CEO and members of the Executive Management
The CEO was paid a base salary of SEK 10.8 M (10.4). The Company’s costs are reduced by SEK 3.6 M for directors’ fees paid by portfolio companies for 2019. Variable salary for 2019, which is based on the Board’s annual evaluation, amounted to SEK 4.3 M (4.2), which will be paid out in 2020. The earned portion in the current incentive program amounted to SEK 1.6 M (1.9). The incentive program that expired in 2019 resulted in grants of 13,873 (17,196) Industrivärden Class C shares to the CEO, corresponding to a value of SEK 2.9 M (3.2). The cost of defined contribution pension premiums was SEK 4.3 M (4.2). Other benefits pertain to a company car, etc. In the event the Company serves notice of termination of the employment contract, a two-year notice period applies. For notice given by the CEO, a six-month notice period applies.
The other four (three) members of the Executive Management together received base salaries of SEK 10.1 M (7.0). The other members of the Executive Management are entitled to long-term and short-term variable salary. Short-term variable salary for 2019 amounted to SEK 4.2 M (2.8), which will be paid out in 2020. The outcome is based on the achievement of individually set goals. The vested portion of the ongoing incentive program amounted to SEK 0.8 M (0.6). The incentive program that expired in 2019 resulted in grants of 2,756 (3,696) Industrivärden Class C shares to the other members of the Executive Management, for a value of SEK 0.6 M (0.7). The combined cost of defined contribution pension premiums was SEK 3.2 M (2.2). Other benefits pertain to company cars, etc. In the event of the Company service notice of termination of an executive’s employment contract, a one or two-year notice period applies. For notice given by the executive, a sixmonth notice period applies.
Long-term incentive programs
The incentive programs are part of a competitive total compensation package in which the employee has the opportunity to receive matching shares and performance shares after three years, subject to investment of part of the employee’s base salary in Industrivärden shares. The program aims to encourage Industrivärden’s employees to increase their ownership of shares in the Company and thereby further emphasize long-term shareholder value. The incentive program is expected to increase Industrivärden’s opportunities to recruit and retain competent employees as well as the participants’ interest in and commitment to Industrivärden’s business and development. Against this background, the program is judged to have a positive impact on Industrivärden’s continued development and thereby be beneficial for both the shareholders and Industrivärden’s employees. In the outstanding programs, a maximum of 17,961 matching shares and 62,352 performance shares may be granted. Grants of matching shares and performance shares require continued employment at the time of the match. In addition, grants of performance shares are conditional upon an average annual total return for Industrivärden’s Class C shares during the three year lock-in period that is equal to or higher than the SIXRX index, and full grants of performance shares require an average annual total return for Industrivärden’s Class C shares during the three-year lock-in period that exceeds the SIXRX index by 2 percentage points per year. The cost of incentive programs in 2019 was SEK 0.0 M (0.8). The total liability for the programs is SEK 3.4 M (4.2).
Long-term incentive program 2019
The 2019 AGM resolved to offer a long-term incentive program for a maximum of 20 employees in the Industrivärden Group. During 2019, 13,058 shares were bought within the program, which can qualify for a maximum grant of 6,529 matching shares and 22,821 performance shares.
Guidelines for compensation of senior executives 2020
The Board of Directors recommends that the 2020 AGM resolve in favor of the following guidelines for compensation of senior executives.
These guidelines pertain to Industrivärden’s CEO and other members of the Executive Management. The guidelines are to be applied for compensation agreed upon, and changes made to already agreed upon compensation, after the guidelines have been adopted by the 2020 AGM. Compensation decided by the AGM is not covered.
Compared with the guidelines decided upon by the 2019 AGM, the proposal below has been updated to meet the requirements arising out of implementation of the EU’s Shareholder Rights Directive.
The guidelines' promotion of the Company's business mission, long-term interests and sustainability
The Company’s business mission is to be a long-term asset manager and active owner of listed Nordic companies.
Successful and sustainable execution of the Company’s mission, objectives and strategy for capitalizing on the Company’s long-term interests requires that the Company can recruit and retain qualified employees. The guidelines contribute to this by ensuring that senior executives can be offered a going-rate, competitive total compensation package that is commensurate with their responsibilities and authority.
Types of compensation, etc.
Compensation shall be in line with the going rate in the market and competitive, and be related to individual performance as well as the Company’s development. Compensation may consist of the following components: fixed cash salary, short-term variable cash compensation, pension benefits and other benefits.
