Kinnevik Remuneration Committee
The Remuneration Committee of the Board of Kinnevik AB comprises of the Chairman of the Board, Tom Boardman, and of the Board members Dame Amelia Fawcett and Erik Mitteregger. Dame Amelia Fawcett is the Chairman of the Committee.
In accordance with the Swedish Corporate Governance Code the Remuneration Committee monitors and evaluates programmes for variable remuneration (both ongoing and those that have ended during the year), how the guidelines for remuneration to the Senior Executives adopted at the Annual General Meeting have been applied, as well as the current remuneration structure and levels of remuneration in the Company.
The following is the Board’s report of the results of the evaluation carried out by the Remuneration Committee.
General information with respect to the remuneration for Senior Executives
The remuneration to the Senior Executives during 2017 has consisted of fixed salary and short-term variable remuneration paid in cash, the possibility to participate in long-term share-based and cash-based incentive plans, pensions and other customary benefits. The aim is to create incentives for the Senior Executives to execute strategic plans and deliver excellent operating results and to align their incentives with the interests of the shareholders. The intention is that all Senior Executives shall have a significant long-term shareholding in the company.
The maximum outcome for short-term variable remuneration paid in cash for the Senior Executives during 2017 according to the guidelines for remuneration was 100 percent of the individual Senior Executive’s fixed salary, and the outcome was based on pre-established targets relating to both individual and Company performance. A part of such variable remuneration was conditional upon that a portion of it was invested in Kinnevik shares.
During 2017, all employees in Kinnevik could participate in either a share-based, or a cash-based, long-term incentive plan.
For further information regarding the existing guidelines and remuneration for the Senior Executives paid out during 2017, please refer to the Kinnevik’s 2017 Annual Report, Note 16 for the Group.
Evaluation of programmes for variable remuneration
The Remuneration Committee follows and evaluates the short-term and long-term variable remuneration, and actual and expected outcome has been reported to the Board and discussed at Board meetings. The evaluation of the programmes for variable remuneration has shown that:
- the programmes for variable remuneration are an important tool in attracting, motivating and retaining the best talent for Kinnevik in Sweden and globally; and
- the remuneration to the Senior Executives strikes an appropriate balance between motivating the Senior Executives and achieving a well-balanced competitive compensation that aligns the Senior Executives’ incentives with the interests of Kinnevik and the shareholders.
The Remuneration Committee is however of the opinion that in light of Kinnevik’s focus on investments and management of the private portfolio, a larger number of employees (including the CEO) should be offered an incentive that links their long term remuneration to the value creation of Kinnvik’s private portfolio. Furthermore, the Remuneration Committee have, together with external advisors, concluded, that while retaining the same economic characteristics for the participants and the same criteria for measuring performance as the two long-term incentive plans adopted in 2017, a change from share rights (used in previous share-based incentive plans) and synthetic options (used in the 2017 cash-based plan) to reclassifiable incentive shares will enable Kinnevik to offer its employees a long-term share remuneration, and a total remuneration package, that is more competitive in the context of Kinnevik’s peers, in Sweden and globally. In addition, the Remuneration Committee considers that an own investment in Kinnevik shares is fundamental in order to achieve an alignment with Kinnevik’s shareholders, also during the vesting period of LTIP 2018, and as was the case with the share-based incentive plans, a personal holding of Kinnevik Class B shares will therefore be a condition to participate in LTIP 2018.
Evaluation of the guidelines for remuneration to the Senior Executives
During 2017, both the Remuneration Committee’s evaluation and the auditor’s review have concluded that there has been compliance with the guidelines resolved by the 2016 and 2017 Annual General Meetings. However, when recruiting a new CEO in June 2017, the Board agreed to award the new CEO, a cash payment (so called sign-on bonus) of SEK 8m, which will be included in his remuneration cost for 2018, which may result in that his total STI in 2018 exceeds 100 percent of his fixed salary.
Furthermore, as stated in the guidelines the intention is that all Senior Executives shall have a significant long-term shareholding in the company. The Board’s view is that a Senior Executive shall reach a shareholding in Kinnevik corresponding to his or her annual fixed salary, net after taxes, in order to be considered to have a significantshareholding. This goal shall be achieved over time through an annual re-investment of a portion of the short-term variable remuneration paid in cash.
Evaluation of remuneration structure and levels of remuneration in Kinnevik
Based on the Remuneration Committee’s evaluation of the remuneration programmes, the Board has determined that the current remuneration structure and levels of remuneration have had a positive effect on Kinnevik. In an effort to offer its employees a long-term share remuneration, and a total remuneration package, that is more competitive in the context of Kinnevik’s peers, in Sweden and globally, the Board is proposing that the Annual General Meeting resolves on LTIP 2018. The Board believes that the models and award levels in the proposed programmes for variable remuneration will ensure the competitiveness of the total remuneration as well as facilitate Kinnevik’s ability to attract, motivate and retain key personnel.
Stockholm, April 2018
KINNEVIK AB (PUBL)
THE BOARD OF DIRECTORS