Volvo 2006 Annual Report Download - page 84

Code 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 Remuneration
Committee, the Code sets the requirement that
members of the Remuneration Committee,
with the exception of the Board chairman if a
member of the Remuneration Committee, shall
be independent of the company and company
management.
Considering the above demands regarding
the Board’s independence, the Election
Committee has reported to the company the
following understanding about the independ-
ence from the company and the company man-
agement as well as the company’s largest
shareholders with regard to the Board mem-
bers who were elected at the Annual General
Meeting in 2006:
Finn Johnsson, Peter Bijur, Philippe Klein,
Louis Schweitzer and Ying Yeh are all independ-
ent from the company and company manage-
ment.
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 been
members for more than 12 years and conse-
quently, in accordance with the Code, are not to
be considered independent of the company
and company management.
Philippe Klein and Louis Schweitzer are
employee and Chairman of the Board respect-
ively of Renault SA and represent Renault SA
on the company’s Board of Directors. 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 shareholders.
Audit Committee
In December 2002, the Board established an
Audit Committee primarily for the purpose of
overseeing the accounting and financial report-
ing processes and the audit of the financial
statements. The Audit Committee is responsi-
ble 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 addition, the Audit
Committee’s task is to establish guidelines
specifying what other services than audit the
company may procure from the company’s
auditors and to provide guidelines for and deci-
sions on transactions with companies and per-
sons closely associated with Volvo. The Audit
Committee is also responsible for evaluating
the internal and external auditors’ work as well
as to provide the Election Committee with the
results of the evaluation and to assist in prepar-
ing proposals for auditors.
Up to the 2006 Annual General Meeting, the
Audit Committee comprised Board members
Haruko Fakuda, Ken Whipple and Per-Olof
Eriksson, Chairman. After the Annual General
Meeting in 2006, the Audit Committee com-
prised Board members Peter Bijur, Ying Yeh
and Per-Olof Eriksson, Chairman. During 2006
the Audit Committee held three regular meet-
ings and one extraordinary meeting.
The Audit Committee met with the external
auditors and Head of Internal Audit at the ordin-
ary meetings. The Audit Committee has also
met with the external auditors without the pres-
ence of the company management.
Remuneration Committee
In April 2003, the Board established a
Remuneration Committee primarily for the pur-
pose of preparing and deciding on issues relat-
ing to remuneration to senior executives in the
Group. The duties of the Committee include
presenting recommendations for resolution by
the Board regarding terms of employment and
remuneration for the President and Executive
Vice President of AB Volvo, principles for remu-
neration, including pensions and severance
payment for other members of the Group
Executive Committee, and principles for vari-
able salary systems, share-based incentive
programs, pensions and severance payment
for other senior executives in the Group. In
addition, the Remuneration Committee decides
the individual terms of employment for the
other members of the Group Executive
Committee in accordance with the principles
established by the Board.
In 2006, the Remuneration Committee com-
prised Board members Tom Hedelius, Louis
Schweitzer and Finn Johnsson, Chairman. 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 pages 82 and 83.
External auditing
Volvo’s auditors are elected by the Annual
General Meeting, for a period of three or 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 Pricewater-
houseCoopers AB (“PwC”). Two PwC partners,
Göran Tidström and Olov Karlsson, are respon-
sible for the audit of Volvo. Göran Tidström is
the Lead Partner.
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 detailed findings from their review to the
Audit Committee and, once a year, to the full
Board of Directors.
In addition to the audit, PwC also provides
certain services to Volvo. In 2006 such ser-
vices included advice on the company’s
extended procedures for testing and reporting
of internal controls, in accordance with SOX,
Section 404, which is mandatory for the first
time in 2006. PwC also 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
pre-approval of the nature of the services and
the fees. Volvo believes that the provision of the
additional services does not jeopardize PwC’s
independence.
For more detailed information concerning
auditor’s fees see Note 35 of the notes to the
consolidated financial statements.
80 Corporate Governance 2006