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Remuneration of the CEO and the Executive Committee

The Neste Executive Committee’s remuneration policy consists of the following key elements:

Remuneration element Purpose and link to strategy and long-term financial success Description and operation
Fixed salary (Base salary and fringe benefits in Finland) The base salary should be sufficient to attract, retain and motivate high-calibre individuals

Fixed salary which includes taxable fringe benefits (car and mobile phone) in Finland. The remuneration (including base salary) of the President and CEO and the members of the Executive Committee are reviewed annually by the People and Remuneration Committee and any changes are approved by the Board of Directors.

Peter Vanacker’s fixed salary is EUR 75,020 per month in 2019 and EUR 76,370 per month beginning from 1st of January 2020. 

Pension To provide a competitive retirement benefit in line with local market practices

Peter Vanacker: The retirement age according to the Finnish Employee’s Pension Act (TyEL), no additional pension scheme.

ExCo members: *
• For those who have started before 1 January 2009: a defined benefit (DB) plan based on a retirement age of 60 (up to 60% of retirement salary). Retirement salary for DB schemes is calculated based on the average monthly salary and related statutory pension insurance contributions over the ten years prior to retirement.
• For those who have started after 1 January 2009 but before 31 August 2018, a defined contribution (DC) pension scheme (based on retirement age of 62, 63 or as prescribed under Finnish pension legislation). DC pension allocation is 16% of annual fixed base salary.
• New additional pension schemes are no longer made for those who have started after 31 August 2018. 

Short-term incentive (STI) To reward and incentivize improvements in short-term financial and operational performance and support the delivery of the business strategy

Based on the attainment of annual financial and non-financial measures. Maximum award value is 40% of annual fixed base salary.

President and CEO: KPIs are group financial targets (comparable Group EBIT, comparable Free Cash Flow and group safety targets [Total Recordable Injury Frequency per million hours worked, TRIF, including contractors] and Process Safety Event Rate per million hours worked [PSER]).

For ExCo members with business area responsibility: a combination of group and business area specific financial and safety measures (for example comparable EBIT, comparable Free Cash Flow, TRIF and/or PSER).

For ExCo members with common function responsibility based on Group comparable EBIT, comparable Free Cash Flow, TRIF, PSER and specific strategic measures of the function in question.

Long-term incentive (LTI) To drive long-term sustainable growth and align the interests of executives with shareholders

LTI 2016: Based on the attainment of three-year financial and share price performance targets for Neste. For award cycles commencing in 2017 and 2018, 75% of the awards are based on cumulative comparable free cash flow and 25% are based on the total return of Neste shares relative to the STOXX Europe 600 Index. Awards vest in one tranche after three years, partly in shares and partly in cash. The cash element will cover taxes and other tax-like costs. The shares delivered based on the award cycle, which commenced in 2017, are subject to a one-year lock-up period. The shares potentially delivered based on the award cycle, which commenced in 2018, will similarly be subject to a one-year lock-up period. The award for President and CEO varies between 0–100% of annual fixed salary, based on performance and share price appreciation. Awards for ExCo members vary between 0–80% of annual fixed salary. Should the amount of total incentive awarded to executives (STI + LTI) exceed 120% of annual salary, the excess amount of LTI shares vesting in any one year will be cut to maintain this limit. LTI 2016 is targeted to selected key employees of Neste, including the CEO and the other ExCo members.

LTI 2019: Performance Share Plan (PSP)
Based on the attainment of three-year share price performance targets for Neste. For award cycle commencing in 2019 (PSP 2019-2021), 100% of the awards are based on the total return of Neste shares compared to the STOXX Europe 600 Index. Awards vest in one tranche after three years, partly in shares and partly in cash. The cash element will cover taxes and other tax-like costs. The award for President and CEO and other ExCo members vary between 0–100% of annual fixed salary, based on performance and share price appreciation. Should the amount of total incentive awarded to executives (STI + LTI) exceed 120% of annual salary, the excess amount of LTI shares vesting in any one year will be cut to maintain this limit. LTI 2019 is targeted to selected key employees of Neste, including the CEO and the other ExCo members.

LTI 2019: Restricted Share Plan (RSP) The Restricted Share Plan consists of annually commencing individual restricted share plans, each with a three-year retention period after which the share rewards granted within the plan will be paid to the participants in shares of Neste. A precondition for the payment of the share reward based on the Restricted Share Plan is that the employment relationship of the individual participant with Neste continues until the payment date of the reward. RSP 2019–2021 within the Restricted Share Plan structure commences effective as of the beginning of 2019 and the potential share reward thereunder will be paid in the spring 2022. The Restricted Share Plan serves as a complementary long-term retention tool for individually selected key employees. Nominations for the Restricted Share Plan are approved by the Board of Directors on individual basis.

Other benefits and programs Provides benefits and insurances in a cost-efficient way to attract and retain high-calibre individuals. The ExCo members have company car benefit, mobile phone benefit, private accident-, life- and disability insurance, business travel, directors’ and officers’ liability insurances. The ExCo members may participate in the sickness fund (in Finland).
Claw back and malus provision  To ensure pay for performance Variable pay awards (STI and LTI awards) are subject to malus (adjustment before pay-out) and clawback (reclaimed after pay-out) provisions, which can be applied in case of material misstatement, misconduct or a significant environmental or health and safety issue or any other circumstance as determined by the Board of Directors at its discretion.
Shareholding requirement To encourage to build a meaningful shareholding in Neste President and CEO and ExCo members must accumulate and maintain a shareholding which is equivalent to their annual fixed salary. Until this threshold is met, participants must retain 50% of vested incentive shares after tax.
Service contracts and loss of office payments To ensure clear contractual terms are followed 

Peter Vanacker: Both parties have a six-month period of notice. Should the Company terminate the President and CEO’s agreement, the Company is required to pay six month’s salary and a separate severance pay equivalent to six month’s salary.

ExCo members are entitled for 6 months’ severance payments. Change of control terms are same as for termination.

Supplementary information

Benchmarking approach: The Personnel and Remuneration Committee reviews market benchmark data from Finnish and, where necessary, international industrial companies of a similar size and complexity to Neste when setting total remuneration packages for the President and CEO and the members of the ExCo. This is used more as a guide than a direct determinant of pay levels. Other factors considered include each individual’s role and experience, as well as Company and personal performance.

Shareholder alignment: Significant shareholders of the Company may release ownership policies or express their view on remuneration principles. The Board of Directors of the Company evaluates how it, taking into account the best interest of the Company, observes the relevant shareholder views on remuneration applicable at any given time.