Volvo 2012 Annual Report Download - page 176

The proposal by the Board of Directors of AB Volvo to be adopted
by the Annual General Meeting April 4, 2013.
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 2012 sets out details on the total remuneration and
benefits awarded to the Executives during 2012.
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
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 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 resi-
dent 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 coun-
try where the Executives are or have been resident or to which the Execu-
tives 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 pay-
ment that are competitive in the country where the Executives are or have
been resident or to which the Executives have a material connection, pref-
erably solutions comparable to the solutions applied to Executives resi-
dent 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, remuner-
ations 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 evalu-
ating the application of this Policy, and (iv) monitoring and evaluating cur-
rent 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 Executives.The Remuneration Committee shall
approve proposals 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
2013 fall within the frames of this policy, except that some of the Execu-
tives 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.
Information on the policy concerning remuneration and other terms of
employment for the Group Executive Team decided at the Annual General
Meeting 2012 is provided in Note 27 Personnel.
Proposed Remuneration Policy
FINANCIAL INFORMATION 2012
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