Adopted by the AGM September 2020
The Board of Directors proposes that the 2020 AGM resolve on the following guidelines for salary and other forms of remuneration for senior executives at Sectra. Compared with the guidelines adopted by the 2019 AGM, these guidelines were developed and updated to meet the new requirements following from Chapter 8, Sections 51–53 of the Companies Act (2005:551).
Scope and applicability of the guidelines
These guidelines cover the President and CEO, other members of Group Management and, where applicable, remuneration to Board members for work performed above and beyond their commission. The guidelines will be applied to contractual remuneration, and changes made to remuneration already contracted, after the guidelines are adopted by the 2020 AGM.
The guidelines do not cover remuneration that has been resolved on by the General Meeting of Shareholders. Board fees will not be paid to executives employed in the Group.
The guidelines’ promotion of the company’s business strategy, long-term interests and sustainability
Briefly, Sectra’s business strategy entails developing and selling products and services for medical IT and cybersecurity. Helping our customers improve the efficiency and quality of patient care and increase cybersecurity in critical functions of society is the company’s most significant contribution to a more sustainable society. For more information about the company’s business strategy, refer to Sectra’s latest Annual Report available at the company’s website, sectra.com.
Successfully implementing the company’s business strategy and looking after the company’s long-term interests including sustainability assumes that the company can recruit and retain qualified employees. This requires the company to offer competitive remuneration. These guidelines make it possible to offer senior executives competitive total remuneration.
Long-term share-based incentive programs have been introduced at the company in certain years. These programs are adopted, where necessary, by the General Meeting of Shareholders and are thus not covered by these guidelines.
Forms of remuneration, etc.
The terms and conditions of remuneration must emphasize remuneration after performance, and vary in relation to the individual’s performance and the Group’s earnings. Total remuneration shall be on market terms and can consist of the following components: fixed cash salary, variable cash remuneration, pension benefits and other benefits.
Fixed remuneration consists of a basic annual salary (the “Basic Salary”), which is to be competitive in the relevant market and reflect the responsibilities that the job entails. Salary levels will be reviewed once a year to ensure continued competitiveness and to reward individual performances.
Variable cash remuneration covered by these guidelines must be intended to promote the company’s business strategy and long-term interests, including sustainability.
Variable cash remuneration will be based on predetermined and measurable criteria. These criteria must be based on (i) financial earnings (profit, financial efficiency and sales) or alternately operational goals that over the long term are intended to lead to solid financial results; (ii) share-related goals and (iii) non-financial goals such as sustainability, customer satisfaction, quality and corporate culture. They could also consist of individually adapted quantitative or qualitative goals.
Meeting the criteria for disbursement of variable cash remuneration should be measurable over a period of one or more years. Variable cash remuneration can total a maximum of 50% of the Basic Salary as regards financial, operative, non-financial and individually adapted goals and a maximum of 25% as regards share-related goals during the relevant measurement period.
When the measurement period for meeting the criteria for disbursement of variable cash remuneration has concluded, the extent to which the criteria were met must be determined. The Remuneration Committee is responsible for the assessment regarding variable cash remuneration to the CEO. As regards variable cash remuneration to other executives, the CEO is responsible for the assessment. As regards financial goals, the assessment must be based on the latest financial information released by the company.
In addition to variable remuneration that executives may receive in accordance with these guidelines, the Board of Directors may decide that such executives could be covered by programs for variable remuneration that also cover personnel categories other than senior executives such as all employees in the Group or in a particular business area. Such programs must entitle all employees (regardless of position) to the possibility of the same nominal remuneration.
The Board of Directors must also have the legal or contractual possibility — with the ensuing limitations — of demanding the return in full of erroneously disbursed variable remuneration (clawback). A Such request for repayment, where applicable, must be made within five years of the disbursement.
Pension and other benefits
For the CEO and other executives covered by these guidelines, retirement and survivor benefits including health insurance must be provided and are to be defined-contribution. Variable cash remuneration must not be pensionable. Pension premiums must total a maximum of 30% of the Basic Salary.
The executive must be provided with the possibility of exchanging a portion of the Basic Salary with other benefits such as life insurance, healthcare insurance and a company car, provided that it is cost-neutral for the company.
As regards terms of employment subject to laws other than Swedish, the company may make the proper adjustments concerning pension and other benefits in order to comply with compulsory regulations or local practice, in which case the overall goals of these guidelines must be met to the greatest possible extent.
Period of notice
The period of notice must be linked to the age of the executive, in accordance with the following policies.
Upon termination by the company or the executive, the period of notice must be at most (i) 6 months, if at the time of termination the executive is age 40 or younger; (ii) 12 months, if at the time of termination the executive is age 41–50; (iii) 18 months, if at the time of termination the executive is age 51–60; and (iv) 24 months, if at the time of termination the executive is age 61 or older. From the date the executive turns 67, however, the period of notice must be at most 6 months.
Salary and conditions of employment for employees
In preparing the Board’s proposal for these remuneration guidelines, salary and conditions of employment for the company’s employees were taken into account through information on total employee remuneration, the components of remuneration and the increase (and rate of increase) of the remuneration forming a part of the basis for decision by the Board and the Remuneration Committee in assessing the reasonableness of the guidelines and the ensuing limitations.
The decision-making process for adopting, reviewing and implementing the guidelines
The Board of Directors has set up a Remuneration Committee, the tasks of which include preparing the Board’s decisions on proposals for guidelines on remuneration to senior executives. The Board of Directors will draw up proposals for new guidelines at least once every four years, and present the proposal for resolution by the AGM. The guidelines will be in force until new guidelines are adopted by the General Meeting of Shareholders.
