The Board of Directors’ work with remuneration in 2019

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 executives 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 executives

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 executive must be determined individually, aligned with the market pay and thereby mirror the responsibility and performance of the executive. 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 behaving according to Peab's values.

Base salary

The CEO and other executives are offered a base salary aligned with the market pay for the industry and other relevant sections of business. Every year Peab obtains information on market pay for each position as a reference and reviews current salaries in the company

Variable salary

The CEO and the other executives are offered an annual variable salary for achieving goals based on the Peab Group's strategic objectives. Such variable varies between maximum 25 - 60 percent of annual base salaries and applies to all executives. Variable salary is settled the year after being earned and the individual executive 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 the CEO and the other executives 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

For the period 2018 – 2020 there is a cash based, long-term incentive programme - called Delägarskap 2018 – 2020 (part ownership 2018 – 2020) - with annual targets for the group's operating margin. The purpose of the programme is to reward key people. To receive benefits from the programme, the employment throughout the period of the programme must be unbroken. In the view of the remuneration committee, the programme thus also has a retaining effect of senior management.

For the CEO and the other executives upper limit is 32 percent of their base annual salary and any result is placed in pension savings in a financial instrument connected to the Peab share.

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 the other executives are entitled to pension solutions corresponding to collective agreement and additionally by agreement with Peab.

The pension policy for executives states that pension undertakings are based on a premium ladder or fixed premiums which entitles a premium of 35-47 percent of the base salary.

CEO and some of the executives have agreements with Peab that the employment ceases in the month when the executive reaches the age of 62, whilst other executives at the age of 65.

Terms of employment

The period of notice given by Peab is twelve months and there is also severance pay corresponding to six to twelve months' base salary. The severance pay represents only the monthly base salary with no additional benefits.

For the CEO and the other executives, if income or other remuneration from external activities is received during the notice period, this is offset against the eventual severance pay.

In the case the CEO or an executive gives notice the term of notice is six months. Peab has decided to provide severance pay after the notice period of six months for a further six months in order to reasonably compensate the inconvenience that the non-competition clauses entails.

Other benefits

A company car is provided for the CEO and the other executives 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 2018 are followed and correctly applied on salaries and other remuneration to the Chief Executive Officer and the other executives in the group management.

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