Volvo 2010 Annual Report Download - page 130

The proposal by the Board of Directors of AB Volvo to be
adopted by the Annual General Meeting April 6, 2011.
This Policy concerns the remuneration and other terms of employ-
ment 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 “Executives”.
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
employment for the Executives shall be competitive in order to ensure
that the Volvo Group can attract and retain competent Executives.
The annual report 2010 sets out details on the total remuneration
and benefits awarded to the Executives during 2010.
2. The principles for fixed salaries
The Executive’s fixed salary shall be competitive and based on the
individual Executive’s responsibilities and performance.
3. The principal terms of variable salary and incentive schemes,
including the relation 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 sala-
ries. The variable salary may, as regards the President, amount to a
maximum of 75% of the fixed annual salary and, as regards the other
Executives, a maximum of 60% 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 Busi-
ness Unit where the Executive is employed. The performance will be
related to the fulfilment of various improvement targets or the attain-
ment 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 pro-
posed to the Annual General Meeting or not. Such proposal may con-
cern a program comprising one or several financial years. The Annual
General Meeting decides upon such programs. The Board of Direc-
tors has decided to propose to the Annual General Meeting 2011 to
approve the adoption of a share-based incentive program relating to
the financial years 2011, 2012 and 2013.
4. The principal terms of non-monetary benefits, pension, notice of
termination 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 amounting to SEK 30,000 plus 20% of the pension-
able salary over 30 income base amounts. In the defined-contribution
plan, the pension earned will correspond to the sum of paid-in premi-
ums and possible return without any guaranteed level of pension
received by the employee. In the defined-contribution plan, no definite
retirement date is set.
Some of the Executives have earlier been entitled to defined-ben-
efit pension plans, but the majority of the Executives have re-negoti-
ated these to the new system of defined-contribution plans. In con-
nection therewith, agreements have in some cases been reached on
individual adjusting premiums in accordance with actuarial calculations.
Previous pension agreements for certain Executives stipulated that
early retirement could be obtained from the age of 60. Such agree-
ments are no longer signed and the majority of the Executives that
earlier were entitled to such defined-benefit pension plans have
agreed to exchange these for defined-contribution plans without any
defined point of time for retirement. The premium 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 hav-
ing 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
Company will be twelve months and six months from the Executive. In
addition thereto, the Executive, provided that termination has been
made by the Company, will be entitled to twelve months severance pay.
Executives resident outside Sweden or resident in Sweden but hav-
ing a material connection to or having been resident in a country other
than Sweden may be offered notice periods for termination and sever-
ance payment that are competitive in the country where the Execu-
tives are or have been resident or to which the Executives have a
material connection, preferably solutions comparable to the solutions
applied to Executives resident in Sweden.
5. The Board’s preparation and decision-making on issues concerning
remuneration and other terms of employment for the Group Execu-
tive Committee
The Remuneration Committee is responsible for (i) preparing the
Board’s decisions on issues concerning principles for remuneration,
remunerations and other terms of employment for Executives, (ii) moni-
toring and evaluating programs for variable remuneration, both ongoing
and those that have ended during the year, for Executives, (iii) monitor-
ing and evaluating 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 remuneration 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 remunera-
tion of the members of the Group Executive Committee.
The Remuneration Committee is further responsible for the review
and recommendation 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
consideration 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
2011 fall within the framework of this policy, except that some of the Exec-
utives 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
2010 is provided in note 34 Personnel.
PROPOSED REMUNERATION POLICY
FINANCIAL INFORMATION 2010
126