Share 2017-04-28 13:44 RATOS B 41.65 SEK

Incentive systems

The guidelines for remuneration and incentive systems for key people as set out below were approved by the 2016 Annual General Meeting. The following guidelines were applied throughout 2016.

Guidelines and principles for remuneration to senior executives

The incentive system for the Company's business organisation is of major strategic importance for Ratos. Against this background, a remuneration and incentive system has been drawn up designed to offer competitive terms at the same time as the company's employees are motivated to work in the interests of the shareholders.

The incentive system comprises a number of components – basic salary, variable salary, pension provisions, call options and synthetic options – and rests on five basic principles.

  • Ratos’s employees shall be offered competitive terms of employment in an industry where competition for qualified employees is intense and at the same time be encouraged to remain with Ratos.
  • Both individual efforts and the Group’s performance must be linked to clear targets set by the Board.
  • Variable salary paid shall be linked to the results development that benefits shareholders. Variable salary to senior executives does not fall due until certain conditions have been met with regard to return on the company's equity and is paid over a multi-year period. The cost of each year's variable salary, however, is booked in its entirety in the year the compensation is earned.
  • Each year the Board sets a limit for the total variable salary, which shall amount to a maximum of approximately one per cent of the company's equity at the start of the financial year.
  • Key people at Ratos shall be encouraged to have the same perspective as the company's shareholders which will be achieved through reasonably balanced option programmes where employees can share in price rises or realised increases in value, but also take a personal risk by paying a market premium for the options.

Pension benefits are generally paid in accordance with the ITP Plan. For pension benefits that deviate from the ITP Plan, defined contribution pension benefits apply. The Board shall be entitled to deviate from these guidelines if special circumstances should prevail in an individual case.

Variable cash salary for senior executives

The variable cash salary is related to the annual shared and individual established targets. The targets are both quantitative and qualitative and aimed at meeting Ratos’s long-term strategy. During 2016, the criteria for and the calculation of the outcome of variable cash salary were modified. Examples of targets were the increase of EBITA in portfolio companies and the divestment of certain defined portfolio companies.

Variable cash salary is disbursed over a three-year period and is divided into 50% for the first year and 25% each for the remaining two years. However, the expense for each year’s variable salary is expensed in its entirety in the year the remuneration is earned. A ceiling has been established in relation to each senior executive’s fixed salary and for 2016 could amount to a maximum of 130% of fixed salary.

Follow-up and evaluation of variable cash salary is conducted at the end of each year. Target fulfilment by the CEO and company management is followed up and evaluated by the Compensation Committee and then approved by the Board of Directors following proposal by the Compensation Committee.

Call option programmes

Annual general meetings from 2001 onwards have decided on call option programmes directed to senior executives and other key people within Ratos. Employees have paid a market premium for the call options in all programmes. Acquisition of call options is subsidised by the purchaser receiving extra remuneration corresponding to a maximum of 50% of the option premium after deduction for 55% standard tax, whereby the remuneration is divided into equal parts for five years. Payment of remuneration is conditional upon continued employment. Call options are issued on treasury shares and have a maturity of 4 years.

Terms for options outstanding at 31 December 2016

Maturity date Price/ option, SEK Right to purchase no. of shares Exercise price, SEK/share Number of options Corresponding number of shares
2012 - 20 March 2017 4.70 1.03 72.00 1,149,200 1,183,676
2013 - 20 March 2018 11.50 1 63.50 585,900 585,900
2014 - 20 March 2019 7.30 1 55.20 574,500  574,500
2015 - 20 March 2020 6.50 1 57.10 462,100 462,100
2016 - 20 March 2021 4.80 1 48.70 453,000 453,000
        3,224,700 3,259,176

Oustanding options corresponds to 1.022% of outstanding shares.

Synthetic options

The 2016 Annual General Meeting, like all Annual General Meetings since 2007, resolved on a cash-based option programme related to the Ratos’s investments in the companies. The programme is carried out through the issue of synthetic options that are transferred at market price. The programme gives the CEO and other key people within Ratos an opportunity to share in the investment result of the individual companies. Options related to an individual investment only have a value if Ratos’s annual return on the investment exceeds 10%. The total value of the issued options at the closing date will be a maximum of 3% of the difference between the actual realised value for Ratos’s investment at the closing date and the cost increased by 10% per year. Acquisition of synthetic options is subsidised by the purchaser receiving extra remuneration corresponding to a maximum of 50% of the option premium after deduction for 55% standard tax, whereby the remuneration is divided into equal parts for five years. Payment of rem neration is conditional upon continued employment.