Kinnevik Remuneration Committee
The Remuneration Committee of the Board of Investment AB Kinnevik comprises the Chairman of the Board, Cristina Stenbeck, and the Board members Dame Amelia Fawcett, Erik Mitteregger and Wilhelm Klingspor. Dame Amelia Fawcett is the Chairman of the Committee.
In accordance with the Swedish Corporate Governance Code, the Remuneration Committee has monitored and evaluated programmes for variable remuneration (both on-going and those that have ended during the year) and how the guidelines for remuneration to the Senior Executives (being the CEO and the other members of the executive management) 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 to Senior Executives
The remuneration to the Senior Executives during 2014 has consisted of fixed salary and variable remuneration, 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 variable salary paid in cash (STI) during 2014 was 75 percent of the fixed salary and was based on pre-established targets relating to both individual and company performance. Information regarding STI is found in the Annual Report 2014.
For the employees in Kinnevik there are long-term share related incentive programs (LTI). Information regarding the LTI, such as outcome, participation ratio, number of issued instruments and awards etc. is found in the Annual Report 2014 and on the Company's website at www.kinnevik.se.
Evaluation of programmes for variable remuneration
The Remuneration Committee follows and evaluates the STI and LTI, and the expected outcome has been reported to the Board and discussed at Board meetings.
During the year the Board decided that in order to further align the employees' incentives and rewards with the interests and return of the shareholders, all employees should be encouraged to build up a significant, personal shareholding in Kinnevik (in relation to the employee's financial conditions). As a result, during 2015, the Board resolved that payment of part of the STI shall be subject to that it is invested in Kinnevik shares and this is also proposed to be reflected in the guidelines for remuneration to the Senior Executives that a part of the STI shall be invested in Kinnevik's shares. In light of this new requirement to purchase shares in Kinnevik as part of STI, the Board is proposing that the cap on the STI be raised from 75 percent to 100 percent.
In addition to the proposed changes to STI, the Remuneration Committee continues to monitor the extent to which the Senior Executives and other key employees participate in the ongoing long-term share related programs LTIP 2012 and LTIP 2013, as well as the two inter-linked option based plans adopted at the 2014 Annual General Meeting which included payment of cash subsidies. The Remuneration Committee also monitors and analyses the effectiveness of all these plans. In this regard, the Board has decided not to proceed with the two inter-linked option-based plans approved at the 2014 Annual General Meeting, due to issues encountered at launch and an unexpected low take-up level in the options plans. As a result, the Board has, subject to the approval of the Annual General Meeting, resolved on an alternative remuneration model for the employees that were entitled to participate in the option plans. This alternative model retains the economic characteristics of the option plans, but now provides that the participants receive cash compensation from Kinnevik which is conditional upon the employee making an investment in Kinnevik shares, instead of options issued under the option plans. This modification has been assessed to be workable, in line with the aim to increase the employees' shareholding in Kinnevik and more attractive to Kinnevik's employees, and the total cost to Kinnevik remains unchanged. Furthermore, LTIP 2012 and LTIP 2013 have received a high take-up level and have created a high retention level. Therefore, it is proposed that the new long-term incentive plan, LTI 2015, adopts the LTIP 2013 structure and includes all Kinnevik employees.
In addition, if Kinnevik should establish operations, in the form of a co-investment vehicle or similar structure, Kinnevik professionals (including members of the executive management), subject to making a co-investment, may receive additional variable remuneration paid in cash. The purpose of such programs is to strengthen the incentives for such personnel and reward them in relation to the return such operations generate for Kinnevik.
Evaluation of the guidelines for remuneration to the Senior Executives
The Remuneration Committee's evaluation, and the review carried out by the auditor, have resulted in the conclusion that the guidelines for remuneration for Senior Executives established at the 2013 and 2014 Annual General Meetings have been applied by the Company during the year.
Evaluation of remuneration structure and levels of remuneration in Kinnevik
Based on the Remuneration Committee's evaluation of the remuneration programs, the Board has determined that the current remuneration structure and levels of remuneration for the Senior Executives have had a positive effect on Kinnevik. In an effort to increase the effectiveness of Kinnevik's remuneration programs and structures, particularly in aligning to a greater extent Senior Executives interests and incentives with shareholders' interests, the Board is proposing a revised remuneration structure and levels of remuneration for STI and LTI. The Board believes that these proposals will ensure the competitiveness of Kinnevik's remuneration structure and levels and facilitate the Company's ability to attract, motivate and retain key personnel.
Stockholm, April 2015
THE BOARD OF DIRECTORS
INVESTMENT AB KINNEVIK (PUBL)