STOCKHOLM, Feb. 21, 2020 /PRNewswire/ -- The Annual General
Meeting of shareholders of Telefonaktiebolaget LM Ericsson (NASDAQ:
ERIC) will be held on Tuesday, March 31,
2020, at 3 p.m. at
Kistamässan, Arne Beurlings Torg 5, Kista/Stockholm.
The Nomination Committee proposes among other things:
- Unchanged composition of the Board of Directors (item 11 and
item 12)
- Increase of the Board fees and the fees for work on the
Committees of the Board (item 10)
- Election of Deloitte AB as new auditor (item 15)
The Board of Directors proposes among other things:
- A dividend of SEK 1.50 per share,
to be paid in two equal installments (item 8.3)
- Revised Guidelines for remuneration to Group Management to
align with new legislation while keeping the core principles
unchanged (item 16)
- A Long-term Variable Compensation Program for the Executive
Team, with a one-year Group operating income target for 2020 and
three-year total shareholder return targets, all targets with a
three-year vesting period (item 17)
- Transfer of treasury stock in relation to the Long-Term
Variable Compensation Programs 2020, 2019 and 2018 (item 17.2 and
item 18)
Welcome to the Annual General Meeting of shareholders 2020 of
Telefonaktiebolaget LM Ericsson
Telefonaktiebolaget LM Ericsson's (reg. no 556016-0680)
shareholders are invited to participate in the Annual General
Meeting of shareholders to be held on Tuesday, March 31, 2020 at 3 p.m. at Kistamässan, Arne Beurlings Torg 5,
Kista/Stockholm. Registration to
the Annual General Meeting starts at 1.30
p.m.
Registration and notice of attendance
Shareholders who wish to attend the Annual General Meeting
must
- be recorded in the share register kept by Euroclear Sweden AB,
the Swedish securities registry, on Wednesday, March 25, 2020; and
- give notice of attendance to the Company at the latest on
Wednesday, March 25, 2020. Notice of
attendance can be given by telephone +46 (0)8 402 90 54 on weekdays
between 10 a.m. and 4 p.m. or on
Ericsson's website www.ericsson.com.
Notice may also be given in writing to:
Telefonaktiebolaget LM Ericsson
General Meeting of shareholders
c/o Euroclear Sweden AB
Box 191
SE-101 23 Stockholm
Sweden
When giving notice of attendance, please state name, date of
birth or registration number, address, telephone number and number
of attending assistants, if any.
The Annual General Meeting will be conducted in Swedish and
simultaneously translated into English.
Shares registered in the name of a nominee
In addition to giving notice of attendance, shareholders having
their shares registered in the name of a nominee, must request the
nominee to temporarily enter the shareholder into the share
register as per Wednesday, March 25,
2020, in order to be entitled to attend the Annual General
Meeting. The shareholder should inform the nominee to that effect
well before that day.
Proxy
Shareholders represented by proxy shall issue a power of
attorney for the representative. A power of attorney issued by a
legal entity must be accompanied by a copy of the entity's
certificate of registration (should no such certificate exist; a
corresponding document of authority must be submitted). In order to
facilitate the registration at the Annual General Meeting, the
power of attorney in the original, certificate of registration and
other documents of authority should be sent to the Company in
advance to the address above for receipt by Monday, March 30, 2020. Forms of power of
attorney in Swedish and English are available on Ericsson's
website, www.ericsson.com.
Processing of personal data
For information on how your personal data is processed, see:
https://www.euroclear.com/dam/ESw/Legal/Privacy-notice-bolagsstammor-engelska.pdf
Agenda
1. Election of the Chair of the Annual General Meeting
2. Preparation and approval of the voting list
3. Approval of the agenda of the Annual General Meeting
4. Determination whether the Annual General Meeting has been
properly convened
5. Election of two persons approving the minutes
6. Presentation of the annual report, the auditor's report, the
consolidated accounts, the auditor's report on the consolidated
accounts and the auditor's report whether the guidelines for
remuneration to group management have been complied with, as well
as the auditor's presentation of the audit work with respect to
2019
7. The President's speech. Questions from the shareholders to
the Board of Directors and the management
8. Resolution with respect
to
1. adoption of the income
statement and the balance sheet, the consolidated income statement
and the consolidated balance sheet;
2. discharge of liability for the
members of the Board of Directors and the President; and
3. the appropriation of the
results in accordance with the approved balance sheet and
determination of the record dates for dividend
9. Determination of the number of Board members and deputies of
the Board of Directors to be elected by the Annual General
Meeting
10. Determination of the fees payable to members of the Board of
Directors elected by the Annual General Meeting and members of the
Committees of the Board of Directors elected by the Annual General
Meeting
11. Election of the members and deputies of the Board of
Directors
The Nomination Committee's proposal for Board
members:
1. Jon Fredrik Baksaas
2. Jan
Carlson
3. Nora
Denzel
4. Börje Ekholm
5. Eric A. Elzvik
6. Kurt
Jofs
7. Ronnie Leten
8. Kristin
S. Rinne
9. Helena
Stjernholm
10. Jacob
Wallenberg
12. Election of the Chair of the Board of Directors The
Nomination Committee's proposal:
The Nomination Committee proposes that Ronnie Leten be
re-elected Chair of the Board of Directors.
13. Determination of the number of auditors
14. Determination of the fees payable to the auditors
15. Election of auditors
16. Resolution on the guidelines for remuneration to Group
Management
17. Long-Term Variable Compensation Program 2020
("LTV 2020")
1. Resolution on implementation of
LTV 2020
2. Resolution on transfer of
treasury stock for the LTV 2020
3. Resolution on Equity Swap
Agreement with third party in relation to the LTV 2020
18. Resolution on transfer of treasury stock to employees and on
an exchange in relation to the resolution on the Long-Term Variable
Compensation Programs 2018 and 2019
19. Resolution on transfer of treasury stock in relation to the
resolutions on the Long-Term Variable Compensation Programs 2016
and 2017
20. Resolution on proposal from the shareholder Thorwald Arvidsson to amend the articles of
association in the following way:
1. to make an addition to § 5 of
the articles of association - a new section two - stating: all
shares carry equal rights; and
2. to delete § 6 of the articles
of association, and to adjust the numbering accordingly.
21. Resolution on proposal from the shareholder Thorwald Arvidsson that the Annual General
Meeting resolve to delegate to the Board of Directors:
1. to work for the abolishment of
the possibility to have voting power differences in the Swedish
Companies Act, primarily by turning to the Government of
Sweden; and
2. to prepare a proposal for Board
and Nomination Committee representation for the small and midsize
shareholders, to be presented to the Annual General Meeting 2021,
or any earlier held extraordinary general shareholders meeting.
The assignment shall also include working to ensure that the
corresponding change is made in national legislation, primarily by
turning to the Government of Sweden
22. Resolution on proposal from the shareholder Thorwald Arvidsson for an examination through a
special examiner (Sw. särskild granskning) of the circumstances
leading to the company reportedly having to pay SEK 10.1 billion to the US public treasury. This
special examination shall also cover the company auditors' actions
or lack of actions.
23. Resolution on proposal from the shareholder Einar Hellbom
that the Annual General Meeting resolve that the Board of Directors
shall propose at the next General Meeting of shareholders that all
shares carry equal voting rights and describe how this should be
implemented
24. Closing of the Annual General Meeting
Item 1 Chair of the Annual General Meeting
The Nomination Committee, appointed in accordance with the
Instruction for the Nomination Committee resolved by the Annual
General Meeting 2012, is composed of the Chair of the Committee
Johan Forssell (Investor AB), Karl
Åberg (AB Industrivärden and Svenska Handelsbankens
Pensionsstiftelse), Jonas Synnergren (Cevian Capital Partners
Limited), Anders Oscarsson (AMF
Försäkring och Fonder) and Ronnie Leten (Chair of the Board of
Directors). The Nomination Committee proposes that Advokat Sven
Unger be elected Chair of the Annual General Meeting of
shareholders 2020.
