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, Erik Mitteregger and Cristina Stenbeck. 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 on-going 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 to Senior Executives
The remuneration to the Senior Executives during 2016 has consisted of fixed salary and short-term variable remuneration paid in cash, the possibility to participate in long-term share or share price related 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 2016 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 2016, Kinnevik employees could also participate in long-term share related incentive plans.
For further information regarding the existing guidelines and remuneration for the Senior Executives paid out during 2016, please refer to the Kinnevik’s 2016 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 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 employees that have a direct impact on, and works almost exclusively with, the value creation in Kinnevik’s private portfolio, should be offered an incentive that links their remuneration to the value creation of the private portfolio. During 2016 and the first months of 2017, the Remuneration Committee has therefore prepared a proposal for a long-term, cash based, synthetic option plan (“VCPP 2017”), and the Board proposes that the shareholders approve VCPP 2017 at the 2017 Annual General Meeting. In order for Kinnevik to achieve the long-term value growth targets for its private portfolio it is vital that Kinnevik can motivate and retain the best talents to manage its private portfolio. The Board is of the opinion that VCPP 2017 will be an important tool to achieve this during the coming years. VCPP 2017 will replace the long-term, share based, incentive plans for these employees to emphasize the importance of the value creation in the private portfolio, and also create a more competitive remuneration package for Kinnevik’s investment professionals.
Evaluation of the guidelines for remuneration to the Senior Executives
During 2016, both the Remuneration Committee’s evaluation and auditor’s review have concluded that there has been compliance with the guidelines resolved by the 2015 and 2016 Annual General Meetings. However, following the former CEO leaving Kinnevik in December 2016, the Board agreed to award two Senior Executives, both instrumental to Kinnevik’s investment activities and for managing the private portfolio, a retention based cash bonus, which may result in that their total STI in 2018 and 2019 may exceed 100 percent of their 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 significant shareholding. 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 for the Senior Executives have had a positive effect on Kinnevik. In an effort to further link the remuneration of employees that have a direct impact on, and works almost exclusively with, the value creation in Kinnevik’s private portfolio, the Board is proposing that the Annual General Meeting resolves on the VCPP 2017 for these employees. For Kinnevik’s other employees, the maximum levels for both short-term and long-term variable remuneration will remain unchanged from 2016. 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 2017
KINNEVIK AB (PUBL)
THE BOARD OF DIRECTORS