Volvo 2009 Annual Report Download - page 106

Notes to consolidated financial statements
the amount of the individual’s pensions comprises the premium paid
and any return. Members of the Group Executive Committee resident
outside Sweden or resident in Sweden but having a material connec-
tion to or having been resident in a country other than Sweden are
offered pension solutions that are competitive in the country where
the members are or have been resident or to which the members have
a material connection.
With regard to notice of termination of employment for members of
the Group Executive Committee domiciled in Sweden, the notification
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. Members resident outside Sweden or
resident in Sweden but having a material connection to or having been
resident in a country other than Sweden are offered notice periods for
termination and severance payment that are competetive in the country
where the members are or have been resident or to which the members
have a material connection.
Fee paid to the Board of directors
In accordance with a resolution adopted at the Annual General Meet-
ing 2009, the fee paid to the Board of Directors was SEK 5,725,000.
Due to changes of the Board of Directors SEK 5,581,250 has been
paid, distributed among the members as follows; SEK 1,181,250 to
the retiring Chairman, including fee in the capacity of being a member
of the Remuneration Committee. Incoming Chairman received SEK
825,000 including fee in the capacity of being a member of the
Remuneration Committee. Except for the President and Chief Execu-
tive Officer each of the boardmembers received SEK 500,000. In
addition SEK 250,000 was paid to the chairman of the audit commit-
tee SEK 125,000 to each of the members in the audit commmittee
and SEK 75,000 to each of the members in the remuneration commit-
tee. Apart from board fee no renumeration was paid to the Board of
directors except for the President and Chief Executive Officer.
Terms of employment and remuneration to the CEO
The President and Chief Executive Officer, Leif Johansson, is entitled
to a remuneration consisting of a fixed annual salary and a variable
salary. The variable salary is based on operating income and cash flow
for the Volvo Group up to a maximum of 65% of his fixed annual salary.
Leif Johansson also participates in the Volvo Group long-term incen-
tive program and may receive shares to the extent the financial goals
for the financial year are being met.
For the financial year 2009, Leif Johansson received a fixed salary
of SEK 12,331,683 and a variable salary of SEK 1,002,348. The vari-
able salary corresponded to 8,1% of the fixed annual salary and was
pertaining to the fourth quarter of 2009 and the positive cash flow for
the Volvo Group. The share-based incentive program was based on
financial goals for 2009, as these goals was not met no incentives
were paid. Other benefits, mainly pertaining to car and housing,
amounted to SEK 583,125 in 2009.
Leif Johansson is covered by the Volvo executive pension plans,
Volvo Management Pension (VMP) and Volvo Executive Pension
(VEP). The retirement benefit is a defined contribution plan with
refund protection. The disability pension is a defined benefit plan.
Contributions to VMP and VEP are not tax deductable, the benefit
from the insurance is not taxable to the company, but pension paid will
be tax deductable. A defined time for retirement does not exist. The
pensionable salary consists of the annual salary and the average of
the variable salary for the previous five 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 commitments other than the payment of the premiums.
The disability pension consists of 70% of pensionable salary 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 con-
ditional to employment and will cease upon termination of duty.
Leif Johansson is also covered by Volvo Företagspension, a defined
contribution plan for additional retirement benefit. The premium is
negotiated each year, for 2009 the premium amounted to SEK 500 a
month.
Pension premiums for the President and CEO amounted to SEK
4,891,488 for 2009.
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 fixed salaries. Vari-
able salaries are in most cases based on the fulfillment of certain
improvement targets or financial targets. The targets are decided by
the Board of Directors in AB Volvo and may relate to operating income
and/or cash flow. During 2009, a variable salary could amount to a
maximum of 50% of the fixed annual salary.
For the financial year 2009, fixed salaries amounted to SEK
59,574,280 and variable salaries amounted to SEK 4,915,952 for mem-
bers of the Group Executive Committee, excluding the President and
CEO. In addition to the CEO and the Group Chief Executive, the Group
Executive Committee comprised 17 members at the beginning and at
the end of the year. The share-based incentive program was based on
2009 financial goals, as these goals were not met no incentives were
paid to the Group Executive Committee. Other benefits, mainly pertain-
ing to car and housing, amounted to SEK 6,685,499 in 2009.
For the financial year 2008, other senior executives received SEK
253,504 related to allotted shares and SEK 123,757 pertaining to
cash payments, for the GEC members not residing in Sweden, linked to
the share-based incentive program 2008. This allotment, made in
2009, was based on the fulfillment of certain financial goals in 2008.
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
FINANCIAL INFORMATION 2009
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