UPM Annual Report 2022

GOVERNANCE

UPM

BEYOND FOSSILS

BUSINESSES

RESPONSIBILITY

ACCOUNTS FOR 2022

certain circumstances, such as the violation of laws or other legal obligations or the vio lation of the UPM Code 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 earned by the President and CEO and members of the Group Executive Team are shown in the tables on the right. In 2022, costs under the Finnish stat utory pension scheme for the President and CEO amounted to EUR 458,000 (EUR 329,000). Payments under the voluntary pension plan amounted to EUR 1,000,000 (EUR 1,200,000). In 2022, costs under the Finnish and German statutory pension schemes for GET members (excluding the President and CEO) amounted to EUR 941,000 (EUR 860,000). Payments under the voluntary pension plan amounted to EUR 987,000 (EUR 1,035,000). Please also see the Remu neration Report 2022 (subject to adoption at the AGM 2023) and Note 3.2 of the consolidated Financial Statements. Auditor and audit fees At the AGM 2022, PricewaterhouseC oopers Oy, a firm of Authorised Public Accountants, was re-elected as the Com pany’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. He is the CEO of PwC Finland. The Company conducted a tendering process for auditing services in 2022. The previous tendering process was carried out in 2013. Following the stipulations of the Auditor Regulation, the last financial year that PricewaterhouseCoopers Oy can act as the Company’s auditor is 2023. Therefore, the AGM has been given proposals for elec tion of the auditor for the financial years 2023 and 2024 (page 107). The AGM 2022 further resolved that the audit fee would be paid against invoices, approved by the Board of Directors’ Audit Committee. The amounts paid to the audi tor, as approved by the Audit Committee, are shown in the table on the right.

It is a long-standing custom 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 the interests of Board members with those of shareholders.

Remuneration of executive management Remuneration at UPM is designed to encourage our value-based behaviour and the achievement of ambitious strategic targets, as well as compensate performance accordingly. The aim of the remuneration process for the Company’s management team is to promote the Company’s long-term finan cial success, competitiveness and favour able development of shareholder value. Remuneration comprises fixed and variable components. These components are shown in the table on page 111. The variable components are linked to pre-determined and measurable per formance criteria, as well as thresholds have been set for the payable amount. The payable amounts of incentives are linked to the management team member’s position, as well as their achievement of performance measures and targets set on an annual basis. The Company has the right to reclaim any paid or due variable remuneration under

COMPONENTS OF MANAGEMENT REMUNERATION

COMPONENT

PAYABLE IN

BASIS OF PAYMENT TIME OF PAYMENT

Base salary

Cash

Service agreement/ Executive contract Service agreement/ Executive contract

Monthly

Fringe benefits

For example, company car and phone

Monthly

BOARD REMUNERATION AND PAYMENT MECHANISM

Short-term incentives Long-term incentives

Cash

Short-Term Incentive Plan Annually

ANNUAL BASE FEE (EUR)

Shares

Performance Share Plan (PSP)

Annually following a three year earning period

2022 2021

PAYMENT MECHANISM

Chair

200,000 195,000 •Approx. 40% in company shares, rest in cash to cover taxes. The Company paid costs and transfer tax related to the purchase of the Company shares 140,000 140,000

Deputy Chair

• Shares may not be transferred within two years from the purchase date or until the Director’s membership in the Board has ended, whichever occurs first

Member

115,000 115,000

REMUNERATION OF THE PRESIDENT AND CEO

SALARIES AND BENEFITS (EUR 1,000) Salary, paid during the financial year

2022 1,153 1,473 1) 2,902 3)

2021 1,093

COMMITTEE FEES AND PAYMENT MECHANISM

Short-term incentives, earned during the financial year

1,309 2) 2,997 4)

Share rewards, earned

ANNUAL COMMITTEE FEES 2021-2022 (EUR)

CHAIR MEMBERS

PAYMENT MECHANISM

Benefits, paid during the financial year

28

31

Audit Committee

35,000 27,500 (20,000)

15,000

1) Paid in February 2023 2) Paid in February 2022

Remuneration Committee

10,000

cash

3) PSP 2020-2022 (shares delivered in February 2023) 4) PSP 2019-2021 (shares delivered in February 2022)

Nomination and Governance Committee

20,000

10,000

BOARD REMUNERATION IN 2022

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

ANNUAL BASE FEE (EUR) OF WHICH

ANNUAL COMMITTEE FEE (EUR)

TOTAL REMUNERATION (EUR)

NUMBER OF SHARES PURCHASED AS PART OF ANNUAL BASE FEE 2)

40% FOR SHARES (EUR)

60% IN CASH (EUR)

DIRECTOR 1)

SALARIES AND BENEFITS (EUR 1,000) Salaries, paid during the financial year

2022 4,140 2,973 1) 9,242 3)

2021 3,958 2,739 2) 9,347 4)

200,000

Björn Wahlroos

20,000

220,000

2,489

80,000 120,000

Short-term incentives, earned during the financial year

140,000

Henrik Ehrnrooth

10,000

150,000

1,742

Share rewards, earned

56,000 84,000

Benefits, paid during the financial year

135

142

115,000

Emma FitzGerald

10,000

125,000

1,431

46,000 69,000

1) Paid in February 2023 2) Paid in February 2022

115,000

Jari Gustafsson

15,000

130,000

1,431

46,000 69,000

3) PSP 2020-2022 (shares delivered in February 2023) 4) PSP 2019-2021 (shares delivered in February 2022)

115,000

Piia-Noora Kauppi

10,000

125,000

1,431

46,000 69,000

115,000

Topi Manner

10,000

125,000

1,431

46,000 69,000

115,000

Marjan Oudeman

15,000

130,000

1,431

AUDITOR’S FEES

46,000 69,000

115,000

Martin à Porta

27,500

142,500

1,431

EUR MILLION

2022

2021

2020

46,000 69,000

4.0 0.2 0.3 0.1 4.6

3.4 0.2 0.4 0.2 4.2

3.8 0.1 0.4 0.2 4.5

Audit fee

115,000

Kim Wahl

35,000

150,000

1,431

Audit-related services

46,000 69,000

Tax services Other services

1,145,000

Total

152,500

1,297,500

14,248

458,000 687,000

Total

1) Berndt Brunow's term ended at the AGM 2022 due to his announcement that he would not be available for re-election. No Board fees were payable to him during financial year 2022. 2) Transaction date 27 April 2022

110

111

UPM ANNUAL REPORT 2022

UPM ANNUAL REPORT 2022