Scania annual report 2004

NOTE 27 Information regarding compensation to executive officers
According to the decision of the Annual Meeting, remuneration during
2004 to the external members of the Board of Directors elected by the
Annual Meeting amounted to SEK 3,750,000. The remuneration to the
Chairman is SEK 800,000, of which SEK 50,000 is the compensation
for the chairmanship of the Remuneration Committee.
Beyond the customary remuneration to the Board, no compensation
from Scania was paid to the members of the Board who are not
employees of the company.
Scania’s incentive programme for executive officers, among them the
President and CEO, which was approved by the Board in 1997, is
based on operating return, defined as Scania Group net income after
subtracting the cost of shareholders’ equity.
The programme consists of one portion which is related to Scania’s
ability to increase its operating return as defined according to the
preceding paragraph (maximum 75 percent of fixed salary) from one
year to another. The outcome of this component will be disbursed by
1/3 each year during 2005–2007 assuming employment at the end of
each previous year. The second component in the incentive programme
is related to actual ability to generate a return during the year in question,
all provided that the return calculated according to the preceding paragraph
is positive (maximum 150 percent of fixed salary). The outcome
of this component will be disbursed during 2005. As indicated, both
components are designed in such a way that they contain an upper
limit for the compensation that is payable according to the programme.
This upper limit has never been reached.
The outcome of the incentive programme for the period 1997–2003
for the members of the Executive Board, among them the President,
has fluctuated from zero to 132 percent of fixed salary. The outcome for
the period has, on average, amounted to 67 percent of fixed salary.
The incentive programme generated a positive outcome for 2004, of
which one part will be settled during 2005 and the remaining part will
be settled during 2005 – 2007 as earlier stipulated. For the President
the programme resulted in SEK 10,306,600. The corresponding total for
other Group Management executive officers amounts to SEK
53,793,089.
The fixed salary for the President 2003 and 2004 amounted to SEK
5,800,000 per year. The salary paid out to the President during 2004
totalled SEK 5,007,759 (including taxable benefits and after subtracting
the President’s pension co-payments). As from 2005, the fixed annual
salary is adjusted to SEK 6,500,000.
Group Management executive officers, including the President, are
covered by a defined contribution pension system in addition to the
public pension and the ITP occupational pension.
According 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 the President according to
his pension agreement amounts to 35 percent of fixed salary – SEK
2,030,000 for 2004 – for as long as the President remains an employee
of the company.
The annual company-paid premium for other members of the
Executive Board, excluding the President, varies between 28 and 33
percent of fixed salary. The premium for other members of the Group
Outcome, Pension costs, Pension costs,
Salary/Board incentive defined contribution defined benefit Other
SEK remuneration 2004 system system (ITP) remuneration Summary
Chairman
of the Board 750 000 750 000
President
and CEO 5 007 759 10 306 600 7 433 348 509 514 10 817 23 268 038
Executive officers
in the Group 33 182 540 53 793 089 8 870 471 10 732 501 2 373 790 108 952 391
Management
including the Executive
Board (22 persons)
Salary/Board remuneration: corresponds to legal information to tax authorities.
Pension cost, defined contribution system: annual company paid premium and individual employee co-payment according to the DC Pension
System for Executives and ITPK (defined contribution portion of the ITP occupational pension).
Pension cost, defined benefit system (ITP): risk insurance premium and the increase of book reserved old age pension according to the ITP
occupational pension.
Other remuneration: taxable portion of car allowance, newspaper subscriptions etc.
Retirement: the retirement age according to agreements is 60 for the Executive Board including the President and 62 for executives in the Group
Management. The stipulated retirement age for the ITP occupational pension is 65.
Management varies between 11 and 23 percent of annual fixed salary.
Since 1999 the President holds a non-transferable employee stock
option without market value, entitling him, as from 1 January 2004 but
no later than 31 December 2005, to purchase a maximum of 220,000
shares in Scania AB at a price of SEK 196 per share. Scania’s costs for
this programme are known and were charged to earnings earlier. The
option carries an entitlement to purchase existing Series B shares from
Investor AB and thus will not lead to any risk or dilution for Scania’s
shareholders.
If the President resigns of his own volition, he is entitled to his salary
for a six month notice period.
In light of the then complex ownership structure of Scania AB the
Board’s committee for remuneration issues during 2001 approved a
five-year employment agreement with the President. The new agreement,
which stipulates the conditions of the President’s employment until 30
March 2006, prescribes that an annual extra pension provision of SEK
4,410,000 will be made during each of the five years even if employment
should cease due to termination by the company. In such a case,
the other agreed salary and incentive benefits will also be provided for
the period. As a consequence of this agreement, a pension provision of
SEK 4,410,000 was made during 2004.
The employment agreement with the President will end automatically
twelve months after Volkswagen AG has reduced its holding in Scania
AB – direct or indirect – so that it is below 5 percent. In such a case,
the above-stated benefits shall be provided.
The other members of the Executive Board, if the company terminates
the employment, are entitled to severance pay equivalent to a maximum
of two years’ salary, in addition to their salary during the six-month
notice period. If they obtain new employment within 18 months, counting
from their termination date, their severance pay ceases. In case of a
substantial change in the ownership structure of Scania, the members
of the Executive Board are entitled to resign of their own volition with
severance pay amounting to two years’ salary.
Compensation issues for the President and the Executive Board
are decided by the Board after preparation by the Remuneration
Committee, which consists of Dr. Bernd Pischetsrieder, Chairman;
Peggy Bruzelius and Sune Carlsson. During 2004 this committee had
two meetings.
Salaries and other remuneration to the Chairman of the Board, the
President and Group Management executive officers are shown in the
table (excluding employer’s contribution according to law) above.
NOTE 28 Fees and other remuneration to auditors
Fees for audit assignments and other assignments reported as
expenses during the year, in those cases where the same audit
company has the audit assignment in that particular company.
2004 2003
Audit Audit Other Audit Other
firm assignments assignments assignments assignments
KPMG 23 4 22 6
Ernst & Young 7 2 7 2
Other auditors 10 4 10 7
Total 40 10 39 15
NOTES • SCANIA ANNUAL REPORT 2004 70