Item 8.3 Dividend and record dates
The Board of Directors proposes a dividend to the shareholders
of SEK 1.50 per share. The dividend
is proposed to be paid in two equal installments, SEK 0.75 per share with the record date
Thursday, April 2, 2020, and
SEK 0.75 per share with the record
date Friday, October 2, 2020.
Assuming these dates will be the record dates, Euroclear Sweden AB
is expected to disburse SEK 0.75 per
share on Tuesday, April 7, 2020, and
SEK 0.75 per share on Wednesday, October 7, 2020.
Item 9 Number of Board members and deputies to be elected by
the Annual General Meeting
According to the articles of association, the Board of Directors
shall consist of no less than five and no more than twelve Board
members, with no more than six deputies. The Nomination Committee
proposes that the number of Board members elected by the Annual
General Meeting of shareholders shall be ten and that no deputies
be elected.
Item 10 Fees payable to members of the Board of Directors
elected by the Annual General Meeting and to members of the
Committees of the Board of Directors elected by the Annual General
Meeting
The Nomination Committee proposes that fees to non-employee
Board members elected by the Annual General Meeting and
non-employee members of the Committees of the Board of Directors
elected by the Annual General Meeting be paid as follows:
- SEK 4,175,000 to the Chair of the
Board of Directors (previously SEK
4,075,000);
- SEK 1,050,000 to each of the
other Board members (previously SEK
1,020,000);
- SEK 420,000 to the Chair of the
Audit and Compliance Committee (previously
SEK 400,000);
- SEK 270,000 to each of the other
members of the Audit and Compliance Committee (previously
SEK 250,000);
- SEK 205,000 to each Chair of the
Finance, the Remuneration and the Technology and Science Committee
(previously SEK 200,000);
and
- SEK 180,000 to each of the other
members of the Finance, the Remuneration and the Technology and
Science Committee (previously SEK
175,000).
A basic principle when assessing Board fees is that these shall
be competitive and enable the recruitment and retainment of
individuals with the best possible competence. When assessing the
level of fees, a comparison has been made in relation to the Board
fees in companies of equal size and complexity and it should be
considered that the Ericsson Group has customers in 180 countries
and that sales in 2019 amounted to more than SEK 200 billion.
The Nomination Committee has compared the Board fees in Ericsson
with Board fees in other international high-tech companies and has
concluded that an increase of all fees in accordance with the above
is reasonable and well-justified, in order to secure that the fees
remain relevant compared to other companies in the market. The
proposal of the Nomination Committee implies all in all an increase
of the fees of approximately 3% compared with the total fees to the
corresponding number of Board and Committee members for Board and
Committee work resolved by the Annual General Meeting 2019.
Fees in the form of synthetic shares
Background
The Nomination Committee believes that it is appropriate that
Board members elected by the shareholders hold shares in Ericsson,
in order to strengthen the Board members' and the shareholders'
mutual interests in the Company. The Nomination Committee
recommends Board members elected by the shareholders to, during a
five year period, build a holding of shares or synthetic shares in
Ericsson at least corresponding to the value of the annual Board
fee (excluding fees for Committee work), and that such holding be
kept during the time the Board member remain Board member in
Ericsson.
To enable Board members to create an economic interest in the
Company and considering that it is in many cases difficult for
Board members to trade in the Company's share due to applicable
insider rules, the Nomination Committee proposes that the Board
members should, as previously, be offered the possibility of
receiving part of the Board fees in the form of synthetic shares. A
synthetic share constitutes a right to receive payment of an amount
which corresponds to the market value of a share of series B in the
Company on Nasdaq Stockholm at the time of payment.
Proposal
The Nomination Committee therefore proposes that the Annual
General Meeting of shareholders 2020 resolve that part of the fees
to the Directors, in respect of their Board assignment (however,
not in respect of Committee work), may be paid in the form of
synthetic shares, on the following terms and conditions.
- A nominated Director shall be able to choose to receive the fee
in respect of his or her Board assignment, according to the
following four alternatives:
i. 25 percent in cash - 75 percent
in synthetic shares
ii. 50 percent in cash - 50
percent in synthetic shares
iii. 75 percent in cash - 25
percent in synthetic shares
iv. 100 percent in cash.
- The number of synthetic shares to be allocated shall be valued
to an average of the market price of shares of series B in the
Company on Nasdaq Stockholm during a period of five trading days
immediately following the publication of Ericsson's interim report
for the first quarter of 2020. The synthetic shares are vested
during the term of office, with 25 percent per quarter of the
year.
- The synthetic shares give a right to, following the publication
of Ericsson's year-end financial statement in 2025, receive payment
of a cash amount per synthetic share corresponding to the market
price of shares of series B in the Company at the time of
payment.
- An amount corresponding to dividend in respect of shares of
series B in the Company, resolved by the Annual General Meeting
during the holding period, shall be disbursed at the same time as
the cash amount.
- Should the Director's assignment to the Board of Directors come
to an end no later than during the third calendar year after the
year in which the Annual General Meeting resolved on allocation of
the synthetic shares, payment may take place the year after the
assignment came to an end.
- The number of synthetic shares may be subject to recalculation
in the event of bonus issues, splits, rights issues and similar
measures, under the terms and conditions for the synthetic
shares.
The complete terms and conditions for the synthetic shares are
described in Exhibit 1 to the Nomination Committee's
proposal.
The financial difference for the Company, should all Directors
receive part of their fees in the form of synthetic shares compared
with the fees being paid in cash only, is assessed to be
limited.
Item 11 Election of Board members and deputies of the Board
of Directors
The Nomination Committee proposes that the following persons be
re-elected Board members:
11.1 Jon Fredrik Baksaas
11.2 Jan Carlson
11.3 Nora Denzel
11.4 Börje Ekholm
11.5 Eric A. Elzvik
11.6 Kurt Jofs
11.7 Ronnie Leten
11.8 Kristin S. Rinne
11.9 Helena Stjernholm,
and
11.10 Jacob Wallenberg
In the composition of the Board of Directors, the Nomination
Committee considers, among other things, experience and competence
needed in the Board of Directors and its Committees, and also the
value of diversity in age, gender and cultural/geographic
background as well as the need for renewal. The Nomination
Committee has applied the Swedish Corporate Governance Code,
Section 4.1, as diversity policy. The Nomination Committee also
assesses the appropriateness of the number of members of the Board
of Directors and whether the Board members can devote the necessary
time required to fulfill their tasks as Board members in Ericsson.
The Nomination Committee primarily searches for potential Board
member candidates for the upcoming mandate period but also
considers future competence needs. It is a long journey to identify
the right candidates for the future, meaning that long-term
planning is essential for the Nomination Committee.
In its appraisal of qualifications and performance of the
individual Board members, the Nomination Committee takes into
account the competence and experience of each individual member
along with the individual member's contribution to the Board work
as a whole and to the Committee work. The Nomination Committee has
familiarized itself with the results of the Board work evaluation
that was led by the Chair of the Board of Directors. The Nomination
Committee believes that it is very important that the composition
of Board members proposed includes complementing experiences and
competencies to enable the Board of Directors to contribute to a
positive development of Ericsson. The Nomination Committee aims to
propose a Board of Directors that constitutes a good team to lead
Ericsson.
