Volvo 2008 Annual Report Download - page 144

140 Financial information 2008
Proposal by the Board of Directors of AB Volvo
to be adopted by the Annual General Meeting April 1, 2009
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 any possible
Executive Vice President, are in the following referred to as the “Execu-
tives”.
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 2008 sets out details on the total remuneration and
benefi ts awarded to the Executives during 2008.
2. The principles for fi xed salaries
The Executive’s fi xed salary shall be competitive and based on the indi-
vidual Executive’s responsibilities and performance.
3. The principal terms of variable salary and incentive schemes, including
the rela tion between fi xed and variable components of the remunera-
tion 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 nancial objectives. Such targets will be set by the Board and may relate
to i.a. operating income or cash fl ow.
The Board will, for each fi nancial year, evaluate whether a share or
share-price related incentive program comprising the year in question will
be proposed to the Annual General Meeting or not. The Annual General
Meeting decides upon such programs. The Board of Directors has decided
to propose that the Annual General Meeting 2009 approves the adoption
of a share-based incentive program relating to the fi nancial year 2009.
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, pro-
vided AB Volvo’s return on equity (ROE) amounts to 20% or more. Results
under VPS are principally 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 termi-
nation 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 accord-
ing 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 correspond to the sum of paid-in premiums and possible return
without any guaranteed level of pension received by the employee. In the
defi ned-contribution plan, no defi nite retire ment date is set.
Some of the Executives have earlier been entitled to defi ned-benefi t
pension plans, but the majority of the Executives have re-negotiated these
to the new system of defi ned-contribution plans. In connection therewith,
agreements have in some cases been reached on individual adjusting pre-
miums in accordance with actuarial calculations.
Previous pension agreements for certain Executives stipulated that
early retire ment 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 pre mium amounts to 10% of the pensionable salary plus
individual adjusting premiums based on actuarial calculations in some
cases.
Executives resident outside Sweden or resident in Sweden but having
a material connection to or having been resident in a country other than
Sweden may be offered pension benefi ts that are competitive in the coun-
try where the Executives are or have been resident or to which the Execu-
tives have a material connection, preferably defi ned-contribution plans.
4.3 Notice of termination and severance pay
For Executives resident in Sweden, the termination period from the Com-
pany will be 12 months and 6 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 or resident in Sweden but having
a material connection to or having been resident in a country other than
Sweden may be offered notice periods for termination and severance pay-
ment that are competi tive in the country where the Executives are or have
been resident or to which the Executives have a material connection, pref-
erably solutions comparable to the solutions applied to Executives resi-
dent in Sweden.
5. The Board’s preparation and decision-making on issues concerning
remunera tion and other terms of employment for the Group Executive
Committee
The Remuneration Committee recommends and the Board decides, on
the remu neration and other terms of employment for the President and
any possible Executive Vice President. The Remuneration Committee
decides on the remu neration and other terms of employment for the other
members of the Group Executive Committee, in accordance with the prin-
ciples decided by the Board.
The Remuneration Committee is further responsible for the review and
recom mendation to the Board of share and share-price related incentive
programs 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
section 3, third paragraph, if there are specifi c reasons to do so in an
individual case.
7. Information on earlier decisions on remuneration that has not become
due for payment at the time of the Annual General Meeting’s considera-
tion 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.
The policy concerning remuneration and other terms of employment
for the Group Executive Committee decided at the Annual General
Meting 2008 is provided in note 34 Personnel.
Proposed remuneration policy