Scania Annual Report 2011

124
notes to the consolidated financial statements
NOTE 28 Compensation to executive officers
FIXED SALARY FOR THE PRESIDENT AND CEO
The fixed salary of the President and CEO amounted to
SEK 10,000,000 for 2011.
VARIABLE SALARY
Variable salary is dependent on Scania’s earnings and consists of a
two-part incentive programme, Part 1 and Part 2.
The principles for variable salary to executive officers − including the
President and CEO − were approved by the 2011 AGM and constitute
a programme with the same parameters that were in force during 2010.
The programme covers a maximum of 150 executive officers.
The outcome is calculated on the basis of operating return defined
as Scania Group net income after subtracting the cost of equity −
resi dual net income (RNI ) − and is established by the Board’s Remuneration
Committee. For 2011, the Remuneration Committee of the
Board of Directors fixed RNI on the basis of a factor of equity amounting
to 8 percent.
Part 1 is related to actual ability to generate a return during the year
in question, all provided that RNI according to the preceding paragraph
is positive, and is determined as a cash amount (maximum 45
to 150 percent of fixed salary depending on position). Part 2 is related
to Scania’ s ability to increase RNI as defined above from one year to
another, and the outcome is also determined as a cash amount (maximum
35 to 80 percent of annual fixed salary). The outcome of both
these components will be disbursed during 2012.
As indicated above, both components are designed in such a way
that they contain an upper limit for the compensation that is payabl e
according to the programme. The outcome of the variable salary
programme for the period 1997–2011 for the members of the Executive
Board, among them the President and CEO, has varied from 0 to 150
percent for Part 1 and from 0 to 80 percent for Part 2. The outcome
for the period 1997−2011 has, on average, amounted to 81 percent of
annual fixed salary with regard to Part 1 and 27 percent of annual fixed
salary with regard to Part 2. The 2011 outcome for the President and
CEO was 105 percent for Part 1 and 0 percent for Part 2.
When generating a payout, 50 percent of the total outcome of
Part 1 and Part 2 shall be paid in cash as salary and the remaining 50
percent shall be determined as a cash amount that, after subtracting
the applicable tax, is used by the employee for the purchase of Series
B shares in Scania AB at market value through a third party designated
by the company, on a day determined by the company. A purchase of
Series B shares in Scania AB shall be carried out with one third of the
cash amount each year over a three year period. The participants shall
not have the right of disposal over the shares during a period of one
year from the respective date of purchase.
Full access to the allotted amount is granted four calendar
years from the commencement of the incentive year. The Board
is authorise d, in whole or part, to waive the requirement to use
50 percent to purchase Scania B shares, if on the payment date there
is a risk that participants are regarded as possessing insider information
or there is some other circum stance that makes a payment to purchase
Scania B shares difficul t or impossible. The Board has utilised
this authority for a limited number of participants during 2011.
Payments will be made on the condition that the participant is
employed in the Scania Group at the close of the calendar year or that
employment has ended through agreed retirement. The return on the
shares is at the participants’ disposal and participants shall be entitled
to purchase shares for a pension according to a pension obligation,
secured through endowment insurance.
PENSION SYSTEM for executive officers
The President and CEO, other Executive Board and Heads of
Corpo rate Units are covered by a defined contribution pension system
in addition to the public pension and the ITP occupational pension.
Accor ding to this defined contribution system, benefits accrue by
means of annual payment of premiums by the company. Added to this
is the value of annual individual employee co-payments, amounting to
5 percent of fixed salary.
The annual company-paid premium for members of the Executive
Board, excluding the President and CEO, varies between 15–31 percent
of fixed salary. The premium for Heads of Corporate Units varies
between 16–30 percent of fixed salary.
OTHER CONDITIONS FOR THE PRESIDENT AND CEO
In addition to the fixed salary, the incentive programme in force for the
Executive Board shall apply to the President and CEO. The annual
company-paid pension premium for the President and CEO according
to his pension agreement amounts to 35 percent of his fixed salary for
as long as the President and CEO remains an employee of the company.
The premium for 2011 amounted to SEK 3,500,000. The agreement
also prescribes an extra annual pension provision, amounting to
SEK 6,000,000 for 2011.
If the President and CEO resigns of his own volition, he is entitled to
his salary for a six-month notice period. The applicable outcome of the
incentive programme shall be proportional to the length of his period
of employment during the year in question. In case of termination by
the company before the end of 31 March 2015, the President and CEO
shall be entitled to his fixed salary in an unchanged amount per year,
plus annual compensation equivalent to the average of three years’
variable salary according to applicable employment contract.
TERMINATION CONDITIONS FOR THE EXECUTIVE BOARD
If the company terminates their employment, the other members of
the Executive Board are entitled to severance pay equivalent to a
maximum of two years’ salary, in addition to their salary during the sixmonth
notice period. If they obtain new employment within 18 months,
counting from their termination date, the severance pay ceases.
financial reports Scania 2011