Volvo 1998 Annual Report Download - page 72

70
NOTE S
At December 31, 1998, future rental income from noncan-
cellable financial and operational leases (minimum leasing
fees) amounted to 27,272 (19,991; 13,051), of which
26,670 (19,322; 12,745) pertains to sale-financing com-
panies. Future rental income is distributed as follows:
At December 31, 1998, future rental payments related
to noncancellable leases amounted to 7,042 (6,356;
7,269), of which 2,944 (2,548; 2,170) in sales-financing
companies. Rental expenses in 1998 amounted to 1,826
(2,002; 1,782).
Future rental payments are distributed as follows:
Rental payments
1999 2,130
2000 1,617
2001 1,246
2002 1,007
2003 597
2004 and later 445
Total 7,042
In accordance with a resolution adopted at the Annual
General Meeting, the fee paid to the Board of Directors
is a fixed amount of SEK 2,975,000, to be distributed as
decided by the Board. The Chairman of the Board,
Håkan Frisinger, receives a fee of SEK 850,000 and the
vice Chairman of the Board, Lars Ramqvist, receives a
fee of SEK 500,000.
In 1998, Leif Johansson, President and Chief Executive
Officer, received 7,804,260 in salary and other benefits
amounting to SEK 1,430,838. Other benefits include
a single payment of SEK 1,160,000 to compensate
a capital loss selling the former apartment in Stockholm.
His bonus for 1997 was SEK 692,300 (SEK 1,000,000
on an annual basis), of which SEK 230,766 was paid in
cash during 1998 and the rest saved. For 1998 the bonus
is maximum 30% of the annual salary. Leif Johansson is
eligible to take early retirement on pension at age 55.
A pension is earned gradually over the years up to the
employee’s retirement age and is fully earned at age 55.
During the period between the ages of 55 and 65, he
would receive a pension equal to 70% of his pension-
qualifying salary, and a pension amounting to 50% of his
pension-qualifying salary after reaching the age of 65.
Leif Johansson has a twelve months notice of termination
from AB Volvo and six months on his own initiative.
If Leif Johansson’s employment is terminated by AB
Volvo, he is entitled to a severance payment equal to two
years’ salary, plus bonus.
In 1998, Sören Gyll, President and Chief Executive
Officer up to and including April 22, 1997, received SEK
3,000,000 in salary regarding the operational year 1997,
SEK 325,000 in board fee and other benefits amounting
to SEK 456,077. Sören Gyll continued to serve the Group
until December 31, 1997 and then retired on pension.
The Group Executive Committee, members of the
executive committees of subsidiaries and a number of
key persons receive bonuses in addition to salaries.
Bonuses are based on the performance of the Volvo
Group and/or of the executive’s company, in accordance
with the bonus system established by the Volvo Board in
1993 and revised in 1996, 1997 and 1998. A bonus
may, in principle, amount to a maximum of 50% of an
executive’s annual salary.
The employment contracts of certain senior executives
contain provisions for severance payments when em-
ployment is terminated by the Company, as well as rules
governing pension payments to executives who take
early retirement. The rules governing early retirement
provide that, when employment is terminated by the
Company, an employee is entitled to severance pay equal
to the employee’s monthly salary for a period of 12 or 24
months, depending on age at date of severance. In certain
contracts, replacing contracts concluded earlier, an em-
ployee is entitled to severance payments amounting to
the employee’s monthly salary for a period of 30 to 42
months. In agreements concluded after the spring of
1993, severance pay is reduced, in the event the employee
gains employment during the severance period, in an
amount equal to 75% of income from new employment.
An early-retirement pension may be received when the
employee reaches age 60. A pension is earned gradually
over the years up to the employee’s retirement age and
is fully earned at age 60. From that date until reaching
the normal retirement age, the retiree will receive 70%
of the qualifying salary.
In February 1996, Skandia and Trygg-Hansa (insurance
companies) offered approximately 100 senior executives
in the Volvo Group an opportunity to acquire call options
on AB Volvo’s Series B shares. At the close of the sub-
scription period approximately 90% of the executives
had accepted the offer. The call options, which expire
March 3, 2001, entitle the holder to acquire one Volvo
Series B share for each option held. The option price,
based on a market valuation, was fixed at SEK 21.15
and the exercise price is SEK 200. Members of the
Group Executive Committee were offered an opportunity
to acquire 6,000 or 10,000 options each. Other senior
executives could acquire 4,000 or 6,000 options each.
A total of 514,000 options were subscribed.
In October 1998 Volvo announced a new options pro-
gram, to be effective in April 1999. Approximately 100
senior executives were offered an opportunity to partici-
pate in the options program, which includes options on
AB Volvo Series B shares. 95% of the executives has
accepted the offer.
The call options, which can be exercised until April
2004, give a holder the right to acquire one Series B
Volvo share for each option held. The price of the options
is based on a market valuation. The number of options
will equal part of the executive’s bonus earned.
The options are financed 50% by the company and
50% from the option holder’s bonus.
Operational leasing Financial leasing
1999 4,646 4,627
2000 3,934 4,207
2001 2,513 3,349
2002 1,090 1,503
2003 374 587
2004 or later 241 201
Total 12,798 14,474
Leasing Note 28
Personnel Note 29