Annual Report 2006 - Munters

NOTE 27 REMUNERATION TO THE BOARD AND SENIOR EXECUTIVESRemuneration and other benefitsAmounts in SEK 000sBoardfeesBasicsalaryVariableremunerationOtherbenefitsPensionexpenseChairman of the Board 400 – – – – 400Other Board members 1,150 – – – – 1,150President (incoming) 1,215 596 38 364 2,213President (departing) – 1,326 482 53 627 2,488Other senior executives – 9,702 2,413 484 2,977 15,576Total 1,550 12,243 3,491 575 3,968 21,827TotalThe Board fee refers to both the fee to elected Board members and to the feeto the members of the Audit Committee, appointed at the Annual GeneralMeeting in 2006.The departing President was employed during the first five months of theyear and the incoming President was employed during the last four months ofthe year.The group “Other senior executives” refers to five persons and an additionalperson during the first two months of the year.Variable remuneration for the 2006 fiscal year refers to expensed variableremuneration that will be paid during 2007. This also includes payments ofsubsidies during 2006 relating to the option program that matured duringthe year. The variable remuneration for the incoming President corresponds to49 percent of the expensed salary and 36 percent for the departing President.For other senior executives, variable remuneration was between 20 and 45percent.Other benefits refers to company cars and meal benefits.Pension expenses include costs for disability pension insurance and survivorannuity, etc. The amounts are stated excluding special employer’s contributionon pension expenses.PrinciplesMembers of the Board of Directors receive remuneration according to theAnnual General Meeting’s decision. Employee representatives receive noremuneration.Remuneration to the President and other senior executives consists of basicsalary, variable remuneration, company car, and food expense benefits and apension.The division between basic salary and variable remuneration should stand inrelation to the executive’s responsibility and authority.For the President, variable remuneration is a maximum of 50 percent of fixedsalary. The variable remuneration is based on the Group’s earnings per share.For other senior executives, variable remuneration is maximized to between30 and 70 percent of fixed salary. The variable remuneration is normally basedon the improvement in relation to the preceding year for each individual’s area ofresponsibility in terms of sales, operating earnings and capital turnover rate, aswell as the outcome of individual activity plans. Variable remuneration is normallyconditional upon achieving results that exceed the preceding year.PensionThe retirement age for the President is 62 years and for other senior executivesbetween 62 and 65 years. For the President and other senior executives inSweden there is a defined-contribution plan. The contracted premium provisionshall amount to between 20 and 35 percent, depending on age, of the pensionentitling salary. Pension-entitling salary means basic salary. Funds are allocatedmonthly to insurance or funds and correspond on each occasion to theCompany’s commitments. The costs for transition from a defined-benefit to apremium-based pension plan are distributed over a five-year period up to March2008 in an amount of SEK 67,000 on an annual basis. One senior executive,who is a US citizen, is covered by the general 401k pension plan plus a specialpremium-based pension plan. Funds are allocated monthly to a fund andcorrespond on each occasion to the Company’s commitments. All pensionplans are vested – that is, not conditional on future employment.Severance payBetween the Company and the President and other senior executives, thereis a mutual termination period of 6 months. If employment is terminated by theCompany, severance pay will be received amounting to 12 months’ salary(18 months for the President). Severance pay is not considered pensionableincome, except for the President, and is reduced by income from otheremployment. If the President or other senior executive takes the initiative interminating employment, there is no severance pay.Stock option programsThe incoming President and other senior executives have participated in theoptions program, approved by the Annual General Meeting during the past year.Options were acquired at market prices. The option premium for the programwill be subsidized by 60 percent, subject to the option holder still beingemployed by the company at the time when the exercise period is reached.Procedure and decision processThe Board of Directors has appointed a Remuneration Committee among itsmembers consisting of Berthold Lindqvist and Sören Mellstig. The work of theCommittee is presented in the report on corporate governance on page 35.NOTE 28 OUTSTANDING INCENTIVE PROGRAMSDuring the years from 2003 to 2004, and 2006, Munters implemented stockoption programs directed to senior executives in the Group. The options for alloutstanding stock option programs were purchased at a market premium,which is reported as an increase in the Company’s equity. To cover theCompany’s commitments according to the stock option programs, own shareshave been acquired, with the purchase price being reported as a reduction ofthe Group’s equity. In the future when options are exercised, the subscriptionprice received will be reported as an increase in Group equity. The optionpremium for all programs will be subsidized by 40 percent for the 2003-2004start year and by 60 percent for the 2006 start year of the option premium in theform of a cash bonus, on condition that the option holder is employed at thetime of the option’s exercise period. The subsidy and associated social costswill be charged against consolidated earnings. Provisions for these subsidiesamounted to SEK 2 M on the closing date, of which SEK 1 M was expensedduring the year.The change in the number of outstanding share options and their weightedaverage exercise price (SEK) are as follows:Averageexerciseprice2006 2005OptionsAverageexercisepriceOptions1 January 278.66 220,100 214.58 422,800Issued 341.00 75,000 – –Utilized 226.00 –53,000 145.00 –202,700Matured 315.00 –114,000 – –31 December 304.61 128,100 278.66 220,100M U N T E R S A N N U A L R E P O R T 2 0 0 6 63