The Nomination Committee is of the opinion that the current
Board of Directors and Board work is well functioning. Further it
is the Nomination Committee's view that the Board fulfils high
expectations in terms of composition and that the Board of
Directors as well as the individual Board members fulfil high
expectations in terms of expertise. The Nomination Committee
believes that the proposed Board composition provides the Company
with the right conditions for realizing its long-term potential.
Out of the proposed Board members to be elected by the Annual
General Meeting of shareholders (excluding the President and CEO)
33% are women. Gender balance is a key priority for the Nomination
Committee, and the Committee works to improve the gender balance on
the Board of Directors over time.
Since the Nomination Committee believes that stability and
continuity on the Board of Directors is in the interest of Ericsson
to secure continuity in the execution and follow up of Ericsson's
focused strategy, the Nomination Committee does not propose any
changes to the composition of the Board of Directors this year.
Information regarding proposed Board members
Information regarding the proposed Board members is presented in
Exhibit 2 to the Nomination Committee's proposal.
Independence of Board members
The Nomination Committee has made the following assessments in
terms of applicable Swedish independence requirements:
(i) The Nomination Committee considers that at least the
following Board members are independent of the Company and its
senior management:
a. Jon Fredrik Baksaas
b. Jan
Carlson
c. Nora
Denzel
d. Eric A. Elzvik
e. Kurt
Jofs
f. Ronnie Leten
g. Kristin
S. Rinne
h. Helena
Stjernholm
i. Jacob
Wallenberg
(ii) From among the Board members reported in (i) above,
the Nomination Committee considers that at least the following are
independent of the Company's major shareholders:
a. Jon Fredrik Baksaas
b. Jan
Carlson
c. Nora
Denzel
d. Eric A. Elzvik
e. Kurt
Jofs
f. Kristin
S. Rinne
Moreover, the Nomination Committee considers that at least the
following Board members are independent in respect of all
applicable independence requirements:
a. Jon Fredrik Baksaas
b. Jan
Carlson
c. Nora
Denzel
d.Eric A. Elzvik
e. Kurt
Jofs
f. Kristin
S. Rinne
The Nomination Committee concludes that the proposed composition
of the Board of Directors meets the independence requirements
applicable to Ericsson.
Item 12 Election of the Chair of the Board of
Directors
The Nomination Committee proposes that Ronnie Leten be
re-elected Chair of the Board of Directors.
Item 13 Number of auditors
According to the articles of association, the Company shall have
no less than one and no more than three registered public
accounting firms as auditor. The Nomination Committee proposes that
the Company should have one registered public accounting firm as
auditor.
Item 14 Fees payable to the auditor
The Nomination Committee proposes, like previous years, that the
auditor fees be paid against approved account.
Item 15 Election of auditor
In accordance with the recommendation by the Audit and
Compliance Committee, the Nomination Committee proposes that
Deloitte AB be appointed auditor for the period from the end of the
Annual General Meeting 2020 until the end of the Annual General
Meeting 2021.
Statement regarding the Nomination Committee's proposal on
election of auditor
In 2018, Ericsson initiated a selection process for the purpose
of securing a timely auditor rotation. After an overall assessment,
taking into account the outcome of the selection process and
analyzing the selection criteria used throughout the process
(face-to-face meeting impression, global reach, conflict services,
governance, tools and automation vision, integrated audit model,
transition plan and commercial fee), the Audit and Compliance
Committee resolved to recommend election of Deloitte AB as auditor
at the Annual General Meeting of shareholders 2020 or, as a second
choice, re-election of PricewaterhouseCoopers AB. The Nomination
Committee therefore proposes that the Annual General Meeting, in
accordance with the Audit and Compliance Committee's
recommendation, appoint Deloitte AB as auditor for the period from
the end of the Annual General Meeting 2020 until the end of the
Annual General Meeting 2021.
Item 16 Guidelines for remuneration to Group
Management
The Board of Directors proposes that the Annual General Meeting
of shareholders 2020 resolve on the following guidelines for
remuneration to Group Management. Compared to the guidelines
resolved by the Annual General Meeting of shareholders 2019, the
guidelines have been updated to comply with the requirements of the
European Union Shareholder Rights Directive II ("SRD II") as
transposed into Swedish law.
Guidelines for remuneration to Group Management
Introduction
These Guidelines for Remuneration to Group Management (the
"Guidelines") apply to the Executive Team of
Telefonaktiebolaget LM Ericsson (the "Company" or
"Ericsson"), including the President and Chief Executive
Officer (the "President and CEO") ("Group
Management"). These Guidelines apply to remuneration agreed and
changes to previously agreed remuneration after the date of
approval of the Guidelines and are intended to remain in place for
four years until the Annual General Meeting of shareholders 2024.
For employments outside of Sweden,
due adaptations may be made to comply with mandatory local rules or
established local practices. In such cases, the overall purpose of
these Guidelines shall be accommodated to the largest extent
possible. These Guidelines do not cover remuneration resolved by
the general meeting of shareholders, such as long-term variable
compensation programs ("LTV").
Objective
These Guidelines aim to ensure alignment with the current
remuneration philosophy and practices applicable for the Company's
employees based on the principles of competitiveness, fairness,
transparency and performance. In particular to:
- attract and retain highly competent, performing and motivated
people that have the ability, experience and skill to deliver on
the Ericsson strategy,
- encourage behavior consistent with Ericsson's culture and core
values,
- ensure fairness in reward by delivering total remuneration that
is appropriate but not excessive, and clearly explained,
- have a total compensation mix of fixed pay, variable pay and
benefits that is competitive where Ericsson competes for talent,
and
- encourage variable remuneration which aligns employees with
clear and relevant targets, reinforces their performance and
enables flexible remuneration costs.
The Guidelines and the Company's strategy and sustainable
long-term interest
A successful implementation of the Company's strategy and
sustainable long-term interests requires that the Company can
attract, retain and motivate the right talent and can offer them
competitive remuneration. These Guidelines aim to allow the Company
to offer the members of the Group Management attractive and
competitive total remuneration. Variable compensation covered by
these guidelines shall be awarded against specific pre-defined and
measurable business targets derived from the long-term business
plan approved by the Board of Directors. Targets may include
financial targets at either Group, Business Area or Market Area
level, strategic targets, operational targets, employee engagement
targets, customer satisfaction targets, sustainability and
corporate responsibility targets or other lead indicator
targets.
The Company operates long-term variable compensation programs
for the Group Management. These have been approved by the Annual
General Meeting ("AGM") and as a result are not covered by
these Guidelines. Details of Ericsson's current remuneration policy
and how we deliver on our policy and guidelines and information on
previously decided long-term variable compensation programs that
have not yet become due for payment, including applicable
performance criteria, can be found in the Remuneration Report and
in Note G2, "Information regarding members of the Board of
Directors, the Group management" and Note G3, "Share-based
compensation" in the annual report 2019.
Governance of remuneration to Group Management
The Board has established a Remuneration Committee (the
"Committee") to handle compensation policies and principles
and matters concerning remuneration to Group Management. The Board
has authorized the Committee to determine and handle certain issues
in specific areas. The Board may also on occasion provide extended
authorization for the Committee to determine specific matters.
The Committee is authorized to review and prepare for resolution
by the Board salary and other remuneration for the President and
CEO. Further, the Committee shall prepare for resolution by the
Board proposals to the AGM on Guidelines for Remuneration to Group
Management at least every fourth year and on LTV and similar equity
arrangements.
The Committee has the mandate to resolve salary and other
remuneration for the other members of Group Management except for
the President and CEO, including targets for short-term variable
compensation ("STV"), and payout of STV based on
achievements and performance.
