Volvo 2013 Annual Report Download - page 160

Share-based payments
The Volvo Group applies IFRS 2, 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 vest-
ing 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 Finan-
cial Reporting Board. The cash-settled payment is revalued at each balance
sheet date and is recognized as an expense during the vesting period and
as a short term liability. An assessment whether the terms for allotment
will be fulfi lled is made continuously. Based on such assessment, expense
might be adjusted.
Remuneration policy decided at
the Annual General Meeting in 2013
The Annual General Meeting of 2013 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 Executive Team, shall be competitive to ensure that the
Volvo Group can attract and retain skilled persons to the Group Executive
Team. The fi xed salary shall be competitive and shall refl ect the individu-
al’s area of responsibility and performance. In addition to the fi xed salary
a variable salary may be paid. The variable salary may for the CEO amount
to a maximum of 75% of the fi xed salary and for the other members of the
Group Executive Team, a maximum of 60% of the fi xed salary.
The variable salary shall be based on the fulfi llment of improvement targets
or certain fi nancial 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 fl ow. The Board may under certain
conditions decide to reclaim variable salary already paid or to cancel or limit
variable salary to be paid.
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 Executive Team members and other senior
executives in the Volvo Group consisting of three annual programs covering
each of the fi nancial years 2011, 2012 and 2013.
In addition to fi xed and variable salary, normally other customary benefi ts,
such as company car and company healthcare are provided. In individual
cases, accommodation benefi ts and other benefi ts may be provided.
In addition to pension benefi ts provided by law and collective bargain
agreements, members of the Group Executive Team domiciled in Sweden
can be offered two different defi ned-contribution plans with annual pre-
miums whereby the amount of the individual’s pensions comprises the
premium paid and any return, without any guaranteed level of pension. No
defi ned 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 hav-
ing 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 defi ned-contribu-
tion pension solutions.
With regard to notice of termination of employment for Group Executive
Team members domiciled in Sweden, the notifi cation 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 sev-
erance pay of 12 months’ salary if the employment is terminated by the
company. Group Executive Team members 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 competitive in the country
where the Group Executive Team members are or have been resident or
to which the member of Group Executives have a material connection,
however primarily arrangements that are similar to what is valid for mem-
bers domiciled in Sweden.
The Board of AB Volvo may deviate from the remuneration policy if there
are specifi c 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 2013,
the fee to the Board of Directors appointed at the Annual General Meet-
ing for the period until the close of the Annual General Meeting 2014 shall
be paid as follows: The Chairman of the Board should be awarded SEK
2,250,000 and each of the other members SEK 750,000 with exception
of the President and Chief Executive Offi cer 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 fi xed
annual salary and a variable salary. The variable salary is based on oper-
ating margin and six months moving cash fl ow. The variable salary amounts
to a maximum of 75% of the fi xed annual salary. For the fi nancial year
2013, Olof Persson received a fi xed salary of SEK 11,888,640 and a
variable salary of SEK 1,188,640. The variable salary corresponded to
10% of the fi xed salary. Other benefi ts, mainly pertaining to car and
housing, amounted to SEK 884,848 in 2013.
Olof Persson is covered both by pension benefi ts provided under col-
lective bargain agreements and by the Volvo Management Pension (VMP)
and Volvo Executive Pension (VEP) plans. The retirement benefi t under
the Volvo executive pension plans is a defi ned-contribution plan. The dis-
ability pension is a defi ned-benefi t plan. The pensionable salary consists
of the annual salary and a calculated variable salary component. The pre-
mium for the VMP is SEK 30,000 plus 20% of the pensionable salary over
30 income base amounts and the premium for VEP is 10% of pensionable
salary. There are no commitments other than the payment of the premi-
ums. The disability pension for Olof Persson amounts to 50% of pension-
able salary. The right to disability pension is conditional to employment
and will cease upon termination of duty.
The President and CEO of AB Volvo is also covered by Volvo Företags-
pension, a defi ned contribution plan for additional retirement benefi t. The
premium is negotiated each year. For 2013 the premium amounted to
SEK 556 a month. Pension premiums 2013 for Olof Persson amounted to
SEK 4,609,508. Olof Persson is also participating in the long-term share-
ACCOUNTING POLICY
NOTE 27 PERSONNEL
156
FINANCIAL INFORMATION 2013