Preparation and decision-making process
The Board of Directors elected a Remuneration Committee from within its ranks, with the task of preparing issues pertaining to remuneration of executive management and employees who have overall responsibility for any of the company’s control functions prior to the Board’s decisions on such matters. The Remuneration Committee is also to prepare decisions on measures for following up the application of the Remuneration Policy. The Remuneration Committee has no decision-making mandate.
The Board of Directors elected the Chairman of the Board and Christer Malm as members of the Remuneration Committee at the Board meeting on June 7, 2011.
The Remuneration Committee for Länsförsäkringar AB (LFAB), the Parent Company in the LFAB Group, is responsible for processing and preparing a Group-wide Remuneration Policy. The Policy was adopted by LFAB’s Board of Directors on March 29, 2011 and by the Board of Directors of Länsförsäkringar Hypotek on April 27, 2011.
The Remuneration Policy for Länsförsäkringar Hypotek is based on a risk analysis of the risks that may be connected to the Remuneration Policy. The implemented risk analysis resulted in an assessment that very limited risks are connected to the Remuneration Policy. The assessment is based primarily on the Remuneration Policy not having any long-term negative impact on the company’s finances, that the balance between fixed and variable portions is such that the variable portion is deemed to have very limited impact on the company’s capital base, that guaranteed variable remuneration does not exist, that the general rule of deferred payment for three years of 60% of the target-related remuneration that exceeds SEK 12,000 applies without exception, that the target-related remuneration will not exceed two months’ salary per year or a maximum of SEK 12,000 per year, and that individual deviations, which may occur following a Board decision and consultation within the LFAB Group, will occur on a highly selective base.
The company’s risk control function participated in the analysis. Furthermore, specifically controlled personnel in the company have been identified.
Remuneration model and remuneration criteria
The starting point for the remuneration model is that it must contribute to generating favourable conditions for the LFAB Group to satisfactorily perform its task from the owners. The remuneration model must stimulate good performance and contribute to making the LFAB Group an attractive employer that is able to compete for the right competency in the market. The remuneration model must be compatible with and promote sound and efficient risk management and counteract excessive risk-taking, while conforming to the LFAB Group’s long-term interests.
The base of the remuneration model is to consist of fixed remuneration. The fixed remuneration must be at the correct level to attract and retain the right competency and must be set at an individual level, with a distinct connection to the employee’s work and performance, and comply with applicable collective agreements.
Target-related remuneration
Target-related remuneration is applied as a complement to the fixed remuneration. The target-related remuneration must encourage and reward good performance, which will lead to the long-term positive development of the company.
Target-related remuneration must be based on such factors as position and performance and, with the below-mentioned exceptions and conditions, may be paid to employees according to the following:
- Target-related remuneration in an amount not exceeding two months’ salary may be paid to senior executives and certain specialists who work in equity management within the LFAB Group.
- Other employees who are not senior executives may receive target-related remuneration not exceeding SEK 12,000 per year.
However, the target-related remuneration may not exceed 50% of the fixed remuneration.
At least one third of the target-related remuneration must be based on surpassing the Group-wide goals stipulated in the LFAB Group’s business plan and a maximum of two thirds on surpassing the individual goal for own unit/department/group. Individual goals must be connected to the business goals, quality assured and documented.
A condition for payment of target-related remuneration is that the LFAB Group must recognize a profit before appropriations and tax for the financial year for which the remuneration applies. The Board is to evaluate and establish whether the Group-wide goals in the Group’s business plan have been surpassed not later than in connection with the LFAB Board of Directors’ adoption of the Annual Report for the full year. The evaluation and establishment of whether individual goals have been surpassed will occur in connection with follow-up discussions.
Individual deviations from the above must, when applicable, be prepared in Länsförsäkringar Hypotek’s Remuneration Committee and be decided by the Board of Länsförsäkringar Hypotek following consultation within the LFAB Group.
Target-related remuneration according to Item 1 above, and target-related remuneration in the event of individual deviations according to the preceding paragraph, must be based on risk-adjusted profit measurements to the extent that the goals used as a basis for remuneration are profit-based.
No target-related remuneration is to be paid to members of Länsförsäkringar Hypotek’s executive management and to other executives within Länsförsäkringar Hypotek. Nor is such remuneration to be paid to the Compliance, Risk Control and Internal Audit control functions.
Deferred remuneration
For senior executives and specialists who work with equity management within the LFAB Group or who, through individual deviation following specific Board decisions, receive target-related remuneration in excess of SEK 12,000, 60% of the target-related remuneration will not be paid until after three years. Länsförsäkringar Hypotek’s Board of Directors must ensure that the deferred remuneration payment is only paid out or transferred to the employee in the amount that is justifiable considering the company’s financial situation and fulfilment of the criteria for the target-related remuneration.
Other remuneration and benefits
Länsförsäkringar Hypotek may, in addition to remuneration, offer benefits to employees, for example in the form of discounts on company products, company cars, lunch subsidies and healthcare benefits.
Pension and severance terms and conditions are to comply with collective agreements. The LFAB Group may, within the framework of the remuneration policies governing remuneration of senior executives adopted by the Annual General Meeting, agree on special pension and severance terms and conditions.
Total remuneration expensed during the 2010 financial year
Breakdown by category
| Executive Management |
4.3 |
0 |
2 |
0 |
Other employees who can influence
the company’s risk level |
0 |
0 |
0 |
0 |
| Other employees |
1.8 |
0 |
2 |
2 |
|
Total |
6.1 |
0 |
4 |
2 |
The “Executive Management” category comprises the President, Vice President and other members of company management or similar bodies who report directly to the Board of Directors or the President. The “other employees who can influence the company’s risk level” category comprises those defined as specifically controlled personnel. Another breakdown of expensed amounts in addition to what is stated in the table above could risk disclosing individual’s financial situations. In 2011, some of the employees who are not included in the “Employees in executive positions” category were paid target-related remuneration for the 2010 financial year totalling a maximum of SEK 6,000 per employee, depending on target fulfilment. The target-related remuneration consists in its entirety of cash. No remuneration has been deferred and no pledges of variable remuneration have been made.
During the 2010 financial year, remuneration totalling SEK 6.1 M was expensed and paid.
During the 2010 financial year, the expensed amount for severance pay amounted to SEK 0 and consisted of zero employees. In addition, no severance pay offered was expensed.