Below Remuneration Committee Chairman Barbara Milian Thoralfsson presents the company’s approach to remuneration for senior management.
"Offering competitive salaries to senior management is a prerequisite for attracting personnel and stimulating them to make the strong commitment that is required in the tough international competition that Electrolux faces. The Group also aims at offering competitive total remuneration, based on performance.
Advice from independent consultants
In order to determine appropriate total remuneration in connection with recruiting someone for a specific position and retaining him/her, Electrolux requests advice from external consultants. They evaluate the leading management positions and compare remuneration with other Swedish and European companies, including Electrolux leading competitors.
More than fixed salary
Remuneration to management in Electrolux consists of a fixed salary, a variable salary based on annual targets, a long-term share-related salary, and pension benefits. Remuneration other than fixed salary has symbolic importance. If the company does not perform well, the shareholders are not the only ones affected. And since many others in the company have performance-based salaries, it would be inappropriate for senior management to receive only a fixed salary.
Important variable component
The variable salary is based on clearly defined targets for each member of senior management. The Board devotes a good deal of time to defining these targets, since they are an important part of the work of running the company. The targets include financial goals for value creation. Variable salary is paid only if the targets are reached, and a maximum level is defined for each position. The maximum level may not be exceeded.
Performance share program
In addition to fixed and variable remuneration, there is a long-term share-related component. For a large listed company like Electrolux, with tens of thousands of shareholders, it is important that in their daily activities the President and senior management are moving in the same direction as the owners, who do not participate in daily operations. The Electrolux incentive program is linked to the Groups’ financial development and is maximized at a defined level, and covers about 160 persons. The Board of Directors will propose a share program in 2008 based on earnings per share. Over time, the fixed component corresponds to about half of total remuneration, and the variable and share-based components each correspond to about 25%.
Pension benefits
Pension benefits are based on allocations during the period in which the individual is employed by the company. This premium-based system enables the Group to have continuous control of costs."
Information on performance based share programs and previous option programs can be downloaded from the Annual Report, to the right.
