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).
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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
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SOURCE Ericsson