Volvo 2013 Annual Report Download - page 161

based incentive program decided by the Annual General Meeting 2011.
Based on ROE for 2013, Olof Persson will receive 18,815 shares during
2016/2017 related to 2013 if all program conditions are met (see further
information under Long-term incentive program below). The amount of
taxable benefi t related to these shares is determined at the time of allot-
ment. Olof Persson has a six-month notice of termination on his own initi-
ative and twelve months’ notice of termination from AB Volvo. If termi-
nated by the company within three years from entering the position as
President and CEO, Olof Persson is entitled to a severance payment
equivalent to twelve months’ salary. Thereafter, he is not entitled to sever-
ance payments.
Remuneration to the Group Executive Team
Fixed and variable salaries
Members of Group Executive Team receive variable salaries in addition to
fi xed salaries. Variable salaries are based on the fulfi llment of certain
improvement targets or fi nancial targets. The targets are decided by the
Board of Directors in AB Volvo and can, for example, relate to operating
income, operating margin and/or cash fl ow for a six month rolling period.
During 2013, a variable salary, for Group Executive Team members exclud-
ing CEO, could amount to a maximum of 60% of the fi xed annual salary.
For the fi nancial year 2013, fi xed salaries amounted to SEK 51,902,260
and variable salaries amounted to SEK 4,077,616 for Group Executive
Team members excluding the CEO. Group Executive Team comprised, in
addition to the CEO, of 15 members at the beginning of the year and 15
members at the end of the year. Other benefi ts, mainly pertaining to car
and housing, amounted to SEK 4,988,236 in 2013. Group Executive
Team members, excluding the CEO, also participate in the long-term
incentive program which was approved by the Annual General Meeting
held in 2011 and is based on ROE outcome. For 2013, they will during
2016/2017 receive 77,031 shares related to 2013 if all program conditions
are met (see further information under Long-term incentive program below).
During the fi nancial year 39,342 shares (0) corresponding to SEK 3,812,240
have been allotted to Group Executive Team members that are leaving the
Volvo Group (i.e. to so called “good leavers”) and 72,714 shares (0) have
forfeited. The forfeited shares corresponds to SEK 2,062,788 and an
amount of SEK 776,966 which refers to social security costs.
Severance payments
The employment contracts for Group Executive Team members contain
rules governing severance payments when the company terminates the
employment. For members domiciled in Sweden, the rules provide that,
when the company terminates the employment, an employee is entitled to
severance payment equivalent to twelve months’ salary. In the event the
employee gains employment during the severance period, severance pay
is reduced with an amount equal to 100% of the income from the new
employment.
Members having a material connection to a country other than Sweden
can be offered notice periods for termination and severance payments that
are competitive in the country to which the members have a material con-
nection, preferably solutions corresponding to what is present for in Sweden.
Pensions
Group Executive Team members are covered by a defi ned-contribution
plan, Volvo Executive Pension plan with pension premium payments at the
longest to the age of 65 years. The premium constitutes 10% of the pen-
sionable salary. As complement to the collective agreement regarding
occupational pension employees born before 1979 are covered by a
defi ned contribution pension plan, Volvo Management Pension. The pre-
mium constitutes of SEK 30,000 plus 20% of the pensionable salary over
30 income base amounts. The pensionable salary consists of the twelve
times the current monthly salary and the average of the variable salary for
the previous fi ve years. Pension premiums for the Group Executive Team
excluding CEO amounted to SEK 33,461,634 in 2013.
Group Executive Team members are offered pensions that are compet-
itive in the country in which the person is or have been domiciled or in the
country to which the person is essentially connected.
Volvo Group’s total costs for remuneration and benefi ts to
the Group Executive Team
Costs for total remuneration and benefi ts to the Group Executive Team in
2013 are pertaining to the following: fi xed salary SEK 85 million (87);
variable salary SEK 7 million (10); other benefi ts SEK 13 million (10) and
pensions SEK 44 million (38). The cost related to the long-term share-based
incentive program is refl ected over the vesting period and amounted to
SEK 11 million (27) for 2013. Total costs for the Group Executive Team
include social fees on salaries and benefi ts, special pension tax and addi-
tional costs for other benefi ts. The remuneration model of the Volvo Group
is to a main part designed to follow changes in the profi tability of the Group.
Long-term incentive program
The Annual General Meeting held in 2011 approved a long-term share-
based incentive program for up to 300 Group and senior executives and
comprising the years 2011 to 2013. The program consists of three annual
programs for which the measurement periods are each of the respective
fi nancial years. A prerequisite for participation in the program is that the
participants invest a portion of their salary in Volvo shares and retain these
shares and continue to be employed by the Volvo Group for at least three
years after the investment has been made. Under special circumstances, it
is possible to make exceptions to the requirement of continued employment
(so called “good leaver” situations). The AB Volvo Board is, in the event of
exceptional conditions, entitled to limit or omit allotment of performance
shares. In addition, if the Annual General meeting of AB Volvo resolves that
no dividend shall be paid to the shareholders for a specifi c fi nancial year, no
matching shares are allotted for the year in question.
Shares are granted under the program during the respective fi nancial
year. At the end of the vesting period, the main rule is that the participants
will be allotted one matching share per invested share and, assuming that
the Volvo Group’s ROE (return on equity) for the particular fi nancial year
amounts to at least 10%, a number of performance shares. Maximum allot-
ment of performance shares corresponds to seven shares for the CEO, six
shares for other members of Group Executive Team and fi ve shares for
other participants in the program for each invested share, subject to ROE
reaching 25%. ROE for 2013 amounted to 5.0%, i.e. no performance
shares will be allotted for 2013. For 2012 the number of performance shares
reached 35% of the maximum grant. Allotment of shares will be made
through Volvo owned, earlier re-purchased, Volvo shares. Participants in
certain countries will be offered a cash-based version of the incentive
program. For participants in these countries, no investment is required by
the participant and the program does not comprise an element of match-
ing shares. Allotment of shares in this version is replaced by a cash allot-
ment at the end of the vesting period. Other program conditions are simi-
lar between the programs.
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