Note 27 - Employees and remuneration

Employees and employee benefits

In 2010, the average number of employees was 51,544 (50,633), of whom 33,748 (32,955) were men and 17,796 (17,678) women.

A detailed specification of the average number of employees by country has been submitted to the Swedish Companies Registration Office and is available on request from AB Electrolux, Investor Relations and Financial Information. See also Electrolux website, Company overview.


Average number of employees, by geographical area
	Group
	2010	2009
Europe	23,030	25,292
North America	10,076	10,384
Rest of world	18,438	14,957
Total	51,544	50,633


Salaries, other remuneration and employer contributions
	2010			2009
	Salaries and remuneration	Employer contri- butions	Total	Salaries and remuneration	Employer contri- butions	Total
Parent Company	831	575	1,406	764	562	1,326
(whereof pension costs)	—	(246)¹⁾	(246)¹⁾	—	(159)¹⁾	(159)¹⁾
Subsidiaries	11,847	3,122	14,969	12,398	3,477	15,875
(whereof pension costs)	—	(495)	(495)	—	(718)	(718)
Total Group	12,678	3,697	16,375	13,162	4,039	17,201
(whereof pension costs)	—	(741)	(741)	—	(877)	(877)

1) Includes SEK 12m (14), referring to the President and his predecessors.


Salaries and remuneration by geographical area for Board members, senior managers and other employees
	2010			2009
	Board members and senior managers	Other employees	Total	Board members and senior managers	Other employees	Total
Sweden
Parent Company	44	787	831	48	716	764
Other	8	214	222	8	201	209
Total Sweden	52	1,001	1,053	56	917	973
EU, excluding Sweden	75	5,057	5,132	99	5,797	5,896
Rest of Europe	26	766	792	10	768	778
North America	21	3,084	3,105	18	3,360	3,378
Latin America	46	1,442	1,488	35	1,094	1,129
Asia	17	375	392	14	326	340
Pacific	4	689	693	4	641	645
Africa	1	22	23	2	21	23
Total outside Sweden	190	11,435	11,625	182	12,007	12,189
Group total	242	12,436	12,678	238	12,924	13,162

Of the Board members in the Group, 83 were men and 16 women, of whom 7 men and 5 women in the Parent Company. Senior managers in the Group consisted of 82 men and 23 women, of whom 9 men and 3 women in the Parent Company. The total pension cost for Board members and senior managers in the Group amounted to 33m (37) in 2010.


Employee absence due to illness
	2010		2009
%	Employees in the Parent Company	All employees in Sweden	Employees in the Parent Company	All employees in Sweden
Absence due to illness, as % of total normal working hours	4.8	4.2	5.2	4.9
Of which 60 days or more	45.3	44.8	52.5	52.2

Absence due to illness, by category¹⁾
Women	6.6	6.1	7.7	7.0
Men	3.3	3.1	3.7	3.8
29 years or younger	1.8	1.9	2.4	2.3
30–49 years	4.5	4.1	5.3	5.0
50 years or older	5.5	5.0	5.8	5.4

1) % of total normal working hours within each category, respectively.

In accordance with the regulations in the Swedish Annual Accounts Act, in effect as of July 1, 2003, absence due to illness for employees in the Parent Company and the Group in Sweden is reported in the table above. The Parent Company comprises the Group’s head office as well as a number of units and plants, and employs approximately 75% of the Group’s workforce in Sweden.

Compensation to the Board of Directors

The Annual General Meeting (AGM) determines the total compensation to the Board of Directors for a period of one year until the next AGM. The compensation is distributed between the Chairman, Deputy Chairman, other Board Members and remuneration for committee work. The Board decides the distribution of the committee fee between the committee members. Compensation is paid out in advance each quarter. Compensation paid in 2010 refers to one fourth of the compensation authorized by the AGM in 2009, and three fourths of the compensation authorized by the AGM in 2010. Total compensation paid in cash in 2010 amounted to SEK 4,617k, of which SEK 4,017k referred to ordinary compensation and SEK 600k to committee work. The Board member Hasse Johansson was paid a fee of SEK 15,000 for consultancy services relating to the Groups work on modularization.


