UPM Annual Report 2016

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Governance

In brief

Strategy

Businesses

Stakeholders

Accounts

Executive management Jussi Pesonen has been the President and Chief Executive Officer of UPM-Kymmene Corporation since January 2004. He has also been a member of the company’s Board of Directors since March 2007. The President and CEO leads the company’s day-to-day operations in accordance with the instructions and orders given by the Board of Directors. The duties and responsibilities of the President and CEO are presented on the corporate website. In the operative management of the company, the President and CEO is assisted by the Group Executive Team, the Business Area Boards and the Strategy Team as presented in the illustration on page 73 of this report. The Group Executive Team consists of the executives heading the business areas and the

budget, business performance, operative investments, commercial strategies, business development plans, business and strategic risks, strategic and organisational changes as well as HRmatters. The Strategy Team is chaired by the President and CEO and its other members are the CFO and the heads of the strategy, technology and legal functions. The team assists the President and CEO in matters pertaining to the preparation of group strategies, strategic projects, capital expenditure, M&A and other strategic develop ment initiatives for approval by the Board of Directors. Members of the Group Executive Team and their position and shareholdings in the company are presented in the table below.

global functions, and it assists the President and CEO in respect of approving and executing group-level guidelines and procedures. The President and CEO chairs the Group Executive Team. Members of the Group Executive Team carry the main responsibility for the business areas and global functions they are heading. These responsibility areas are presented in the illustration below. The Business Area Boards comprise, in addition to the President and CEO chairing the boards, the CFO, the EVPs of the global functions, and the EVP of the business area in question. The Business Area Boards assist the President and CEO as regards business- area-level decision making in matters pertaining to each business area’s strategy,

Management remuneration

Responsibility areas of the members of the Group Executive Team

PRESIDENT AND CEO JUSSI PESONEN

CFO 1)

UPM Biorefining

Remuneration of the Group Executive Team in 2016

Tapio Korpeinen

Heikki Vappula

The Board of Directors resolves annually on the remuneration of the President and CEO and other members of the Group Executive Team based on the proposals by the Remuneration Committee. The aim of the company’s management remuneration is to promote the company’s long-term financial success, competitiveness and favourable development of shareholder value. The management remuneration comprises non-variable and variable components. The variable components are linked to predetermined and measurable performance and results criteria, and maximum levels have been set for the variable components of the remuneration. The base salary is paid monthly in cash. The base salary includes the fringe benefits, e.g. company car and phone. Short-term incentives are based on the company’s Short Term Incentive Plan and they are paid annually in cash. The amount of the incentive is linked to the executive’s position and achievement of annually set targets. Long-term incentives are based on the Performance Share Plan targeted at the President and CEO and other Group Executive Teammembers, as well as other selected members of management. The Performance Share Plan consists of annually commencing three-year plans, and the incentives are payable in company shares following a three-year earning period. The number of payable shares is linked to the executive’s position and achievement of annually set targets. Long-term

incentives are also paid to other key employees of the group based on the Deferred Bonus Plan. The company’s short- and long-term incentive plans, and the termination payments and pension benefits of the President and CEO and other members of the Group Executive Team, are presented on pages 117-119 of this report and in the Remuneration Statement, which is available on the corporate website. Remuneration of the President and CEO in 2016 The President and CEO’s annual salary and other financial benefits are shown in the table below.

General Counsel

UPM Energy

Juha Mäkelä

Tapio Korpeinen

The annual salaries and other financial benefits of the members of the Group Executive Team (excluding the President and CEO) are shown in the table below.

Strategy

Antti Jääskeläinen UPM Raflatac

Kari Ståhlberg

UPM Specialty Papers

Technology 2)

Jyrki Ovaska

Bernd Eikens

Human Resources

UPM Paper ENA

Riitta Savonlahti

Winfried Schaur

SALARIES AND BENEFITS (EUR 1,000)

Stakeholder Relations 3)

2016 2015

UPM Plywood

Pirkko Harrela

Mika Sillanpää

Salaries

3,564 3,455 1,779 1,733 6,269 1,805 231 238 11,843 7,231

1) Incl. Finance & Control, Treasury, IR, IT, Sourcing and Real Estate (incl. Finnish forest assets) 2) Incl. Investment Management, R&D, new business development (biocomposites, biochemicals) 3) Incl. Brand & Communications, Environment & Responsibility, Public & Media Relations

Short-term incentives

Share rewards

Benefits

Total

SALARIES AND BENEFITS (EUR 1,000)

Members of the Group Executive Team

2016 2015

TEAM MEMBER SINCE

SHAREHOLDINGS ON 31 DEC. 2015

SHAREHOLDINGS ON 31 DEC. 2016