Volvo 2005 Annual Report Download - page 78

74 Volvo Group 2005
demands that a majority of the members in
the Audit Committee shall be independent of
the company and that at least one member
shall be independent of the company’s major
shareholders. With regard to the Remunerat -
ion Committee, the Code sets the requirement
t h a t m e m b e r s o f t h e R e m u n e r a t i o n C o m m i t t e e ,
with the exception of the Board chairman if a
member of the Remuneration Committee,
shall be independent of the company and com-
pany management.
The Election Committee has informed the
company about its proposal for Board mem-
bers and the Board Chairman that it intends to
present to the Volvo Annual General Meeting.
Considering the above demands regarding
the Board’s independence, the Election
Committee has reported to the company the
following understanding about the proposed
Board members independence from the com-
pany and the company management as well as
the company’s largest shareholders.
Finn Johnsson, Patrick Faure, Haruko
Fukuda, Louis Schweitzer and Ken Whipple
are all independent from the company and
company management.
Leif Johansson, as Volvo’s CEO, is not inde-
pendent of the company and company man-
agement.
Tom Hedelius and Per-Olof Eriksson have
been members of the Board of Volvo since
January 19, 1994. Accordingly, they have, at
the time of issuance of this corporate govern-
ance report, been members for more than 12
years and consequently in accordance with the
Code are not to be considered independent of
the company and company management.
Patrick Faure and Louis Schweitzer are
e m p l o y e d b y R e n a u l t S A a n d r e p r e s e n t R e n a u l t
SA on the company’s Board. Since Renault
SA controls more than 10% of the shares and
votes in Volvo, these persons may not pursuant
to the Code be considered as independent in
relation to one of the company’s major share-
holders.
Audit Committee
In December 2002, the Board established an
Audit Committee primarily for the purpose of
overseeing the accounting and financial
reporting processes and the audit of the finan-
cial statements. The Audit Committee is
responsible for preparing the Board’s work
through quality assurance of the company’s
financial reporting through reviewing the
interim reports and the annual report. In add-
ition, the Audit Committee’s task is to establish
guidelines specifying what other services than
audit the company may procure from the com-
pany’s auditors and to provide guidelines for
and decisions on transactions with companies
and persons closely associated with Volvo. The
Audit Committee is also responsible for evalu-
ating the auditors’ work as well as to provide
the Election Committee with the results of the
evaluation and to assist in preparing proposals
for auditors.
In 2005, the Audit Committee comprised
Board members Haruko Fukuda, Ken Whipple
and Per-Olof Eriksson, Chairman. The Audit
Committee held three ordinary meetings and
one extraordinary meeting in 2005. The Audit
Committee met with the external auditors and
Head of Internal Audit at the ordinary meetings
as well as the external auditors without the
presence of the company management.
Remuneration Committee
In April 2003, the Board established a
Remuneration Committee primarily for the
purpose of preparing and deciding on issues
relating to remuneration to senior executive in
the Group. The duties of the Committee
include presenting recommendations for reso-
lution by the Board regarding terms of employ-
ment and remuneration for the President and
Executive Vice President of AB Volvo, princi-
ples for remuneration, including pensions and
severance payment for other members of the
Group Executive Committee, and principles for
variable salar y systems , share-based incentive
programs, pensions and severance payment
for other senior executives in the Group. In
addition the Remuneration Committee de -
cides the individual terms of employment for
the other members of the Group Executive
Committee In accordance with the principles
established by the Board.
In 2005, the Remuneration Committee
comprised Board members Tom Hedelius,
Louis Schweitzer and Finn Johnsson, Chair-
man. The Remuneration Committee held four
meetings during the year.
Group Executive Committee
An account of their respective age, education,
Board memberships, ownership of shares in
Volvo, and year of joining Volvo for the CEO
and each member of the Group Executive
Committee is presented on page 77.
External auditing
Volvo’s auditors are elected by the Annual
General Meeting, for a period of four years. The
current auditors were elected at the 2003
Annual General Meeting and the next election
of auditors will be at the 2007 Annual General
Meeting. Volvo’s auditor is Pricewaterhouse-
Coopers AB (“PwC”). Two PwC partners, Olof
Herolf and Olov Karlsson, are responsible for
the audit of Volvo. Olof Herolf has the primary
responsibility.
The Auditors report their findings to the
shareholders through the audit report, which
they present to the Annual General Meeting of
the shareholders. In addition, the auditors
report the detailed findings made since the
latest meeting to the Audit Committee at each
of the ordinary meetings of the Audit Committee
and to the full Board once a year.
PwC provides certain services to Volvo in
addition to the audit. In 2005 such services
included advice on the company’s preparation
and implementation of the testing and report-
ing of internal controls, which is mandatory
under the provisions of the US Sarbanes-
Oxley Act. PwC also advised on the transition
t o I nte rn ati ona l F i nan ci al R ep or t in g St an da rds .
In addition, PwC provides tax advice and other
audit related services to Volvo. When PwC is
retained to provide services other than the
audit, it is done in accordance with rules
decided by the Audit Committee pertaining to
preapproval of the nature of the services and
the fees. Accordingly, Volvo believes that the
provision of the additional services does not
jeopardize PwC’s independence.
For more detailed information concerning
auditors’ fees see Note 35 of the notes to the
consolidated financial statements.