Short-term variable cash compensation may amount to a maximum of 50% of the executive’s fixed annual cash salary. The compensation shall be coupled to fulfillment of individual criteria that are set yearly and that are evaluated according to the executive’s work contribution and performance. The criteria may be financial or nonfinancial, or they may consist of individually adapted quantitative or qualitative goals. The criteria shall be formulated so that they have a clear coupling to value creation for the Company and promote the Company’s business mission and sustainable execution of the Company’s long-term interests.
Fulfillment of criteria for payment of short-term variable cash compensation shall be measured during a period of one year. The Compensation Committee is responsible for assessing the extent to which the criteria for payment of short-term variable cash compensation to the CEO is fulfilled. The Board thereafter sets the CEO’s compensation. The CEO is responsible for assessing the fulfillment of criteria for payment of short-term variable cash compensation for other senior executives. Short-term variable cash compensation shall not be pensionable.
The Board shall have the opportunity pursuant to law or agreement, with the restrictions that may arise out of such, to fully or partly rescind variable cash compensation paid out on incorrect grounds.
Pension benefits, including disability insurance, (Sw. sjukförsäkring) shall be defined contribution solutions to the extent that the executive is not covered by a defined benefit pension under compulsory collective contract provisions, and shall entitle the executive to receive a pension from 60 or 65 years of age, depending on the position. For the CEO and other senior executives, premiums and other costs related to defined contribution pensions may amount to a combined maximum of 40% of the fixed annual cash salary, depending on the position.
Other benefits may include, among other things, life insurance, health insurance (Sw. sjukvårdsförsäkring), a car benefit and a wellness benefit. For the CEO, such benefits may amount to a maximum of one (1)% of fixed annual cash salary, and for other senior executives they may amount to four (4)% of fixed annual cash salary, depending on the position.
In addition to the above, the general meeting of shareholders may – independently from these guidelines – decide on e.g., share-based and share price–related compensation. Since 2012 the Company has established share-based incentive programs approved by general meetings, of which the 2017–2019 programs are currently in effect. The programs cover all employees and require a personal shareholding and holding period of three (3) years. The outcome is based on performance targets that are related to the long-term growth in Industrivärden’s share price.
For notice of termination served by the Company, the notice period may be a maximum of two (2) years. Fixed cash salary paid during the notice period and severance pay may together not exceed an amount corresponding to two (2) years’ fixed cash salary. For notice given by the executive, the notice period may be a maximum of six (6) months, without any right to severance pay.
Additionally, compensation may be payable for any "non compete" obligation. Such payment shall compensate for possible loss of income and shall only be paid to the extent that former executive lacks entitlement to severance pay. Compensation shall amount to a maximum of 60% of fixed cash salary at the time notice was served, unless other terms apply under stipulations of a compulsory collective agreement. It shall be paid during the time the "non compete" obligation applies, which shall be a maximum of 12 months after the end of employment.
Decision-making process for setting, revising and implementing the guidelines
The Compensation Committee’s duties include conducting preparatory work for board decisions on proposed guidelines for compensation of senior executives. The Board shall draw up a recommendation for new guidelines at least every fourth year and present the recommendation for decision by the Annual General Meeting. The guidelines apply until new guidelines have been adopted by a general meeting. The Compensation Committee shall also monitor and evaluate variable compensation programs for members of the Executive Management, application of guidelines for compensation of senior executives and applicable compensation structures and compensation levels in the Company.
In the preparatory work for the Board’s recommendation on these compensation guidelines, salary and terms of employment for the Company’s other employees have been taken into account, whereby information on the employees’ total compensation, the components of their compensation and the increase in their compensation and rate of growth over time have made up part of the Compensation Committee’s and Board’s decision-making documentation in evaluating the fairness of the guidelines and the limitations that arise out of these.
The Compensation Committee’s members are independent in relation to the Company and Executive Management. In the Board’s handling of and decisions on compensation-related matters, the CEO and other members of the Executive Management are not present to the extent they are the subject of the matters at hand.
Departures from the guidelines
The Board may decide to temporarily depart from the guidelines entirely or partly if in an individual case there are special reasons for doing so and a departure is necessary for safeguarding the Company’s long-term interests or to ensure the Company’s financial soundness. The Compensation Committee’s duties include conducting preparatory work for the Board’s decisions on compensation matters, which includes decisions to depart from the guidelines.