Proposal by the Board of Directors of Sandvik Aktiebolag for a resolution on principles for the remuneration of senior executives
The Board of Directors proposes that the Annual General Meeting resolve on the following revised principles for the remuneration of senior executives for 2012.
The Board's proposal for the resolution on principles for the remuneration of senior executives is designed to ensure that the Sandvik Group from a global perspective can offer remuneration at the market rate and on competitive terms that will attract and retain qualified members of Sandvik's Group Executive Management.
The remuneration package for Group Executive Management comprises fixed salary, short-term incentives in cash and long term incentives in cash and/or in shares in Sandvik AB. It is intended that the components will form a well-balanced remuneration and benefit program that reflects the individual's performance, responsibility and the Group's earnings trend.
The fixed salary, which is individual and differentiated considering responsibility and performance, is determined taking into account market conditions and is reviewed each year.
The annual component of short term incentives in cash is based on the achievement of goals that are determined each year. The goals are mainly related to the financial results of the Company but also to measurable goals within each individual's area of responsibility. Short-term incentives in cash shall not exceed 75 per cent of the fixed annual salary.
A prerequisite for the long-term incentives in cash is the achievement of measurable goals established by the Board, i.e. certain key ratios that create shareholder value linked to the Company's growth, profitability and capital efficiency – Sandvik Value Added (SVA) – over a three-year period. Long-term incentives in cash shall not exceed 50 per cent of the fixed annual salary.
Long-term incentives may also be paid in the form of shares in Sandvik AB through participation in a share related incentive program including the right to be allotted employee stock options and matching rights. Such program shall have been approved by the General Meeting and its key terms shall include that participation for certain categories of top executives requires own investments in Sandvik stock, a three-year performance period with continued employment required during such time and that allotment is related to SVA performance criteria.
Other benefits to members of Group Executive Management shall match what may be considered reasonable in relation to market practice. These benefits include pension, company car, residence, health insurance and termination benefits.
Pension benefits to members of Group Executive Management are based on the fixed salary or cash paid out and may be of either the defined benefit or the defined contribution kind. Normal pension age is 62. For the President, the pension age is 60. For non-Swedish members of the Group Executive Management the pension age follows local rules and practice.
Termination benefits are normally paid in the event that Sandvik terminates the employment. The President has a notice period of 24 months and no severance pay. The notice period for other Group Executive Management members is in general 12 months. The severance pay equals 6 months' pay for persons aged less than 55 and 12 months' pay for persons aged 55 or more, for Swedish members of Group Executive Management. Other members of Group Executive Management have in general a severance pay of 12 months´ pay.All other benefits will follow local market practices in each country. Any other earned income is offset against the severance pay. No termination benefit is paid in the event the employee terminates the employment.
The Board may depart from the principles established by the Annual General Meeting if, in isolated cases, there are special reasons for a departure.
Those encompassed by these proposed principles are the President and the other members of Group Executive Management.
Stockholm, January 2012
Sandvik Aktiebolag (publ)
The Board of Directors