Compensation to Board members 2010
‘000 SEK	Ordinary compensation	Compen-sation for committee work	Total compen- sation
Marcus Wallenberg, Chairman	1,600	55	1,655
Peggy Bruzelius, Deputy Chairman	550	200	750
Lorna Davis (as from the AGM 2010)	356	—	356
Hasse Johansson	475	—	475
John S. Lupo	475	—	475
Johan Molin	475	55	530
Hans Stråberg, President	—	—	—
Caroline Sundewall	475	85	560
Torben Ballegaard Sørensen	475	85	560
Barbara Milian Thoralfsson	475	120	595
Ola Bertilsson	—	—	—
Gunilla Brandt	—	—	—
Ulf Carlsson	—	—	—
Total compensation 2010	5,356	600	5,956
Revaluation of synthetic shares from previous assignment period	849	—	849
Total compensation cost 2010 including revaluation of synthetic shares	6,205	600	6,805

Synthetic shares

The AGM in 2010 decided that a part of the fees to the Board of Directors should be payable in synthetic shares. A synthetic share is a right to receive in the future a payment corresponding to the stock-market value of a B-share in Electrolux at the time of payment. In accordance with the fee structure laid down by the AGM, the Directors have for the 2010/2011 term of office been given the choice of receiving 25% or 50% of the fees for the Board assignment in synthetic shares. The remaining part of the fees to the Directors is paid in cash. Foreign Directors have been able to elect to receive 100% of the fee in cash. The synthetic shares entail a right to payment, in the year 2015, of a cash amount per synthetic share corresponding to the price for a B-share in Electrolux at the time of payment. Should a Director’s assignment end not later than four years after the time of allocation, cash settlement may instead take place during the year after the assignment came to an end. The elections made by the Directors mean that on average 25% of the fees for the Board assignment for 2010/2011 is allocated in the form of (in total) 7,374 synthetic shares. At the end of 2010, a total of 34,465 (26,519) synthetic shares were outstanding, having a total value of SEK 6.6m (4.4). The accrued value of the synthetic shares has been calculated as the number of synthetic shares times the volume weighted average price of a B-share in Electrolux as of December 31, 2010. The cost from revaluation of synthetic shares during 2010, was SEK 0.8m. No cash settlements took place in 2010.

Remuneration Committee

The working procedures of the Board of Directors stipulate that remuneration to the President be proposed by a Remuneration Committee. The Committee comprises the Chairman of the Board and two additional Directors. During 2010, the Committee members were Barbara Milian Thoralfsson (Chairman), Marcus Wallenberg and Johan Molin.

The Remuneration Committee establishes principles for remuneration for the President and the other members of Group Management, subject to subsequent approval by the AGM. Proposals on the President’s remuneration submitted by the Remuneration Committee to the Board include targets for variable compensation, the relationship between fixed and variable salary, changes in fixed or variable salary, criteria for assessment of long-term variable salary, pensions and other benefits. The Remuneration Committee resolves on the above subjects for members of the Group Management on proposal by the President.

A minimum of two meetings are convened each year and additional meetings are held when needed. Eight meetings were held during 2010.

Remuneration guidelines for Group Management

The AGM in 2010 approved the proposed remuneration guidelines. These guidelines are described below.

The overall principles for compensation within Electrolux are tied strongly to the position held, individual as well as team performance, and competitive compensation in the country or region of employment.

The overall compensation package for higher-level management comprises fixed salary, variable salary based on short-term and long-term performance targets, and benefits such as pensions and insurance.

Electrolux strives to offer fair and competitive total compensation with an emphasis on "pay for performance". Variable compensation represents a significant proportion of total compensation for higher-level management. Total compensation is lower if targets are not achieved.

The Group has a uniform program for variable salary for management and other key positions. Variable salary is based on financial targets and may include non-financial targets for certain positions. Each job level is linked to a minimum and a maximum level for variable salary, and the program is capped.

Since 2004, Electrolux has long-term performance-share programs for approximately 160 senior managers of the Group. The 2003 option program expired during the year. For more information see options provided to Group Management.

Compensation and terms of employment for the President

The compensation package for the President comprises fixed salary, variable salary based on annual targets, a long-term performance-share program and other benefits such as pensions and insurance.

