AAK Annual Report 2020

AAK Annual Report 2020 87 Note 8 | Remuneration of the Board of Directors and senior executives Principles The principles for the remuneration of senior managers (Group management) at AAK, in both the Parent company and the Group, are designed to ensure that AAK can offer internationally competitive remuneration that can attract and retain qualified managers. Consideration and determination Compensation of the Chief Executive Officer and other senior managers is considered by the Remuneration Committee of the Board of Directors and all decisions are made by the Board as a whole. Components of remuneration Total remuneration includes salary, annual variable remuneration, pension, car allowance, and termination benefit. Salary Fixed salary, individually determined and differentiated according to responsibility and perfor- mance, is determined on competitive principles and reviewed annually. The applicable date for the annual performance review is January 1. Variable remuneration Annual variable remuneration is based on meeting set targets determined on an annual basis. These targets are related to the performance of the Company. Senior management are enti- tled to up to 110 percent of their annual fixed salary in variable remuneration. Incentive program At the Annual General Meeting in AAK AB on May 17, 2017 it was resolved to implement a long-term incentive program for senior executives and key employees in AAK and issue of subscription warrants for implementation of a subscription warrants program. The sub- scription warrants are acquired by the employees at market value using the Black & Scholes formula. The exercise period for the subscription warrants is September 1, 2020 - August 31, 2022 at an exercise price of SEK 140.20 per share. The total number of subscription warrants in the program amounted to 1,220,000 with an initial value of SEK 42.40 per subscription warrant, in total SEK 51,728,000. In 2017, employees in AAK subscribed for 880,320 subscrip- tion warrants at an average price per subscription warrant of SEK 42.54 for a value of SEK 37,444,825. After the share split in 2018 the number of shares each subscription warrant entitles to is six. In 2019, employees in AAK subscribed for 20,480 subscription warrants at an average price per subscription warrant of SEK 244.14 for a value of SEK 4,999,987. The number of outstanding subscription warrants on December 31, 2019 amounted to 319,200 (339,680) at a book value of SEK 9,283,187 (14,283,175). In 2020, employees in AAK subscribed for 61,580 subscription warrants at an average price per subscription warrant of SEK 155.16 for a value of SEK 9,554,753. The holdings of subscription warrants for the CEO and other senior executives, please see pages 50–51. The number of outstanding subscription warrants on December 31, 2020 amounted to 257,620 (319,200) at a book value of SEK 0 (9,283,187). Pension Pensions for senior management are in line with the Swedish KTP plan (corresponding to ITP) and retirement age for senior managers is 65 years. Termination benefits The Company has separate agreements with the Chief Executive Officer and senior managers for termination compensation of one year’s salary (fixed cash amount per month x 12 months) on termination by the Company. Neither the Chief Executive Officer nor any senior manager can independently assert the right to termination compensation. The period of notice of termination by the Chief Executive Officer and senior managers is agreed as 6 months. Termination notice by the Company is agreed as 12 months. Compensation of Board Members Fees are paid to the elected members of the Board in accordance with a resolution of the Shareholders’ Annual General Meeting. This is distributed between the members as decided by the Board of Directors. No other compensation or benefits have been paid to members of the Board, except travel expenses. The CEO, the secretary to the Board and employee representatives to the Board do not receive any compensation other than for costs in connection with their participation in Board activities. Under a resolution of the Annual General Meeting, total compensation of elected external members of the Board is set at SEK 3,480,000, for the period up to the next Annual General Meeting, including compensation for committee work. Of this amount, the Chairman receives SEK 880,000 and each other external member receives SEK 390,000. Compensation for com- mittee work is distributed, in accordance with a decision of the Annual General Meeting, as SEK 250,000 to the Chairman of the Audit Committee, SEK 125,000 to other members of the Audit Committee, SEK 100,000 to the Chairman of the Remuneration Committee, and SEK 50,000 to other members of the Remuneration Committee.