The Board of Directors’ work with remuneration in 2016

According to the Swedish Code of Corporate Governance the Board must establish a remuneration committee charged with preparing matters regarding remuneration and other employment conditions for executive management.

The remuneration committee shall also, according to chapter 9.1, second and third point in the Swedish Code of Corporate Governance, monitor and evaluate variable remuneration programs that are ongoing or completed during the year and monitor and evaluate the application of the guidelines for remuneration to senior officers which, according to law, the Annual General Meeting decides as well as the current remuneration structures and levels in the company. The remuneration committee has thereby performed the following evaluation.

Principles for remuneration to senior officers

Peab’s remuneration policy states that remuneration in its entirety should be designed so that it attracts the employees needed to meet Group goals. The total remuneration for the CEO and each senior officer must be determined individually, on par with the market and thereby mirror the responsibility and performance of the senior officer. The structure of the total remuneration must be such that it supports achieving results in line with Peab’s goals and strategies as well as beehaving according to Peab’s values.

Fixed salary

The CEO and senior officers (executive management) are offered a fixed salary on par with the market for the industry and other relevant sections of business. Every year Peab obtains information on market salaries for each position as a reference and reviews current salaries in the company.

Variable salary

The CEO and senior officers are offered an annual variable salary for achieving goals based on the Peab Group’s result before tax. Such variable salary are maximized to 60 percent of annual salaries and applies to all senior officers. The scale between minimum, goal and maximum levels is linear and defined as +/- 20 percent in relation to Group result goals. Variable salary is settled the year after being earned and the individual officer can decide if it should be paid out as salary or placed as a pension premium in a financial instrument connected to the Peab share.

The remuneration committee believes that because all the members of executive management have identical goals this will lead them to work in the same direction, higher Group results, which is also meant to be in the best interests of the shareholders.

Long-term incentive program

A new cash-based long-term incentive (LTI) program was launched for 2015 - 2017 - called "Partnership 2015 - 2017" with annual goals for Group operative operating margins where the outfall is connected to Peab's dividend level. The purpose of the program is to reward key people. An unbroken empolyment for the entire course is required to receive the outfall from the program. The program therefore also has a retaining effect.

For senior officers and the CEO the upper limit is 40 percent of their fixed annual salary and any outfall is placed in pension savings in a financial instrument connected to the Peab share.

A previous LTI program was launched in 2011 that stretched to the end of 2014 with the same Group targets for qualification as in the current program. The targets were not met in 2011-2014 and therefore no provisions were made for the LTI program.

It is the remuneration committee’s opinion that the previous program did not have the intended rewarding and retaining effect when the goals were not met and there was no outfall.

Share-related programs

At the moment there are no share-related incentive programs in the Peab Group.

The remuneration committee believes that together the current program for variable salary and ongoing long-term incentive programs are sufficient and therefore there is no reason to propose the implementation of a share-related incentive program at the moment.  

Pensions

The CEO and senior officers have the right to pension solutions corresponding to collective bargaining agreements and additional agreements with Peab. All pension obligations are defined contribution pensions which means that the premium for alternative ITP and early retirement in total is 47 percent of the fixed salary with a reduction for premiums Peab has paid for ITPK Own pension and to Alecta for ITP. The CEO and senior officers have made an agreement with Peab that employment terminates on the month the employee turns 62 years old.

Terms of employment

Notice on the part of Peab is twelve months and a severance pay of twelve months salary. Severance pay is based on the employee’s fixed monthly salary and does not include extra payment for benefits.

For senior officers, a reduction in the severance payment is made for any salary received from a new position or any kind of remuneration from other operations.

In the case the CEO or a senior officer gives notice the term of notice is six months. Peab has decided to provide severance pay after the notice term of six months for a further six months in order to reasonably compensate the inconvenience that the competition and solicitation prohibition entails. If a senior officer has received notice from Peab they may continue to work in the industry. The period under which a senior officer may not compete is, in other words, twelve months no matter which party breaks the contract.  

Other benefits

A company car is provided for the CEO and senior officers according to Peab’s benefit car policy as well as healthcare insurance from one of the companies listed by Peab.  

The remuneration committee’s conclusion

Due to the above the remuneration committee can conclude that the guidelines (Peab’s remuneration policy) decided by Peab’s Annual General Meeting 2016 are followed and correctly applied on salaries and other remuneration to the Chief Executive Officer and senior officers.

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