UPM annual report 2015

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IN BRIEF

STRATEGY

BUSINESSES

STAKEHOLDERS

GOVERNANCE

ACCOUNTS

Corporate management

CFO and the heads of the strategy, technology and legal functions. The team assists the Presi- dent and CEO in matters pertaining to the preparation of group strategies, strategic pro- jects, capital expenditure, M&A and other strategic development initiatives for the Board of Directors’ approval. Members of the Group Executive Team and their position and shareholdings in the com- pany are presented in the table below, and their responsibility areas in the illustration on the following page. Kim Poulsen headed UPM Paper Asia until he left the company at the end of October 2015. Bernd Eikens, Executive Vice President of UPMPaper ENA, was appointed his successor in December and he assumed his new duties as the Executive Vice President of UPMPaper Asia on 1 February 2016. Winfried Schaur was appointed Executive Vice President of UPMPaper ENA succeeding Mr Eikens as of 8 February 2016. The executives’ personal details, career histories and positions of trust are presented on pages 73–74 of this report and under www. upm.com/governance.

Group Executive Team and the Strategy Team were reconsidered. The duties and responsi- bilities and the composition of these manage- ment bodies are presented below. Members of the Group Executive Team continue to carry the main responsibility for the business areas and global functions they are heading. The Group Executive Team consists of the executives heading the business areas and the global functions, and it is responsible for approving and executing group-level guidelines and procedures. The President and CEO chairs the Group Executive Team. The Business Area Boards comprise, in addition to the President and CEO chairing the boards, the CFO, the EVPs of the global func- tions, and the EVP of the business area in question. The Business Area Boards are responsible for business area level decision- making in matters pertaining to each business area’s strategy, budget, business performance, operative investments, commercial strategies, business development plans, business and strategic risks, strategic and organizational changes as well as HRmatters. The Strategy Team is chaired by the Presi- dent and CEO and its other members are the

RESPONSIBILITY AREAS OF THE MEMBERS OF THE GROUP EXECUTIVE TEAM President and CEO Jussi Pesonen

Tapio Korpeinen

Heikki Vappula

CFO 1)

UPM Biorefining

Jussi Pesonen is the President and Chief Exec- utive Officer of UPM-Kymmene Corporation since January 2004. He is also member of the company’s Board of Directors since March 2007. The President and CEO leads the com- pany’s day-to-day operations in accordance with the instructions and orders given by the Board of Directors. The duties and responsibili- ties of the President and CEO are presented on the Corporate Governance Statement 2015 and under www.upm.com/governance. In the operative management of the com- pany, 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 63 of this report. The company’s management systemwas modified during the year with the purpose of creating a more direct leadership channel from the group level to the business area level. As a result of this modification, UPM initiated a new forum, Business Area Boards, for business area level decision-making. Also, the roles of the

Juha Mäkelä

Tapio Korpeinen

General Counsel

UPM Energy

Kari Ståhlberg

Tapio Kolunsarka

Strategy

UPM Raflatac

Jyrki Ovaska

Bernd Eikens

UPM Paper Asia

Technology 2)

Riitta Savonlahti

Winfried Schaur

Human Resources

UPM Paper ENA

Pirkko Harrela

Mika Sillanpää

UPM Plywood

Stakeholder Relations 3)

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 Affairs

Management remuneration

Remuneration of the Group Executive Team

the management. The Performance Share Plan consists of annually commencing three-year plans, and the incentives are payable in com- pany 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 incen- tive plans, and the termination payments and pension benefits of the President and CEO and other members of the Group Executive Team are presented in the Remuneration Statement which is available under www.upm.com/ governance. Remuneration of the President and CEO The President and CEO’s annual salary and other financial benefits are shown in the table below.

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.

The remuneration of the President and CEO and other members of the Group Executive Team consists of the base salary and fringe benefits, performance-based short and long term incentives, and pension benefits. 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 Board of Directors also approves the terms and conditions of the short and long term incentive plans prepared by the Remuneration Committee. When preparing long term incentive plans, the committee consults independent advisors. 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 remuneration comprises non-varia- ble 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. Further information on the variable compo- nents is available in the Remuneration State- ment under www.upm.com/governance. 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 Incen- tive Plan and they are paid annually in cash. The amount of the incentive is linked to the executive’s position and achievement of annu- ally set targets. Long term incentives are based on the Performance Share Plan targeted at the Presi- dent and CEO and other Group Executive Teammembers, and other selected members of

MEMBERS OF THE GROUP EXECUTIVE TEAM Executive

REMUNERATION OF THE GROUP EXECUTIVE TEAM Salaries and benefits (EUR 1,000)

Team member since Position at UPM

Shareholdings on 31 Dec. 2015

Shareholdings on 31 Dec. 2014

2015 2014

2001

President and CEO

220,275

195,280

Jussi Pesonen *)

Salaries

3,455 3,457

2013

Executive Vice President, UPM Paper ENA Executive Vice President, Stakeholder Relations Executive Vice President, UPM Raflatac CFO, Executive Vice President, UPM Energy Executive Vice President, Technology Executive Vice President, UPM Paper Asia Executive Vice President, Human Resources Executive Vice President, UPM Plywood Executive Vice President, Strategy Executive Vice President, UPM Biorefining General Counsel

13,747

10,000

Bernd Eikens *)

Short term incentives

1,733 869

Share rewards

1,805 –

Pirkko Harrela

2004

40,870

35,488

Benefits

238 249

2013

13,588

10,000

Tapio Kolunsarka *)

Total

7,231 4,575

2008

54,747

45,792

Tapio Korpeinen *)

Juha Mäkelä

2008

37,500

32,068

REMUNERATION OF THE PRESIDENT AND CEO Salaries and benefits (EUR 1,000)

Jyrki Ovaska

2002

74,269

64,612

2015 2014

2013

–

Kim Poulsen (until 31 Oct. 2015) *)

Salary

1,052 1,052

Riitta Savonlahti

2004

17,803

16,570

Short term incentives

856 627

Share rewards

824 –

2013

11,883

10,117

Mika Sillanpää *)

Benefits

27 27

Kari Ståhlberg

2013

7,229

4,212

Total

2,759 1,706

1,381 927

Personal income tax withholding in Finland *)

2010

17,111

10,000

Heikki Vappula *)

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

Total

509,022

434,139