Remuneration at Wärtsilä is guided by the ’Pay for Performance’ principles of being responsive, transparent, competitive, and aligning relevant interests. These principles guide the development of remuneration and related practices approach throughout the organisation including for the President & CEO and the rest of the Board of Management. Remuneration principles are designed to attract, retain, and motivate by providing compensation solutions that reward performance in delivering business results.
The remuneration for the CEO and the rest of the Board of Management is prepared by the People Committee and approved by the Board of Directors. The People Committee evaluates how Wärtsilä’s Remuneration Principles have been implemented and the competitive¬ness of the remuneration. The remuneration is benchmarked against relevant peer group, and the benchmark study is reviewed by the People Committee.
Remuneration of the CEO and the rest of the Board of Management
The remuneration for the CEO and the rest of the Board of Management consists of fixed and variable compensation. The objective is to have a good balance of rewarding elements, bya market competitive level of fixed pay supplemented by short-term incentive (STI) and long-term incentive (LTI) schemes aimed at driving company performance and providing an appropriate total compensation.
Remuneration mix for the CEO and the rest of the Board of Management
The fixed pay to the CEO and to the rest of the Board of Management consists of a monthly base salary and pension & benefits. The base salary is reviewed annually, taking into consideration the company and the individual performance, along with relevant market comparison. The review does not necessarily lead to a salary increase. Statutory increases are being applied as required based on the applicable regulation. The annual base salary of the CEO is EUR 963,000.
The CEO and the rest of the Board of Management are provided medical insurance and life insurance. They are also offered a company car benefit. Taking into consideration Wärtsilä's emphasis on environmental responsibility, hybrid or low emission cars are recommended.
The CEO and the rest of the Board of Management participate in company specific supplementary pension schemes, in addition to any statutory requirements. The nature of the supplementary pension schemes and retirement ages vary. They are generally based on the retirement scheme of the national social security system to which the person in question belongs and are typically defined contribution based. The retirement age of the CEO is sixty-three (63). The supplementary pension contribution for the CEO is equivalent to 30% of the annual salary.
In a situation where the CEO or other member of Board of Management is recruited from a country other than the country of employment, the salary-setting and any additional benefits may be in accordance with Wärtsilä’s International Mobility framework. The additional benefits considered may be accommodation, relocation support, family related benefits, and taxation services.
Variable pay - Short-term incentives
The short-term incentive scheme is designed to provide incentives for the achievement of, and to reward the delivery of the short-term business plan. Performance period is one financial year. Targets are set on a sliding scale (min/target/max) or as on/off. When the performance criteria are met at the target level, the pay-out is 50 % of the maximum. The short-term incentive opportunity is capped at 100% of the annual base salary for the CEO, and 70-80% of the annual base salary for the rest of the Board of Management. The People Committee reviews, and the Board of Directors approves, the scheme realization against the set targets before the pay-out. Pay-out of the STI is made in cash shortly following the year-end.
2022 short-term incentive scheme for the CEO and for the rest of the Board of Management
Group financial targets
Respective business financial targets
Strategic or individual targets
Head of Support Function
Head of Business
Variable pay - Long-term incentives
The objective of the long-term incentive scheme is to align the interests of participants with those of Wärtsilä’s shareholders. The People Committee reviews, and the Board of Directors approves, the scheme realization against the set targets before the pay-out. The pay-out is made shortly following the performance period and can be made in cash and/or in shares.
In January 2021, the Board of Directors decided on the long-term incentive scheme which comprises a Performance Share Plan (PSP). The PSP consists of annually commencing individual performance share plans, each with a three-year performance period, followed by the payment of the potential share reward subject to the achievement of the set performance criteria. The potential share reward is paid in listed shares of Wärtsilä. The first plan in the PSP structure covers the years 2021-2023 and the performance criterion applied is Economic Value Added (EVA). The aggregate maximum number of shares payable as a reward based on the first plan is approximately 3,151,000 shares.
In February 2022, the Board of Directors decided on the long-term incentive scheme which comprises a Performance Share Plan (PSP). The plan in the PSP structure covers the years 2022-2024 and the performance criterion applied is Economic Value Added (EVA) and Sustainability Targets linked to decarbonisation. The aggregate maximum number of shares payable as a reward based on the plan is approximately 2,412,000 shares.
Prior to the 2021-2023 long-term incentive scheme, the schemes have been based on Wärtsilä share price development. The table below sets out details of the realised and outstanding awards under Wärtsilä's long-term incentive scheme. The value delivered is based on share price development during the three-year performance period.
Realised and outstanding long-term incentive schemes
LTI for performance period 2019-2021
LTI for performance period 2020-2022
Number of incentive rights outstanding (on 31.12.2020)
Starting share price, EUR (Threshold for payment)
Measurement period for comparison share price
Q4 2021 + 100% of dividends paid
Q4 2022 + 100% of dividends paid
Maximum value per incentive right, EUR
Final comparison share price, EUR
Final value per incentive right, EUR
Scheme payment date
Other terms of employment of the CEO and the rest of the Board of Management
The CEO and the rest of the Board of Management are expected to accumulate and, once achieved, maintain a share ownership in Wärtsilä that at least corresponds to the individual’s annual gross base salary.
Notice period and severance pay
The term of notice by the CEO as well as by the company is six months. The remuneration paid to the CEO if dismissed by the company corresponds to 18 months of severance pay. The term of notice for the rest of the Board of Management is six months, and the severance paid if dismissed by the company corresponds to six months.
2021 actualised remuneration of the Board of Management excluding the CEO
The below table presents the actualised remuneration paid out during the financial year 2021 for the Board of Management, excluding the CEO.
Salary and short-term benefits
Supplementary pension contributions
Rest of the Board of Management
* Actualised STI pay-out is based on the STI performance period 2020
** Actualised LTI pay-out is based on the LTI performance period 2018-2020
Remuneration Policy for Governing Bodies of Wärtsilä
Remuneration report 2021