Volvo 2015 Annual Report Download - page 184

As per March 1, 2016, the Group Executive Board will consist of 13 execu-
tive positions including the CEO. In addition to the CEO, the Group Execu-
tive Board comprises the Executive Vice Presidents of the three Group
Truck Divisions, the Executive Vice Presidents of the five Business Areas
Renault Trucks, Mack Trucks, UD Trucks, Volvo Trucks and Volvo Construc-
tion Equipment, and the Executive Vice Presidents of the four Group Func-
tions Group Human Resources, Group Communication & Sustainability
Affairs, Group Finance (Deputy CEO & Chief Financial Officer (CFO)), and
Group Legal & Compliance. The members of the Group Executive Board
will report directly to the CEO. The position Executive Vice President GTP
will be vacant as per March 1, 2016.
The Presidents of the Business Areas Value Trucks & JVs, Volvo Buses,
Volvo Penta, Governmental Sales and VFS will also report directly to the
CEO, and be part of an enlarged Group Management Team together with
the members of the Group Executive Board and representatives from
some other key functions.
The CEO is responsible for managing the day-to-day operations of the
Volvo Group and is authorized to take decisions on matters that do not require
Board approval. The CEO leads the operations of the Group mainly through
the Group Executive Board and the enlarged Group Management Team but
also through individual follow-ups with the respective Group Executive Board
members and the Presidents of the Business Areas not represented in the
Group Executive Board. The ten Business Areas also have separate decision
foras for important matters called Business Review Meetings. The CEO is the
Chairman of the Business Review Meetings for the five trucks related Busi-
ness Areas, and the Deputy CEO and CFO is the Chairman of the Business
Review Meetings for the five Business Areas Volvo Construction Equipment,
Volvo Buses, Volvo Penta, Governmental Sales and VFS.
All the above bodies affect control and monitoring of the Group’s finan-
cial development, strategies and targets and take decisions regarding
investments and other matters.
Remuneration to the Group Executive Board
AB Volvo’s Annual General Meeting annually approves a policy on remu-
neration to the Group Executive Board, following a proposal from the AB
Volvo Board. The remuneration policy adopted by the Annual General
Meeting 2015 states that the guiding principle is that remuneration and
other terms of employment for the Group Executive Board shall be com-
petitive in order to ensure that the Volvo Group can attract and retain
competent executives.
The policy also states that the executives may receive variable salary in
addition to fixed salary. The variable salary may, as regards the CEO,
amount to a maximum of 75 percent of the fixed salary and, as regards the
other Group Executive Board members, a maximum of 60 percent of the
fixed salary. In 2015, members of the Group Executive Board were enti-
tled to variable salary according to a program for variable remuneration to
senior executives determined by the AB Volvo Board. The performance
targets defined in the program for the Group Executive Board members
were related to operating margin and cash flow. The purpose of the program
for variable remuneration is to create an incentive for the executives to strive
for the Volvo Group developing in such a manner that the defined perfor-
mance targets are achieved, thereby constituting a management tool.
Group Management
10
The Group Executive Board members have during 2015 participated in
the Group’s long-term, share-based incentive plan for senior executives
which was adopted by the Annual General Meeting 2014. The participants
have during 2015 invested in Volvo shares up to a maximum of 15 percent
of the fixed gross base salary for Group Executive Board members and 10
percent of the fixed gross base salary for other participants. On the condi-
tions that the participant remains an employee within the Volvo Group and
also retains the invested Volvo shares for at least three years after the
investment date (exceptions could be granted in so called good leaver
situations), one matching share per invested share and a number of
performance shares per invested share could be allotted. As for the
matching shares, allotment for 2015 is conditional upon the Annual Gen-
eral Meeting to be held in April 2016 deciding that dividend shall be dis-
tributed to the shareholders. Allotment of performance shares for 2015
was conditional on the Volvo Group’s ROE for 2015 reaching at least 11
percent. Maximum allotment of performance shares was set at an ROE of
26 percent for 2015. Maximum allotment of performance shares under a
yearly plan amounts to seven shares per invested share for the CEO, six
shares per invested share for Group Executive Board members and five
shares per invested share for other participants.
The AB Volvo Board Remuneration Committee conducts an annual
evaluation of the remuneration policy, Volvo’s system for variable remu-
neration to executives and the long-term, share-based incentive program
to senior executives, and the AB Volvo Board prepares a special report of
this evaluation and the conclusions. The report on the evaluation for 2015
will be available on Volvo’s website no later than three weeks prior to the
Annual General Meeting 2016, www.volvogroup.com. For more informa-
tion about remuneration to the Group Executive Board and an account of
outstanding share and share-price related incentive programs to the
management, refer to Note 27 in the Group’s notes in the Annual Report.
Changes to the Group Executive Board
As a result of the new trucks sales organization and a decision to include
representatives from the Group’s largest Business Areas in the Executive
Board, the number of executive positions comprising the Group Executive
Board will be increased from 10 to 13 including the CEO as from March 1,
2016, through the following changes:
• The presidents of the four new brand-based truck sales Business Areas
will be included in the Group Executive Board, replacing the Executive
Vice President for the current Group Trucks Sales Division.
• A separate Truck Division for the purchasing organization, GTP, will be
created resulting in one additional Group Executive Board member (the
position will however be vacant on March 1, 2016).
• The Executive Vice President of the Business Area Volvo Construction
Equipment will be included as a member of the Group Executive Board.
• In addition to the CFO’s current role, the CFO will also become Deputy
CEO and assume responsibility for the strategy function. Corporate
Strategy & Brand Portfolio will therefore be relocated organizationally
under the CFO, and the current Executive Vice President for this func-
tion will no longer be a member of the Group Executive Board.
• The current Executive Vice President Group Business Areas will assume
the responsibility for strategic projects and will no longer be a member
of the Group Executive Board.
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CORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT 2015