Fortum’s headquarters in Espoo on 22 September 2022. The majority state-owned energy company has found itself at the centre of controversy after a questionable decision by its board of executives seemed to guarantee substantial bonuses to top executives despite the heavy loss reported for 2022. (Heikki Saukkomaa – Lehtikuva)


FORTUM on Saturday announced it will revisit the performance-based incentives it plans to pay to its executive management for 2022, reports Helsingin Sanomat.

The Finnish energy company decided to revisit the incentives after its majority owner, the Finnish government, rejected the remuneration report drafted by its board of executives at the general meeting held on Thursday, 13 April.

The rejection of the general meeting is not binding, and a final decision on the bonuses will be made by the board.

“I will add the issue to the agenda of the board without delay,” Mikael Silvennoinen, the board chairperson at Fortum, pledged in a press release published on Saturday. “The opposition of shareholders in the general meeting and other feedback show that the previous board’s interpretation of implementing incentives for the executive management fails to sufficiently take into account the company’s overall situation in 2022.”

Fortum has experienced severe difficulties in recent months, reminded Helsingin Sanomat. It wrote off a loss of roughly six billion euros last year due to the collapse of Uniper, its natural gas-dependent subsidiary based in Düsseldorf, Germany. It also had to consolidate its solvency with a 2.35-billion-euro bridge financing arrangement with Solidium, a Finnish state-owned investment firm.

The bridge financing was granted on the condition that the executive management receive neither short, nor long-term incentives for 2022 and 2023.

Fortum posted a net loss of 2.4 billion euros in 2022. Its board, however, exhibited “an utter lack of a sense or proportion” by interpreting the incentive restriction as stating that the long-term incentives for 2020–2022 and 2021–2023 should be calculated based on performance in 2020 and 2021 – without the loss-making year of 2022.

CEO Markus Rauramo would have thereby earned 28,499 shares for 2020–2021 and another 21,999 shares for 2021–2023. The shares were valued at a total of 710,000 euros on Friday.

“We don’t think that the ruling aligns with what was agreed on in conjunction with the bridge financing,” Jukka-Pekka Ohtola, the ministerial adviser who represented the state at the general meeting, told Helsingin Sanomat on Friday.

Helsingin Sanomat reported yesterday that while the board interpreted the incentive restrictions in a way that would guarantee major incentives for the executive management, ordinary employees had to settle for notably lower incentives than usual, despite the high-pressure environment created by the energy crisis and collapse of Uniper.

Jari Laitinen, the head of compensation and benefits at Fortum, explained to the newspaper that the incentives are typically based 60 per cent on the comparative operating profit, 10 per cent on safety targets and 30 per cent on personal or team performance. The incentive criteria, though, also include a clause that cuts the incentives by 50 per cent if the operating profit fails to reach a certain threshold. The clause was triggered for the first time in 2022.

The outcome has been discussed by the board of executives.

“It concluded that there was no reason to change it because the incentives went by the rules,” he said.

Fortum’s remuneration policy does grant the board of executives the authority to revisit incentive criteria in circumstances where the incentives do not reflect the development of profits and share price. The board opted not to utilise its authority under the leadership of Veli-Matti Reinikkala, the chairperson of the nomination and remuneration committee at Fortum.

Aleksi Teivainen – HT