The key principles of remuneration

At Tokmanni Group, remuneration is not only compensation for the input received by the company but also a key incentive used to guide and motivate the company’s employees. Responsible remuneration is used to engage personnel with the company, supporting the continuity and sustainable long-term financial success of the business. Well-functioning and competitive remuneration is an essential tool for recruiting competent employees to the company, retaining them and motivating them to contribute to the Group’s success.

The earning potential based on the variable remuneration, including long-term remuneration, of the Group CEO and the Deputy CEO is set at a competitive level in line with the market. In line with prevailing market practice, the higher a person’s position in the organisation, the greater the proportion of variable remuneration of the total earning potential under the company’s policy of variable remuneration. This follows the principle of performance-based pay, where incentive schemes, including short-term remuneration, do not include any guaranteed minimum bonus. If performance is good or excellent according to incentive scheme indicators, incentive bonuses can play a significant role in the overall remuneration of the Group CEO and the Executive Team. Earning potential based on the short-term remuneration scheme may be limited to a maximum amount set by the Board of Directors.

The remuneration paid to Board members must be sufficiently competitive to enable the recruitment of competent members to the Board of Directors of the Tokmanni Group. In the company, the remuneration of the members of the Board of Directors is organised separately from the remuneration systems applicable to the Group CEO, Deputy CEO, Executive Team and personnel. Tokmanni Group’s Annual General Meeting resolves on the remuneration of the Chair and members of the Board of Directors and of the Board committees annually on the basis of a proposal prepared by the Shareholders’ Nomination Board. In addition, the Annual General Meeting — or the Board of Directors pursuant to an authorisation from the Annual General Meeting — makes decisions concerning the possible distribution of shares, options or other special rights entitling to shares as part of remuneration.

Short-term remuneration

The Board of Directors determines the terms of the Group’s performance-related bonus each year. These short-term performance bonuses are typically paid quarterly and/or once a year. The bonuses are paid in cash or as additional pension contributions based on the achievement of the company’s profitability targets and other financial targets for the financial year, thereby supporting the achievement of strategic goals. Criteria can also be non-economic or qualitative, such as sustainability criteria. As the recommended indicators are measurable, the Board will be able to assess objectively the results at the end of the performance period.

The Board of Directors may also, if necessary, decide on the one-off or individual remuneration components for the Group CEO and Deputy CEO and for other key persons for successful execution of the key or strategic projects that are important for the Group. Such projects include acquisitions and large-scale construction projects.

Quarterly cash-based short-term performance bonus

The target levels for the 2024 quarterly short-term bonus were determined on a quarterly basis. The bonus was based on comparable sales performance depending on the person’s role (store or region-specific). The payment of the bonus was conditional on the cash margin not falling in the unit under review. The bonus was calculated using the percentage of the person’s gross salary for the relevant earning period as shown in a specified table. The bonus scheme covered Tokmanni Oy’s store personnel. Tokmanni Oy’s logistics employees were paid a personal productivity bonus based on their monthly performance, on top of their monthly basic salary. In 2024, the employees of the Dollarstore segment and of Shoe House Oy were not covered by this bonus scheme.

Annual cash-based short-term performance bonus

The bonus paid under the 2024 annual short-term performance-based bonus scheme was based on revenue and performance targets. In addition, the synergies between Tokmanni and Dollarstore measured in euros were used as an indicator. The bonus was paid after the financial statements for the year in question were finalised. The short-term cash-based performance bonus included all of the Tokmanni Group’s key employees. In addition, Tokmanni Oy’s experts have their own remuneration scheme, which is based on unit-specific targets. The targets were met, so the bonus was paid after the financial statements for the year in question had been finalised.

Individual short-term bonuses

Tokmanni Group Corporation has a complementary share-based retention scheme, which is based on personal performance and the achievement of set targets. In 2023, an individual bonus was paid to the Group CEO, the Deputy CEO and the members of the Executive Team. In 2024, no additional individual bonuses were paid.

Long-term remuneration

Share-based long-term incentive schemes are part of the company’s remuneration scheme for key employees. The purpose of this arrangement is to unite the targets of the owners and key employees in order to raise the value of the company over the long term and to commit the key employees to the implementation of the company’s strategy. In addition, the scheme aims to provide key employees with a competitive remuneration system based on the earning and accumulation of the company’s shares.

The 2023 share bonus scheme

The earning period for the share-based bonus scheme was the 2023 calendar year. The scheme’s bonus was based on the Group’s earnings per share (EPS), Tokmanni Group Corporation’s total shareholder return compared to peer companies for the period 1 January–31 December 2023 and customer perception of the Group’s sustainability. The persons eligible for the scheme are the Group CEO, the members of the Executive Team and other key persons of the company. The shares earned were transferred to the beneficiary’s book-entry account in 2024 and will be released from restrictions in January 2026. If the employment or manager’s contract of an eligible person is terminated before the restrictions on the shares expire, the shares will be returned to the company.

Share-based long-term incentive scheme

On 13 December 2023, the Board of Directors of Tokmanni Group Corporation decided to establish a new share-based long-term incentive scheme for the Group’s management and selected key personnel. The scheme consists of a Performance Share Plan (PSP). The Board of Directors also decided to launch a Restricted Share Plan (RSP). It is intended to be used as a complementary share-based retention scheme. Both schemes have a rolling structure, i.e. the PSP and RSP plans are started by a decision of the Board of Directors. Participants, earning potential, performance indicators and target levels are decided separately for each programme.

The first individual plan in the PSP structure, PSP 2024–2026, commenced at the beginning of 2024 and the awards potentially earned thereunder will be paid in listed shares of Tokmanni Group Corporation and potentially partly in cash during the first half of 2027. The PSP 2024–2026 indicators were earnings per share, relative total shareholder return relative to the median return of peer companies, as well as the environmental scope 3 climate target and the diversity, equity and inclusion (DEI) indicator.

The first individual plan in the RSP structure, RSP 2024–2026, commenced at the beginning of 2024 and share awards payable thereunder will be paid in annual tranches during the plan’s restriction period. The aggregate maximum number of shares payable as a reward under the RSP 2024–2026 is approximately 50,000 shares (referring to gross reward, from which the applicable payroll tax is withheld before share delivery). In 2024, Tokmanni Group Corporation transferred 2,000 of its own shares under the RSP programme to pay a share award to the company’s Group CEO. In addition, the Group CEO was paid the equivalent of 2,000 shares in cash to cover taxes.