Corporate Governance Report


4. Board of Directors

Duties
The Board of Directors is ultimately responsible for Volvo’s organization and management of the company’s operations. The Board is responsible for the Group’s long-term development and strategy, for regularly controlling and evaluating the Group’s operations and for the other duties set forth in the Swedish Companies Act.

Composition
During the period January 1, 2012 – December 31, 2012, AB Volvo’s Board consisted of nine members elected by the Annual General Meeting. In addition, the Board had three members and two deputy members appointed by employee organizations.

The Annual General Meeting 2012 appointed Carl-Henric Svanberg as new member and Chairman of the AB Volvo Board. Carl-Henric Svanberg is also Chairman of the Board of BP p.l.c. He has long prior experience as a President and CEO for leading global companies.

An account of each Board member’s age, principal education, professional experience, assignments in the company, other important board memberships, their own and related parties’ ownership of shares in Volvo as of February 21, 2013, and the year they were elected on the Volvo Board, is presented in the “Board of Directors” section.

Independence requirements
The Board of Directors of AB Volvo must meet independence requirements pursuant to the Code entailing that only one person from the company’s management may be a member of the Board, that a majority of the Board members elected by the General Meeting shall be independent of the company and the company management and that at least two of the Board members elected by the General Meeting who are independent of the company and the company’s management shall also be independent of the company’s major shareholders. Prior to the Annual General Meeting 2012, the Election Committee presented the following assessment concerning independence of the Board members elected by the Annual General Meeting 2012.

Peter Bijur, Hanne de Mora, Carl-Henric Svanberg, Ravi Venkatesan, Lars Westerberg and Ying Yeh were all considered independent of the company and company management as well as of the company’s major shareholders.

Olof Persson, as AB Volvo’s President and CEO of the Volvo Group, was considered independent of the company’s major shareholders but not of the company and company management.

Jean-Baptiste Duzan was considered independent in relation to the company and company management. However, in his prior capacity as an advisor to the CEO of Renault S.A., he was deemed to have such a relation to Renault s.a.s. that he could not be considered independent thereof. Since Renault s.a.s., prior to the Annual General Meeting 2012, controlled more than 10 percent of the votes in the company, Jean-Baptiste Duzan was not considered independent in relation to one of the company’s major shareholders.

Anders Nyrén was deemed independent in relation to the company and company management. However, due to his capacity as President and CEO of AB Industrivärden, he was not deemed independent thereof. Since AB Industrivärden, prior to the Annual General Meeting 2012, controlled more than 10 percent of the votes in the company, Anders Nyrén was not considered independent in relation to one of the company’s major shareholders.

Work procedures
Every year, the Board adopts work procedures for the Board’s work. The work procedures contain rules pertaining to the distribution of work between the Board members, the number of Board meetings, matters to be addressed at regular meetings of the Board and duties incumbent on the Chairman.

In accordance with the work procedures, Volvo’s Chairman shall organize and guide the Board’s work, be responsible for contacts with the owners regarding ownership matters and provide the owners’ viewpoints to the Board, ensure that the Board receives adequate information and decision documents for its work and ensure compliance with the Board’s resolutions. In addition, the work procedures contain directives concerning the tasks of the Audit Committee and the Remuneration Committee respectively.

The Board has also issued written instructions specifying how financial information should be reported to the Board, as well as defining the distribution of duties between the Board and the President.

The Board’s work in 2012
The Board’s work is mainly performed within the framework of formal Board meetings and through meetings in the respective committees of the Board. In addition, regular contact is maintained between the Chairman of the Board and the CEO in order to discuss on-going business and to ensure that the resolutions taken by the Board are executed.

In 2012, there were eight regular meetings, one statutory meeting and two extraordinary meetings. The attendance of Board members at these meetings is presented in the table The Board’s composition and attendance at meetings January 1, 2012 - December 31, 2012.

During 2012 the Board devoted time to matters related to the implementation of the new organizational structure of the Group, such as the introduction of a new financial framework and new strategic objectives for 2013-2015 and discussions concerning a new truck brand positioning strategy. The launch of the new Volvo FH was an important event for the Volvo Group during 2012, which was the result of a long-term development project that has been discussed and decided upon by the AB Volvo Board. During 2012 the Volvo Group further divested the subsidiary Volvo Aero to the British engineering company GKN and the Group increased its shareholding in the German engine manufacturer Deutz AG, two transactions that have also been discussed and decided by the Board. Further the Board has during 2012 devoted time to matters concerning the agreement that Volvo signed with Dongfeng Motor Group Company Limited (DFG) in January 2013, to acquire 45% of a new subsidiary of DFG. As a result of the uncertainty about the macroeconomic trend, the Board specifically focused on monitoring the business environment in order to be prepared to adapt the operation to prevailing demand. The Board also continuously worked with leadership succession- and leadership development issues.