For the new President, the annualized base salary for 2011 has been set at SEK 9,870,000 (fixed USD amount 1,450,000). It will not be reviewed until January 1, 2013.

The variable salary is based on annual financial targets for the Group. Each year, a performance range is determined with a minimum and a maximum. If the performance outcome for the year is below or equal to the minimum level, no pay out will be made. If the performance outcome is at or above the maximum, pay out is capped at 100% of the annualized base salary. If the performance outcome is between minimum and maximum, the pay out shall be determined on a linear basis.

The President participates in the Group’s long-term performance programs. For more information on these programs, see below.

The notice period for the company is 12 months, and for the President 6 months. The President is entitled to 12 months severance pay based on base salary. Severance pay is applicable if the employment is terminated by the company. It is also applicable if the employment is terminated by the President provided serious breach of contract on the company’s behalf or if there has been a major change in ownership structure in combination with changes in management and changed individual accountability.

The President is employed on a US employment contract and has been assigned to Sweden. A specific support package is provided to him under the Group’s International Assignment Policy, that includes amongst others relocation support, tax filing support, as well as various allowances that are provided to expatriates within the Group under the policy.

Pensions for the President

The President is covered by the pension plans in place with his US employer for old age, disability and death benefits. The retirement age for the President is 65. The President is entitled to a fixed defined annual contribution of SEK 5,445,000 (USD 800,000) that is paid towards the employer’s pension plans (401(k), excess 401(k) and Supplemental Defined Contribution Plan).

The capital value of pension commitments for the President in 2010, prior Presidents, and survivors is SEK 155m (148).

Compensation and terms of employment for other members of Group Management

Like the President, other members of Group Management receive a compensation package that comprises fixed salary, variable salary based on annual targets, long-term performance-share programs and other benefits such as pensions and insurance.

Base salary is revised annually per January 1. The average base salary increase for members of Group Management in 2010 was 3.5% (0).

Variable salary in 2010 is based on financial targets on sector and Group level. Variable salary for sector heads varies between a minimum (no pay out) and a maximum of 100% of annual salary, which is also the cap. The US-based members of Group Management have 100% as midpoint and a maximum of 150%.

Group staff heads receive variable salary that varies between a minimum (no pay out) and a maximum of 80%, which is also the cap.

During 2010 final payments were made for retention agreements relating to variable compensation based on achieved financial targets during the years 2007-2009 and for 2008-2010, as well as for recruitment compensation. The total sum paid in 2010 was SEK 20.6m. There are no further extraordinary arrangements outstanding for either retention or recruitment purposes.

The members of Group Management participate in the Group’s long-term performance programs. These programs comprise the performance-share program introduced in 2004 as well as previous option programs. For more information on these programs, see below.

Certain members of Group Management are entitled to 12 months severance pay based on base salary. Severance pay is applicable if the employment is terminated by the company. It is also applicable if the employment is terminated by the Group Management member provided serious breach of contract on the company’s behalf or if there has been a major change in ownership structure in combination with changes in management and changed individual accountability.

The Swedish members of Group Management are not eligible for fringe benefits such as company cars. For members of Group Management employed outside of Sweden, varying fringe benefits and conditions may apply, depending upon the country of employment.

Pensions for other members of Group Management

The earliest retirement age is 60 for members of Group Management.

Members of Group Management employed in Sweden are covered by the Alternative ITP plan, as well as a supplementary plan.

The Alternative ITP plan is a defined contribution plan where the contribution increases with age. The contribution is between 20% and 35% of pensionable salary, between 7.5 and 30 income base amounts. Provided that the member retains the position until age 60, the company will finalize outstanding premiums in the alternative ITP plan. The contribution to the supplementary plan is 35% of pensionable salary above 20 income base amounts.

Certain Swedish members are covered by a closed supplementary plan in which contributions equal 35% of the pensionable salary. They are also entitled to individual additional contributions.

Electrolux provides disability benefits equal to 70% of pensionable salary less disability benefits from other sources. Electrolux also provides survivor benefits equal to the highest of the accumulated capital for retirement or 250 income base amounts.

