Volvo 2008 Annual Report Download - page 119

115
Financial information 2008
up to 30 income base amounts and 40% of the pensionable salary
between 30 and 50 income base amounts. The right to disability pension
is conditional to employment and will cease upon termination of duty.
Pension premiums for the President and CEO amounted to SEK
4,903,292 for 2008.
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.
Remuneration to other senior executives
Fixed and variable salaries
Members of the Group Executive Committee and a number of senior
executives receive variable salaries in addition to fi xed salaries. Vari-
able salaries are in most cases based on the fulfi lment of certain
fi nancial targets. The targets are decided by the Board of Directors in
AB Volvo and may relate to operating income and/or cash fl ow. During
2008, a variable salary could amount to a maximum of 50% of the
fi xed annual salary.
For the fi nancial year 2008, fi xed salaries amounted to SEK
55,249,098 and variable salaries amounted to SEK 11,721,674 for
members in the Group Executive Committee, excluding the President
and CEO. In addition to the CEO, the Group Executive Committee
comprised of 17 members at the beginning and at the end of the year.
Allotment of the share-based incentive program based on the 2008
fi nancial goals was distributed in 2009 and resulted in the allotment
of shares corresponding to a total amount of SEK 391,358 for other
senior executives. Other benefi ts, mainly pertaining to car and hous-
ing, amounted to SEK 3,584,993 in 2008.
For the fi nancial year 2007, other senior executives received SEK
19,874,970 related to allotted shares and SEK 8,487,861 pertaining
to cash payments, for the GEC members not residing in Sweden,
linked to the share-based incentive program 2007. This allotment,
made in 2008, was based on the fullfi llment of certain fi nancial goals
in 2007.
Severance payments
The employment contracts for members of the Group Executive Com-
mittee and certain other senior executives contain rules governing
severance payments when the company terminates the employment.
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 months, 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, with an amount equal to 75% of the income from
the new employment. In agreements concluded after the spring of
2004, severance pay is reduced by the full income from the new
employment. Furthermore, age limit at date of notice of termination is
removed and with few exceptions, severance pay is entitled for a
period of 12 months.
Pensions
Previous pension agreements for certain senior executives stipulated
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. Agree-
ments 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 pensionable 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 con-
stitutes of SEK 30,000 plus 20% of the pensionable salary over 30
income base amounts. The pensionable salary consists of the annual
salary and the average of the variable salary for the previous fi ve years.
Pension premiums amounted to SEK 46,183,160 for other senior
executives in 2008.
Total costs for remuneration and
benefi ts to senior executives
Total costs for total remuneration and benefi ts to the members of the
Group Excecutive Committee (GEC) in 2008 is pertaining to the fol-
lowing: fi xed salary SEK 87 million (86); variable salary SEK 19 million
(28); other benefi ts including allotted shares in the share incentive
program SEK 49 million (58); employee stock options revenue of SEK
6 million (cost of 17) and pensions SEK 61 million (66). Total costs for
members of the GEC include social fees on salaries and benefi ts,
special pension tax and additional costs for other benefi ts. The remu-
neration model of the Volvo group is to a main part designed to follow
changes in the profi tability of the group, why the remuneration to the
members of the GEC have declined signifi cantly during the last six
months of 2008.
Incentive programs
During 2008, Volvo had two types of incentive programs for certain
senior executives outstanding, one program for employee stock
options (exercised 2006/2008) and a share-based incentive program
(allotment in 2009).
Employee stock options program
The period to exercise the employee stock options was ongoing from
May 2, 2006, up to and including May 1, 2008, and the employee
stock option program is thus ended. The Volvo B share price, for
options exercised during 2008, has in average been SEK 91 within a
range from SEK 88 up to SEK 96. The Volvo B share price, for options
exercised during 2007, has in average been SEK 116 within a range
from SEK 110 up to SEK 148.
Share-based incentive program
In 2006 the Annual General Meeting approved a share-based incen-
tive program for certain senior executives within the Volvo Group.
Allotment of a value corresponding to 480,000 shares in the program
was executed in March 2007 and was based on the fulfi llment of cer-
tain fi nancial goals determined by the Board for fi scal year 2006. The
allotment was made from Volvo’s treasury stock, with 263,667, and
cash payment corresponding to 216,333 shares. The share price at
allotment was SEK 560. The total costs for the share-based incentive
program 2006/2007 amounted to SEK 276 million, whereof SEK 110
million during 2007 and SEK 166 million during 2006 and pertains to
the costs for payments in shares and in cash.
The Annual General Meeting in 2007 decided on a similar program
for allotment in 2008. In February 2008, allotment was made of a
value corresponding to 2,443,333 shares and was based on the ful-
fi llment of certain fi nancial goals determined by the Board for fi scal
year 2007. The allotment was made from Volvo’s treasury stock, with
1,333,333 and cash payment corresponding to 1,110,000 shares.
The share price at allotment was SEK 90,00. The total cost for Volvo
for the share-based incentive program 2007/2008 amounted to SEK
304 million whereof SEK 249 million during 2007 and SEK 55 million
during 2008 and pertains to the costs for payments in shares and in
cash.
The Annual General Meeting in 2008 decided on a similar program