Finnair's Board of Directors decided on new periods and changes to the employee share plan and incentive scheme for key personnel
Finnair Plc Stock Exchange Release 21 December 2016 at 10:05 am EET
Employee share plan
The Board of Directors of Finnair Plc has decided to launch a new 12-month savings period under the Employee Share Plan. The purpose of the plan introduced in 2013 is to encourage the employees to become shareholders in the company, to provide long-term rewards through potential share price appreciation and thereby strengthen the employees’ interest in the development of Finnair’s shareholder value.
Participation in the share savings plan is voluntary. The decided 12-month savings period will commence on 1 July 2017. Potential future savings periods are subject to separate Board decisions.
The eligible Finnair employees are offered the opportunity to invest part of their base salary in Finnair shares through the plan. Finnair awards each participant one Matching Share for each two purchased shares after a holding period of approximately two years. The awarded shares are taxable income for the recipient.
To increase the attractiveness of the plan, each employee participating in the plan for the first time in this savings period will additionally be awarded 20 bonus shares in October 2017, provided that employee participates at least in the first three months of the plan. The plan will be offered to approximately 5,000 Finnair employees in Finland. The maximum monthly savings are eight per cent and the minimum are two per cent of each participant's gross base salary during one month. In order to simplify the structure of the plan, the Board of Directors has decided to remove the monetary maximum limit of savings which the individual participant may annually make under the plan.
The total amount of all savings in 2017–2018 may not exceed 7.5 million euros, which equals 1.875 million shares, using the 20 December 2016 closing share price of 4.0 euros.
Shares will be purchased with the accumulated savings at the market price quarterly, after the publication dates of the Finnair's interim results. Any dividends paid on purchased shares during the commencing savings period will be reinvested into additional shares on the following purchase date. These shares will have equal rights to Matching Shares.
Performance-based incentive plan for key personnel
The Board of Directors has decided to simplify the structure of performance share plans within the company’s long-term incentive arrangement which is aimed at the key personnel of Finnair Group. The purpose of the arrangement is to motivate the management to work for increasing the shareholder value in the long-term and to commit the management to the company.
In the revised structure the annually commencing performance share plans include a three-year performance period like before. Unlike in the earlier structure, the potential share rewards will be delivered to the participants in one tranche after the performance period and they are at the participants’ free disposal after delivery.
The members of Finnair’s Executive Board are expected to retain at least fifty per cent of the net shares received based on the arrangement until their share ownership in Finnair corresponds to at least their annual gross base salary.
The maximum combined value of all variable compensation paid to an individual participant in any given year may not exceed hundred and twenty per cent of the participant’s annual gross base salary.
The aim of the structural revision is to simplify the long-term incentive structure and to increase alignment with the shareholders. The revised structure is in line with the Finnish Government’s Resolution on Ownership Steering Policy adopted on May 13, 2016.
The Board of Directors of Finnair has approved the first individual performance share plan covering the years 2017–2019 within the above described revised structure. Within the plan, the participants have the opportunity to earn Finnair shares as a long-term incentive reward, if the performance targets set by the Board of Directors for the plan are achieved. The potential share rewards will be delivered to the participants in the spring 2020.
The performance criteria applied to the plan 2017–2019 are earnings per share and revenue growth.
If the targets set for the plan for years 2017–2019 are fully achieved, the maximum number of shares to be delivered based on this plan is approximately 750,000 shares. This number of shares represents a gross earning, from which the applicable payroll tax is deducted and the remaining net-value is delivered to the participants in shares.
The number of employees eligible to participate in the plan 2017–2019 is approximately 60 persons.
The Board of Directors anticipates that no new shares will be issued in connection with the share-based incentive plans and that therefore the arrangement will have no dilutive effect on the registered number of the company’s shares.
In accordance with the afore-mentioned revision of the long-term incentive plan structure, the Board of Directors has decided that the share rewards earned under the plan 2013–2015 which have not yet been delivered to the participants, will be delivered before the end of the year 2016. Accordingly, the Board of Directors has also decided that share reward possibly earned and payable under the individual plans which commenced at the beginning of 2014, 2015 and 2016 will be delivered in one tranche after the respective three-year performance periods of these plans have ended.
Finnair Plc
Communications
Further information:
Finnair communications, tel. +358 9 818 4020, comms(a)finnair.com
Distribution:
Nasdaq Helsinki
Principal media
Finnair is a network airline specialising in passenger and cargo traffic between Asia and Europe. Helsinki’s geographical location gives Finnair a competitive advantage, since the fastest connections between many European destinations and Asian megacities fly over Finland. Finnair’s vision is to offer its passengers a unique Nordic experience, and its mission is to offer the smoothest, fastest connections in the northern hemisphere via Helsinki and the best network to the world from its home markets. Finnair is the only Nordic carrier with a 4-star Skytrax ranking and a member of the oneworld alliance. In 2015, Finnair’s revenues amounted to EUR 2,255 million and it had a personnel of 4,800 at the year-end. Finnair Plc’s shares are quoted on Nasdaq Helsinki.