The pensionable salary is calculated as the current fixed salary including vacation pay plus the average variable salary for the last three years. Accrued capital is subject to a real rate of return of 3.5% per year.

For members of Group Management employed outside of Sweden, varying pension terms and conditions apply, depending upon the country of employment.


Compensation paid to Group Management
	2010					2009
’000 SEK	Annual fixed salary¹⁾	Variable salary paid 2009²⁾	Total salary	Long-term PSP (value of shares awarded)	Other remuneration³⁾	Annual fixed salary¹⁾	Variable salary paid 2009²⁾	Total salary	Long-term PSP (value of shares awarded)	Other remuneration³⁾
President	9,593	9,460	19,053	—	—	9,081	1,204	10,285	—	—
Other members of Group Management⁴⁾	49,928	47,694	97,622	—	22,901	44,711	15,015	59,726	—	12,731
Total	59,521	57,154	116,675	—	22,901	53,792	16,219	70,011	—	12,731

1) The annual fixed salary includes vacation salary, paid vacation days and travel allowance.
2) The actual variable salary paid in a year refers to the previous year’s performance.
3) Includes conditional variable compensation, severance payment and other benefits as housing and company car.
4) In 2010, other members of Group Management comprised of 11 people. In 2009, other members of Group Management comprised of 10 people with the exception of the period from May 1 to June 12, when the position of Head of Professional Products was vacant, and 11 people from August 4, after the appointment of the Chief Operations Officer Major Appliances.


Compensation cost incurred for Group Management
	2010						2009
’000 SEK	Annual fixed salary	Variable salary incurred 2010 but paid 2011	Long- term PSP (cost)¹⁾	Other remuner- ation²⁾	Total pension contri-bution³⁾	Social contri-bution	Annual fixed salary	Variable salary incurred 2009 but paid 2010	Long- term PSP (cost)¹⁾	Other remuner- ation²⁾	Total pension contri-bution³⁾	Social contri-bution
President	9,593	9,680	–891	—	5,795	6,014	9,081	9,460	891	—	7,650	5,034
Other members of Group Management	50,144	52,425	11,781	—	66,820	10,586	44,711	49,408	3,046	7,625	22,582	8,969
Totalt	59,737	62,105	10,890	—	72,615	16,600	53,792	58,868	3,937	7,625	30,232	14,003

1) Cost for share-based incentive programs are accounted for according to IFRS 2, Share-based payments. When the expected cost of the program is reduced, the previous recorded cost is reversed and an income is recorded in the income statement. The cost includes social contribution cost for the program.
2) Includes conditional variable compensation and other benefits as housing and company car.
3) Includes SEK 45m in one-time pension contribution for Keith McLoughlin in his role as Chief Operations Officer Major Appliances and previously Head of Major Appliances North America. The contribution is a result of changed remuneration terms for Mr McLoughlin and refers to his services before accepting the role as Chief Executive Officer.

Share-based compensation

Over the years, Electrolux has implemented several long-term incentive programs (LTI) for senior managers. These programs are intended to attract, motivate, and retain the participating managers by providing long-term incentives through benefits linked to the company’s share price. They have been designed to align management incentives with shareholder interests. All programs are equity-settled.

2003 option programs

In 2003, a stock option plan for employee stock options was introduced for less than 200 senior managers. The options could be used to purchase Electrolux B-shares at an exercise price that was 10% above the average closing price of the Electrolux B-shares on the exchange Nasdaq OMX Stockholm during a limited period prior to allotment. The options were granted free of consideration. The program expired on May 8, 2010.


Change in number of options per program
	Number of options 2009					Number of options 2010
Program	January 1, 2009	Exercised	Forfeited¹⁾	Expired¹⁾	December 31, 2009	Exercised²⁾	Forfeited¹⁾	Expired¹⁾	December 31, 2010
2003	301,890	189,549	—	—	112,341	112,331	—	10	—

1) Options expire when they are not exercised post vesting period, e.g., due to expiration at the end of the term of the options or earlier, because of termination of employment after vesting. Forfeiture is when the employees fail to satisfy the vesting condition, e.g., termination of employment before vesting period. Forfeiture is governed by the provisions of the option plan.
2) The weighted average share price for exercised options is SEK 181.76.

