Nordhaven continues to grow in incentive advisory

30 june 2017

Nordhaven is a leading designer of equity based incentive schemes in Finland. Our approach is that the new incentive schemes have been designed and tailored based on the individual clients’ needs. The structures and performance criteria have been designed to support the achievement of the clients’ strategic targets and the increase of shareholder value.

Long-term incentive plans
 
Nordhaven has recently acted as the advisor in the long-term incentive plan design and implementation to DNA in connection with its IPO, to Kesko in relation to the renewal of its compensation practices, to Finnair and Fortum in connection with the change of the compensation guidelines issued by the Finnish government and i.a. to Huhtamäki, Wärtsilä, Ahlström-Munksjö and Raute. In addition, Nordhaven has recently advised Ensto and Altia as the companies have been developing their compensation practices.
  
In addition to designing new incentive plans, Nordhaven provides services relating to target setting, review and analysis of ongoing long-term incentive plans. Customers using our continuous services include, among others, Alma Media, Finnair, Fortum, Huhtamäki, Metso, Neste, Outokumpu, UPM and Wärtsilä.

As part of the projects we support our clients in the communication of their long-term incentive plans. Clear, visual and up-to-date communication to plan participants is a crucial part of the plan implementation. In our recent projects, we have implemented a comprehensive communication package i.a. to DNA, Fortum and Kesko.

Increased transparency requirements

We advise companies on preparing for the upcoming revision of the Shareholders' Rights Directive. Once the national implementation of the Directive realizes during the next two years, the new regulations thereunder will be applied in annual general meetings either beginning from 2019 or 2020. Due to the revision of the Directive the transparency and content requirements of remuneration planning and reporting will increase. Companies need to ensure that their remuneration policy and reporting are in line with the requirements of the Directive.

The Directive will have an impact on decision-making on incentive plans in two ways. Firstly, the Directive requires that the remuneration policy is presented in the annual general meeting at least every four years and the remuneration report must be presented annually. Secondly, the institutional investors must formulate an engagement policy where they take a stand on remuneration principles. Based on the experience from the Great Britain, it is likely that the reconciliation of the institutional investors’ remuneration views will require a substantial amount of additional preparation from the companies.

As the remuneration policy and report will be dealt with in the annual general meeting, the proxy advisors and their principles regarding remuneration will become more important as well. 
 
Nordhaven estimates that due to the revision of the Directive, the long-term incentive plan earning periods will become longer and the performance measures will be evaluated in even more critically than before. Simultaneously, the requirements for simplifying the long-term incentive plan structures will be likely to increase.

The preparation of Board compensation will change

The new regulation will as well have an impact on the preparation and justification of Board compensation. The preparation of the Board compensation will as a process become more similar to that of executive compensation. Thus, we have broadened our services to also cover Board compensation. Nordhaven’s approach to Board compensation is analytical and comprehensive. The goal is to build a bridge from the targets set for the Board to the company’s performance and compensation.

 

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