Volvo 2009 Annual Report Download - page 132

Proposal by the Board of Directors of AB Volvo to be
adopted by the Annual General Meeting April 14, 2010
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
“ E x e c u t i v e s ” .
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 2009 sets out details on the total remuneration and
benefits awarded to the Executives during 2009.
2. The principles for fixed salaries
The Executive’s fixed 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 fixed and variable components of the remuneration
and the linkage between performance and remuneration
The Executives may receive variable salaries in addition to fixed salaries.
The variable salary may, as regards the President, amount to a maximum
of 65% of the fixed annual salary and, as regards the other Executives,
a maximum of 50% of the fixed 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
fulfilment of various improvement targets or the attainment of certain
financial objectives. Such targets will be set by the Board and may relate
to i.a. operating income or cash flow.
The Board shall before each Annual General Meeting evaluate whether
a share or share-price related incentive program shall be proposed to the
Annual General Meeting or not. The Annual General Meeting decides
upon such programs. The Board of Directors has decided not to propose
to the Annual General Meeting 2010 to resolve on any share-based incentive
program relating to the financial year 2010.
The Executives are also participating in Volvo’s Profit 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 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 benefits, pension, notice of ter-
mination and severance pay
4.1 Non-monetary benefits
The Executives will be entitled to customary non-monetary benefits such
as company cars and company health care. In addition thereto in individual
cases company housing and other benefits may also be offered.
4.2 Pension
In addition to pension benefits which the Executives are entitled to according
to law and collective bargaining agreements, Executives resident in Sweden
may be offered defined-contribution plans with annual premiums amount-
ing to SEK 30,000 plus 20% of the pensionable salary over 30 income
base amounts. In the defined-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 defined-
contribution plan, no definite retire ment date is set.
Some of the Executives have earlier been entitled to defined-benefit
pension plans, but the majority of the Executives have re-negotiated these
to the new system of defined-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 defined-benefits pension plans have agreed to exchange
these for defined-contribution plans without any defined 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 benefits that are competitive in the country
where the Executives are or have been resident or to which the Executives
have a material connection, preferably defined-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 resident
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 is responsible for (i) preparing the Board’s
decisions on issues concerning principles for remuneration, remuner-
ations and other terms of employment for Executives, (ii) monitoring and
evaluating programs for variable remuneration, both ongoing and those
that have ended during the year, for Executives, (iii) monitoring and evalu-
ating the application of this Policy, and (iv) monitoring and evaluating current
remuneration structures and levels in the Company.
The Remuneration Committee prepares and the Board decides on (i)
terms of employment and remu neration of the President and the Executive
Vice President, if any, and (ii) principles for remuneration (incl. pension and
severance pay) for the Group Executive Committee. The Remuneration
Committee shall approve proposals on remu neration of the members of
the Group Executive Committee.
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 specific 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 consider-
ation of this Policy
The decisions already taken on remuneration to the Executives that has not
become due for payment at the time of the Annual General Meeting 2010
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 2009 is provided in note 34 Personnel.
Proposed remuneration policy
FINANCIAL INFORMATION 2009
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