Remuneration to the CEO and, where applicable, Board members (above and beyond ordinary remuneration resolved on by shareholders’ meetings) is decided by the Board based on the recommendations of the Remuneration Committee. Remuneration to other executives is determined by the CEO.
The Remuneration Committee must also monitor and evaluate programs for variable remuneration to Group Management, the application of guidelines for remuneration to senior executives and applicable remuneration structures and remuneration levels in the company. The members of the Remuneration Committee are independent in relation to the company and Group Management. To the extent they are affected by such issues, neither the CEO nor other members of Group Management are present when the Board discusses and decides on issues related to remuneration.
Departures from the guidelines
The Board of Directors may decide to temporarily depart from the guidelines in full or in part if, in an individual case, there are particular reasons to do so and a departure is necessary to safeguard the company’s long-term interests including its sustainability, or to ensure the company’s financial strength. As indicated above, the tasks of the Remuneration Committee include preparing Board decisions on remuneration issues, which includes decisions on departures from the guidelines.
Adopted by the AGM September 2019
In accordance with the guidelines prepared by the Board, the 2019 AGM adopted the following policies for remuneration and other terms of employment for company management (the President and other members of Executive Group management). The guidelines are unchanged since the AGM 2013. The guidelines state that:
Remuneration to company management is to be based on normal market terms, while also supporting the interests of shareholders. Remuneration primarily comprises fixed salary, variable salary, pension benefits and other benefits, such as a company car. Pension benefits are defined-contribution.
Fixed salary is established by accounting for the senior executive’s experience, responsibilities and performance and is based on market conditions. Variable remuneration is proportionate to the executive’s responsibilities and authority. It has a maximum limit and is based on the attainment of goals that promote the company’s long-term value-creation. Where applicable, variable salary is based on pre-determined and measurable criteria. The company’s costs for the variable salary portion for the President and other members of company management amount to not more than 50% of the fixed salary costs.
The notice period for terminating employment by the senior executive is a maximum of 12 months. If employment is terminated by the company, the total notice period and the time during which severance pay is received is a maximum of 24 months. Ordinary retirement age is 65. Pension terms are market-based and based on defined-contribution pension solutions. The pension premium is not more than 30% of the fixed and variable salary.
Board members with special expertise who perform services for the company beyond the scope of the Board assignment may receive a fee for such services payable at market rates. Decisions on such fees are addressed by the Board of Directors, without the participation of the relevant Board member in either the consideration or the decision.
Matters concerning remuneration to company management are addressed by the President. Remuneration to the President is resolved by the Board of Directors.
The Board of Directors shall be able to deviate from the guidelines for remuneration drawn up by the AGM, if there are special reasons for so doing in individual instances.
Remuneration of the Board
Fees are paid to the Board Chairman and other external members in accordance with the decision of the Annual General Meeting. Internal Board members are not paid a fee.
In 2019/2020, a fee of SEK 225,000 was paid to each of the Board members, and SEK 450,000 was paid to the Chairman of the Board. For Audit Committee work, SEK 50,000 was paid to external Board members and SEK 100,000 to the Chairman of the Audit Committee. No separate fees were paid for Remuneration Committee work. Other remuneration pertains to consultant services for assignments in which a Board member has specialist expertise.
Remuneration of the President and other senior executives
Remuneration of the President/CEO and other senior executives is based on market terms and comprises basic salary, variable salary, other benefits and pension. The fixed salary is determined taking into account experience, responsibility and performance. The variable salary is performance-based and capped at a percentage of the fixed annual salary, which is a maximum of 50%. “Other senior executives” refers to the nine individuals who, together with the President/CEO, comprised Group Management during the fiscal year.
Further information see Sectra’s Annual Report 2019/2020, Note 2 page 82.
Preparation and decision-making process
The Board fee was decided at the Annual General Meeting in accordance with the proposal of the Nomination Committee. Guidelines for remuneration of the President and other senior executives are determined at the Annual General Meeting. Remuneration to the President/CEO was prepared by the Remuneration Committee and decided by the Board of Directors. The President/CEO prepared and decided on the remuneration of other senior executives.
Terms of notice and severance pay
The company must give the President/CEO 18 months’ notice of termination. The President/CEO must give the company six months’ notice of resignation. The notice periods for other senior executives range from three to 12 months on the part of the company, and from three to six months on the part of the executives. There are no special agreements regarding severance pay.
The retirement age for the President and other senior executives is 65. Pension benefits for the President and other senior executives are paid within the framework of the pension plan that applies to all employees, which is a defined-contribution and vested pension.
Convertibles programs enable employees and external Board members to acquire shares in the company. For further information on outstanding share-based incentive programs, please see:
Evaluation and statements
The Board has authorized the Remuneration Committee to assume responsibility for matters pertaining to the company’s and the Group’s bonus system and remuneration policy. The main task of the Remuneration Committee is to prepare the Board’s decisions on matters pertaining to principles for remuneration and other terms of employment for the President and management and the guidelines for remuneration of senior executives that the AGM is legally obliged to establish.
The Remuneration Committee’s tasks also include:
- preparing supporting documentation on certain matters of principle or other important matters pertaining to remuneration, such as incentive programs and profit-sharing systems.
- monitoring and evaluating all programs for variable remuneration of company management.
- monitoring and evaluating the application of the guidelines for remuneration of senior executives established by the AGM, as well as the current remuneration structures and levels in the company.
Here you find the Board’s presentation of the remuneration committee’s evaluation and the statement of Auditor whether the guidelines for remuneration to senior executives adopted by the AGM of shareholders :