Fortum CEO to get EUR 800,000 in tax-free shares

Minister Pekkarinen approves incentive programme at shareholders' meeting

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Mikael Lilius, CEO of the majority state-owned energy company Fortum, stands to get EUR 800,000 worth of tax-free shares in the company next year.
      The shares will come from a new incentive programme, and more such incentives are expected in the coming years.
      The value of the whole deal is set to grow, once the company gets to buy its own shares.
     
Minister of Trade and Industry Mauri Pekkarinen (Centre) reversed his stand he took a year ago, and gave his approval on Wednesday to planned buybacks of the company's shares without preconditions. Last year he set a price ceiling for such buybacks.
     
The price ceiling of EUR 19.75 per share managed to block plans to buy back EUR 500 million, because the market price remained above that limit nearly throughout the year, and the company did not start buying back its shares at a higher price.
      This time, Fortum shareholders were asked at a meeting on Wednesday to authorise a buyback worth EUR 300 million, which Pekkarinen accepted as representative of the state, which has a 51 per cent holding in Fortum.
      Pekkarinen said that he was able to approve the buyback unconditionally, because the programme was more moderate than before - EUR 200 million smaller.
     
However, there was talk during breaks at the shareholders' meeting on Wednesday, that the real reason why Pekkarinen did not approve of the scheme last year was the effect that such a move might have on the Parliamentary elections.
      The theory is that with the elections ahead, Pekkarinen shied away from the proposed programme, because a buyback of shares could boost the value of the company's stock, which would have boosted the stock option benefits of the company's top management, which had come under severe public criticism.
     
Although most of the big stock option programmes evaporated last year, the company now has plans for rewarding management with shares in the company, whose value is also dependent on how the company is quoted on the stock exchange.
      For instance, CEO Mikael Lilius is to get 32,000 Fortum shares next spring, which are worth a total of EUR 800,000. The income is tax free.
      Although decisions at the stockholders' meeting can be dictated by the state representative - in this case, Pekkarinen - thousands of shareholders attended the meeting on Wednesday.
      Colourful commentary was heard. There calls for Lilius to resign as incompetent. One shareholder urged Pekkarinen to buy back all shares for the state, claiming that the majority owner had damaged the company.
      There was extensive debate on the status Administrative Council of the company, which is composed of Members of Parliament. Calls for the abolition of the body were rejected, because Pekkarinen voted against it.


Previously in HS International Edition:
  Energy company Fortum to scale back lucrative perks to management (16.3.2006)
  Fortum Board has powers to alter stock options procedures (20.10.2005)
  Fortum management to keep stock options; no action in Parliament (14.10.2005)
  Political controversy over Fortum stock option perks escalates (29.9.2005)

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