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CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | OTHERS
6.2 SHARE-BASED PAYMENTS
Share based incentive plans
KONE has two separate share-based incentive plans, one
performance share plan and one restricted share plan.
On January 28, 2021, KONE's Board of Directors decided
on a new performance share plan, which replaced the existing
performance share plans. The new performance plan
continues to emphasize profitable growth and as a new
measure sustainability. It consists of annually commencing
individual share plans, each with a three-year rolling
performance period, after which the potential share awards
vest. If the participant's employment or service relationship
with KONE Group terminates before the end of the
performance period, the participant, as a rule, forfeits the
share award without compensation. The potential reward is to
be paid as a combination of KONE class B shares and a cash
payment equivalent to the taxes and similar charges that are
incurred from the receipt of shares. The target group and
targets within the plan as well as possible rewards are
decided upon annually by the Board. As part of the
performance share plan for the senior management, a long-
term target for their ownership has been set. For the
Executive Board members, the long-term ownership target is
that the members have an ownership of KONE shares
corresponding to at least five years' annual base salary. For
other selected top management positions, the ownership
target is at least two years' base salary.
The 2021 performance share plan is targeted to
approximately 55 members of the top management, including
the President and CEO, members of the Executive Board and
other top management, and approximately 500 other selected
key personnel of KONE Group. The performance criteria
applied to the 2021 performance share plan are based on
annual growth in sales, adjusted EBIT margin and
improvements in sustainability. The sustainability performance
condition is a combination of reductions in carbon footprint,
diversity and inclusion as well as safety related targets.
The restricted share plan serves as a complementary long-
term share plan to be used as a commitment instrument for
retention and recruitment purposes for top management
(excluding the President and CEO) and other selected key
persons. The restricted share plan does not have a
performance condition. The plan has a commitment period up
to three years, after which the potentially granted share
Accounting principles
Share-based payments
KONE has a share-based incentive plan to the senior
management of KONE and other key personnel. Pursuant to
the share ownership plan, the reward to the management will
be settled as a combination of KONE class B shares and
cash when the criteria set in the terms and conditions for the
plan are met. The fair value of the share-based payments
settled with KONE class B shares has been determined at
the grant date and will be recognized as an expense over the
vesting period. The total amount to be expensed over the
vesting period is determined based on the Group's estimate
of the number of the shares that are expected to be vested
by the end of the vesting period. The impact of any non-
market vesting conditions have been excluded, but they are
included in assumptions about the number of shares that are
Share based incentive plan
expected to be distributed. At each statement of financial
position date, the Group revises its estimates of the number
of shares that are expected to be distributed. It recognizes
the impact of the revision of original estimates in the
statement of income. The fair value of the cash settled part of
share-based payments reward has been determined so that
it covers taxes and taxable benefit costs that are incurred.
The liability shall be measured, initially and at each reporting
date until settled, based on the fair value of the shares
expected to be distributed and expensed based on the extent
to which the employees have rendered service to date.
KONE recognizes the impact of the revision of original
estimates, if any, in the statement of income.
Share-based payments recognized as an expense in the statements of income,
MEUR
Jan 1-Dec 31, 2021
28.0
11.4
Jan 1-Dec 31, 2020
23.4
16.3
To be paid in shares
To be paid in cash
awards will be paid to the participant, provided that their
employment or service relationship with KONE Group is in
force at the time of payment.
As part of the previous share-based incentive plan a total
of 171,231 KONE class B shares were delivered in April 2021
to the management as a reward due to the achievement of the
targets for the year 2020 and 155,115 shares in January 2021
to other key personnel. During the year 2021 a total of 8,849
of those KONE class B shares were returned to KONE
Corporation. The maximum number of shares to be delivered
in the first quarter of 2024 as part of the 2021 share-based
incentive plan is 751,334 KONE class B shares based on the
performance period 2021-2023, reduced by an amount of
shares equivalent to the taxes and similar charges that are
incurred by the receipt of shares.
As part of the restricted share plan, the maximum number
of shares granted in 2021 and to be delivered in 2023 is 6,700
KONE class B shares (gross before deduction for applicable
taxes) and 8,950 KONE class B shares (gross before
deduction for applicable taxes) to be delivered in 2024.
6.3 RELATED PARTY TRANSACTIONS
KONE's related parties comprise its subsidiaries as well as
the Board of Directors, the President & CEO, and the
Executive Board including any companies controlled or
significantly influenced by them. The Corporate Controlling
function evaluates and monitors transactions between the
Group and its related parties to ensure that any conflicts of
interest are taken into account appropriately in KONE's
decision making process.
Except for management remuneration there have not been
any material transactions between KONE and its members of
the Board of Directors, the President & CEO, the Executive
Board including any companies controlled or significantly
influenced by them. Information concerning management
remuneration is disclosed in note 6.1 and shares held by the
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