Remuneration principles and decision-making procedure

Remuneration at Terveystalo is based on the principles of performance, fairness and competitiveness. These remuneration principles apply to all Terveystalo employees and the purpose is to ensure that Terveystalo as an employer attracts motivated and competent professionals. Remuneration shall support the achievement of Terveystalo´s strategic goals, align management’s priorities with the interests of Terveystalo´s shareholders, encourage behavior consistent with Terveystalo’s values, and reward excellent performance.

The Company’s Annual General Meeting decides on the remuneration of the members of the Board of Directors each year. The Remuneration Committee of the Board of Directors prepares remuneration-related matters and proposals regarding the CEO and the Executive team for the Board. The Board of Directors approves the remuneration of the CEO and the other Executive team members. Terveystalo’s remuneration policy describes the decision-making procedure in more detail.

Short-term incentive scheme (STI)

Terveystalo’s Board of Directors decides on the targets related to the short-term incentive schemes for the CEO and other members of the Executive Team. For 2020, the STI performance targets for the CEO and the Executive Team were based on the Company’s adjusted EBITA as well as eNPS and NPS targets.

In 2020, the maximum STI payable to the CEO was equivalent to 120 % of the annual base salary. The STI payable to the other members of the Executive Team for achieving the set targets was equivalent to five months’ salary, and the STI payable for exceeding the set targets to an exceptional extent was equivalent to at most 7.5 months’ salary.

Long-term incentive scheme (LTI)

Long-term incentive (LTI) scheme 2020

Terveystalo’s share-based rolling long-term incentive scheme consists of three performance periods, corresponding to the calendar years 2018, 2019 and 2020. Each plan consists of a one-year performance period and a two-year vesting period, following the performance period. The Board of Directors decides on the performance criteria and the required performance levels for each criterion at the beginning of each performance period.

During the performance period 2020, the share-based incentive scheme offered the key employees the possibility to earn rewards based on the Company achieving the required operational targets and Total Shareholder Return (TSR) levels. Any rewards payable from the performance share plan are paid partly in Terveystalo Plc shares and partly in cash approximately two years after the end of the performance periods. The purpose of the cash component is to cover the taxes and tax-like fees incurred by the participants. The criteria set for the performance period 2020 were not met and the CEO and the Executive Team will not be remunerated for this performance period.

Performance Period 2021-2023 of the Performance Share Plan (PSP)

In December 2020, Terveystalo Plc's Board of Directors has decided on a new long-term share-based incentive program for key personnel. The plan replaces the previous long-term incentive program.

During the performance period 2021-2023, the performance measures on the basis of which share rewards may be paid are relative Total Shareholder Return (TSR) with 60 per cent weight, and the development of the company’s Digital footprint with 40 per cent weight, the latter measuring the implementation and transformation of the company's strategy. The transformation measure is a combination of productivity development and growth of digital service sales.

Terveystalo's Board of Directors confirms the total amount of shares earned after the end of the performance period. The shares that may be paid based on the 2021–2023 earning period will be paid in Terveystalo Plc shares after the end of the performance period, provided that the performance targets set for the program by the Board are achieved. Taxes and tax-like payments to the recipient are deducted from the share reward, after which the remaining net amount is paid to the participants in shares.

Bridge Plan 2021-2022

The one-off CEO-only plan is intended to cover the transition from the old long-term incentive plan to the new plan. The performance metrics are the same as in the PSP 2021-2023 except for a shorter performance period. Any share awards will be paid after the end of the performance period, provided that the performance targets are met.

If the level of performance entitling to the maximum awards based is reached, the total maximum amount of share awards to be paid under the PSP and Bridge plan is 700,600 shares (gross amount before deduction of applicable taxes).

Remuneration of the CEO and the other members of the Executive Team

Remuneration of the CEO, as well as other key terms applicable to the service contract, are described in more detail in Terveystalo’s remuneration report.

The fixed remuneration of the Executive team members consists of a fixed monthly salary and fringe benefits. In addition, the total remuneration of the Executive Team members includes short-term incentives and long-term incentives.

Remuneration of the Executive team members in 2020

Remuneration paid during the year 2020.

Other Executive Team members, in total

Fixed annual salary and benefits, thousand euros 1820
Short-term incentives, thousand euros 693
Long-term incentives, thousand euros -
Termination benefits, thousand euros 302
In total, thousand euros

Key terms applicable to the service contract

The contract of a member of the Executive Team may be terminated at three months’ notice. If the Company terminates the employment contract of a member of the Executive team other than the CEO, the member is entitled to additional severance pay equaling his or her monthly salary for 7.5 months.

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