NOTE 92. Related-party transactions
Related-party transactions in 2008
EUR million
Parent company
Adminis-trative
personnel Others *
Loans 50 2,167
Other receivables 62 92
Deposits 56 395
Other liabilities 1 447
Interest income 8 288
Interest expenses 11 218
Dividend income 0 5
Other income from Non-life Insurance 4
Commission income 1 0 24
Commission expenses 2 0 3
Trading income 58
Trading expenses 91
Other operating income 9 14
Operating expenses 86 7
Off-balance-sheet commitments
Guarantees 68
Irrevocable commitments 8 1
Salaries and other short-term benefits
Salaries and other short-term benefits 2
Related-party holdings
Number of shares 60,825,897 63,421 4,205,946
* Other related-party entities include OP Bank Group Pension Fund, OP Bank Group Pension Foundation and their sister companies within OP-Pohjola Group Central Cooperative Consolidated.
Pohjola Group's Parent Company is OP-Keskus osk (OP-Pohjola Group Central Cooperative).
Pohjola Group administrative personnel comprises Pohjola Bank plc's President and CEO, his deputy (Deputy CEO), members of the Board of Directors and their close family members. Normal loan terms and conditions apply to loans granted to the management. Tied to generally used reference rates, these loans with normal collateral are repaid according to the agreed repayment schedule.
The list of Pohjola Group's associates can be found in Note 91. Pohjola Group's related parties comprise the Parent Company, associates, administrative personnel and other related party companies.
Related-party transactions in 2007
EUR million
Parent company
Adminis-trative
personnel Others *
Loans 4 1,325
Other receivables 64 486
Deposits 420
Other liabilities 2 230
Interest income 2 172
Interest expenses 6 102
Dividend income 4
Other income from Non-life Insurance 3 2
Commission income 1 27
Commission expenses 2 3
Trading income 3
Trading expenses 4
Other operating income 6 11
Operating expenses 59 5
Off-balance-sheet commitments
Guarantees 8 45
Irrevocable commitments 77
Salaries and other short-term benefits
Salaries and other short-term benefits 1
Related-party holdings
Number of shares 60,825,897 72,278 4,220,946
Board emoluments 2008
Reijo Karhinen, Chairman EUR 93,900
Tony Vepsäläinen, Vice Chairman EUR 78,300 Board members:
Merja Auvinen EUR 59,400
Eino Halonen EUR 57,000
Simo Kauppi EUR 59,000
Satu Lähteenmäki EUR 60,400
Tom von Weymarn EUR 60,000
Markku Vesterinen EUR 44,500
* Other related-party entities include OP Bank Group Pension Fund, OP Bank Group Pension Foundation and their sister companies within OP-Pohjola Group Central Cooperative Consolidated.
The Annual General Meeting approved the following Board emoluments:
Emoluments paid to Board members in 2008 totalled EUR 512,500. The Chairman's monthly emoluments totalled EUR 7,000, the Vice Chairman's EUR 5,000 and other members EUR 4,000. All Board members received an attendance allowance of EUR 500 for each meeting.
Mikael Silvennoinen, President and CEO EUR 716,599 Ilkka Salonen, Deputy CEO until 31 Dec. 2008 EUR 287,680
NOTE 93. Long-term incentive schemes
Long-term management incentive scheme
-Pohjola Group's earnings per share for the financial year, target 1 euro per share, weight 50%
-Change in the number of Pohjola Insurance Ltd's loyal customer households, target 35,000, weight 25%
-Change in the number of OP-Pohjola Group's loyal customer households, target 82,501, weight 25%
Personnel fund
In 2008, the amount of profit-based bonuses based on profit for 2007 and transferred to the Personnel Fund totalled around EUR 0.4 million.
If the targets are met, each person covered by the scheme is entitled to a bonus corresponding to his/her regular salary subject to PAYE tax for the following periods: the President and CEO, 6 months; Group Executive Committee members, 5 months; heads of business divisions and departments, 3 months; and other persons covered by the scheme, 1.5 months. Persons in the latter group are also entitled to a share of the profit-based payment paid into the Personnel Fund. The bonus will be paid in two years' time following the end of the vesting period.
Bonuses paid in terms of shares and cash are charged to personnel costs on an accrual basis over the vesting period. In the financial year, a total of EUR 0.03 million was expensed for the incentive scheme.
In 2008, target indicators for the management incentive scheme were as follows:
The bonus factor, which is determined by the achievement of the target set for the performance indicators (profitability, growth 1 and growth 2) and by their weights, determines the final amount of bonuses payable. A minimum of 80% of the target set for each performance indicator must be achieved in order for the indicator to accumulate the bonus factor. The actual figure recorded for each performance indicator, ranging between 80% and 120% of the target level, and its weight determine the final bonus factor. The following restrictions apply to the bonus: At least 80% of one of the two Pohjola Group's targets set for the indicators (profitability or growth 1) must be achieved. At least 60% of the target set for growth 2 must be achieved to be entitled to bonuses. However, this will not apply if the target set for loyal customer households (growth 1) has been achieved at 100%. The bonus payable derives from the share, based on the abovementioned bonus factor, of the set target bonus.
On 26 October 2004, Pohjola Bank plc joined the OP Bank Group Personnel Fund. On 31 December 2008, the Fund had 2,394 Pohjola Group employees. At the end of 2008, no members of the staff of Group subsidiaries were included in the Fund, excluding Pohjola Insurance's personnel.
The Group's long-term management incentive scheme applies to the President and CEO of Pohjola Bank plc, heads of business divisions and departments and those in charge of separately defined managerial, supervisory and expert duties. On 31 December 2008, the scheme covered 134 people. The Board of Directors confirms the inclusion of the President and CEO and members of the Executive Committee in the scheme. The Executive Committee confirms the inclusion of other people in the scheme.
Those included in the incentive scheme may receive Pohjola Bank plc shares for 2006–08 as annual bonuses.
Salaries and performance-based bonuses paid to the President and CEO and his deputy in the financial year ending 31 December 2008 were as follows:
His period of notice is six months and the severance pay equals a 12-month salary in addition to compensation for loss of office.
NOTE 94. Events after the balance sheet date
At its meeting on12 February, Pohjola Bank plc's Board of Directors decided on measures to be taken to strengthen the company's capital base. Accordingly, this capital increase could be implemented in the spring 2009 through a rights issue of around EUR 300 million for the existing shareholders, subject to a Board authorisation issued by the Annual General Meeting.
The profit-based bonuses transferred to the Personnel Fund in 2008 and 2009 are based on the same performance indicators as applied in the management's long-term incentive scheme. However, the minimum requirement for the growth 2 performance indicator within the management incentive scheme will not apply when determining the profit-based bonuses transferred to the Personnel Fund. If the targets set for the performance indicators are achieved, profit-based bonuses for 2009 to be transferred to the Fund account for 3.0% of the combined salaries and wages earned by the Fund's members in 2009.