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Note 7 Board and executive remuneration

Board remuneration and committee memberships
Year Ended 31 December
2017 2016
EUR thousand Cash Shares Total Total Committee Memberships
Board Members at 31 December 2017
Jorma Eloranta, Chairman 126 68 194 106 Remuneration, Nomination2,3, Financial and Audit
Hans Stråberg, Vice Chairman 66 40 106 76 Remuneration, Nomination2,3
Anne Brunila 52 28 80 80 Sustainability and Ethics
Elisabeth Fleuriot 48 28 76 76 Remuneration
Hock Goh 48 28 76 70 Sustainability and Ethics
Christiane Kuehne 56 28 84 - Financial and Audit
Mikael Mäkinen 56 28 84 84 Financial and Audit
Richard Nilsson 62 28 90 96 Financial and Audit
Göran Sandberg 48 28 76 - Sustainability and Ethics
Former Board members
Gunnar Brock (until 27 April 2017) - - - 194
Total Remuneration as Directors1 562 304 866 782
1 40% of the Board remuneration in 2017 was paid in Stora Enso R shares purchased from the market and distributed as follows: to Chairman 6 012 R shares, Vice Chairman 3 536 R shares, and members 2 475 R shares each. The Company has no formal policy requirements for the Board members to retain shares received as remuneration.
2 Stora Enso’s Shareholders’ Nomination Board has been appointed by the AGM in 2016 to exist until otherwise decided. The Shareholders’ Nomination Board according to its Charter as approved by the AGM comprises of 4 members: the Chairman and Vice Chairman of the Board of Directors, as well as two members appointed by the two largest shareholders (one each) as of 31 August each year.
3 Marcus Wallenberg appointed by FAM AB is Chairman of the Nomination Board. Harri Sailas is the member of the Shareholders’ Nomination Board appointed by Solidium Oy. Jorma Eloranta and Hans Stråberg were appointed as members of the Shareholders’ Nomination Board in their roles as Chairman and Vice Chairman of the Board of Directors.

The Stora Enso Annual General Meeting (AGM) in 2016 established  a Shareholders’ Nomination Board to exist until otherwise decided and to annually prepare proposals for the AGM's approval concerning the number of members of the Board of Directors, the Chairman, Vice Chairman and other members of the Board as well as the remuneration for the Chairman,Vice Chairman and members of the Board and its committees.

Board share interests at 31 December 2017
Shares held1
A R
Board Members at 31 December 2017
Jorma Eloranta, Chairman 1 150 12 660
Hans Stråberg, Vice Chairman - 35 006
Anne Brunila - 18 384
Elisabeth Fleuriot - 18 384
Hock Goh - 24 167
Christiane Kuehne - 2 475
Mikael Mäkinen - 31 060
Richard Nilsson - 16 517
Göran Sandberg - 2 475
Total Shares Held 1 150 161 128
1 Board members’ related parties hold no Stora Enso shares.
The following Board members also Served in 2017
Shares Held when Board Membership Ended Effective Date of Board Membership Ending
Gunnar Brock 78 000 27 April 2017

Group Leadership Team (GLT) remuneration and share interests

The table below includes the remuneration paid to GLT members during the year, including the shares vested in that year. The company recommends and expects the CEO and GLT members to hold Stora Enso shares at a value corresponding to at least one annual base salary. Stora Enso shares received as remuneration are therefore recommended not to be sold until this level has been reached.

The aggregate cost of remuneration for GLT in 2017 amounted to EUR 11.1 (EUR 9.9) million. The total number of GLT members was twelve (twelve) at year end in 2017. Annica Bresky joined GLT on 1 May, and one GLT member left during the year, Juan Carlos Bueno on 31 May.

In accordance with their respective pension arrangements, GLT members may retire at sixty-five years of age with pensions consistent with local practices in their respective home countries. Contracts of employment provide for six months’ notice prior to termination with severance compensation of twelve months basic salary if the termination is at the Company’s request.

The outcome of the financial targets relating to the Short term incentive programmes for the performance year 2016, and Long term incentive programmes for the performance years 2014 to 2016 were reviewed and confirmed by the Remuneration Committee in the ordinary February meeting, and approved by the Board of Directors in February.

Note 21 Employee variable compensation and equity incentive schemes includes details of incentive schemes and share opportunity programmes for the management and staff of Stora Enso.

Group Leadership Team remuneration
Year Ended 31 December
2017 2016
EUR thousand CEO Others1 GLT Total CEO Others GLT Total
Remuneration
Annual salary4 913 3 583 4 496 934 3 964 4 898
Local housing (actual costs) - 70 70 - 119 119
Other benefits 20 610 630 20 581 601
Termination benefits - 531 531 - - -
Short Term Incentive programme3 532 643 1 175 499 924 1 423
Long Term Incentive programme3 549 1 403 1 952 151 424 575
2 014 6 840 8 854 1 604 6 012 7 616
Pension Costs
Mandatory plans 69 1 029 1 098 64 1 044 1 108
Stora Enso voluntary plans 5552 544 1 099 550 625 1 175
624 1 573 2 197 614 1 669 2 283
Total Compensation 2 638 8 413 11 051 2 218 7 681 9 899
1 The amounts include payments related to Juan Carlos Bueno until 31 May 2017. Payments related to the new GLT member Annica Bresky are included from 1 May 2017.
2 The CEO participates in the Swedish Executive Pension Plan where pension accruals are unfunded for all participants, the liability is calculated and insured in accordance with Swedish legislation. The unfunded liability for the CEO amounts to EUR 2 049 thousand.
3 Disclosed amounts for Short and Long term Incentives include amounts for executives who were GLT members at the time of the payment in March 2017.
4 Annual salary for executives is disclosed only for the period during which they were GLT members.

