Terrafame's salary and remuneration report
The remuneration practises of Terrafame Ltd. (“Terrafame” or “Company”) comply with the guidelines and principles detailed in the decision in principle concerning the State’s ownership policy, given on 13 May 2016.
The management of Terrafame Ltd. consists of a Board of Directors and a Management Team.
The Annual General Meeting of Terrafame Ltd. decides annually on the remuneration payable to Board members. The Board of Directors decides on the remuneration payable to the Management Team. In 2016, Terrafame Ltd. did not use the services of any external advisors for preparations related to remuneration.
Remuneration and other benefits of the Board of Directors
Remuneration payable to the Board of Directors and its Committee members is paid in cash. The Board members do not have share incentive plans or share-based compensation plans. They are also excluded from the other remuneration or pension plans of the Company.
As of 14 August 2015, the annual fee payable to the Chairman of the Board is EUR 72,000 and the meeting fee is EUR 600 per meeting. From the same date onwards, a Board member receives a fee of EUR 36,000 per year and a meeting fee of EUR 600 per meeting. Meeting fees for Committee meetings are of the same amount.
The members of the Board of Directors were paid a total of EUR 162,000 in monthly remuneration and meeting fees in 2016. The fees were paid as follows:
|Member||Attendance in Board meetings||Monthly fees in 2016, EUR||Meeting fees in 2016, EUR||Total in 2016, EUR|
Terrafame Ltd.’s parent company Terrafame Group Ltd. has a consulting agreement with a company owned by the immediate circle of Lauri Ratia, Chairman of the Board of Terrafame Ltd. The agreement concerns consulting and advisory services associated with Terrafame’s ramp-up and operations as well as the ownership and financing arrangements which are not part of the usual responsibilities of the Chairman of the Board (for instance, the execution and management of the ramp-up of the mine operations as well as assisting in work to secure private financing).
Based on the consulting agreement, fees totalling EUR 180,000 were paid to the company owned by Ratia’s immediate circle in 2016. The advisory services were priced at fair value. No other consultation services were acquired from companies owned by the Board members or their immediate circle in 2016.
Salary, remuneration and other benefits of the CEO and the Management Team
Details of the CEO’s contract of employment
The CEO Joni Lukkaroinen started in his position on 15 February 2016. The retirement age of the CEO is 63 years, and the pension is determined on the basis of the Employees Pensions Act. The CEO does not have a supplementary pension plan.
The CEO’s period of notice is six months. When the employment is terminated by the employer, severance pay equivalent to six months’ basic salary is payable on top of the salary for the notice period. No other compensation is payable based on termination of employment.
Remuneration of the CEO and the Management Team
The remuneration of the CEO and the other members of the Management Team in 2016 was based on fixed monthly salaries paid. In addition to mobile phone and internet service benefits, the members of the Management Team had no other fringe benefits, nor any contribution-based or other supplementary pension plan in 2016.
The salaries paid to Terrafame Ltd.’s Management Team in 2016 amounted to EUR 1,198,661. The CEO’s share of the salaries paid was EUR 264,421.
The Management Team did not receive performance-related remuneration in 2016 related to operations in 2015, as the Management Team had no bonus or share-based compensation plans in 2015.
In 2016, Terrafame Ltd. introduced a performance-related payment system for the Management Team and certain key persons. Terrafame Ltd.’s Board of Directors decides on the bonus system, its principles and measurements of the performance-related remuneration, and also monitors the achievement of the targets that the remuneration is based on. Targets related to the production, financial development and safety of Terrafame’s operations function as measurements in the bonus system. In addition, each person within the bonus system has a personal target. The targets of the bonus system have been selected so that their achievement materially contributes to the long-term development and success of the Company.
The maximum amount of the CEO’s bonus payment is 40% of a sum corresponding with the yearly salary. The maximum amount of the bonus payment of the Management Team members is a sum corresponding with three months’ salary. The maximum amount of the bonus payment for other persons within the bonus system is a sum corresponding with two months’ salary.
In 2016, no bonuses were paid to the Management Team. In March 2017, the Management Team received bonuses of EUR 91,263 in total (7.6% of the total salaries paid to the Management Team in 2016) related to their performance in 2016. The CEO’s share of the bonuses paid was EUR 31,301 (11.8% of the total salary paid to the CEO in 2016).
In addition to performance-related pay, Terrafame has no financial incentive schemes for the Management Team or other key personnel.
Remuneration of other personnel
Salaries and remuneration paid to personnel in 2016 totalled EUR 26.7 million. The salaries paid to personnel are in accordance with the terms and conditions of the collective agreements of each personnel group.
As of November 2015, a safety bonus plan covering all personnel has been in effect, which is paid if no lost-time accidents occur in the following functions: 1) mining and materials handling, 2) bioleaching and metals production plant, and 3) maintenance and office. In 2016, safety bonuses paid totalled EUR 570,735.