Volvo 2008 Annual Report Download - page 118

114
THE VOLVO GROUP
Financial information 2008
Notes to consolidated fi nancial statements
Note 34 Personnel
Remuneration policy decided at
the Annual General Meeting in 2008
The Annual General Meeting of 2008 decided upon principles for
remuneration and other employment terms for the members of Volvo’s
Group Executive Committee (“Remuneration Policy”). The accepted
principles can be summarized as follows.
The guiding principle is that remuneration and other employment
terms for company management, shall be competitive to ensure that
Volvo can attract and retain skilled persons in the Group Executive
Committee. The fi xed salary shall be competitive and shall refl ect the
individual’s area of responsibility and performance.
In addition to the fi xed salary a variable salary may be paid. The
variable salary may for the CEO amount to a maximum of 65% of the
fi xed salary and for the other senior executives a maximum of 50% of
the fi xed salary. The variable salary shall be based on the Volvo Group’s
and/or the executive’s respective Business Area’s or Business Unit’s
fulfi lment of certain fi nancial goals. These goals are decided by the
Board of AB Volvo and may be related, for example, to operating
income and/or cash fl ow.
In addition to fi xed and variable salary, normally other customary
benefi ts, such as company car and company healthcare are provided.
In individual cases, accommodation benefi ts and other benefi ts may
be provided.
In addition to pension benefi ts provided by law and collective bar-
gain agreements, the members of the Group Executive Committee
domiciled in Sweden are offered a defi ned-contribution pension plan
whereby the amount of the individual’s pensions comprises the pre-
mium paid and any return. Members of the Group Executive Commit-
tee domiciled outside Sweden are offered pension solutions that are
competitive in the country in which the person is domiciled.
With regard to notice of termination of employment for members of
the Group Executive Committee domiciled in Sweden, the notifi cation
period is 12 months if the company terminates the employment and
six months if the individual terminates the employment. In addition, the
employee is entitled to a severance pay of 12 months’ salary if Volvo
terminates the employment. Those members who are domiciled out-
side Sweden are offered terms in this respect that are competitive in
the country in which the person is domiciled.
Fee paid to the Board of directors
In accordance with a resolution adopted at the Annual General Meet-
ing 2008, the fee paid to the Board of Directors was SEK 5,725,000,
to be distributed among the members as follows: SEK 1,575,000 to
the Chairman, including fee in the capacity of being a member of the
Remuneration Committee, and SEK 500,000 to each of the mem-
bers; in addition, SEK 250,000 to the chairman of the Audit Commit-
tee and SEK 125,000 to other members of the Audit Committee and
SEK 75,000 to each of the members of the Remuneration Committee.
Apart from the board fee, the members of the Board of directors have
not obtained any other remuneration.
Terms of employment and remuneration to the CEO
The President and Chief Executive Offi cer, Leif Johansson, is entitled
to a remuneration consisting of a fi xed annual salary and a variable
salary. The variable salary is based on operating income and cash fl ow
for the Volvo Group up to a maximum of 65% of his fi xed annual salary.
Leif Johansson also participates in the Volvo Group long-term incen-
tive program and may receive shares to the extent the fi nancial goals
for the fi nancial year are being met.
For the fi nancial year 2008, Leif Johansson received a fi xed salary
of SEK 12,331,236 and a variable salary of SEK 3,432,043. The vari-
able salary corresponded to 27.8% of the fi xed annual salary and was
mainly pertaining to the fi rst six months of 2008. Leif Johansson
received no variable salary from September to December 2008. The
allotment of the share-based incentive program based on the 2008
fi nancial goals was distributed during 2009 and resulted in the allot-
ment of shares to the President and CEO corresponding to an amount
of SEK 48,255. Other benefi ts, mainly pertaining to car and housing,
amounted to SEK 628,045 in 2008.
For the fi nancial year 2007, Leif Johansson received 40,000 shares
since certain fi nancial goals for 2007 were achieved. The shares were
alloted in February 2008 and corresponded to a value of SEK
3,600,000.
The employee stock options were granted in 2003 based on the
fi nancial result of 2002. The allotment of the options were reported in
the annual report 2003 and the holdings have been reported in the
annual reports after that. The costs for the stock options have been
reported in previous periods. The options exercised by the President
and CEO at the end of the exercise period are valued at SEK
16,493,896 and resulted in an income of SEK 6,471,842 in the Volvo
Group as a consequence of the lower share price at exercise date
compared to the valuation of the obligation at the inception of the
fi nancial year.
Leif Johansson is covered by the Volvo executive pension plans,
Volvo Management Pension (VMP) and Volvo Executive Pension
(VEP). The retirement benefi t is a defi ned contribution plan with
refund protection. The disability pension is a defi ned benefi t plan.
Contributions to VMP and VEP are not tax deductable, the benefi t
from the insurance is not taxable to the company, but pension paid will
be tax deductable. A defi ned time for retirement does not exist. The
pensionable salary consists of the annual salary and the average of the
variable salary for the previous fi ve years. The premium for the VMP is
SEK 30,000 plus 20% of the pensionable salary over 30 income base
amounts and the premium for VEP is 10% of pensionable salary.
There are no other commitments other than the payment of the pre-
miums. The disability pension consists of 70% of pensionable salary
Salary and share-based incentive program to
CEO Leif Johansson for 2007 and 2008
Variable salary
Operating income
Q1-08Q4-07Q3-07Q2-07Q1-07 Q4-08Q3-08Q2-08
0
1
2
3
4
5
6
7
8
Salary
SEK M
Fixed salary
Full allotment in share-based
incentive program
3% allotment in share-based
incentive program
0
1
2
3
4
5
6
7
8
-1
Operating
income
SEK bn
For 2007:
Fixed salary: SEK 11.84 M
Variable salary: SEK 4.80 M
Share-based incentive
program: SEK 3.60 M
Total: SEK 20.24 M
For 2008:
Fixed salary: SEK 12.33 M
Variable salary: SEK 3.43 M
Share-based incentive
program: SEK 0.05 M
Total: SEK 15.81 M