In order to conduct its responsibilities, the Committee
considers trends in remuneration, legislative changes, disclosure
rules and the general global executive remuneration environment. It
reviews salary survey data, Company results and individual
performance before preparing salary adjustment recommendations for
the President and CEO for resolution by the Board and before
approving any salary adjustments for the other members of Group
Management. In order to avoid conflict of interests, no employee is
present at the Committee's meetings when issues relating to their
own remuneration are being discussed. The President and CEO is not
present at Board meetings when issues relating to the President and
CEO's own remuneration are being discussed. The Committee may
appoint independent expert advisors to assist and advise in its
work.
The Chair of the Remuneration Committee along with the Chair of
the Board work together with Ericsson's Investor Relations team,
striving to ensure that healthy contact is maintained as necessary
and appropriate with shareholders regarding remuneration to Group
Management.
Overview of remuneration package covered by these
Guidelines
For Group Management the remuneration package may consist of
fixed salary, short-term and long-term variable compensation (STV
and LTV), pension and other benefits.
The table below sets out the key components of remuneration of
Group Management covered by these Guidelines, including why they
are used, their operation, opportunity levels and the related
performance measures. In addition, the AGM has resolved and may in
the future decide to implement LTV for Group Management. The
ongoing share-based LTV programs resolved by the AGM have been
designed to provide long-term incentives for the members of Group
Management and to incentivize the Company's performance creating
long-term value. The aim is to attract, retain and motivate
executives in a competitive market through performance-based share
related incentives and to encourage the build-up of significant
equity holdings to align the interests of the members of Group
Management with those of shareholders. The vesting period under the
ongoing share-based LTV programs resolved by the shareholders is
three years and vesting is subject to the satisfaction of
identified performance criteria. Although LTV is an important
component of the remuneration of Group Management, it is not
covered by these Guidelines, because these programs are separately
resolved by the AGM.
Element and
purpose
|
Operation
|
Opportunity
|
Performance
measures
|
Fixed salary
Fixed compensation paid at set times.
Purpose:
- attract and retain the executive talent
required to implement Ericsson's strategy,
- deliver part of the annual compensation in a
predictable format.
|
Salaries shall
normally be reviewed annually in January. Salaries shall be set
taking into account:
- Ericsson's overall business performance,
- business performance of the Unit that the
individual leads,
- year-on-year performance of the
individual,
- external economic environment,
- size and complexity of the position,
- pay and conditions for other employees based
in locations considered to be relevant to the role.
When setting fixed salaries, the impact on total remuneration,
including pensions and associated costs, shall be taken into
consideration.
|
There is no maximum
salary level; however, salary increases (as a % of existing salary)
for most Group Management members would normally be in line with
the external market practices, employees in relevant locations and
performance of the individual. There are circumstances where higher
salary increases could be awarded. For example,
where:
- a new Group Management member has been
appointed at a below-market salary, in which case larger increases
may be awarded in following years, subject to strong individual
performance,
- the Group Management member has been promoted
or has had an increase in responsibilities,
- an individual's salary has fallen
significantly behind market practice.
|
This element of the
package does not require achievement of any specific performance
targets. However, individual performance and capability shall be
taken into account along with business performance when determining
fixed salary levels and any salary increases.
|
Short-term
variable compensation (STV) STV is a variable compensation plan
that shall be measured and paid over a single year.
Purpose:
- align members of Group Management with clear
and relevant targets to Ericsson's strategy and sustainable
long-term interests,
- provide individuals an earning opportunity
for performance at flexible cost to the Company.
|
The STV shall be paid
in cash every year after the Committee and, as applicable, the
Board have reviewed and approved performance against targets which
are normally determined at the start of each year for each member
of Group Management. The Board and the Committee reserve the right
to:
- revise any or all of the STV targets at any
time,
- adjust the STV targets retroactively under
extraordinary circumstances,
- reduce or cancel STV if Ericsson faces severe
economic difficulties, for instance in circumstances as serious as
no dividend being paid,
- adjust STV in the event that the results of
the STV targets are not a true reflection of business
performance,
- reduce or cancel STV for individuals either
whose performance evaluation or whose documented performance
feedback is below an acceptable level or who are on performance
counselling.
Malus and Clawback The Board and the Committee shall have
the right in their discretion
to:
- deny, in whole or in part, the entitlement of
an individual to the STV payout in case an individual has acted in
breach of Ericsson's Code of Business Ethics,
- claim repayment in whole or in part the STV
paid in case an individual has acted in breach of Ericsson's Code
of Business Ethics,
- to reclaim STV paid to an individual on
incorrect grounds such as restatement of financial results due to
incorrect financial reporting, non-compliance with a financial
reporting requirement etc.
|
Target pay-out
opportunity for any financial year may be up to 150% of annual
fixed salary of the individual. This shall normally be determined
in line with the external market practices of the country of
employment. Maximum pay-out shall be up to two times the target
pay-out opportunity (i.e. 300% of annual fixed salary)1),
2).
|
The STV shall be
based on measures linked to the annual business plan which in
itself is linked to Ericsson's long-term strategy and
sustainability. Measures shall include financial targets at Group,
Business Area or Market Area level (for relevant members of Group
Management). Other potential measures may include strategic
targets, operational targets, employee engagement targets, customer
satisfaction targets, sustainability and corporate responsibility
targets or other lead indicator targets. A maximum of four STV
targets shall be assigned to an individual in total for a financial
year. Financial targets shall comprise at least 75% of the target
bonus opportunity with a minimum of 40% being defined at Group
level. The minimum weighting for an STV target shall be 20%.
Performance of all STV targets shall be tested over a one-year
performance period (financial year). The STV measures and targets
shall be determined by the Committee for the members of Group
Management other than the President and CEO. The Board has the
mandate to define STV measures and targets for the President and
CEO, should STV be introduced for the President and CEO.
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Pension
Contributions paid towards retirement fund.
Purpose:
- attract and retain the executive talent
required to implement Ericsson's strategy,
- facilitate planning for retirement by way of
providing competitive retirement arrangements in line with local
market practices.
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The operation of the
pension plan shall follow competitive practice in the individual's
home country and may contain various supplementary plans in
addition to any national system for social security. Pension plans
should be defined contribution plans unless the individual
concerned is subject to defined benefit pension plan under
mandatory collective agreement provisions or mandatory local
regulations. In some special circumstances where individuals cannot
participate in the local pension plans of their home countries of
employment:
- cash equivalent to pension may be provided as
a taxable benefit, or
- contributions may be made to an international
pension fund on behalf of the individual on a cost-neutral
basis.
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Since 2011, members
of Group Management in Sweden participate in the defined
contribution plan (ITP1) which applies for the wider workforce in
Sweden. The pension contribution for ITP1 is capped at 30% of
pensionable salary which includes fixed salary and STV paid in
cash. According to the local collective bargaining agreement in
Sweden, the members of Group Management are also entitled to an
additional pension contribution for part-time retirement for which
the cap is determined during the union negotiations for all the
local employees. Members of Group Management employed outside of
Sweden may participate in the local market competitive pension
arrangements that apply in their home countries in line with what
is offered to other employees in the same country. In all cases the
annual pension contributions shall be capped at 70% of annual fixed
salary3).
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None
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Other Benefits
Additional tangible or intangible compensation paid annually which
do not fall under fixed salary, short-term and long-term variable
compensation or pension.
Purpose:
- attract and retain the executive talent
required to implement Ericsson's strategy,
- deliver part of the annual compensation in a
predictable format.
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Benefits offered
shall take into account the competitive practices in the
individual's country of employment and should be in line with what
is offered to other senior employees in the same country and may
evolve year on year. Benefits may for example include company
phones, company cars, medical and other insurance benefits, tax
support, travel, Company gifts and any international relocation
and/or commuting benefits if the individual is required to relocate
and/or commute internationally to execute the requirements of the
role.
