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
-engel
ska.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 |Operation |Opportunity |Performance measures
|
|purpose | | |
|
+-------------+---------------+-----------------+-----------------------------
-+
|Fixed
salary |Salaries shall |There is no |This element of the package
|
|Fixed |normally be |maximum salary |does not require achievement
|
|compensation |reviewed |level; however, |of any specific performance
|
|paid at set |annually in |salary increases |targets. However,
individual |
|times. |January. |(as a % of |performance and
capability |
|Purpose: |Salaries shall |existing salary) |shall be taken
into account |
| · attract |be set taking |for most Group |along with
business |
|and retain |into account: |Management
|performance when determining |
|the executive| · Ericsson’s |members would
|fixed salary levels and any |
|talent |overall |normally be in
|salary increases. |
|required to |business |line with the
| |
|implement |performance, |external
market | |
|Ericsson’s | · business
|practices, | |
|strategy, |performance
of |employees in | |
| · deliver |the Unit
that |relevant | |
|part of the |the
individual |locations and | |
|annual
|leads, |performance of |
|
|compensation | · year-on |the individual. |
|
|in a |-year |There are |
|
|predictable |performance of |circumstances |
|
|format. |the individual,|where higher |
|
| | · external |salary increases |
|
| |economic |could be awarded.|
|
| |environment, |For example, |
|
| | · size and |where: |
|
| |complexity of | · a new Group |
|
| |the position, |Management member|
|
| | · external |has been |
|
| |market data, |appointed at a |
|
| | · pay and |below-market |
|
| |conditions for |salary, in which |
|
| |other employees|case larger |
|
| |based in |increases may be |
|
| |locations |awarded in |
|
| |considered to |following years, |
|
| |be relevant to |subject to strong|
|
| |the role. |individual |
|
| |When setting |performance, |
|
| |fixed salaries,| · the Group |
|
| |the impact on |Management member|
|
| |total |has been promoted|
|
| |remuneration, |or has had an |
|
| |including |increase in |
|
| |pensions and |responsibilities,|
|
| |associated | · an |
|
| |costs, shall be|individual’s |
|
| |taken into |salary has
fallen| |
| |consideration.
|significantly | |
| |
|behind market | |
| |
|practice. |
|
+-------------+---------------+-----------------+-----------------------------
-+
|Short-term
|The STV shall |Target pay-out |The STV shall be based on |
|variable
|be paid in cash|opportunity for |measures linked to the annual
|
|compensation |every year |any financial |business plan which in
itself |
|(STV) STV is |after the |year may be up to|is linked to
Ericsson’s long |
|a variable |Committee and, |150% of annual |-term
strategy and |
|compensation |as applicable, |fixed salary of
|sustainability. Measures shall|
|plan that |the Board have |the individual.
|include financial targets at |
|shall be |reviewed and |This shall
|Group, Business Area or Market|
|measured and |approved |normally be
|Area level (for relevant |
|paid over a |performance |determined
in |members of Group Management). |
|single year. |against targets|line with
the |Other potential measures may |
|Purpose: |which are |external
market |include strategic targets, |
| · align |normally
|practices of the |operational targets, employee |
|members of |determined at
|country of |engagement targets, customer |
|Group |the start of
|employment. |satisfaction targets, |
|Management |each year
for |Maximum pay-out |sustainability and corporate |
|with clear |each
member of |shall be up to |responsibility targets or |
|and relevant
|Group |two times the |other lead indicator targets. |
|targets to
|Management. The|target pay-out |A maximum of four STV targets |
|Ericsson’s
|Board and the |opportunity (i.e.|shall be assigned to an |
|strategy
and |Committee |300% of annual |individual in total for a
|
|sustainable |reserve the |fixed salary)[1),|financial year. Financial
|
|long-term |right to: |2)]. |targets shall comprise at
|
|interests, | · revise any | |least 75% of the target
bonus |
| · provide |or all of the | |opportunity with a
minimum of |
|individuals |STV targets at | |40% being defined
at Group |
|an earning |any time, | |level. The
minimum weighting |
|opportunity | · adjust the | |for an
STV target shall be |
|for |STV targets | |20%.
