Volvo 2011 Annual Report Download - page 142

The proposal by the Board of Directors of AB Volvo to be
adopted by the Annual General Meeting April 4, 2012.
This Policy concerns the remuneration and other terms of employment for
the Volvo Group Executive Team. The members of the Volvo Group Executive
Team, including the President and any possible Deputy 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 2011 sets out details on the total remuneration and
benefits awarded to the Executives during 2011.
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 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 salaries.
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 inter alia the performance of the
entire Volvo Group or the performance of a certain part of the Group
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 inter alia operating income, operating margin or cash flow. The Board
may under certain conditions decide to reclaim variable salary already
paid or to cancel or limit variable salary to be paid to the Executives.
The Annual General Meeting 2011 decided to adopt a share-based
incentive program for senior executives in the Volvo Group relating to the
financial years 2011, 2012 and 2013. Therefore, the Board has decided
not to propose any share-based incentive program to the Annual General
Meeting to be held in April 2012.
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 two different defined-contribution plans with annual premiums.
For the first plan the annual premiums amount to SEK 30,000 plus 20% of
the pensionable salary over 30 income base amounts and for the second plan
the annual premiums amount to 10% of pensionable salary. In the two
defined-contribution plans, 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. Further no definite retirement date is set in the two
plans but premiums will be paid for the employee until his or her 65th birthday.
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 Company
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 payment that are
competitive in the country where the Executives are or have been resident or
to which the Executives have a material connection, preferably solutions com-
parable 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 Volvo Group
Executive Team
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) monitoring and evaluating
programs for variable remuneration, both ongoing and those that have
ended during the year, for Executives, (iii) monitoring 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 Deputy President,
if any, and (ii) principles for remuneration (incl. pension and severance pay) for
the Group Executive Team. The Remuneration Committee shall approve pro-
posals on remuneration of the members of the Volvo Group Executive Team.
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. Authority to decide on deviations from this Policy
The Board of Directors may deviate from this Policy 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 2012
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 and that some of the Executives are entitled to defined-benefit
pension plans stipulating pension payments starting from the age of 65 with
the possibility to receive part of the pension payment from the age of 60.
8. Deviations from current Policy
The Board of Directors was authorized to deviate from the Policy of
Remuneration to Senior Executives adopted by the Annual General Meeting
of AB Volvo held in 2011 according to section 6 of said Policy. The Board
has resolved on one such deviation, by approving that the variable salary
for the President of Volvo Aero may exceed 60% of the fixed annual salary
if certain parameters in relation to the potential divestment of Volvo Aero
are fulfilled. The reason for the deviation is that there is a strong interest
in securing the continued efforts of the President of Volvo Aero in the
possible divestment thereof, for the purpose of concluding a transaction on
the best possible terms for AB Volvo and its shareholders.
The policy concerning remuneration and other terms of employment for
the Group Executive Team decided at the Annual General Meeting 2011
is provided in Note 27 Personnel.
PROPOSED REMUNERATION POLICY
FINANCIAL INFORMATION 2011
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