Volvo 2003 Annual Report Download - page 61

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Note 31 Government grants
During 2003, government grants amounting to 121 have been
received, of which 77 has been accounted for in the income
Note 32 Personnel
In accordance with a resolution adopted at the Annual General
Meeting 2003, the fee paid to the Board of Directors is a fixed
amount of SEK 5,200,000, to be distributed as decided by the Board.
The Chairman of the Board, Lars Ramqvist, received a fee of SEK
1,200,000. Fixed and variable salaries and other benefits for the
Chief Executive Officer and Executive Vice President are decided by
the Board of Directors after recommendation by the Remuneration
Committee of the Board. The Remuneration Committee furthermore
reviews and recommends for resolution by the Board principles for
remuneration for the Group Executive Committee as well as princi-
ples for variable salary systems, share-based incentive programmes,
pension schemes and severance pay for senior executives. In addi-
tion, the Remuneration Committee approves remuneration of the
members of the Group Executive Committee. Fixed and variable
salaries in line with the program described below, and other benefits
for other senior executives are prepared and decided by the execu-
tive’s superior, in consultation with his or her superior.
Fixed Variable Other Pension Financial
Remuneration to senior executives, SEK salary salary benefits costs instruments Total
Board Chairman 1,200,000 – – – – 1,200,000
CEO 10,191,761 3,417,935 515,636 10,825,500 1,600,000 26,550,832
Other executives (GEC1)46,234,744 14,157,308 9,134,452 25,008,600 10,720,000 105,255,104
Total 57,626,505 17,575,243 9,650,088 35,834,100 12,320,000 133,005,936
1 Group Executive Committee.
Terms of employment of the CEO
The President and Chief Executive Officer, Leif Johansson, is entitled
to a fixed annual salary. In addition, he may receive a variable salary
based on operating income and cash flow up to a maximum of 50%
of his fixed annual salary. In 2003, the variable salary corresponded
to 33% of the fixed annual salary. Leif Johansson is also participat-
ing in the employee stock options program; in 2003 he was allotted
50,000 options based on the fulfillment of financial targets for 2002.
Leif Johansson is eligible to take retirement with pension at age 55.
Pension benefits earned prior to his employment at Volvo are coordi-
nated with prior employers and consequently Volvo does not take the
full pension cost for Leif Johansson. The defined pension benefits
are vested and 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 pensionable salary. For the period after reaching the
age of 65 he will receive a pension amounting to 50% of his pen-
sionable salary. The pensionable salary is the sum of 12 times the
current monthly salary, Volvo’s internal value for company car, and a
five-year rolling annual average of earned variable salary that is limit-
ed to a maximum of 50% of the annual salary. Leif Johansson has
twelve months notice of termination from AB Volvo and six months
on his own initiative. If AB Volvo terminates Leif Johansson’s employ-
ment, he is entitled to a severance payment equal to two years’
salary, plus the average of the outcome of the variable salary for the
previous five years. The severance payment will be adjusted for any
income after the termination of his contract with Volvo.
Variable salaries
Leif Johansson, the Group Executive Committee, members of the
executive committees of subsidiaries and a number of key execu-
tives receive variable salaries in addition to fixed salaries. Variable
salaries are based on operating income and cash flow of the Volvo
Group and/ or of the executive’s company, in accordance with a sys-
tem established by the Volvo Board in 1993 and reviewed in 2000
and 2001. A variable salary may amount to a maximum of 50% of
the fixed annual salary.
Severance payments and early retirement
The employment contracts of the Group Executive Committee and
certain other senior executives contain provisions for severance pay-
ments when the Company terminates employment, as well as rules
governing pension payments to executives who take early retirement.
The rules governing severance payments provide that, when the
Company terminates employment, an employee is entitled to sever-
ance 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 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 the age of 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 a maximum of 70% of the qualifying salary. From the age
of normal retirement, the retiree will receive a maximum of 50% of
the qualifying salary.
Incentive programs
Volvo currently has two different types of option programs for senior
executives, one call option program and one program for employee
stock options. The employee stock options may only be exercised if
the holder is employed by Volvo at the end of the vesting period.
statement. The grants were mainly received from the European
Commission and the Swedish government.