Volvo 2005 Annual Report Download - page 121

Volvo Group 2005 117
Note 33 Government grants
During 2005, government grants amounting to 173 (165) have been received, of which 143 (137) has been accounted for in the income
statement. The grants were mainly received from the European Commission and the Swedish government.
Note 34 Personnel
In accordance with a resolution adopted at the Annual General
Meeting 2005, the fee paid to the Board of Directors is a fi xed
amount of SEK 4,775,000, to be distributed as decided by the
Board. The Chairman of the Board, Finn Johnsson, received a fee of
SEK 1,350,000 as Board Chairman and SEK 75,000 as Chairman of
the Remuneration Committee.
Fixed Variable Other
Remuneration to senior executives, SEK salary salary benefi ts Pension
Board Chairman 1,425,000 – – –
CEO1 10,950,000 5,292,500 1,777,781 20,835,641
4
Other memebrs of GEC1, 2 53,609,500 21,849,000 17,484,000 56,745,000
Total remuneration and benefi ts 65,984,500 27,141,500 19,261,781 77,580,641
Total costs3 85,211,000 34,875,000 28,761,000 92,782,000
1 Other benefi ts for the President and CEO includes SEK 1,204,000 related
to allotted shares during 2005 and for other members of the GEC SEK
6,245,750 related to allotted shares and SEK 3,104,448 pertaining cash
payments linked to the share-based incentive program.
2 In addition to the CEO, the Group Executive Committee (GEC) comprises 16
members at the end of the year.
3 Total costs for senior executives include social fees on salaries and bene-
fi ts, special pension tax and additional costs for other benefi ts.
4 In the beginning of 2005 a previuosly announced one-time payment of SEK
34 was made when Leif Johansson shifted over to a defi ned contribution
based pension. SEK 20.8 M of this amount are reported as a cost in 2005.
The remaining part will be charged during 2006.
Terms of employment of the CEO
The President and Chief Executive Offi cer, Leif Johansson, is enti-
tled to a fi xed annual salary. In addition, he may receive a variable
salary based on operating income and cash fl ow up to a maximum of
50% of his fi xed annual salary. In 2005, the variable salary corre-
sponded to 48.3% of the fi xed annual salary. Leif Johansson also
participates in the Volvo Group long-term incentive program. In
2005, Leif Johansson received 4,000 shares, since the fi nancial
goals for 2004 were achieved.
Leif Johansson’s pension benefi ts are a defi ned-contribution pen-
sion, meaning that Leif Johansson’s pension will equal the sum of all
premiums paid with the addition of possible return. A defi ned time
for retirement does not exist. The pensionable salary consists of the
current monthly salary times 12, Volvo’s internal value for company
car, together with the average of the outcome of the variable salary,
maximized to 50% of the salary, for the previous fi ve years. See point
4 above for premiums paid in 2005.
Leif Johansson has a six-month notice of termination on his own
initiative and 12 months notice of termination from AB Volvo. Leif
Johansson is not entitled to severance payments.
Variable salaries
Leif Johansson, the members of the Group Executive Committee
and a number of senior executives receive variable salaries in addi-
tion to fi xed salaries. Variable salaries are in most cases based on
the fulfi lment of certain improvement targets. The targets are
decided by the Board of Directors in AB Volvo and may relate to
operating income and cash fl ow. A variable salary may amount to a
maximum of 50% of the fi xed annual salary.
Severance payments
The employment contracts for members of the Group Executive
Committee and certain other senior executives contain rules govern-
ing severance payments when the company terminates the employ-
ment. The rules provide that, when the company terminates the
employment, an employee is entitled to severance pay equal to the
employee’s monthly salary for a period of 12 or 24 month, depending
on age at date of severance.
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 the income from new
employment. In agreements concluded after the spring of 2004, sev-
erance pay is reduced by the full income from the new employment.
Furthermore, age limit at date of notice of termination is removed and
an employee is, with few exceptions, entitled to severance pay for a
period of 12 months.
Pensions
Previous pension agreements for certain senior executives stipu-
lated that early retirement could be obtained from the age of 60. The
defi ned pension benefi ts are vested and earned gradually over the
years up to the employee’s retirement age and are fully earned at
age 60. During the period between ages of 60 and 65 the employee
receives a pension equal to 70% of the pensionable salary.
Agreements for retirement at age 60 are no longer signed, and
are instead replaced by a defi ned-contribution plan without a defi nite
time for retirement. The premium constitutes 10% of the pensiona-
ble salary.
Earlier defi ned-benefi t pension plans, which entitled the employee
to 50% of the pensionable salary after normal retirement age, have
also been replaced by a defi ned-contribution plan. The premium
constitutes of SEK 30,000 plus 20% of the pensionable salary over
30 income base amounts.