Corporate Governance Report

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Group Management
9. Group Management

The Group Executive Team has 16 members including the CEO. In addition to the CEO, the Group Executive Team comprises the Executive Vice Presidents of the five Group Trucks divisions, the Executive Vice President Volvo Construction Equipment, the Executive Vice President Business Areas, the Executive Vice President Volvo Financial Services and the Executive Vice Presidents of the seven Corporate Functions. The members of the Group Executive Team report directly to the CEO.

The CEO leads the operations of the Group partly through the Group Executive Team but also through the Group Trucks Executive Management Team, which have regular meetings. In addition, the CEO conducts regular follow-ups with the heads of Group Functions, the other Business Areas and Corporate Functions. Further, the Business Areas and the Group Functions have separate decision foras called Business Review Meetings and there are also cross-functional committees that manage matters concerning processes pertaining to more than one division and/or Business Area. These bodies effect control and monitoring of the Group’s financial development, strategies and targets and make decisions regarding investments and other matters.

Remuneration to the Group Executive Team
AB Volvo’s Annual General Meeting annually approves a policy on remuneration to the Group Executive Team, following a proposal from the Board. The remuneration policy adopted by the Annual General Meeting 2013 states that the guiding principle is that remuneration and other terms of employment for the Group Executive Team shall be competitive in order to ensure that the Volvo Group can attract and retain competent executives.

The policy also states that the executives may receive variable salary in addition to fixed salary. The variable salary may, as regards the President, amount to a maximum of 75 percent of the fixed salary and, as regards the other Group Executive Team members, a maximum of 60 percent of the fixed salary. In 2013, members of the Group Executive Team were entitled to variable salary according to a program for variable remuneration determined by the Board. The performance targets defined in the program were mainly related to operating margin and cash flow.

The purpose of the program for variable remuneration is to create an incentive for the executives to strive for the Volvo Group developing in such a manner that the defined performance targets are achieved, thereby constituting a management tool. Accordingly, the performance targets set by the Board for variable remuneration inter alia relate to the Group’s financial targets for improved operating margin.

The Group Executive Team members have participated in the Group's long-term, share-based incentive plan for senior executives comprising the years 2011-2013. The plan applied during the financial years 2011 until and including 2013 and consisted of three yearly plans. The participants invested in Volvo shares during each yearly plan, up to a maximum of 15 percent of the fixed gross base salary for Group Executive Team members and 10 percent of the fixed gross base salary for other participants. On the conditions that the participant remained an employee within the Volvo Group and also retained the invested Volvo shares for at least three years after the investment date, one matching share per invested share and a number of performance shares per invested share could be allotted. Allotment of performance shares was conditional on the Volvo Group's ROE reaching at least 10 percent according to the Group's annual report for the financial year in question. Maximum allotment of performance shares was effected if ROE for the financial year reached 25 percent. According to the plan conditions, no matching shares should be allotted for a yearly plan if the Annual General Meeting held the following year resolved that no dividend should be distributed to the shareholders. Maximum allotment of performance shares under a yearly plan amounted to seven shares per invested share for the CEO, six shares per invested share for Group Executive Team members and five shares per invested share for other participants. 

The Remuneration Committee conducts an annual evaluation of the remuneration policy, Volvo’s system for variable remuneration to executives and the long-term, share-based incentive program to senior executives and the Board prepares a special report of this evaluation and the conclusions. The report on the evaluation for 2013 will be available on Volvo’s website not later than two weeks prior to the Annual General Meeting 2014, http://www.volvogroup.com/. For more information about remuneration to the Group Executive Team and an account of outstanding share and share-price related incentive programs to the management, refer to Note 27 in the Group’s notes in the Annual Report.

Changes to the Group Executive Team
On April 1, 2013, Eva Persson retired and thereby resigned from the Group Executive Team and from her position as General Counsel and Executive Vice President Corporate Legal & Compliance. Sofia Frändberg assumed the position on the same date.

On April 1, 2013, Jan-Eric Sundgren took up an assignment as expert adviser assisting the CEO and senior management on issues pertaining to environment, technology, policies, research and education. He therefore resigned from the Group Executive Team and from his position as Executive Vice President Public & Environmental Affairs. Niklas Gustavsson assumed the position on the same day.

On January 1, 2014, Patrick Olney left the Volvo Group and he therefore resigned from the Group Executive Team and from his position as Executive Vice President Volvo Construction Equipment. Martin Weissburg assumed the position on the same date. Martin Weissburg therefore resigned from his position as Executive Vice President Volvo Financial Services. While the recruitment process to find the successor to that position is ongoing, Scott Rafkin will, as per January 1, 2014, assume the position as Acting Head of Volvo Financial Services and in such capacity participate at the Group Executive Team meetings.
 
On January 1, 2014, Jan Gurander joined the Group Executive Team and assumed the position as Executive Vice President. On March 1, 2014, Anders Osberg will assume a new position and strengthen the management work on the long-term development of the Business Areas of the Volvo Group. He will therefore resign from the Group Executive Team and from his position as CFO and Executive Vice President Corporate Finance & Control. Jan Gurander will assume this position on the same date.