Volvo 2000 Annual Report Download - page 72

70
THE VOLVO GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 2,475,000, to be distributed as
decided by the Board. The Chairman of the Board, Lars
Ramqvist, receives a fee of SEK 850,000.
In 2000, Leif Johansson, President and Chief
Executive Officer, received SEK 8,996,520 in salary and
other benefits amounting to SEK 546,085. The bonus in
1999 was SEK 2,212,920 after deduction for the option
amount. This bonus, including a 6% upward adjustment,
a total of SEK 2,345,695 was allocated to pension. Leif
Johansson received 8,821 options at a value totaling
SEK 491,760, and 50,000 employee stock options. In
addition, SEK 317,809 was paid during the year in cash,
consisting of a deferred bonus from fiscal year 1997. For
2000 the bonus is a maximum of 50% of the annual
salary. Leif Johansson is eligible to take retirement with
pension at age 55. Pension benefits are earned gradually
over the years up to the employee’s retirement age and
are 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 twelve
months notice of termination from AB Volvo and six
months on his own initiative. If Leif Johansson’s employ-
ment is terminated by AB Volvo, he is entitled to a sever-
ance payment equal to two years’ salary, plus bonus.
In 2000, Sören Gyll, President and Chief Executive
Officer up to and including April 22, 1997, received SEK
325,000 in board fees and other benefits amounting to
SEK 145,645. 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 executives 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, 1998 and 1999.
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 employ-
ment 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 employee is entitled to severance payments amount-
ing 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 employ-
ment. 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. Volvo currently has
three option programs for senior executives. The option
programs have no dilutive effect on Volvo’s outstanding
shares.
In February 1996, Skandia and Trygg-Hansa (insur-
ance companies) provided 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 subscription period approximately 90% of the
executives had accepted the offer. The call options,
which can be exercised from March 4, 1996 until March
3, 2001, entitle the holder to acquire 1.04 Volvo Series B
shares for each option held. The exercise price is 172.20.
The option price, based on a market valuation, was fixed
at the time of acquisition at SEK 21.15. 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 call option
program with two subscriptions, one in 1999 and one in
2000. For the first subscription in May 1999, options
were subscribed to approximately 100 senior executives.
For the second subscription in April 2000, options were
subscribed to approximately 60 senior executives.
The call options subscribed in May 1999, which can
be exercised from May 18, 1999 until May 4, 2004, give
the holder the right to acquire 1.03 Series B Volvo shares
for each option held and the exercise price is SEK
290.70. The price of the options is based on market
valuation and was fixed at SEK 68.70. The number of
options corresponds to a part of the executive’s bonus
earned. A total of 91,341 options were subscribed. The
options are financed 50% by the Company and 50%
from the option-holder’s bonus.
The second subscription took place in April 2000.
These options can be exercised from April 28, 2000
until April 27, 2005, and give the holder the right to
acquire one Series B Volvo share for each option held
and the exercise price is SEK 315.35. The price of the
options is based on market valuation and was fixed at
SEK 55.75. The number of options corresponds to a part
of the executive’s bonus earned. A total of 120,765
options were subscribed. The options are financed 50%
by the Company and 50% from the option holder’s bonus.
In January 2000, a decision was made to implement
a new incentive program for senior executives within the
Volvo Group in the form of so-called employee stock
options. The decision covers allotment of options for
2000 and 2001. Accordingly, during January 2000, a
total of 595,000 options were allotted to 62 senior exec-
utives, including President and CEO Leif Johansson, who
received 50,000 options. The employee stock options
allotted in January 2000 give the holders the right, from
March 31, 2002 through March 31, 2003, to redeem
their options or alternatively receive the difference
between the actual price at that time and the exercise
price determined at allotment. The exercise price is SEK
239.35 and the value of the option at allotment was set
at SEK 35, which is equal to the market value.
The final allotment will depend on the fulfillment of
financial goals. The options are financed by the
Company.
Profit-sharing payments to employees for 2000, 1999
and 1998 amounted to –, 185 and 160, respectively.
Note 30 Personnel