12.1 The board of directors is required by law to establish guidelines for the remuneration of the members of the executive management. These guidelines are communicated to the annual general meeting.
12.2 The guidelines for the remuneration of the executive management should set out the main principles applied in determining the salary and other remuneration of the executive management. The guidelines should help to ensure convergence of the financial interests of the executive management and the shareholders.
12.3 Performance-related remuneration of the executive management in the form of share options, bonus programmes or the like should be linked to value creation for shareholders or the company's earnings performance over time. Such arrangements, including share option arrangements, should incentivise performance and be based on quantifiable factors over which the employee in question can have influence.
The board of directors assesses on an annual basis the competitiveness of the company’s salary system to ensure that the company has the ability to attract, retain and motivate the executive management. The terms for the group CEO are established by the board. Salary and remuneration of the other members of executive management are determined by the group CEO.
The conditions for payment of performance-based remuneration and salaries for members of the executive management are described in the relevant notes in the 2007 annual report.
Guidelines for remuneration of members of the executive management was presented to and approved by the shareholders in the annual general meeting on June 13th 2007.
In the annual general meeting on June 13th 2007 the shareholders approved the board of director’s proposed option program.
Option program
“The general meeting grants the Board of Directors a power of attorney to launch an option program for the company’s senior executives with an allocation limit of maximum 35 million share options per year, in which one option in principle entitles the holder to one share. The option program shall remain in force for three years.
The option program supplements the senior executives’ fixed salaries, as well as any other bonus schemes.
The Board of Directors decides which senior executives in the group who shall be included in the option program, and is in charge of the distribution between them. The Board of Directors has a power of attorney to enter into agreements on options in accordance with the terms stated in this resolution. The Board of Directors cannot further delegate this power of attorney.
The redemption price of the options shall be set at 107.5 percent of the market rate at the time of allocation (the Redemption Price) based on the average rate in the market the last five days before the allocation takes place.
Allocation of options to the company’s senior executives shall take place upon the Board of Directors’ discretion. When exercising discretion, the Board of Directors shall consider the following:
- Development of the company’s result, with particular emphasis on the development of the company’s EBIT margins in relation to other, comparable companies
- Development of the total return (share price and dividend, estimated so that any repurchases of own shares regarded as distribution of dividend) compared to the company’s competitors
- Implementation of major integration or sales processes
The Board of Directors decides how the various aspects of the allocation shall be emphasized.
The redemption price of allocated options cannot be adjusted downwards.
The option shall normally not be exercisable until three years after the allocation date, and shall lapse if the employee’s employment in the company is discontinued, irrespective of why. In special cases, and when establishing the option program for the first time, the Board of Directors may derogate from this. The options cannot be sold or transferred to others.
Upon redemption, up to half of the option value shall be paid in cash to cover any tax claims. The remaining part shall be invested in shares in the company. When the options are redeemed, the company may, as decided by the Board of Directors, let the option holders’ purchase own shares owned by the company, subscribe for new shares or settle the entire, or parts of, the option value in cash. The option holders are entitled to receive values equivalent to the value of the options at the time of redemption. Shares are subscribed for or purchased at Redemption Price.
Shares being subscribed for or purchased in accordance with the option program shall have a lock-in period of one year from the time when the capital increase is registered or transferred to the option holder’s VPS account. The Board of Directors may derogate from the lock-in period if special circumstances so require.”
The option program was launched in March 2008.
The company has no deviations from the code of practice.