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Benefit opportunities
shall be set in line with competitive market practices and shall
reflect what is offered to other senior employees in the
individual's country of employment. The levels of benefits provided
may vary year on year depending on the cost of the provision of
benefits to the Company. Other benefits shall be capped at 10% of
annual fixed salary for members of Group Management located in
Sweden. Additional benefits and allowances for members of Group
Management who are commuters into Sweden or who are on long-term
assignment ("LTA") in countries other than their home countries of
employment, shall be determined in line with the Company's
international mobility policy which may include (but is not limited
to) commuting or relocation costs; cost of living adjustment,
housing, home travel or education allowance; tax and social
security equalization assistance.
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None
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Comments to the table
1. For most of the current members of Group Management,
the current STV target opportunity is below 50% of the annual fixed
salary.
2. At present the President & CEO does not participate
in STV. The Board has the mandate to decide to include the
President and CEO in STV in the future. In doing so the Board
shall:
- determine the STV opportunity for the President and CEO within
the ranges mentioned above and in line with the external market
practices of the country of employment, keeping the STV opportunity
of the other members of Group Management under consideration,
- reduce the LTV opportunity in relation to the STV opportunity,
keeping the total target cash compensation consisting of fixed
salary, STV and LTV unchanged.
Should the Board decide to introduce STV for the President and
CEO, the details will be disclosed in the Remuneration Report for
the relevant year.
3. Since most of the current members of Group Management
are currently under ITP1 coverage, their pension contributions are
currently capped at 30% of pensionable salary and the additional
pension contribution for part-time retirement mandated by the local
collective bargaining agreement in Sweden.
Alignment of short-term variable compensation with the
Company's strategy and criteria for payment
These Guidelines for Remuneration to Group Management have been
developed to support alignment of Ericsson's business strategy and
long-term interests of members of Group Management with that of
shareholders, in particular:
- The targets for the STV shall be set each year either by the
Board or the Committee as appropriate for the members of the Group
Management. In determining the targets, the Board and the Committee
shall take into account Ericsson's focused business strategy, which
is built on technology leadership, product-led solutions and global
scale, along with internal annual and long-term business plans.
Therefore, all members of Group Management shall have one or more
Group financial targets derived from the long-term financial
targets which amount to at least 40% of the target STV opportunity.
At least 75% of the target STV opportunity shall be linked to
financial measures. The Board and the Committee, as applicable, may
also choose to include other operational, strategic, employee
engagement, customer satisfaction or sustainability and corporate
responsibility or other lead indicator measures to support the
delivery of the business plan. For certain roles such targets may
be supplemented by targets for the relevant Business Area, Market
Area or Group Function.
- Maximum pay-out shall be achievable for truly outstanding
performance and exceptional value creation.
- At the end of the performance period for each STV cycle, the
Board and the Committee shall assess performance versus the
measures and determine the formula-based outcome using the
financial information made public by the Company for the financial
targets. The Board has the discretion to adjust targets and
the subsequent outcome in the event that they cease to be relevant
or stretching or to enhance shareholder value. Adjustments shall
normally only occur in the event of a major change (e.g. an
acquisition or divestment) and shall be on the basis that the new
target shall be no more or less difficult to achieve.
Consideration of remuneration offered to the Company's
employees
When developing these Guidelines, the Board and the Committee
have considered the total remuneration and employment conditions of
the Company's employees by reviewing the application of Ericsson's
remuneration policy for the wider employee population to ensure
consistency.
There is clear alignment in the remuneration components for the
members of Group Management and the Company's employees in the way
that remuneration policy is applied as well as the methods followed
in determining fixed salaries, short-term and long-term variable
compensation, pension and benefits, which are to be applied broadly
and consistently throughout the Company. The targets under
short-term variable compensation are similar and the performance
measures under long-term variable compensation program are the same
for the members of Group Management and other eligible employees of
the Company. However, the proportion of pay that is linked to
performance is typically higher for Group Management in line with
market practice.
Employment contracts and termination of employment
The members of Group Management are employed on permanent
rolling contracts. The maximum mutual notice period is no more than
12 months. In case of termination by the employee, the employee has
no right to severance pay.
In any case, the fixed salary paid during the notice period plus
any severance pay payable will not together exceed an amount
equivalent to the individual's 24 months fixed salary.
The employee may be entitled to severance pay up until the
agreed retirement age or, if a retirement age has not been agreed,
until the month when the employee turns 65. In a case where the
employee is entitled to severance pay from a date later than 12
months prior to retirement, the severance pay shall be reduced in
proportion to the time remaining and calculated only for the time
as of the date when the employee's employment ceases (i.e. the end
of the period of notice) and until the time of retirement.
Severance pay shall be reduced by 50 percent of the remuneration
or equivalent compensation the employee receives, or has become
entitled to, from any other employer or from his/her own or other
activities during the period that severance is paid to the employee
by the Company.
The Company shall have the right to terminate the employment
contract and dismiss the employee with immediate effect, without
giving any advance notice and entitlement to severance pay, if the
employee commits a serious breach of his/her obligations towards
the Company.
Normally disputes regarding employment agreements or any other
agreements concerning the employment of the members of Group
Management, the way such agreements have been arrived at,
interpreted or applied, as well as any other litigation proceedings
from legal relations based on such agreements, shall be settled by
arbitration by three arbitrators in accordance with the Rules of
the Arbitration Institute of the Stockholm Chamber of Commerce. Irrespective of
the outcome of any arbitral award, the Company may, in the relation
between the parties, carry all fees and expenses charged by the
arbitrators and all of its own litigation costs (including
attorney's fees), except in the event the arbitration proceedings
were initiated by the employee without reasonable cause.
Recruitment policy for new members of Group
Management
In determining the remuneration of a new member of Group
Management, the Board and the Committee shall take into
consideration all relevant factors to ensure that arrangements are
in the best interests of the Company and its shareholders. These
factors include:
- The level and type of remuneration opportunity received at a
previous employer.
- The geography in which the candidate is being recruited from
and whether any relocation allowance is required.
- The skills, experience and caliber of the candidate.
- The circumstances of the candidate.
- The current external market and salary practice.
Additional arrangements
By way of exception, additional arrangements can be made when
deemed appropriate and necessary to recruit or retain an
individual. Such arrangement could be in the form of short-term or
long-term variable compensation or fixed component and can be
renewed, but each such arrangement shall be limited in time and
shall not exceed a period of 36 months and twice the annual fixed
salary that the individual would have received if no additional
arrangements were made. In addition, if appropriate, different
measures and targets may be applied to the new appointment's
incentives in the first year.
In addition, it may on a case by case basis be decided by the
Board and the Committee respectively to compensate an individual
for remuneration forfeited from a previous employer during
recruitment. The Board and the Committee will consider on a case by
case basis if all or some of the remuneration including incentives
forfeited need to be `bought-out'. If there is a buy-out of
forfeited incentives, this will take into account relevant factors
including the form they were granted (cash vs. shares), performance
conditions attached to these awards and the time they would have
vested/paid. Generally, buy-out awards will be made on a comparable
basis to those forfeited.
In the event of an internal candidate being promoted to Group
Management, legacy terms and conditions may be honored, including
pension and benefit entitlements and any outstanding incentive
awards. If a Group Management member is appointed following a
merger or acquisition with/of another company, legacy terms and
conditions may also be honored for a maximum period of 36
months.
