Volvo 2007 Annual Report Download - page 150
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Please find page 150 of the 2007 Volvo annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report. 146 Financial information 2007
Remuneration policy
Proposed by the Board of Directors of AB Volvo
to be adopted by the Annual General Meeting April 9, 2008
This Policy concerns the remuneration and other terms of employment for
the Group Executive Committee of the Volvo Group. The members of the
Group Executive Committee, including the President and the Executive Vice
President are in the following referred to as the “Executives”.
This Policy will be valid for employment agreements entered into after the
approval of the Policy by the Annual General Meeting and for changes made
to existing employment agreements thereafter.
1 Guiding principles for remuneration and other terms of employment
The guiding principle is that the remuneration and the other terms of employ-
ment for the Executives shall be competitive in order to ensure that the Volvo
Group can attract and retain competent Executives.
The annual report 2007 sets out details on the total remuneration and
benefi ts awarded to the Executives during 2007.
2 The principles for fi xed salaries
The Executive’s fi xed salary shall be competitive and based on the individual
Executive’s responsibilities and performance.
3 The principal terms of variable salary and incentive schemes, including the
relation between fi xed and variable components of the remuneration and the
linkage between performance and remuneration
The Executives may receive variable salaries in addition to fi xed salaries. The
variable salary may, as regards the President, amount to a maximum of 65%
of the fi xed annual salary and, as regards the other Executives, a maximum
of 50% of the fi xed annual salary.
The variable salary may be based on i.a. the performance of the entire
Volvo Group or the performance of the Business Area or Business Unit
where the Executive is employed. The performance will be related to the
fulfi lment of various improvement targets or the attainment of certain fi nan-
cial objectives. Such targets will be set by the Board and may relate to i.a.
operating income or cash fl ow.
On a yearly basis, the Board will evaluate whether a share or share-price
related incentive program will be proposed to the Annual General Meeting or
not. The Annual General Meeting decides upon such programs. In the report
on 2007 operations released on February 6, 2008, it was announced that the
Board of Directors has decided to propose that the Annual General Meeting
2008 approve the adoption of a share-based incentive program relating to
the fi nancial year 2008.
The Executives are also participating in Volvo’s Profi t Sharing Program (VPS),
which applies to the majority of the Volvo Group’s employees and which can
give a maximum individual result of SEK 8,500 per year, provided AB Volvo’s
return on equity (ROE) amounts to 20% or more. Results under VPS are
princip ally placed in Volvo shares and they can be disposed of on the individual
level after three years, at the earliest.
4 The principal terms of non-monetary benefi ts, pension, notice of termin-
ation and severance pay
4.1 Non-monetary benefi ts
The Executives will be entitled to customary non-monetary benefi ts such as
company cars and company health care. In addition thereto in individual
cases company housing and other benefi ts may also be offered.
4.2 Pension
In addition to pension benefi ts which the Executives are entitled to according
to law and collective bargaining agreements, Executives resident in Sweden
may be offered defi ned-contribution plans with annual premiums amounting
to SEK 30,000 plus 20% of the pensionable salary over 30 income base
amounts. In the defi ned-contribution plan, the pension earned will corre-
spond to the sum of paid-in premiums and possible return without any guar-
anteed level of pension received by the employee. In the defi ned-contribution
plan, no defi nite retirement date is set.
Some of the Executives have earlier been entitled to defi ned-benefi t pen-
sion plans, but the majority of the Executives have re-negotiated these to the
new system of defi ned-contribution plans. In connection therewith, agree-
ments have in some cases been reached on individual adjusting premiums in
accordance with actuarial calculations.
Previous pension agreements for certain Executives stipulated that early
retirement could be obtained from the age of 60. Such agreements are no
longer signed and the majority of the Executives that earlier were entitled to
such defi ned-benefi ts pension plans have agreed to exchange these for
defi ned-contribution plans without any defi ned point of time for retirement.
The premium amounts to 10% of the pensionable salary plus individual
adjusting premiums based on actuarial calculations in some cases.
Executives resident outside Sweden may be offered pension benefi ts that
are competitive in the country where the Executives are resident, preferably
defi ned-contribution plans.
4.3 Notice of termination and severance pay
For Executives resident in Sweden, the termination period from the Company
will be 12 months and six months from the Executive. In addition thereto, the
Executive, provided that termination has been made by the Company, will be
entitled to 12 months severance pay.
Executives resident outside Sweden may be offered notice periods for
termination and severance payment that are competitive in the country where
the Executives are resident, preferably solutions comparable to the solutions
applied to Executives resident in Sweden.
5. The Board’s preparation and decision-making on issues concerning remu-
neration and other terms of employment for the Group Executive Com-
mittee
The Remuneration Committee recommends and the Board decides on the
remuneration and other terms of employment for the President and the
Executive Vice President. The Remuneration Committee decides on the
remuneration and other terms of employment for the other members of the
Group Executive Committee, in accordance with the principles decided by
the Board.
The Remuneration Committee is further responsible for the review and
recommendation to the Board of share and share-price related incentive pro-
grams to be decided upon by the Annual General Meeting.
6. Deviations from this Policy
The Board of Directors may deviate from this Policy, except as regards point
3, third paragraph, if there are specifi c reasons to do so in an individual
case.
7. Deviations from an earlier approved Policy
The Board of Directors has, in accordance with section 6 of the Remuner-
ation Policy adopted by the Annual General Meeting 2007, deviated from
section 3 of said Policy as regards variable salary to the President. The
Board has decided that the President’s variable salary shall amount to a
maximum of 65% of the fi xed annual salary as from January 1, 2008. The
reason for the deviation is that the President’s remuneration is revised on a
calendar year basis and that the Board considered the deviation justifi ed
when adjusting the President’s total remuneration to the market.
8. Information on earlier decisions on remuneration that has not become due
for payment at the time of the Annual General Meeting’s consideration of
this Policy
The decisions already taken on remuneration to the Executives fall within the
frames of this policy, except that some of the Executives have a right to
receive 24 months severance pay provided they are above 50 years of age.
Further, some Executives have outstanding rights under the employee stock
option program under which options were allotted in May 2003. The options
may be exercised until May 2008. Information on that program can be found
on the Corporate Governance website.
The policy concerning the remuneration and other terms of employment
for the Group Executive Committee of the Volvo Group which was decided at
the Annual General Meeting 2007 is contained in Note 34 Personnel.
0201009998
5.13.4(1.4)1.30.5
0706050403
15.212.66.811.47.6
Operating cash-flow introduced as parameter
in the variable salary program for executives
Operating cash-fl ow – Industrial operations, SEK bn