Volvo 2012 Annual Report Download - page 140

In 2012, government grants of 675 (783) were received, and 525 (775)
was recognized in income statement. The amount includes tax credits of
348 (545) related to product development, which were primarily received
in France and India. Other grants were mainly received from the Swedish
government and the European Commission.
NOTE 26
GOVERNMENT GRANTS
Share-based payments
The Volvo Group applies IFRS2, Share-based payments for share-based
incentive programs. IFRS 2 distinguishes between “cash-settled” and “equity-
settled” payments. The Volvo Group 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 bal-
ance 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 in 2012
The Annual General Meeting of 2012 decided upon a policy on remuneration
and other employment terms for the members of the Volvo Group Executive
Team. The decided principles can be summarized as follows:
The guiding principle is that remuneration and other employment terms
for the Group Executives, shall be competitive to ensure that the Volvo
Group can attract and retain skilled persons to the Group Executive Team.
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 members of the
Group Executive Team, a maximum of 60% of the fixed salary.
The variable salary shall be based on the fulfillment of improvement targets
or certain financial targets for the Volvo Group and/or the organizational unit
where the member of Group Executive Team is employed. These targets are
decided by the Board of AB Volvo and can be related, for example, to operat-
ing income, operating margin and/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 senior executives.
The Annual General Meeting can also decide on a share, or share-based,
incentive program. At the Annual General Meeting 2011, as proposed by the
Board of AB Volvo, it was decided to implement a long-term share-based
incentive program for Group Executives and senior executives in the Volvo
Group 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, members of the Group Executive Team domiciled in Sweden
can be offered two different defined-contribution plans with annual premi-
ums whereby the amount of the individual’s pensions comprises the pre-
mium paid and any return, without any guaranteed level of pension. No
defined retirement date is set in the two plans but premiums will be paid for
the employee until his or her 65th birthday. Members of the Group Executive
Team 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 mate-
rial connection, however primarily defined-contribution pension solutions.
With regard to notice of termination of employment for Group Executives
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 the employment is terminated by the company. Group Exec-
utives 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 notice periods for termination and severance payments that are com-
petitive in the country where the Group Executives are or have been resident
or to which the member of Group Executives have a material connection,
however primarily arrangements that are simi lar 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.
Fee paid to the Board of Directors
According to a resolution adopted at the Annual General Meeting 2012,
the fee to the Board of Directors appointed at the Annual General Meeting
for the period until the close of the Annual General Meeting 2013 shall be
paid as follows: The Chairman of the Board should be awarded SEK
2,100,000 and each of the other members SEK 700,000 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 125,000 to the chairman of the remuneration committee and SEK
100,000 to each of the members of the remuneration committee.
Terms of employment and remuneration to the CEO
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
margin and six months moving cash flow. The variable salary amounts to a
maximum of 75% of the fixed annual salary. For the financial year 2012,
Olof Persson received a fixed salary of SEK 11,520,000 and a variable salary
of SEK 1,728,000. The variable salary corresponded to 15% of the fixed
salary. Other benefits, mainly pertaining to car and housing, amounted to
SEK 803,238 in 2012.
Olof Persson is covered both by pension benefits provided under collec-
tive bargain agreements and by the Volvo Management Pension (VMP)
and Volvo Executive Pension (VEP) plans. The retirement benefit under the
Volvo executive pension plans is a defined-contribution plan with refund
protection. The disability pension is a defined-benefit plan. The pension-
able salary consists of the annual salary and a calculated variable salary
ACCOUNTING POLICY
NOTE 27
PERSONNEL
NOTES TO FINANCIAL STATEMENTS
FINANCIAL INFORMATION 2012
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