The Board also reviewed the financial positions of AB Volvo and the Volvo Group on a regular basis and acted in order to ensure that there are efficient systems with which to follow-up and control the business and financial position of the Volvo Group. In connection therewith, the Audit Committee was responsible for preparing the Board’s work to assure the quality of the Group’s financial reporting by reviewing the interim reports, the Annual Report and consolidated accounting. The Board also met with the company’s auditors at several occasions during 2012 and without the presence of management at one occasion. The Board continuously evaluates the performance of the CEO.

During 2012 the Board performed its yearly evalutation of the Board's work.

 

The Board’s committees

5. Audit Committee

Duties
In December 2002, the Board established an Audit Committee primarily for the purpose of overseeing the accounting and financial reporting processes and the audit of the financial statements.

The Audit Committee is responsible for preparing the Board’s work to assure the quality of the Group’s financial reporting by reviewing the interim reports, the Annual Report and consolidated accounting. The Audit Committee also has the task of reviewing and overseeing the Group’s legal and taxation matters as well as compliance with laws and regulations that may have a material impact on the financial reporting. The Audit Committee also has the task of reviewing and overseeing the impartiality and independence of the company’s auditors. The Audit Committee is also responsible for evaluating the internal and external auditors' work, providing the Election Committee with the results of the evaluation of the external auditors and to assist in preparing proposals for the election of auditors. In addition, the Audit Committee’s task is to establish guidelines specifying what other services, beyond auditing, the company may procure from the auditors. The Audit Committee shall also evaluate the quality, relevance and efficiency of the Group’s system for internal control over financial reporting, and with respect to the internal audit and risk management. Finally, the Audit Committee adopts guidelines for transactions with companies and persons closely associated with Volvo.

Composition and work in 2012
At the statutory Board meeting following the Annual General Meeting 2012, the following Board members were appointed members of the Audit Committee:

  • Lars Westerberg,
  • Peter Bijur,
  • Jean-Baptiste Duzan

Lars Westerberg was appointed Chairman of the Audit Committee.

According to the Swedish Companies Act, the members of the Audit Committee may not be employees of the company and shall be independent and at least one member of the Audit Committee shall be independent and have accounting or auditing expertise. In addition, the Code stipulates that a majority of the members of the Audit Committee shall be independent of the company and the company management, and that at least one of the members who is independent of the company and the company management shall also be independent of the company's major shareholders. The Election Committee’s assessment of independence prior to the Annual General Meeting 2012 is presented above under the “Independence requirements” section. All members of the Audit Committee are highly familiar with accounting matters and the accounting standards that apply for an international Group such as Volvo.

The Audit Committee met with the external auditors without the presence of management at four occassions in connection with the Audit Committee metings. The Audit Committee has also met with the Head of Corporate Audit at the meetings of the Audit Committee.

The Audit Committee and the external auditors have, among other tasks, discussed the external audit plan and risk management. The Audit Committee held eight meetings during 2012. The attendance of Board members at Committee meetings is presented in the table to the right on this page.

6. Remuneration Committee

Duties
In April 2003, the Board established a Remuneration Committee for the purpose of preparing and deciding on issues relating to remuneration to senior executives in the Group. The duties of the Committee include presenting recommendations for resolution by the Board regarding the terms and conditions of employment and remuneration for the President of AB Volvo, principles for remuneration, including pensions and severance payments, for other members of the Group Executive Team, and principles for variable salary systems, share-based incentive programs, pensions and severance payment for other senior executives in the Group.

The Remuneration Committee shall monitor and evaluate ongoing programs and programs concluded during the year covering variable remuneration for the executives, application of the policy for remuneration to senior executives on which the Annual General Meeting shall decide and the current remuneration structures and levels in the Group. The Board shall, not later than two weeks prior to the Annual General Meeting, submit a report on the results of the Remuneration Committee’s evaluation on the company’s website.

Composition and work in 2012
At the statutory Board meeting following the Annual General Meeting 2012, the following Board members were appointed members of the Remuneration Committee:

  • Carl-Henric Svanberg,
  • Anders Nyrén,
  • Ying Yeh

Carl-Henric Svanberg was appointed Chairman of the Remuneration Committee.

The Code sets the requirement that members of the Remuneration Committee, with the exception of the Board Chairman if a member of the Remuneration Committee, shall be independent of the company and company management. The Election committee’s assessment of independence prior to the Annual General Meeting 2012 is presented above under the “Independence requirements” section

The Remuneration Committee held four meetings during 2012. The attendance of Board members at Committee meetings is presented in the table to the right on this page.

Remuneration to Board members
The Annual General Meeting resolves on the fees to be paid to the Board members elected by the shareholders. The Annual General Meeting held on April 4, 2012, approved fee payments to the Board, for the time until the end of the next Annual General Meeting, as follows:

Volvo’s Chairman should receive a fee of SEK 2,100,000 and each of the remaining members elected by the shareholders should receive a fee of SEK 700,000 with the exception of the President. The Chairman of the Audit Committee should receive a fee of SEK 300,000 and other members of the Audit Committee SEK 150,000 each. In addition, the Chairman of the Remuneration Committee should receive SEK 125,000 and other members of the Remuneration Committee SEK 100,000 each.