Parent Company income statement

Note 6

Employees and personnel expenses

Process for evaluating and determining remunerations to the board of directors,
the ceo and group management

The guidelines applied to the remuneration of senior executives in the 2018/2019 financial year correspond to those in the proposal for the upcoming year, which is included in the Administration Report. The principle for remuneration to the Board of Directors, Chief Executive Officer (CEO) and Group management is that remuneration should be competitive. The Nomination Committee proposes Board fees to the Annual General Meeting. Fees are paid to the Board of Directors in accordance with a resolution by the Annual General Meeting. 

For remuneration to the CEO, members of Group Management and other senior executives in the Group, the Board of Directors has appointed a Remuneration Committee consisting of the Chairman of the Board and the Deputy Chairman of the Board, with the CEO attending in a re-porting capacity. The CEO, members of Group Management and other senior executives are paid a fixed salary, variable remuneration and convention-al employment benefits. Pension benefits and incentive programmes also apply as detailed below. The Remuneration Committee follows the guidelines on remunerations for senior executives approved by the Annual General Meeting of Addtech AB.

Call options for senior executives

Background and motivation for long-term incentive programmes

The purpose of long-term incentive schemes is to enable Group executives, through an investment of their own, to participate in and work for a favourable trend in the value of the Company’s shares.

The schemes are also expected to generate improved conditions for recruiting and retaining skilled personnel for the Addtech Group, to provide competitive compensation and to unite the interests of the shareholders with those of the executives. The schemes are intended to contribute to executives increasing their shareholding in Addtech over the long term. The executives encompassed by the schemes are those who, in an otherwise heavily decentralised organisation, are able to impact profit positively by means of partnerships between Group subsidiaries. The share-related incentive schemes approved by the Annual General Meeting do not entail a net charge against Company equity.

Similar call option schemes for senior executives and a select number of management members in the Addtech Group were adopted by the 2009-2018 Annual General Meetings. With the exception of the CEO, Board members have not been entitled to acquire call options. The schemes involve call options for shares repurchased by Addtech, with each call option entitling the holder to acquire one repurchased Class B share. As financial instruments, the call options are freely transferable. To encourage participation in the scheme, a subsidy is paid corresponding to the premium paid for each call option. This subsidy will be paid out two years after the Annual General Meeting, providing that the option holder’s employment with the Group has not been terminated and that the call options have not been sold before this time. The expenses for the scheme consist of the subsidy plus social security expenses. The subsidy corresponds to the option premium that the Company receives on the transfer of the call options and, accordingly, the scheme entails no net charge on the Company’s equity. 

In the event that the option holder does not wish to exercise all of the call options acquired, the Company is entitled to repurchase call options from the holder. Options are to be acquired at a price corresponding at most to their market value at any given time. Call options may not, however, be repurchased during any period in which trade in the Company’s shares is forbidden. 

At the end of the financial year, Addtech had four call option programmes outstanding, involving a total 1,144,893 Class B shares.

2018/2022 scheme

The allotment for 2018 approved by the 2018 Annual General Meeting included 24 executives and a total of 300,000 call options, corresponding to 0.4 percent of the total number of shares and approximately 0.3 percent of the total number of votes in the Company. The allotment varied between 12,500 and 27,500 options per person. The Chief Executive Officer acquired 27,500 and other members of Group Management 87,500.

Each option entitles the holder to acquire one repurchased Class B share between 6 September 2021 and 3 June 2022. The purchase price for shares when exercising options will correspond to 120 percent of the volume-weighted average price paid for the Company’s Class B shares on NASDAQ Stockholm between 31 August 2018 and 13 September 2018. In the event that, on invoking call options, the market price for Class B shares in the Company exceeds 200 percent of the average price during the period 31 August 2018 to 13 September 2018, the exercise price shall be raised by the amount exceeding 200 percent in SEK 1 increments. The premium for the call options will correspond to the market value of the call options in accordance with an external independent valuation applying the Black & Scholes model. The measurement period for calculating the option premium will be based on the volume-weighted average price paid for the Company’s Class B shares on NASDAQ Stockholm between 7 September 2018 and 13 September 2018. 

