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Share 2017-10-19 17:29 RATOS B 40.07 SEK

Incentive systems

The guidelines for remuneration and incentive systems for key people as set out below were approved by the 2017 Annual General Meeting.

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 group performance must be linked to clear targets set by the Board.
  • Variable salary in cash which is paid out to senior executives shall be linked both to collectivelyand individually set annual targets. The targets are both quantitative and qualitative and aims to fulfill Ratos’s long termed strategy and to fulfill a result development which benefits the shareholders.
  • Each year the Board sets a limit for the total variable salary, which shall amount to a maximum of approximately 0,6 per cent of the company’s equity at the start of the financial year.
  • Key people at Ratos shall be encouraged to have a shared perspective with the company’s shareholders which may be achieved through reasonably balanced option programs where employees can share in price rises alternatively realized increases in value, but also take a personal risk by paying a market premium for the options.

Pension benefits shall, as far as possible, be pre-defined pension cost solutions, however some pension benefits which is in accordance with the ITP Plan are defined benefits.

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 two-year period and is divided into 50% for the first year and 50% the second year. 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 amounted 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 27 September 2017

Maturity date Price/ option, SEK Right to purchase no. of shares Exercise price, SEK/share Number of options Corresponding number of shares
2013 - 20 March 2018 11.50 1 56.90 585,900 585,900
2014 - 20 March 2019 7.30 1 51.80 574,500  574,500
2015 - 20 March 2020 6.50 1 55.50 462,100 462,100
2016 - 20 March 2021 4.80 1 45.00 453,000 453,000
2017 - 18 March 2022 4.50 1 47.10 242,500 242,500
        2,318,000 2,318,000

Oustanding options corresponds to 0.727% of outstanding shares.

Synthetic options

The 2017 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 8%. The total value of the issued options at the closing date will be a maximum of 5% of the difference between the actual realised value for Ratos’s investment at the closing date and the cost increased by 8% 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 four years. Payment of rem neration is conditional upon continued employment.