Variable remuneration is capped at a specific percentage of fixed salary and is recognized as an expense and current liability, respectively, during the earning period in accordance with IAS 19 Employee Benefits. The programs are continuously evaluated and reported in the annual accounts. Payment is made in cash the year following the vesting period.
Description of incentive programs
The structure of the STI targets is related to the financial targets, or goals that contribute to the achievement of financial targets, such as operating cash flow, cost efficiency, EBITA margin, organic sales growth and consolidated profit before tax, as well as innovation goals.
The LTI goal is based on the performance of the company’s B share, measured as the TSR (Total Shareholder Return) index compared with the MSCI Household Products Index, Consumer Staples, which contains a weighted index of competitors’ and consumer companies’ shares performance (TSR) over a three-year period, where the performance target is higher TSR for the company than the benchmark index (maximum outcome requires a 5% better outcome than the benchmark index). Variable remuneration under LTI is paid in cash to employees and accordingly does not have any dilutive effect. Participants in the LTI program are to acquire shares in Essity for half of the LTI outcome paid after tax and to refrain from divesting these shares for a period of three years.
For further information see note C3 in the company´s 2019 Annual and Sustainability Report.
In 2020, all of Essity’s executive management team have sustainability target in their variable remuneration related to Essity’s Science-Based Targets.