Board emoluments and other benefits
The Annual General Meeting (AGM) decides on Board emoluments and other benefits proposed by the parent entity, OP Cooperative.
No separate meeting allowances were paid in 2022 to the members of the Board of Directors employed by OP Cooperative or its subsidiaries.
Managing Director's salary and other benefits
The Board of Directors appoints the Managing Director and decides on their salary, benefits and the terms and conditions of their executive contract. A written Managing Director executive contract stipulates the terms and conditions of the contract.
Pension benefits are determined in accordance with pension laws and OP Financial Group’s own pension plans. The Managing Director is covered by the Finnish Employees Pensions Act which provides pension benefits based on the years of employment and earnings as prescribed in the Act. The Managing Director is not included in any supplementary pension plan.
The period of notice applicable under the Managing Director’s executive contract is six months in case the company terminates the contract. In case the executive contract terminates due to reasons attributable to the company, the Managing Director will be entitled to bonuses under the performance-based bonus scheme for the year of contract termination and the bonuses from the personnel fund, provided that the schemes’ performance criteria and the criteria for payment under the terms and conditions are fulfilled.
Principles governing remuneration paid to the Managing Director and other management
The remuneration schemes approved by OP Cooperative Consolidated are aimed at encouraging and engaging key persons in the development of business and ensuring that the company attracts new employees. OP Mortgage Bank’s Board of Directors, and OP Cooperative’s Board of Directors and its Nomination and Remuneration Committee assess and monitor regularly the effectiveness of the company’s remuneration schemes with the aim of ensuring that remuneration policies and practices with respect to all personnel groups are in line with the Group’s core values, strategy, targets and goals, risk policies and control systems. The regulations regarding the financial sector’s remuneration schemes have been taken into account in establishing the incentive schemes.
Remuneration of the Managing Director and other management consists of the following three components:
1) basic pay (salary and fringe benefits, based on the job grade and skills);
2) performance-based bonus (based on the achievement of targets under the annual plan), and
3) personnel fund (based on the achievement of targets derived from OP Financial Group’s strategy).
The Board of Directors is responsible for deciding on remuneration to the Managing Director and other management.
Performance-based bonus scheme
The Board of Directors annually decides on the performance-based bonus scheme. Remuneration is based on metrics deriving from annual targets. Such metrics may be determined at Group-, function-, team- and employee level. In addition to achieving the annual targets, bonus payout requires the fulfilment of the conditions set for Group- and/or company-level remuneration.
In 2022, the metrics for the Managing Director’s performance-based bonus were based on customer feedback, the development of operations and processes, and the fulfilment of system and regulatory requirements.
The Group-level precondition for remuneration is that OP Financial Group’s LCR (Liquidity Coverage Ratio) exceeds 110% and that the Group’s CET1 ratio exceeds the CET1 MDA + 2 percentage points on the bonus payout date (CET1 MDA = CET1 minimum level. If this level is not met, profit distribution will be restricted). Another precondition for bonus payout is that the EBT of OP Mortgage Bank shows a profit. The final amount of the bonus earned based on the metrics in the balanced scorecard is also determined by the EBT of the central cooperative consolidated, multiplied by a factor of 0.5–1.25.
Furthermore, bonuses earned will be reduced or completely refused if binding internal guidelines within the Group or task or regulatory requirements have been ignored and separately specified qualitative or risk management elements have materialised. Paid bonuses may also be fully or partly reclaimed if the beneficiary is found guilty of misdemeanours, of intentionally endangering the future of business, or of breaking the law.
For 2022, the Managing Director is entitled to bonus corresponding to their regular threemonth salary subject to PAYE tax at a maximum. Bonuses under the performance-based bonus scheme are paid in cash, in view of OP Financial Group’s payment guidelines with respect to persons affecting the company’s risk profile (Identified Staff).
Personnel (including the Managing Director) is included in the long-term incentive scheme based on OP Financial Group Personnel Fund. The personnel fund is grounded on the achievement of the Group’s shared strategic goals and targets. In 2022, the target performance metrics applied in the scheme were based on the growth differential between income and expenses at OP Financial Group as well as net growth in the number of customers using OP as their main bank and insurer. The Board of Directors annually determines the amount of profit-based bonuses transferred to the personnel fund. The maximum amount of the profit-based bonus in 2022 accounted for 3 per cent of the total wages and salaries of the employees included in the personnel fund.