairman of the Board, who 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 consists of a fixed monetary salary, customary fringe benefits, possibly an annual performance bonus as well as long-term remuneration schemes where directed to the CEO and other members of the Corporate Management Committee. 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 possibly 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  627,377 (as per 1 January 2018).

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, selling, general & administrative expenses management, progress of investments, divestments and developments, and personal targets. The achievement of the CEO’s performance targets is 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 is paid in cash, while the other 50% shall be paid as company’s shares. The performance bonus is 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 2018, the CEO’s performance target measures and their mutual weights, as determined by the Board of Directors, are EPRA EPS (weight 15%), net rental income growth (weight 10%), selling, general & administrative expenses management (weight 20%), 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 in the stock option plan 2011 in the performance and restricted share plans 2015 and in the matching share plan 2018–2020. 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, however, expires once the CEO owns the company’s shares worth his 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 possibly an annual performance bonus. In addition, members of the Corporate Management Committee are included in the stock option plan 2011, in the performance and restricted share plans 2015 and in the matching share plan 2018–2020. 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, however, expires 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.

Performance bonus scheme

Citycon has a performance bonus scheme, the principles 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, including the members of the Corporate Management Committee, however, excluding  the company’s CEO whose performance bonus is determined on the basis of the CEO’s service agreement, as described above.

In the performance bonus scheme, the remuneration of the members of the Corporate Management Committee is based on their achievement of the performance target measures annually determined by the Board of Directors. The performance period is one calendar year.   

For the financial year 2018, the Corporate Management Committee members' performance target measures, as determined by the Board of Directors, are confirmed in four areas: EPRA EPS, selling, general & administrative expenses management, EPRA Operating profit and personal performance targets. The target measures carry 20–40% weight, as individually determined by the Board of Directors.

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 to each member of the Corporate Management Committee. 

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. 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.

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 matching share plan 2018–2020, the restricted share plan 2018–2020, the performance share plan 2015, the restricted share plan 2015 and the stock option plan 2011.

Matching share plan 2018-2020

The matching share plan 2018—2020 includes three matching periods, calendar years 2018—2019, 2019—2020, 2020—2021. The plan is directed to the CEO and the other members of the Corporate Management Committee.

The prerequisite for participation in the plan and for reward payment is that a key employee invests in the company’s shares a pre-determined percentage of the bonus earned from the company’s performance bonus scheme during the calendar year preceding a matching period. If a key employee´s share ownership prerequisite is fulfilled and his or her employment or service is in force with a Citycon group company upon reward payment, he or she will receive free matching shares for shares subject to the share ownership prerequisite.

The rewards to be paid on the basis of the matching share plan 2018-2020 from the matching period 2018—2019 correspond to the value of an approximate maximum total of 200,000  Citycon Oyj shares. In addition, a cash proportion is included in the reward to cover taxes and tax-related costs arising from the reward to the participant. The rewards from the matching period 2018—2019 will be paid in 2020.

The terms and conditions of the matching share plan 2018-2020 can be found here.

Restricted share plan 2018-2020

The rewards from the restricted share plan 2018—2020 may be allocated in 2018—2020. The plan is directed to selected key employees, excluding the CEO and other members of the Corporate Management Committee.

The rewards 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 12 to 36 months vesting period. 

The rewards to be paid on the basis of this plan correspond to the value of an approximate maximum total of 200,000 Citycon Oyj shares including (also including the cash proportion to be used for taxes and tax-related costs).

The terms and conditions of the restricted share plan 2018-2020 can be found  here.

Performance share plan 2015   

The performance share plan 2015 includes three three-year performance periods, calendar years 2015–2017, 2016–2018, 2017–2019. The 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 has decided 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 rewards of the plan from all performance periods have been /   will be based on the total shareholder return of Citycon Oyj’s share (TSR).    

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, the maximum total number of shares that can be granted under the performance share plan 2015 is 4,300,000 shares.

After the end of each performance period, the Board of Directors has confirmed / confirms the results of the performance criteria and the number of shares granted based on them. The rewards have been / will be paid partly in the company’s shares and partly in cash by the end of March following the end of each performance period. The cash proportion is intended to cover taxes and tax-related costs arising from the reward to the participant.

As a rule, no rewards have been / will be paid from the plan, if a participant’s employment or service has ended  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.

For the performance period 2015–2017 the key employees have been granted as a reward a total of 49,539 Citycon Oyj shares. The rewards granted for the performance period 2016-2018 will amount to a maximum total of 1,521,280 Citycon Oyj shares and for the performance period 2017-2019  to  a maximum total of 1,374,385 Citycon Oyj shares.   

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 and in March 2017 adjusted the amount of the maximum reward under the plan and extended the allocation period with one year in accordance with the terms and conditions of the plan. After the adjustment the rewards from the restricted share plan 2015 may be allocated in 2015–2018. The plan is directed to selected key employees, including the CEO and the members of the Corporate Management Committee.

The rewards 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 rewards to be paid on the basis of the plan correspond to the value of an approximate maximum total of 700,000 Citycon Oyj shares (also including the cash proportion to be used for taxes and tax-related costs). At the end of 2017 a total of 12,854 Citycon Oyj shares had been granted as rewards from the restricted share plan 2015.

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

Stock option plan 2011 (ended on 31 March 2018)   

The stock option plan 2011, covered the company’s key personnel including, the CEO and certain members of the Corporate Management Committee.   

Stock options 2011 were granted during years 2011–2015. No shares were subscribed with the stock-options during the share subscription period ended on 31 March 2018 after which the share subscription is no more possible under the plan.   

The main terms, subscription ratios and prices of the ended stock option plan 2011 are available in the Note 1.6 of the Financial Statements 2017 (pages 60-61).    

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 are published through a stock exchange release and subsequently available on  Citycon’s webpage

III. Remuneration Reports
Remuneration Report 2017
Remuneration Report 2016 and Addition to the Remuneration Report 2016
Remuneration Report 2015 and Addition to the Remuneration Report 2015