Remuneration to the Management Team
Gränges will offer remuneration levels and employment terms necessary in order to recruit, develop and retain senior executives. These individuals must have the expertise, motivation and capacity to be able to uphold, develop and implement comprehensive, value-creating strategic objectives for the Gränges Group. Senior executives refers to the Group’s Chief Executive Officer and members of the Management Team. Remuneration to the Management Team is to be determined by the Board of Directors, but must follow the guidelines adopted by the General Meeting. The basic principle is that remuneration is to be competitive and consist of a fixed salary and a variable component in the form of various incentive programmes. Applicable laws and other relevant regulations – both Swedish and foreign – in the sector should always be observed.
The Board of Directors proposes that the General Meeting on May 4 passes a resolution on guidelines for remuneration to senior executives according to the following:
The fixed salary is to consist of normal basic pay. The salary is based on responsibility, performance, skills and the complexity and scope of the duties.
Variable pay is to consist of an annual short-term incentive programme (STI 2017) and a long-term incentive programme (LTI 2017). Both STI 2017 and the LTI 2017 programme will provide cash payouts. There is no guaranteed variable remuneration.
Annual short-term incentive programme (STI 2017)
The outcome of the STI is determined by a number of parameters consisting of financial key ratios for the Group, such as adjusted operating profit and cash conversion, and individual predetermined targets. Remuneration under STI 2017 are not to exceed 60 per cent of total basic pay paid to all members of the Management team, except for the person holding position as President Americas, whom may obtain 100 per cent of the total basic pay.
Long-term incentive programme (LTI 2017)
The long-term incentive program (LTI 2017) is offered to senior executives and certain key individuals.
LTI 2017 will run for three years and is structured as follows: An amount equivalent to the payout from STI 2017 for each participant will be reserved in a special so-called LTI bank. Provided that the Participants remain in the employ of the Gränges Group, the payout will be made at the rate of one third per year during the years 2019, 2020 and 2021, adjusted for the Gränges Group’s total return. The total payout from LTI 2017 and STI 2017 payable in one year is maximized at 1.5 times an annual salary, except for the person holding position as President Americas, for whom such total payout is maximised at 2 times an annual salary.
Benefits that are not directly related to fixed and variable pay, such as car allowance, should facilitate the execution of duties and be in line with standard practices in the market for this target Group.
Pension benefits are to comply with Swedish laws and relevant collective agreements, and be limited to the ITP plan (supplementary pension for salaried employees in industry and commerce). Gränges thus has both defined contribution and defined benefit commitments based on individual circumstances. Pension terms are to be in line with market norms. The retirement age for the Chief Executive Officer is 65. The retirement age for other senior executives is 60–65, depending on in which country they are employed.
Period of notice of termination
The contract between the company and Chief Executive Officer stipulates a mutual twelve-month period of notice. Additionally, in the case of termination by the company, severance pay is payable without deduction for an additional twelve months. The contracts between the company and other senior executives stipulate a mutual six-month period of notice. Additionally, in the case of termination by the company, severance pay is payable of an additional twelve months, without deduction for the first six months.
Information on previously agreed remunerations not yet due for payment
According to the decision taken at the Extraordinary General Meeting 2 September 2014, a long-term, shared-based incentive programme (LTI 2014) was introduced. The programme has a term of two years, and matured in the autumn of 2016, but can thereafter be exercised for a further year. It includes senior executives and certain key individuals.
According to the decision taken at the Annual General Meeting 4 May 2015 to stimulate long-term engagement, leading executives and selected key employees were offered a long-term, share-based incentive programme (LTI 2015) in 2015. The programme runs for three years and is designed as follows: an amount equivalent to the outcome from STI 2015 for each participant is set aside in a special so-called LTI bank. Provided participants continue to be employed by Gränges, a third of the amount will be paid in 2017, 2018 and 2019 respectively, adjusted for the total return of the Gränges share. The total outcome from LTI 2015, together with STI for payment in a single year, is limited to 1.5 times an annual salary.
Following a resolution at an Annual General Meeting on 28 April 2016, a long-term share-based incentive programme (LTI 2016) was offered to senior executives and certain key individuals in 2016 to stimulate long-term commitment. LTI 2016 will run for three years and is structured as follows: An amount equivalent to the payout from STI 2016 for each participant will be reserved in a special so-called LTI bank. Provided that the participants remain in the employ of Gränges the amount allocated to LTI 2016 will be paid by one third per year during the years 2018, 2019 and 2020, adjusted to Gränges’ total return. The total payout from LTI 2016 and STI payable in one year is maximised at 1.5 times an annual salary.
See Note 8 Payroll expenses in the Annual Report for 2016
Insofar as elected board members conduct work on behalf of the company, in addition to board assignments, consultancy fees and other compensation for such work shall be paid. The board may deviate from these guidelines in individual cases if there are specific reasons for doing so. However, such reasons shall imply limited scope to deviate from these guidelines.