Remuneration policy
According to the Swedish Companies Act the Board of Directors shall each year propose to the annual general meeting guidelines for remuneration to senior executives upon which the annual general meeting shall decide.
Based on proposal from the Board of Directors the annual general meeting 2008 adopted the following policy for remuneration and other terms of employment to the President and other members of the Group management (i.e. the President, Divisional Managers and Senior Vice Presidents in charge of Group functions reporting directly to the President). The members of the Group management are to be referred below as the “Group Management Team”.
The objective of these principles is to ensure that the Company is able to recruit and retain employees with optimum skills and qualifications for their respective duties. The remuneration structures shall encourage employees to do their utmost to safeguard shareholders’ interests. Swedish Match takes into account both global remuneration practice and the practice of the home country of each member of the Group Management Team.
The principles shall apply to remuneration and other terms of employment for the Group Management Team and apply to employment agreements entered into after the approval of the principles by the Annual General Meeting 2008 and for changes made to existing employment agreements thereafter. The Annual Report for 2007 sets out details of the total remuneration and benefits awarded to the Group Management Team during 2007.
The total remuneration paid to Group Management Team consists of fixed salary, annual variable salary, pension benefits, other benefits, terms related to termination of employment and, subject to approval by the Annual General Meeting for each year, a long-term share-related incentive program.
1. The principles for fixed salary
The fixed salary for the Group Management Team shall correspond to market rates and shall be based on each member’s competence, responsibility and performance.
2. The relative importance of fixed and variable components of the remuneration and the linkage between performance and remuneration
The members of the Group Management Team may be entitled to a variable salary in addition to the fixed salary.
The variable salary for the President and the Senior Vice Presidents in charge of Group functions shall be based on the result of two mutually independent criteria, with one target based on the Group’s earnings per share and one target based on the return on operating capital. Part of the total variable salary for the Divisional Managers shall be based on the same criteria and targets as for the rest of the Group Management Team, with the other part based on the outcome in relation to targets approved by the Compensation Committee for the Division in question.
The maximum annual variable salary shall be capped at 50 per cent of the fixed salary for the President and 40 per cent of the fixed salary for members of the Group Management Team other than the President. Members of the Group Management Team residing outside Sweden may be offered additional variable salary to ensure the compensation´s competitiveness in each country. Such additional variable salary shall also be capped in relation to the Group Management Team member´s fixed salary.
The Group Management Team may, subject to decision by the Annual General Meeting, be covered by a long term share related incentive program.
3. Profit Sharing System
All employees in Sweden are also participating in Swedish Match’s profit sharing system (“PSS“). For 2007 the individual result amounted to SEK 29,355. Results under the PSS are primarily placed in Swedish Match shares and can be disposed of on the individual level after three years at the earliest.
4. Pension
Members of the Group Management Team residing in Sweden shall be covered by the ITP plan (supplementary pensions for salaried employees) for portions of their salary up to 30 times the income base amount and by defined-contribution pensions for portions of their salary in excess thereof. Pensions for members of the Group Management Team residing outside Sweden shall preferably be through defined-contribution pensions with a premium based on the fixed salary.
5. Severance pay, etc
A mutual period of notice of six months shall apply. Severance pay shall total a maximum of eighteen months’ fixed salary if notice of termination is given by the Company. The severance pay shall be reduced by income from other employment or commissions, but by no more than 50 per cent thereof and no more than half of the severance pay.
6. Other benefits
Other benefits shall be payable in accordance with local custom. The combined value of these benefits shall constitute a limited value in relation to the total remuneration package and shall correspond to the market norm.
7. The Board’s right to deviate from the Principles
The Board of Directors shall be entitled to deviate from the principles approved by the Annual General Meeting if specific reasons for doing so exist in any individual case.
8. Committee work and decisions
Swedish Match’s Board of Directors shall have a Compensation Committee. The Committee has the authority to approve salary and other remuneration and employment terms for members of the Group Management Team, except those regarding the President. The Committee shall also prepare and present proposals for the Board’s decisions on issues relating to share related incentive schemes and for salary and other remuneration and employment terms for the President. In addition hereto, the Committee is authorized to decide (and in relation to the President to propose to the Board of Directors) the further details of how to set the criteria and targets on which the variable salary is based for the Group Management Team.
9. Previous undertakings not yet due
The Company has no previous undertakings not yet due besides what is evident from the Annual Report 2007.