Performance of all STV |
|performance |retroactively |
|targets shall be tested over a|
|at flexible |under |
|one-year performance period |
|cost to the |extraordinary |
|(financial year). The STV |
|Company. |circumstances, |
|measures and targets shall be |
| | · reduce or |
|determined by the Committee |
| |cancel STV if |
|for the members of Group |
| |Ericsson faces |
|Management other than the |
| |severe economic|
|President and CEO. The Board |
| |difficulties, |
|has the mandate to define STV |
| |for instance in|
|measures and targets for the |
| |circumstances |
|President and CEO, should STV |
| |as serious as |
|be introduced for the |
| |no dividend |
|President and CEO. |
| |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. | |
|
+-------------+---------------+-----------------+-----------------------------
-+
|Pension
|The operation |Since 2011, |None
|
|Contributions|of the pension |members of Group |
|
|paid towards |plan shall |Management in |
|
|retirement |follow |Sweden |
|
|fund. |competitive |participate in |
|
|Purpose: |practice in the|the defined |
|
| · attract |individual’s |contribution plan|
|
|and retain |home country |(ITP1) which |
|
|the executive|and may contain|applies for the |
|
|talent |various |wider workforce |
|
|required to |supplementary |in Sweden. The |
|
|implement |plans in |pension |
|
|Ericsson’s |addition to any|contribution for |
|
|strategy, |national system|ITP1 is capped at|
|
| · |for social |30% of |
|
|facilitate |security. |pensionable |
|
|planning for |Pension plans |salary which |
|
|retirement by|should be |includes fixed |
|
|way of |defined |salary and STV |
|
|providing |contribution |paid in cash. |
|
|competitive |plans unless |According to the |
|
|retirement |the individual |local collective |
|
|arrangements |concerned is |bargaining |
|
|in line with |subject to |agreement in |
|
|local market |defined benefit|Sweden, the |
|
|practices. |pension plan |members of Group |
|
| |under mandatory|Management are |
|
| |collective |also entitled to |
|
| |agreement |an additional |
|
| |provisions or |pension |
|
| |mandatory local|contribution for
| |
| |regulations. In|part-time
| |
| |some special |retirement for
| |
| |circumstances |which the cap
is | |
| |where |determined
during| |
| |individuals |the union
| |
| |cannot
|negotiations for | |
| |participate
in |all the local | |
| |the local
|employees. | |
| |pension
plans |Members of Group | |
| |of
their home |Management | |
|
|countries of |employed outside | |
|
|employment: |of Sweden may | |
|
| · cash |participate in | |
|
|equivalent to |the local market | |
|
|pension may be |competitive | |
|
|provided as a |pension | |
|
|taxable |arrangements that| |
|
|benefit, or |apply in their | |
|
| · |home countries in| |
|
|contributions |line with what is| |
|
|may be made to |offered to other | |
|
|an |employees in the | |
|
|international |same country. In |
|
| |pension fund on|all cases the |
|
| |behalf of the |annual pension |
|
| |individual on a|contributions |
|
| |cost-neutral |shall be capped |
|
| |basis. |at 70% of annual |
|
| | |fixed salary[3)].|
|
+-------------+---------------+-----------------+-----------------------------
-+
|Other
|Benefits |Benefit |None
|
|Benefits |offered shall |opportunities |
|
|Additional |take into |shall be set in |
|
|tangible or |account the |line with |
|
|intangible |competitive |competitive |
|
|compensation |practices in |market practices |
|
|paid annually|the |and shall reflect|
|
|which do not |individual’s |what is offered |
|
|fall under |country of |to other senior |
|
|fixed salary,|employment and |employees in the |
|
|short-term |should be in |individual’s |
|
|and long-term|line with what |country of |
|
|variable |is offered to |employment. The |
|
|compensation |other senior |levels of |
|
|or pension. |employees in |benefits provided|
|
|Purpose: |the same |may vary year on |
|
| · attract |country and may|year depending on|
|
|and retain |evolve year on |the cost of the |
|
|the executive|year. Benefits |provision of |
|
|talent |may for example|benefits to the |
|
|required to |include company|Company. Other |
|
|implement |phones, company|benefits shall be|
|
|Ericsson’s |cars, medical |capped at 10% of |
|
|strategy, |and other |annual fixed |
|
| · deliver |insurance |salary for |
|
|part of the |benefits, tax |members of Group |
|
|annual |support, |Management |
|
|compensation |travel, Company|located in |
|
|in a |gifts and any |Sweden. |
|
|predictable |international |Additional |
|
|format. |relocation |benefits and
| |
| |and/or |allowances for
| |
| |commuting |members of
Group | |
| |benefits if
the|Management who | |
| |individual
is |are commuters | |
| |required
to |into Sweden or | |
|
|relocate and/or|who are on long | |
|
|commute |-term assignment | |
|
|internationally|(“LTA”) in | |
|
|to execute the |countries other | |
|
|requirements of|than their home | |
|
|the role. |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. |
|
+-------------+---------------+-----------------+-----------------------------
-+
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
role being taken on.
· 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.
· Internal
relativities
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.
· TSR
performance
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
a. 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.
b. 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
a. 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.
b. 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.
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.
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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:
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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 (https://www.ericsson.com/en)
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