Evaluation of Remuneration 2019
Monitoring and evaluation (Report according to the Swedish Corporate Governance Code)
In accordance with Rule 9.1 of the Swedish Corporate Governance Code, the People & 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 Meetings have been applied, as well as the current remuneration structure and levels of remuneration in Kinnevik.
The People & Remuneration Committee comprises the Chairman of the Board Dame Amelia Fawcett, and the Board members Susanna Campbell and Charlotte Strömberg. Susanna Campbell is the Chairman of the People & Remuneration Committee.
The following is the Board’s report of the results of the evaluation carried out by the People & Remuneration Committee and how the remuneration policy is implemented throughout Kinnevik in line with corporate governance best practice, with specific reference to Senior Executives.
General information with respect to the remuneration to Senior Executives
The remuneration to the Senior Executives during 2019 has consisted of fixed salary and short-term variable remuneration paid in cash (”STI”), the possibility to participate in long-term share-based incentive plans (”LTI”), pensions and other customary benefits.
The maximum outcome for the STI for the Senior Executives during 2019 according to the guidelines for remuneration was 100 percent of the individual Senior Executive’s fixed cash salary, and the outcome was based on pre-established targets relating to both individual performance of the Senior Executives and performance of Kinnevik. For Senior Executives whose shareholding in Kinnevik was lower than his or her annual fixed cash salary, net after taxes, payment of a part of the STI was conditional upon a portion of it being invested in Kinnevik shares.
During 2019, all employees in Kinnevik were invited to participate in a long-term share incentive plan based on reclassifiable, sub-ordinated, incentive shares in up to four classes (”LTIP 2019”). Subject to the terms and conditions of LTIP 2019, these incentive shares will be reclassified into Kinnevik Class B shares in 2022 or 2024 (depending on class).
Evaluation of programmes for variable remuneration
The People & Remuneration Committee follows and evaluates the STI and LTI, and the actual and expected outcome has been reported to the Board and discussed at Board meetings. The evaluation has shown that:
- STI and LTI are important tools in attracting, motivating and retaining the best talent for Kinnevik in Sweden and globally;
- LTIP 2019 was well-received by the Kinnevik team with a high level of participation throughout Kinnevik’s organisation;
- LTIP 2019’s design offers an incentive that links the long-term remuneration to the value creation of not only Kinnevik’s total portfolio but also specifically its growth portfolio in line with Kinnevik’s portfolio evolution and growth-focused investment strategy;
- LTIP 2019 enables Kinnevik to offer its employees a total remuneration package that is more competitive in relation to Kinnevik’s peers in Sweden and globally than traditional equity or share-price related long-term incentive plans based on share rights;
- the remuneration packages offered to the Senior Executives strike an appropriate balance between motivating the Senior Executives and achieving a well-balanced competitive compensation aligned with the interests of Kinnevik’s shareholders; and
- in order to simplify the LTI structure, and to achieve further alignment with the shareholders’ interests and better reflect Kinnevik’s portfolio evolution and its growth-focused investment strategy, the People & Remuneration Committee has found that Kinnevik would benefit from reducing the performance conditions of future LTIs from four to two: total shareholder return, and the return on Kinnevik’s portfolio excluding its two major listed holdings, Tele2 AB and Zalando SE.
Evaluation of the guidelines for remuneration to the Senior Executives
Both the People & Remuneration Committee’s evaluation and the Auditor’s review have concluded that Kinnevik has during 2019 complied with the applicable guidelines for remuneration, i.e. the guidelines adopted by the 2018 and 2019Annual General Meetings.
The statement by Kinnevik’s Auditor in accordance with Chapter 8, Section 54 of the Swedish Companies Act, regarding compliance with the guidelines for remuneration to the Senior Executives during 2019 is available on page 22 in this notice document.
The guidelines intend for all Senior Executives to have a significant long-term shareholding in Kinnevik. The Board’s view is that a shareholding should be considered significant if it at least corresponds to the Senior Executive’s annual fixed cash salary, net after taxes. This shall be achieved over time through an annual re-investment of a portion of the STI. The Board have concluded that, in light of the length of the individual Senior Execitives’ employment with Kinnevik, all of the Senior Executives have or are in the process of obtaining a significant long-term shareholding in Kinnevik.
Evaluation of remuneration structures and levels of remuneration in Kinnevik
Based on the People & Remuneration Committee’s evaluation of the remuneration programmes, the Board has determined that the current remuneration structures and levels of remuneration have had a positive effect on Kinnevik. 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.
Proposals to the 2020 Annual General Meeting regarding remuneration
Based on the conclusions drawn from monitoring and evaluating the programmes for variable remuneration, how the guidelines for remuneration to the Senior Executives have been applied, as well as the evaluation of the current remuneration structures and levels of remuneration in Kinnevik, the Board has decided to propose that the 2020 Annual General Meeting resolves on guidelines for remuneration to Senior Executives and a long-term share incentive plan that in substance are the same as in 2019, with the exception of the adjusted performance conditions of future LTIs as set out above. Further, in order to meet new legal requirements, the proposed guidelines for remuneration are more detailed than the previous guidelines.