Volvo 2014 Annual Report Download - page 180

The proposal by the Board of Directors of AB Volvo to be
adopted by the Annual General Meeting April 1, 2015.
This Policy concerns the remuneration and other terms of employment for
the Volvo Group Executive Team. The members of the Volvo Group Exec-
utive 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 2014 sets out details on the total remuneration and
benefi ts awarded to the Executives during 2014.
2. The principles for fi xed salaries
The Executive’s fi xed salary shall be competitive and based on the individual
Executive’s responsibilities and performance.
3. The principal terms of variable salary and incentive schemes, includ-
ing the relation between fi xed and variable components of the remuner-
ation and the linkage between performance and remuneration
The Executives may receive variable salaries in addition to fi xed salaries.
The variable salary may, as regards the President, amount to a maximum
of 75 percent of the fi xed annual salary and, as regards the other Execu-
tives, a maximum of 60 percent of the fi xed 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
fulfi lment of various improvement targets or the attainment of certain
fi nancial objectives. Such targets will be set by the Board and may relate
to inter alia operating income, operating margin 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 to the Executives.
The Annual General Meeting 2014 decided to adopt a share-based
incentive program for senior executives in the Volvo Group relating to the
fi nancial years 2014, 2015 and 2016.
4. The principal terms of non-monetary benefi ts, pension, notice of
termination and severance pay
4.1 Non-monetary benefi ts
The Executives will be entitled to customary non-monetary benefi ts such
as company cars and company health care. In addition thereto in individ-
ual cases company housing and other benefi ts may also be offered.
4.2 Pension
In addition to pension benefi ts which the Executives are entitled to
according to law and collective bargaining agreements, Executives resi-
dent in Sweden may be offered two different defi ned-contribution plans
with annual premiums. For the fi rst plan the annual premiums amount to
SEK 30,000 plus 20 percent of the pensionable salary over 30 income
base amounts and for the second plan the annual premiums amount to 10
percent of pensionable salary. In the two defi ned-contribution plans, the
pension earned will correspond to the sum of paid-in premiums and pos-
sible return without any guaranteed level of pension received by the
employee. Further no defi nite 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 benefi ts that are competitive in the coun-
try where the Executives are or have been resident or to which the Exec-
utives have a material connection, preferably defi ned-contribution plans.
4.3 Notice of termination and severance pay
For Executives resident in Sweden, the termination period from the Com-
pany 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, remunera-
tions 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 specifi c
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
2015 fall within the frames of this policy.
Deviation from current Policy
The Board of Directors was authorized to deviate from the Policy on
Remuneration to Senior Executives adopted by the Annual General Meeting
of AB Volvo held in 2014 according to section 6 of said Policy. The Board
has resolved on such a deviation by, under separation arrangements with
two Executives, approving payment to those Executives of pension premi-
ums corresponding to the period from the termination of the employment,
however from the age of 60 at the earliest, until the age of 65, in addition
to 12 months’ severance pay. The premium payments correspond to about
one annual salary for each Executive. The reason for the deviation is a
reorganization within the Group entailing among other things that the
number of Group Executive Team members has decreased from 16 to 10
and that the two Executives’ respective positions do not remain.
Proposed Remuneration Policy
FINANCIAL INFORMATION 2014
176