The exercise price for the call options was set at SEK 232.90. The market value of the call options was set at SEK 13.30. The expenses for the scheme consist of the subsidy paid in September 2020, as detailed above, and the social security fees payable on that subsidy. The total cost of the subsidy, including social security fees, is estimated at approximately SEK 4.3 million after corporation tax. The subsidy corresponds to the option premium that the Company receives on the transfer of the call options. The personnel expense accrues over the vesting period. 

2017/2021 scheme

The allotment for 2017 approved by the 2017 Annual General Meeting included 24 executives and a total of 300,000 call options, corresponding to 0.4 percent of the total number of shares and approximately 0.3 percent of the total number of votes in the Company. The allotment varied between 7,000 and 25,500 options per person. The Chief Executive Officer acquired 25,500 and other members of Group Management 115,000.

Each option entitles the holder to acquire one repurchased Class B share between 14 September 2020 and 4 June 2021. The purchase price for shares when exercising options will correspond to 120 percent of the volume-weighted average price paid for the Company’s Class B shares on NASDAQ Stockholm between 1 September 2017 and 14 September 2017. In the event that, on invoking call options, the market price for Class B shares in the Company exceeds 200 percent of the average price during the period 1 September 2017 to 14 September 2017, the exercise price shall be raised by the amount exceeding 200 percent in SEK 1 increments. The premium for the call options will correspond to the market value of the call options in accordance with an external independent valuation applying the Black & Scholes model. The measurement period for calculating the option premium will be based on the volume-weighted average price paid for the Company’s Class B shares on NASDAQ Stockholm between 8 September 2017 and 14 September 2017.

The exercise price for the call options was set at SEK 178.50. The market value of the call options was set at SEK 10.80. The expenses for the scheme consist of the subsidy paid in September 2019, as detailed above, and the social security fees payable on that subsidy. The total cost of the subsidy, including social security fees, is estimated at approximately SEK 3.5 million after corporation tax. The subsidy corresponds to the option premium that the Company receives on the transfer of the call options. The personnel expense accrues over the vesting period.

2016/2020 scheme

The allotment for 2016 approved by the 2016 Annual General Meeting included 20 executives and a total of 300,000 call options, corresponding to 0.4 percent of the total number of shares and approximately 0.3 percent of the total number of votes in the Company. The allotment varied between 7,500 and 37,500 options per person. The Chief Executive Officer acquired 31,500 and other members of Group Management 135,000.

Each option entitles the holder to acquire one repurchased Class B share between 16 September 2019 and 5 June 2020. The purchase price for shares when exercising options will correspond to 120 percent of the volume-weighted average price paid for the Company’s Class B shares on NASDAQ Stockholm between 1 September 2016 and 14 September 2016. The premium for the call options will correspond to the market value of the call options in accordance with an external independent valuation applying the Black & Scholes model. The measurement period for calculating the option premium will be based on the volume-weighted average price paid for the Company’s Class B shares on NASDAQ Stockholm between 8 September 2016 and 14 September 2016.

The exercise price for the call options was set at SEK 159.00. The market value of the call options was set at SEK 11.80. The expenses for the scheme consist of the subsidy paid in September 2018, as detailed above, and the social security fees payable on that subsidy. The total cost of the subsidy, including social security fees, is estimated at approximately SEK 3.6 million after corporation tax. The subsidy corresponds to the option premium that the Company receives on the transfer of the call options. The personnel expense accrues over the vesting period.

2015/2019 scheme

The allotment for 2015 approved by the 2015 Annual General Meeting included 24 executives and a total of 350,000 call options, corresponding to 0.5 percent of the total number of shares and approximately 0.4 percent of the total number of votes in the Company. The allotment varied between 4,000 and 30,000 options per person. The Chief Executive Officer acquired 30,000 and other members of Group Management 150,000.

Each option entitles the holder to acquire one repurchased Class B share between 17 September 2018 and 3 June 2019. The purchase price for shares when exercising options will correspond to 120 percent of the volume-weighted average price paid for the Company’s Class B shares on NASDAQ Stockholm between 31 August 2015 and 11 September 2015. The premium for the call options will correspond to the market value of the call options in accordance with an external independent valuation applying the Black & Scholes model. The measurement period for calculating the option premium will be based on the volume-weighted average price paid for the Company’s Class B shares on NASDAQ Stockholm between 7 September 2015 and 11 September 2015.

