Investor Presentaiton
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.
In January 2021, KONE's Board of Directors decided on a
new long-term share-based incentive plan, which replaced the
existing share-based plans. The new long-term incentive 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. The plans vest and are delivered in one
portion after the three years, based on accumulated outcomes
for the three-year performance period. No shares are
delivered in 2022 and 2023. 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 number of
shares earned by participants under the share-based
incentive plans are determined on gross basis with deduction
for taxes made when applicable before delivery of the shares
to the participants. The arrangements initiated previous years
included both cash and equity settled arrangements. Current
arrangements are equity settled only.
The target group and targets within the plan as well as
possible rewards are decided upon annually by the Board. As
part of the long-term incentive 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 2022 long-term incentive plan is targeted to
approximately 55 members of top management, including the
President and CEO, members of the Executive Board and
other top management as well as to 525 other selected key
personnel of KONE Group. The performance criteria applied
to the 2022 long-term incentive 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
Accounting principles
Share-based payments
KONE share-based incentive plans are targeted to the senior
management of KONE and other key personnel. Pursuant to
the plan rules, the potential rewards are settled as a
combination of KONE class B shares and/or 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
To be paid in shares
To be paid in cash
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
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.
The maximum number of shares to be delivered in the first
quarter of 2025 as part of the 2022 long-term incentive plan is
788,768 KONE class B shares based on the performance
period 2022-2024, 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 2022 and to be delivered in 2024 is 2,350
KONE class B shares (gross before deduction for applicable
taxes) and 53,300 KONE class B shares (gross before
deduction for applicable taxes) to be delivered in 2025.
Jan 1-Dec 31, 2022
Jan 1-Dec 31, 2021
18.8
3.8
28.0
11.4
As part of the previous long-term incentive plan a total of
218,091 KONE class B shares were delivered in January
2022 to KONE key personnel as a reward due to the achieved
targets of the 2019 long-term incentive plan. During the year
2022, a total of 15,370 KONE class B shares, based on
previous long-term incentive plans, were returned to KONE
Corporation.
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