Volvo 2011 Annual Report Download - page 122

GOVERNMENT GRANTS
26
NOTE
In 2011, government grants of 783 (472) were received, and 775 (413)
was recognized in income statement. The amount includes tax credits of
545 (204) related to product development, which were primarily received
in France and the US.
Other grants were mainly received from the Swedish government and the
European Commission.
PERSONNEL
27
NOTE
Share-based payments
Volvo applies IFRS2, Share-based payments for share-based incentive
programs. IFRS 2 distinguishes between “cash-settled” and “equity-
settled” payments. The Volvo program includes both a cash-settled and
an equity-settled part. The fair value of the equity-settled payments is
determined at the grant date, recognized as an expense during the vesting
period and off-set in equity. The fair value is based on the share price
reduced by dividends connected with the share during the vesting period.
Additional social costs are reported as a liability, revalued at each balance
sheet date in accordance with UFR 7, issued by the Swedish Financial
Reporting Board. The cash-settled payment is revalued at each balance
sheet date and is reported as an expense during the vesting period and
as a short term liability. An assessment whether the terms for allotment
will be fulfilled is made continuously. Based on such assessment, expense
might be adjusted.
Remuneration policy decided at
the Annual General Meeting in 2011
The Annual General Meeting of 2011 decided upon principles for remu-
neration and other employment terms for the members of Volvo’s group
management. The decided principles can be summarized as follows:
The guiding principle is that remuneration and other employment terms
for company management, shall be competitive to ensure that Volvo can
attract and retain skilled persons in group management. The fixed salary
shall be competitive and shall reflect the individual’s area of responsibility
and performance.
In addition to the fixed salary a variable salary may be paid. The variable
salary may for the CEO amount to a maximum of 75% of the fixed salary
and for the other senior executives a maximum of 60% of the fixed salary.
The variable salary shall be based on the fulfilment of improvement tar-
gets or certain financial targets for the Volvo Group and/or the organiza-
tional unit for which the executive is responsible. These targets are
decided by the Board of AB Volvo and can be related, for example, to
operating income and/or cash flow.
The Annual General Meeting can also decide on a share, or share-
based, incentive program. At the Annual General Meeting 2011, as pro-
posed by the Board of AB Volvo, it was decided to implement a long-term
share-based incentive program consisting of three annual programs covering
each of the financial years 2011, 2012 and 2013.
In addition to fixed and variable salary, normally other customary benefits,
such as company car and company healthcare are provided. In individual
cases, accommodation benefits and other benefits may be provided.
In addition to pension benefits provided by law and collective bargain
agreements, the members of group management domiciled in Sweden can
be offered a defined-contribution pension plan whereby the amount of the
individual’s pensions comprises the premium paid and any return. Members
of group management resident outside Sweden, or resident in Sweden but
having a material connection to or having been resident in a country other
than Sweden, can be 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, however primarily defined-contribu-
tion pension solutions.
With regard to notice of termination of employment for members of group
management domiciled in Sweden, the notification period is 12 months if the
company terminates the employment and six months if the individual termi-
nates the employment. In addition, the employee is entitled to a severance pay
of 12 months’ salary if the employment is terminated by the company. Members
resident outside Sweden or resident in Sweden but having a material connec-
tion to or having been resident in a country other than Sweden can be offered
notice periods for termination and severance payments that are competitive in
the country where the members are or have been resident or to which the
members have a material connection, however primarily arrangements that are
similar to what is valid for members domiciled in Sweden.
The Board of AB Volvo may deviate from the remuneration policy if there
are specific reasons to do so in an individual case. The Board has decided
on one such deviation by approving that the variable salary for the President
of Volvo Aero can exceed 60% of the fixed annual salary if certain conditions
related to the potential divestment of Volvo Aero are met.
Fee paid to the Board of directors
According to a resolution adopted at the Annual General Meeting 2011,
the fee to the Board of Directors appointed at the Annual General Meeting
for the period until the close of the Annual General Meeting 2012 shall be
paid as follows: The Chairman of the Board should be awarded SEK
1,800,000 and each of the other members SEK 600,000 with exception
of the President and Chief Executive Officer of AB Volvo. In addition, SEK
300,000 should be awarded to the chairman of the audit committee and
SEK 150,000 to each of the other members of the audit committee and
SEK 100,000 to each of the members of the remuneration committee.
Terms of employment and remuneration to
the CEO and Deputy CEO
As of August 31, 2011, Leif Johansson retired from the position as Presi-
dent and Chief Executive Officer (CEO) of AB Volvo and was replaced by
Olof Persson from September 1, 2011. The President and CEO 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 75% of the fixed annual salary.
For the financial year 2011, Leif Johansson received a fixed salary of SEK
8,640,000 and a variable salary of SEK 5,913,000. The variable salary cor-
responded to 68% of the fixed salary. Other benefits, mainly pertaining to
car and housing, amounted to SEK 329,621 in 2011. Olof Persson received
for the period as President and CEO of AB Volvo during 2011 a fixed salary
of SEK 3,840,000 and a variable salary of SEK 2,880,000. The variable
salary corresponded to 75% of the fixed salary. Other benefits from Septem-
ber 1, 2011, mainly pertaining to car and housing, amounted to SEK 234,897.
During his period as Executive Vice President and Deputy CEO of AB
Volvo from May 1 until August 31, 2011, Olof Persson received a fixed
salary of SEK 2,245,000 and a variable salary of SEK 1,111,275. The vari-
ACCOUNTING POLICY
NOTES TO FINANCIAL STATEMENTS
FINANCIAL INFORMATION 2011
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