Volvo 2010 Annual Report Download - page 106

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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
According to a resolution adopted at the Annual General Meeting
2010, the fee to the Board of Directors appointed at the Annual Gen-
eral Meeting for the period until the close of the Annual General Meet-
ing 2011 shall be paid as follows: The Chairman of the Board should
be awarded SEK 1,500,000 and each of the other members SEK
500,000 with exception of the President and Chief Executive Officer
of AB Volvo. In addition, SEK 250,000 should be awarded to the chair-
man of the audit committee and SEK 125,000 to each of the other
two members of the audit commmittee and SEK 75,000 to each of
the members of the remuneration committee
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 in relation to
the same period last year and/or cash flow for six months moving
periods up to a maximum of 65% of his fixed annual salary.
For the financial year 2010, Leif Johansson received a fixed salary
of SEK 12,492,450 and a variable salary of SEK 7,986,448. The vari-
able salary corresponded to 64% of the fixed annual salary. Other
benefits, mainly pertaining to car and housing, amounted to SEK
609,542 in 2010.
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. The pensionable salary consists of the annual sal-
ary 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 pensiona-
ble 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 conditional 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 2010 the premium amounted to SEK 502 a
month.
Pension premiums for the President and CEO amounted to SEK
4,680,412 for 2010.
Leif Johansson has a six-month notice of termination on his own
initiative and 12 months notice of termination from AB Volvo. He is not
entitled to severance payments. In December 2010 Leif Johansson
informed the Board of AB Volvo of his intention to resign in conjunc-
tion with his 60th birthday in the summer of 2011.
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
in relation to corresponding period previous year and/or cash flow for
a six month rolling period. During 2010, a variable salary could amount
to a maximum of 50% of the fixed annual salary.
For the financial year 2010, fixed salaries amounted to SEK
55,927,329 and variable salaries amounted to SEK 22,309,808 for
members 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 16 members at the end of the year. Other benefits, mainly pertain-
ing to car and housing, amounted to SEK 5,900,970 in 2010.
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
Members of the Group Executive Committee and certain other senior
executives are offered pensions that are competitive in the country in
which the person is or have been domiciled or in the country to which
the person is essentially connected.
Previous pension agreements for certain senior executives stipulated
that early retirement could be obtained from the age of 60. Agreements
FINANCIAL INFORMATION 2010
102