UPM Annual Report 2019

COMPONENTS OF MANAGEMENT REMUNERATION

COMPONENT

PAYABLE IN BASIS OF PAYMENT TIME OF PAYMENT

Base salary

Cash

Service agreement/ Executive contract Service agreement/ Executive contract Short-Term Incentive Plan Performance Share Plan

Monthly

Remuneration In accordance with the CG Code, we have published our Remuneration Statement for the financial year 2019 and this statement is available on the corporate website at upm.com/governance. The Remuneration Statement has been prepared in accordance with the requirements set out in the CG Code issued in 2015, which are still applicable for the financial year 2019. For the financial year 2020, we will prepare a remuneration report in accordance with the requirements of the CG Code applicable as of 1 January 2020. The Board of Directors’ Remuneration Committee and Nomination and Governance Committee have prepared the Remuneration Policy for the governing bodies (i.e. the Board of Directors and the President and CEO) and this policy will be presented at the AGM 2020. The policy sets out the framework for the remuneration of the company’s governing bodies and it is available on the corporate website at upm. com/agm2020. Our Remuneration Statement for the financial year 2019 is a comprehensive description of the company’s remuneration principles and practices with regard to the members of the Board of Directors, the President and CEO, and members of the

are shown in the table on the right. The variable components are linked to pre-determined and measurable performance and results criteria, and maximum levels have been set for their payment. The payable amounts of incentives are linked to the executive’s position and achievement of annually set performance measures and targets. The company has the right to reclaim any paid or due variable remuneration under certain circumstances, such as violation of law or other legal obligation, or violation of the UPMCode of Conduct or other company policies. Overall circumstances will be considered before exercising this right. The company also has the right to cancel, recover or restate any paid or due variable remuneration in the event that financial or other calculations are found to be incorrect. Salaries, benefits and incentives paid to the President and CEO and members of the Group Executive Team in 2019 are shown in the tables on the right. In 2019, costs under the Finnish statutory pension scheme for the President and CEO amounted to EUR 465,000 (2018: EUR 471,000). Payments under the voluntary pension plan amounted to EUR 1,459,000 (2018: EUR 923,000). In 2019, costs under the Finnish and German statutory pension schemes for GETmembers (excluding the President and CEO) amounted to EUR 924,000 (2018: EUR 988,000). Payments under the voluntary pension plan amounted to EUR 947,000 (2018: EUR 880,000). Auditor and audit fees At the AGM 2019, PricewaterhouseCoopers Oy, a firm of Authorised Public Accountants, was re-elected as the company’s statutory auditor for a one-year term, with Authorised Public Accountant Mikko Nieminen as the lead audit partner. Mr Nieminen has held this position since 4 April 2019. Mr Nieminen is the CEO of PwC Finland and acts as the lead audit partner in Kesko Corporation as well. The latest tendering process for auditing services was carried out in 2013. The last year that PricewaterhouseCoopers Oy can act as the company’s auditor is 2023. The AGM further resolved that the audit fee would be paid against invoices approved by the Board of Directors’ Audit Committee. The amounts paid to the auditor, as approved by the Audit Committee, are shown in the table on the right.

Board members did not receive any other financial benefits for their Board or committee membership in addition to the annual base and committee fees. Shares purchased for the Board members in 2019 may not be transferred for two years from the purchase date (29 April 2019) or until the membership of the respective Board member ends, whichever occurs first. It has long been customary at UPM to remunerate Board members in both shares and cash. Board members are encouraged to own company shares on a long-term basis and most of them have substantial holdings, indicating a close alignment of Board members’ interests with those of shareholders. Remuneration at UPM is designed to encourage our values-based behaviour, promote the achievement of ambitious strategic targets and pay for performance accordingly. 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. Remuneration comprises fixed and variable components. These components Remuneration of executive management