Board of Directors' discretions
The Board upon recommendation from the Committee may in a
specific case decide to temporarily deviate from these Guidelines
in whole or in part based on its full discretion in unusual
circumstances such as:
- upon change of the President and CEO in accordance with
recruitment policy for new members of Group Management,
- upon material changes in the Company structure, organization,
ownership and business (for example takeover, acquisition, merger,
demerger etc.) which may require adjustments in STV and LTV or
other elements to ensure continuity of Group Management, and
- in any other circumstances, provided that the deviation is
required to serve the long-term interests and sustainability of the
Company or to assure its financial viability.
The Committee is responsible for preparing matters for
resolution by the Board, and this includes matters relating to
deviations from these Guidelines. Any such deviation will be
disclosed in the Remuneration Report for the relevant year.
Item 17 Implementation of Long-Term Variable Compensation
Program 2020 ("LTV 2020") including transfer of treasury
stock
Following its continuous evaluation of the Company's long-term
variable compensation, the Board of Directors has concluded to
propose an LTV 2020 materially unchanged compared to the Long-Term
Variable Compensation Programs 2018 and 2019. LTV 2020 is an
integral part of the Company's remuneration strategy, in particular
the Board of Directors wishes to encourage the leadership to build
significant equity holdings to align the interests of the LTV
Program participants with those of shareholders.
Proposals
The Long-Term Variable Compensation Program 2020
The Board of Directors proposes that the Annual General Meeting
resolve on the implementation of a Long-Term Variable Compensation
Program 2020 in accordance with the proposals set out below.
17.1 Implementation of the LTV 2020
The Board of Directors proposes that the Annual General Meeting
resolves on the LTV 2020 for members of the Executive Team,
comprising a maximum of 2.5 million shares of series B in Ericsson
as set out below.
Objectives of the LTV Program
The LTV Program is designed to provide long-term incentives for
members of the Executive Team (the "Participants") and to
incentivize the Company's performance creating long-term value. The
aim is to attract, retain and motivate executives in a competitive
market through performance-based share related incentives and to
encourage the build-up of significant equity holdings to align the
interests of the Participants with those of shareholders.
The LTV Program in brief
The LTV Program is proposed to include all members (current and
future) of the Executive Team, currently comprising of 15
employees, including the President and CEO. Awards under LTV 2020
("Performance Share Awards") will be granted free of charge
entitling the Participant, provided that i.a. certain performance
conditions set out below are met, to receive a number of shares,
free of charge, following expiration of a three year vesting period
(the "Vesting Period"). Allotment of shares pursuant to
Performance Share Awards will be subject to the achievement of
performance conditions, as set out below, and will generally
require that the Participant retains his or her employment over the
Vesting Period. All major decisions relating to LTV 2020 will be
taken by the Remuneration Committee, with approval by the full
Board of Directors as required.
Granting of Performance Share Awards
Granting of Performance Share Awards to the Participants will
generally take place as soon as practicably possible following the
Annual General Meeting 2020. For 2020, the value of the underlying
shares in respect of the Performance Share Awards made to the
President and CEO will not exceed 180% of the annual base salary at
the time of grant, and for other participants, the value will not
exceed 70% of the participants' respective annual base salaries at
the time of grant.
The share price used to calculate the number of shares to which
the Performance Share Award entitles will be the volume-weighted
average of the market price of Ericsson series B shares on Nasdaq
Stockholm during the five trading days immediately following the
publication of the Company's interim report for the fourth quarter
2019.
Performance criteria
The vesting of Performance Share Awards will be subject to the
satisfaction of challenging performance criteria related to 2020
Group Operating Income target and total shareholder return
("TSR"[1]), which will determine what portion (if any) of
the Performance Share Awards will vest at the end of the Vesting
Period.
The 2020 Group Operating Income target relates to 50% of the
Performance Share Awards and the maximum vesting level is 200%.
The performance criteria based on TSR are absolute TSR
development and relative TSR development for the Ericsson series B
share over the period January 1, 2020
- December 31, 2022 (the "TSR
Performance Period"[2]). The TSR performance criteria relate to
a total of 50% of the Performance Share Awards and the maximum
vesting level for each of the TSR performance criteria is 200%.
The following conditions will apply to the performance
criteria:
- 2020 Group Operating Income target:
50% of the Performance Share Awards granted to a Participant
will be subject to fulfilment of a Group Operating Income target
for the 2020 financial year. The 2020 Group Operating Income target
established by the Board of Directors will stipulate a minimum
level and a maximum level. The vesting level of Performance Share
Awards related to 2020 Group Operating Income will be determined by
the Board of Directors when the audited result for the financial
year 2020 is available.
If the maximum performance level is reached or exceeded, the
vesting will amount to (and will not exceed) the maximum level of
200% of the Performance Share Awards related to the 2020 Group
Operating Income target. If performance is below the maximum level
but exceeds the minimum level, a linear pro-rata vesting of shares
will occur. No vesting will occur if performance amounts to or is
below the minimum level. The allotment of the shares will not occur
until the end of the Vesting Period in 2023.
Absolute TSR performance
30% of the Performance Share Awards granted to a Participant
will be subject to fulfilment of an absolute TSR performance
requirement over the TSR Performance Period. If the absolute TSR
development reaches or exceeds 14% per annum compounded, the
maximum vesting of 200% of the Performance Share Awards related to
absolute TSR shall occur. If the absolute TSR development is below
or reaches only 6% per annum compounded, no vesting will occur in
respect of the Performance Share Awards related to the absolute
TSR. A linear pro-rata vesting from 0% to 200% of the Performance
Share Awards related to absolute TSR shall apply if the Company's
absolute TSR performance is between 6% and 14% per annum
compounded.
Relative TSR performance
20% of the Performance Share Awards granted to a Participant
will be subject to fulfilment of a relative TSR performance
requirement over the TSR Performance Period, compared to a peer
group consisting of 11 peer companies (the "Peer Group"[3]).
The vesting of the relative TSR related Performance Share Awards
varies depending on the Company's TSR performance ranking versus
the other companies in the Peer Group. If the Company's relative
TSR performance is below the TSR development of the company ranked
6th in the Peer Group, no vesting will occur in respect of the
Performance Share Awards related to relative TSR performance.
Vesting of the Performance Share Awards related to relative TSR
performance will occur at the following percentage levels, based on
which ranking position in the Peer Group the Company's TSR
Performance corresponds to:
Position within the Peer Group
Associated vesting percentage level
6 or
lower
0%
5
50%
4
100%
3 150%
2 or
higher 200%
If the Company's TSR performance is between two of the ranked
companies, a linear pro-rata vesting shall apply between the
vesting percentage levels for the relevant ranked positions.
Information about the outcome of the performance criteria will
be provided not later than in the annual report for the financial
year 2022.
Allotment of shares
Provided that the performance criteria above have been met and
that the Participant has retained his or her employment (unless
special circumstances are at hand) during the Vesting Period,
allotment of vested shares will take place as soon as practicably
possible following the expiration of the Vesting Period.
When determining the final vesting level of Performance Share
Awards, the Board of Directors shall examine whether the vesting
level is reasonable considering the Company's financial results and
position, conditions on the stock market and other circumstances,
and if not, as determined by the Board of Directors, reduce the
vesting level to the lower level deemed appropriate by the Board of
Directors.
In the event delivery of shares to Participants cannot take
place under applicable law or at a reasonable cost and employing
reasonable administrative measures, the Board of Directors will be
entitled to decide that Participants may, instead, be offered a
cash settlement.
Financing
The Board of Directors has considered different financing
methods for transfer of shares under the LTV 2020. After evaluating
the different options, the Board of Directors considers that
transfer of treasury stock is the most cost efficient and flexible
method to transfer shares under the LTV 2020.