The exercise price for the call options was initially set at SEK 154.50. The market value of the call options was set at SEK 10.20. Under the terms approved by the Annual General Meeting, the programme was recalculated following the Group’s distribution of AddLife. Following the recalculation, the exercise price for the call options is SEK 125.10, with each option entitling the holder to 1.23 shares.

The expenses for the scheme consist of the subsidy paid in September 2017, including social security fees amounting to approximately SEK 3.5 million after corporation tax. The subsidy corresponds to the option premium that the Company receives on the transfer of the call options. The personnel expense accrues over the vesting period.

Between 17 September 2018 and 31 March 2019, 51,500 options were repurchased under current market conditions, based on an in-dependent external valuation applying the Black & Scholes model. During the corresponding period 99,400 options were redeemed, corresponding to 122,262 shares. 

Board of Directors

In accordance with the resolution of the Annual General Meeting, the total Board fees of SEK 2,275 thousand (2,025) approved by the Annual General Meeting are distributed between the Board members not employed by the Parent Company. 

Managing director of the parent company 

During the period 1 April 2018 to 31 August 2018, the former Managing Director of the Parent Company, Johan Sjö, received fixed salary of SEK 2,263 thousand and variable salary of SEK 906 thousand. Variable remuneration included SEK 135 thousand regarding the subsidy expense for the year for participation in the Group’s incentive programmes. He also received taxable benefits amounting to SEK 44 thousand. Pension premiums of SEK 715 thousand were paid. 

During the period 1 September 2018 to 31 March 2019, the Managing Director of the Parent Company, Niklas Stenberg, received fixed salary of SEK 2,450 thousand and variable salary of SEK 906 thousand. Variable remuneration included SEK 171 thousand regarding the subsidy expense for the year for participation in the Group’s incentive programmes. He also received taxable benefits amounting to SEK 2 thousand. Pension premiums of SEK 757 thousand were paid. 

From the age of 65, the Managing Director is covered by a defined contribution pension plan, the scale of which depends on the outcome of pension insurance agreements. The size of the pension premiums is determined annually by the Remuneration Committee. Variable salary paid based on the Group’s earnings may not exceed 30 percent of fixed salary and is not pensionable. An additional premium may be payable corresponding to 20 percent of paid variable remuneration used to acquire shares in Addtech AB. On termination by the Company, the period of notice is of 12 months and, on resignation by the Managing Director, the period of notice is six months. Beyond salary paid during the period of notice, on termination by the Company, the Managing Director is entitled to severance pay equivalent to one year’s salary. In the event that the Managing Director resigns, he does not receive any severance pay.

Other members of group management

For other members of Group Management, fixed salary of SEK 13,850 thousand (12,875) was paid and variable salary of SEK 4,048 thousand (4,486). Variable remuneration included SEK 988 thousand (1,135) regarding the subsidy expense for the year for participation in the Group’s incentive programmes. The variable remuneration was expensed in the 2018/2019 financial year and disbursed in 2019/2020. These individuals also received taxable benefits amounting to SEK 307 thousand (439). From the age of 65, members of Group management are covered by pension entitlements in accordance with individual agreements. Certain pension solutions are defined premium plans, with the size of the pension depending on the outcome of pension insurance agreements, while others are defined benefit plans.

In terms of the expense, both the defined benefit pension plans and the defined premium plans are basically equivalent to the ITP plan. During 2018/2019, a total of SEK 2,854 thousand (2,883) in pension premiums was paid for the group “Other members of Group management”. 

Variable salary paid based on the Group’s earnings may not exceed 30 percent of fixed salary. An additional premium may be payable corresponding to 20 percent of paid variable remuneration used to acquire shares in Addtech AB.

On termination by the Company, the maximum period of notice is of 12 months and, on resignation by the employee, the period of notice is six months. Severance pay is payable equivalent to no more than one year’s salary. In the event that the employee resigns, he/she does not receive any severance pay.

Leases

Addtech as lessor

The Group currently has no significant operating lease income.

Finance leases

The Group currently has no significant finance leases.

Financial income and expenses

Appropriations – Parent Company

Taxes