Group Executive Team. Information on the company’s short- and long-term incentive schemes and plans as well as on the terms and conditions of the aforementioned executives’ service agreements is available in this statement. Please see also pages 163–165 of this report. In this section, we provide information on the directors’ and executives’ actual remuneration in 2019. This information is also available in the Remuneration Statement. In accordance with the Nomination and Governance Committee’s proposal, the AGM 2019 resolved that the remuneration of the members of the Board of Directors remain unchanged. No changes have taken place in the directors’ remuneration since 2017. In terms of directors’ remuneration in 2020, the Nomination and Governance Committee has proposed that the remuneration remain the same. The approved annual fees and each director’s total remuneration including the number of shares purchased to each director are presented in the tables below. No annual fees were paid to the President and CEO for his role as a member of the Board. Remuneration of the Board of Directors

Fringe benefits

For example, company car and phone

Monthly

Short-term incentives Cash

Annually

Long-term incentives Shares

Annually following a three-year earning period

REMUNERATION OF THE PRESIDENT AND CEO IN 2019

SALARIES AND BENEFITS (EUR 1,000)

2019 1,096 1,426 3,025

2018 1,094 1,416 2,966

Salary

Short-term incentives

Share rewards

Benefits

29

31

Total

5,576 2,791

5,507

Income tax withholding * ) 2,739 * ) Income taxes withheld from salaries and benefits and remitted to tax authorities by UPM.

REMUNERATION OF THE GROUP EXECUTIVE TEAM IN 2019 (EXCLUDING THE PRESIDENT AND CEO)

SALARIES AND BENEFITS (EUR 1,000)

2019 4,242 1,779 9,421

2018 3,971 2,387 9,014

Salaries

Short-term incentives

Share rewards

Benefits

123

131

Total

15,565

15,502

AUDITOR’S FEES EUR MILLION

BOARD REMUNERATION AND PAYMENT MECHANISM ANNUAL BASE FEE (EUR)

COMMITTEE FEES AND PAYMENT MECHANISM ANNUAL COMMITTEE FEES 2018–2019 (EUR) CHAIR MEMBERS

2019

2018

2017

PAYMENT MECHANISM

2019 2018 PAYMENT MECHANISM

Audit fee

3.1 0.2 0.5 0.2 4.0

2.4 0.0 0.3 0.5 3.2

2.3 0.1 0.3 0.5 3.2

Audit-related services

Audit Committee

35,000 15,000

Chair

190,000 190,000 •Approx. 40%

Tax services Other services

Remuneration Committee 20,000 10,000 Nomination and Governance Committee 20,000 10,000

in company shares, rest in cash to cover taxes •Two-year lock-up period

Cash

Deputy Chair

135,000 135,000

Total

Members

110,000 110,000

BOARD REMUNERATION IN 2019

NO. OF PURCHASED SHARES

TOTAL REMUNERA- TION (EUR)

ANNUAL COMMITTEE FEE

60% IN CASH (EUR) 114,000 81,000 66,000 66,000 66,000 66,000 66,000 66,000 66,000 657,000 –

40% FOR SHARES (EUR)

ANNUAL BASE FEE (EUR)

UPM SHARES 31 DEC. 2019

DIRECTOR

Björn Wahlroos Berndt Brunow Henrik Ehrnrooth Piia-Noora Kauppi Marjan Oudeman

190,000 135,000 110,000 110,000 110,000 110,000 110,000 110,000 110,000 –

76,000​ ​54,000​ ​44,000​ ​44,000​ 44,000 44,000 44,000 44,000 44,000 –

20,000 10,000 10,000 35,000 15,000 10,000 20,000 10,000 15,000 –

210,000 145,000 120,000 145,000 125,000 120,000 130,000 120,000 125,000 –

2,911 2,068 1,685 1,685 1,685 1,685 1,685 1,685 1,685 –

265,194 312,533

9,506 19,391

3,155

Jussi Pesonen Ari Puheloinen

466,472

11,531 44,327

Veli-Matti Reinikkala

Suzanne Thoma

9,506

Kim Wahl

21,305​

Total

1,095,000

438,000

145,000 1,240,000

16,774 1,162,920

GOVERNANCE 110

GOVERNANCE 111

UPM ANNUAL REPORT 2019

UPM ANNUAL REPORT 2019

CONTENTS