Since the costs for the Company in connection with an equity
swap agreement will be significantly higher than the costs in
connection with transfer of treasury stock, the main alternative is
that the financial exposure is secured by transfer of treasury
stock and that an equity swap agreement with a third party is an
alternative in the event that the required majority for approval is
not reached.
Costs
The total effect on the income statement of the LTV 2020,
including financing costs and social security fees, is estimated to
range between SEK 65 million and
SEK 125 million distributed over the
years 2020-2023.
The administration cost for transfer of shares by way of an
equity swap agreement is estimated to approximately SEK 10.3 million.
Dilution
The Company has approximately 3.3 billion shares in issue. As
per December 31, 2019 the Company
held approximately 19.9 million shares in treasury. The number of
shares that may be required for ongoing long-term variable
compensation programs as per December 31,
2019 is estimated to approximately 17.5 million shares,
corresponding to approximately 0.5 percent of the number of
outstanding shares. In order to implement the LTV 2020, a total of
up to 2.5 million shares are required, which corresponds to
approximately 0.1 percent of the total number of outstanding
shares. The effect on important key figures is only marginal.
17.2 Transfer of treasury stock for the LTV 2020
- Transfer of treasury stock under the LTV 2020
Transfer of no more than 1.9 million shares of series B in the
Company may occur on the following terms and conditions.
- The right to acquire shares shall be granted to such persons
within the Ericsson Group covered by the terms and conditions
pursuant to the LTV 2020. Furthermore, subsidiaries within the
Ericsson Group shall have the right to acquire shares, free of
consideration, and such subsidiaries shall be obligated to
immediately transfer, free of consideration, shares to employees
covered by the terms and conditions of the LTV 2020.
- The employee shall have the right to receive shares during the
period when the employee is entitled to receive shares pursuant to
the terms and conditions of the LTV 2020, i.e. in 2023.
- Employees covered by the terms and conditions of the LTV 2020
shall receive shares of series B in the Company free of
consideration.
- Transfer of treasury stock on an exchange
The Company shall have the right to, prior to the Annual General
Meeting in 2021, transfer no more than 600,000 shares of series B
in the Company, in order to cover certain expenses, mainly social
security payments. Transfer of the shares shall be effected on
Nasdaq Stockholm at a price within the, at each time, prevailing
price interval for the share as disseminated by Nasdaq
Stockholm.
17.3 Equity Swap Agreement with third party in relation to
the LTV 2020
In the event that the required majority for approval is not
reached under item 17.2 above, the financial exposure of the LTV
2020 shall be hedged by the Company entering into an equity swap
agreement with a third party, under which the third party shall, in
its own name, acquire and transfer shares of series B in the
Company to employees covered by the LTV 2020.
Majority rules
The resolution of the Annual General Meeting on implementation
of the program according to item 17.1 above requires that more than
half of the votes cast at the Annual General Meeting approve the
proposal. The Annual General Meeting's resolution on transfer of
treasury stock according to item 17.2 a) above requires that
shareholders representing at least nine-tenths of the votes cast as
well as the shares represented at the Annual General Meeting
approve the proposal and the Annual General Meeting's resolution on
transfer of treasury stock according to item 17.2 b) above requires that shareholders
representing at least two-thirds of the votes cast as well as the
shares represented at the Annual General Meeting approve the
proposal. A valid resolution in accordance with the proposal for an
equity swap agreement under item 17.3 above requires that more than
half of the votes cast at the Annual General Meeting approve the
proposal.
Description of other ongoing long-term variable compensation
programs
In addition to the LTV-programs, which are directed at the
members of the Executive Team, the Company also has other ongoing
long-term variable compensation programs directed at other
employees within the Group. These programs are an integral part of
the Company's remuneration strategy as well as a part of the
Company's talent management strategy. The company has decided to
implement the following share-related compensation programs for
2020. The Executive Performance Plan 2020 ("EPP 2020") is
designed to attract, retain and motivate senior managers in a
competitive market through performance based long-term cash
incentive supporting the achievement of the Company's long-term
strategies and business objectives. Approximately 200 senior
managers will be eligible for the EPP 2020. Participants are
assigned a potential award defined as a percentage of the
participants' annual gross salary, which is converted into a number
of synthetic shares based on the same market price of Ericsson
series B shares used for the LTV 2020 at the time of grant. There
are two award levels called "High" and "Regular" which are
differentiated as below between the USA and the rest of the world to bring greater
alignment with the local market conditions:
Award
level
USA
Rest of the world
High
35%
25%
Regular 25%
15%
The vesting level of the awards, occurring after a three-year
vesting period, is subject to the achievement of the same
performance criteria as for the LTV 2020, and generally requires
that the participant retains his or her employment over the
three-year vesting period. At the end of the Vesting Period, the
allotted synthetic shares are converted into a cash amount, based
on the market price of Ericsson series B shares at Nasdaq Stockholm
at the payout date, and this final amount is paid to the
Participant in cash gross before tax. It is estimated that
approximately one million synthetic shares will be awarded under
the EPP 2020. The maximum total cost effect of the EPP 2020 on the
income statement, including social security fees, is estimated to
be approximately SEK 334 million
distributed over the years 2020-2023.
The Key Contribution Plan 2020 ("KC Plan 2020") is
designed to recognize the best talent, individual performance,
potential and critical skills as well as encourage the retention of
key employees. Approximately 7,100 employees will be eligible for
the KC Plan 2020. There are three award levels at 10%, 25% and 30%
of the participants' annual gross salary. Participants are assigned
a potential award, which is converted into a number of synthetic
shares based on the same market price of Ericsson series B shares
used for the LTV 2020 at the time of grant. The program has a three
year total vesting period during which the awards are paid on an
annual rolling bases following the below payment schedule:
- 25% of the award at the end of the first year,
- 25% of the award at the end of the second year, and
- 50% of the award at the end of the full vesting period.
The value of each synthetic share is driven by the absolute
share price performance of Ericsson series B shares during the
vesting period. At the date of payout for each instalment of the
above described annual rolling payment schedule, the synthetic
shares are converted into a cash amount, based on the market price
of Ericsson Series B shares at Nasdaq Stockholm at the respective
payout date, and this final amount is paid to the Participant in
cash gross before tax. It is estimated that approximately 10
million synthetic shares will be awarded under the KC Plan 2020.
The maximum total cost effect of the KC Plan 2020 on the income
statement, including social security fees, is estimated to be
approximately SEK 1.6 billion
distributed over the years 2020-2023.
The Company's ongoing variable compensation programs are
described in further detail in the Annual Report 2019 in the Notes
to the consolidated financial statements, Note G3: "Share-based
compensation" and on the Company's website. The Remuneration Report
published in the Annual Report outlines how the Company implements
its guidelines on remuneration to Group management in line with the
Swedish Corporate Governance Code.
Item 18 The Board of Directors' proposal for
resolution on transfer of treasury stock to employees and on an
exchange in relation to the resolutions on the Long-Term Variable
Compensation Programs 2018 ("LTV 2018") and 2019 ("LTV
2019")
Background
The Annual General Meetings 2018 and 2019 resolved to implement
Long-Term Variable Compensation Programs 2018 and 2019 ("LTV 2018"
and "LTV 2019"). The Annual General Meeting 2019 resolved to secure
the Company's undertakings under the programs through equity swap
agreements with a third party. The Board of Directors considers
that transfer of treasury stock is the most cost efficient and
flexible method to secure the undertakings under LTV 2018 and
LTV 2019, and therefore proposes that the Annual General
Meeting resolve as follows.
Proposal
- Transfer of treasury stock under the LTV 2018 and the LTV
2019
To secure the delivery of Performance Shares in accordance with
the terms of the LTV 2018 and the LTV 2019, the Board of Directors
proposes that the Annual General Meeting resolve that the Company
shall have the right to transfer no more than 4.4 million
shares of series B in the Company on the following terms and
conditions.