Executives other than CEO

Short Term Incentive (STI) programmes for management

GLT members have STI programmes with up to a maximum of 40% or 50% of their annual fixed salary, payable the year after the performance period. 70% of the STI for 2016 and 2017 was based on financial measures and 30% on Individual Key Targets.

Long Term Incentive (LTI) programmes for management

Since 2014, the LTI programmes have had three-year targets and vest in one portion only after three years and the absolute maximum vesting level is 100% of the number of shares granted. Three quarters (75%) of the opportunity under the 2017 programme is in Performance Shares, where the shares are vested in accordance with performance criteria proposed by the Remuneration Committee and approved by the Board of Directors. One quarter (25%) of the opportunity under the 2017 programme is in Restricted Shares, for which vesting is subject to continued employment.

Under the 2017 LTI programme, GLT members (in GLT at year end) can potentially receive 269 386 shares assuming the maximum vesting level during the three-year vesting period (2017-2019) is achieved.

The fair value of employee services received in exchange for share-based compensation payments is accounted for in a manner that is consistent with the method of settlement and is either cash or equity settled as described in more detail in Note 21. For the equity settled part, it is possible that the actual cash cost does not agree with the accounting charges because the share price is not updated at the time of the vesting. The figures in the Group Leadership Team Remuneration table refer to individuals who were executives at the time of settlement.

During the year, the 2014 programme vested in one portion after three years, dependent on Economic Value Added (EVA) for the Stora Enso Group. The number of shares settled on executives (GLT members at settlement date) from previous Restricted Share programmes and Performance Share programmes amounted to 138 388  shares with a cash value at the 1 March 2017 settlement date of EUR 1 403 254  based on the share price at that date.

Chief Executive Officer – Karl-Henrik Sundström

The CEO has been employed since 1 August 2012 and assumed the position as CEO on 1 August 2014. He has a notice period of six months with a severance payment of twelve months salary on termination by the company but with no contractual payments on any change of control. The CEO’s benefits include pension provisions. The CEO’s pension plan consists of a collectively agreed pension plan in Sweden (ITP2) and a defined contribution (DC) top up pension plan. Contributions to the DC plan in the 20-30 interval Income Base Amounts (IBA; one IBA was 61 500 SEK in 2017) is 23%, contributions above 30 IBA are 35% for the salary the CEO had prior to assuming this position and 39% of the salary increase amount received when assuming the position as CEO. The retirement age is sixty-five years.

Short Term Incentive (STI) programme for CEO

The CEO is entitled to an STI programme decided by the Board each year giving a maximum of 75% of the annual fixed salary. The STI for 2016 and 2017 was 70% based on financial measures and 30% on Individual Key Targets.

Long Term Incentive (LTI) programmes for CEO

The CEO participates in 2015, 2016 and 2017 share based LTI programmes. The programmes have three year targets and vest in only one portion after three years. Three quarters (75%) of the opportunity is in Performance Shares, where shares will vest in accordance with performance criteria proposed by the Remuneration Committee and approved by the Board of Directors. One quarter (25%) of the opportunity is in Restricted Shares, for which vesting is only subject to continued employment.

The CEO has the potential to receive up to 81 401 shares under the 2017 LTI programme. The grant value of EUR 825 406 is based on the share price at the grant date and assuming maximum vesting level during the three-year vesting period is achieved. The CEO received shares from previous Restricted Share programmes and Performance Share programmes, which amounted to 54 181 shares with a cash value at the 1 March 2017 settlement date of EUR 549 395 based on the share price of EUR 10.14 at that date.

Group Leadership Team share interests
Executives in Office at the Year End R Shares Held1 Performance Share Opportunity 2018–20202 Restricted
Share Opportunity 2018–20202
Johanna Hagelberg 4 745 50 396 16 798
Kati ter Horst 19 166 79 469 26 490
Malin Bendz 13 793 30 400 10 133
Ulrika Lilja 16 582 41 816 13 939
Annica Bresky - 25 191 8 397
Per Lyrvall3 44 632 61 180 20 393
Markus Mannström 25 746 35 580 11 860
Noel Morrin 18 092 54 680 18 227
Gilles van Nieuwenhuyzen - 87 369 29 123
Seppo Parvi 17 026 62 192 20 730
Karl-Henrik Sundström4 114 548 199 584 66 528
Jari Suominen 23 068 60 471 20 157
Total, Serving Officers5 297 398 788 328 262 775
1 None of the GLT members holds A shares.
2 Potential shares to GLT members listed here are gross of taxes
3 Spouse holds 1 257 shares.
4 41 700 of the shares are held by a related party (Alma Patria AB).
5 The Company recommends and expects GLT members to hold Stora Enso shares at a value corresponding to at least one annual base salary. Stora Enso shares received as remuneration are therefore recommended not to be sold until this level has been reached.
The following executive officers also served in 2017
Shares Held when GLT Membership Ended Performance Share Opportunity when GLT Membership Ended1 Restricted
Share Opportunity when GLT Membership Ended1
Effective Date of GLT Membership Ending
Juan Carlos Bueno - 87 083 29 028 31 May 2017
1 Unvested Performance and Restricted share awards were forfeited when employment ended.

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