- The right to acquire shares shall be granted to such persons
within the Ericsson Group covered by the terms and conditions
pursuant to the LTV 2018 and the LTV 2019. Furthermore,
subsidiaries within the Ericsson Group shall have the right to
acquire shares, free of consideration, and such subsidiaries shall
be obligated to immediately transfer, free of consideration, shares
to employees covered by the terms and conditions of the LTV 2018
and the LTV 2019.
- The employee shall have the right to receive shares during the
period when the employee is entitled to receive shares pursuant to
the terms and conditions of the LTV 2018, i.e. in 2021, and the LTV
2019, i.e. in 2022.
- Employees covered by the terms and conditions of the LTV 2018
and the LTV 2019 shall receive shares of series B in the Company
free of consideration.
- Transfer of treasury stock on an exchange
The Company shall have the right to, prior to the Annual General
Meeting in 2021, transfer no more than 1.6 million shares of series
B in the Company, in order to cover certain expenses, mainly social
security payments. Transfer of the shares shall be effected on
Nasdaq Stockholm at a price within the, at each time, prevailing
price interval for the share as disseminated by Nasdaq
Stockholm.
Majority rules
The Annual General Meeting's resolution on transfer of treasury
stock according to item 18 a) above requires that shareholders
representing at least nine-tenths of the votes cast as well as the
shares represented at the Annual General Meeting approve the
proposal and the Annual General Meeting's resolution on transfer of
treasury stock according to item 18 b) above requires that
shareholders representing at least two-thirds of the votes cast as
well as the shares represented at the Annual General Meeting
approve the proposal.
Item 19 The Board of Directors' proposal for
resolution on transfer of treasury stock in relation to the
resolutions on the Long-Term Variable Compensation Programs 2016
and 2017
Background
The Annual General Meetings 2016 and 2017 resolved on a right
for the Company to transfer in total not more than 5,300,000 shares
of series B in the Company on a stock exchange to cover certain
payments, mainly social security charges, which may occur in
relation to the Long-Term Variable Compensation Programs 2016 and
2017.
Each resolution has only been valid up to the following Annual
General Meeting. Resolutions on transfer of treasury stock for the
purpose of the above-mentioned programs have therefore been
repeated at the subsequent Annual General Meeting.
In accordance with the resolutions on transfer of in total not
more than 5,300,000 shares, 828,300 shares of series B have
been transferred up to February 19,
2020.
Proposal
The Board of Directors proposes that the Annual General Meeting
resolve that the Company shall have the right to transfer, prior to
the Annual General Meeting 2021, not more than 4,471,700 shares of
series B in the Company, or the lower number of shares of series B,
which as per March 31, 2020 remains
of the original 5,300,000 shares, for the purpose of covering
certain payments, primarily social security charges that may occur
in relation to the Long-Term Variable Compensation Programs 2016
and 2017. Transfer of shares shall be effected on Nasdaq Stockholm
at a price within the, at each time, prevailing price interval for
the share.
Majority rules
The resolution of the Annual General Meeting on a transfer of
treasury stock requires that shareholders holding at least
two-thirds of the votes cast as well as the shares represented at
the Annual General Meeting vote in favor of the proposal.
Item 20 - 23 Proposals from shareholders
The proposals under item 20 - 23 are included in the agenda.
Item 20.1 - 20.2 Proposals from the shareholder Thorwald Arvidsson to amend the articles of
association with respect to voting rights of shares
Resolution on proposal from the shareholder Thorwald Arvidsson to amend the articles of
association in the following way:
-
1. to make an addition to §
5 of the articles of association - a new section two - saying: all
shares carry equal rights; and
2. to delete § 6 of the articles
of association, and to adjust the numbering accordingly
Majority rules
The resolution of the Annual General Meeting to amend the
articles of association under items 20.1 and 20.2, are valid if all
shareholders represented at the meeting vote in favor of the
proposal and those shareholders represent at least nine-tenths of
all shares in the company, alternatively if shareholders
representing at least two-thirds of the votes cast as well as the
shares represented at the meeting vote in favor of the proposal and
holders of half of all shares of series A and nine-tenths of the
shares of series A represented at the meeting agree to the
change.
Shares and votes
There are in total 3,334,151,735 shares in the Company;
261,755,983 shares of series A and 3,072,395,752 shares of series
B, corresponding to in total 568,995,558.2 votes. The Company's
holding of treasury stock as of February 19,
2020 amounts to 16,000,276 shares of series B,
corresponding to 1,600,027.6 votes.
Information at the Annual General Meeting
The Board of Directors and the President shall, if any
shareholder so requests and the Board of Directors believes that it
can be done without material harm to the Company, provide
information regarding circumstances that may affect the assessment
of an item on the agenda and circumstances that can affect the
assessment of the Company's or its subsidiaries' financial
situation and the Company's relation to other companies within the
Group.
Documents
The complete proposals of the Nomination Committee with respect
to items 1 and 9 - 15 above, including a description of the work of
the Nomination Committee before the Annual General Meeting and
Exhibit 1 and 2 to the Nomination Committee's proposals, and the
shareholder letters (in original language) under items 20-22, are
available at the Company's website www.ericsson.com. The documents
will be sent upon request to shareholders providing their address
to the Company. In respect of all other items, complete proposals
are provided under the respective item in the invitation.
The Annual Report and the Auditor's Report as well as the
Auditor's statement regarding the guidelines for remuneration to
Group management will be made available at the Company and posted
on the Company's website www.ericsson.com no later than three weeks
prior to the Annual General Meeting. The documents will be sent
upon request to shareholders providing their address to the
Company.
Stockholm, February 2020
The Board of Directors
[1] Total shareholder return, i.e. share price growth including
dividends.
[2] To provide a stable assessment of performance, the TSR
development will be calculated based on the average closing price
of the Ericsson B share on Nasdaq Stockholm (or the corresponding
closing share price of the relevant peer group company) for the
three-month period immediately prior to the commencement and
expiration of the Performance Period.
[3] The Peer Group consists of the following companies: Cap
Gemini, CGI Group, Cisco Systems, Cognizant, Corning, F5 Networks,
International Business Machines, Juniper Networks, Motorola
Solutions, Nokia, and Qualcomm. TSR will be measured in Swedish
Krona (SEK) for all companies in line with best practice.
NOTES TO EDITORS:
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MORE INFORMATION AT:
Contact person
Peter
Nyquist, Head of Investor Relations
Phone: +46-10-714-64-99
E-mail: peter.nyquist@ericsson.com
Investors
Lena Häggblom, Director, Investor
Relations
Phone: +46-10-713-27-78
E-mail: lena.haggblom@ericsson.com
Stefan Jelvin, Director, Investor Relations
Phone: +46-10-714-20-39
E-mail: stefan.jelvin@ericsson.com
Rikard Tunedal, Director, Investor Relations
Phone: +46-10-714-54-00
E-mail: rikard.tunedal@ericsson.com
Media
Corporate Communications
Phone: +46-10-719-69-92
E-mail: media.relations@ericsson.com
About Ericsson
Ericsson enables communications service providers to capture the
full value of connectivity. The company's portfolio spans Networks,
Digital Services, Managed Services, and Emerging Business and is
designed to help our customers go digital, increase efficiency and
find new revenue streams. Ericsson's investments in innovation have
delivered the benefits of telephony and mobile broadband to
billions of people around the world. The Ericsson stock is listed
on Nasdaq Stockholm and on Nasdaq New
York. www.ericsson.com
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Invitation to
Ericsson’s Annual General Meeting 2020
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