Options provided to Group Management
	Number of options
	Beginning of 2010	Expired	Exercised	End of 2010
President	30,000	—	30,000	—
Other members of Group Management	9,390	—	9,390	—
Total	39,390	—	39,390	—

Performance-share programs 2008, 2009 and 2010

The Annual General Meeting in 2010 approved an annual long-term incentive program. The program is in line with the Group’s principles for remuneration based on performance, and is an integral part of the total compensation for Group Management and other senior managers. Electrolux shareholders benefit from this program since it facilitates recruitment and retention of competent executives and aligns management interest with shareholder interest as the participants invest in Electrolux B-shares.

Under the 2010 program, the allocation is determined by two main factors. First, the participant should invest in Electrolux B-shares through a purchase in the open market. The personal investment should be equal in value to 10% to 15% of the maximum program value. Each purchased share will be matched with one share at the end of the program by the company. The second factor is that allocation is determined by average annual growth in earnings per share. If the minimum level is reached, the allocation will amount to 25% of maximum number of shares. There is no allocation if the minimum level is not reached. If the maximum is reached, 100% of shares will be allocated. Should the average annual growth be below the maximum but above the minimum, a proportionate allocation will be made. The shares will be allocated after the three-year period free of charge.

Participants are permitted to sell the allocated shares to cover personal income tax arising from the share allocation. For the 2008 and 2009 programs, the remaining shares must be held for another two years; for the 2010 program this additional requirement is not applicable.

If a participant’s employment is terminated during the performance period, the right to receive shares will be forfeited in full. In the event of death, divestiture or leave of absence for more than six months, this will result in a reduced award for the affected participant.

All programs cover almost 160 senior managers and key employees in about 20 countries. Participants in the program comprise five groups, i.e., the President, other members of Group Management, and three groups of other senior managers. All programs comprise B-shares.

Number of potential shares per category and year
	2010 Maximum number of B-shares ¹⁾	2009 Maximum number of B-shares ¹⁾	2008 Maximum number of B-shares ¹⁾	2010 Maximum value, SEK ^{2) 3)}	2009 Maximum value, SEK ^{2) 3)}	2008 Maximum value, SEK ^{2) 3)}
President	29,654	54,235	58,552	5,000,000	5,000,000	5,000,000
Other members of Group Management	10,676	19,525	21,079	1,800,000	1,800,000	1,800,000
Other senior managers, cat. C	8,007	14,644	15,809	1,350,000	1,350,000	1,350,000
Other senior managers, cat. B	5,338	9,763	10,540	900,000	900,000	900,000
Other senior managers, cat. A	4,004	7,322	7,905	675,000	675,000	675,000

1) Each value is converted into a number of shares. The number of shares is based on a share price of SEK 85.39 for 2008, SEK 92.19 for 2009 and SEK 168.62 for 2010, calculated as the average closing price of the Electrolux B-share on the Nasdaq OMX Stockholm during a period of ten trading days before the day participants were invited to participate in the program, adjusted for net present value of dividends for the period until shares are allocated. The recalculated weighted average fair value of shares at grant for the 2008, 2009 and 2010 programs is SEK 105.28 per share. One member of Group Management is entitled to a cash- settled share-based program instead of the share-settled program 2010. The value of the program is equal to the program for other members of Group Management and the main difference is that the program is settled in cash rather than Electrolux shares. This is due to legal restrictions in foreign share ownership in the country of residence for the individual in question.
2) Total maximum value for all participants at grant is SEK 146m for the 2008 and 2009 programs and SEK 168m for the performance-share program 2010.
3) The 2008 program did not meet its financial targets and no shares were distributed. The 2009 program is expected to meet the maximum level. The current expectation is that the performance of the 2010 program will be approximately at midpoint.

If performance is in the middle, i.e., beween minimum and maximum, the total cost for the 2010 performance share program over a three-year period is estimated at SEK 130m, including costs for employer contributions. If the maximum level is attained, the cost is estimated at a maximum of SEK 222m. The distribution of shares under this program will result in an estimated maximum increase of 0.5% in the number of outstanding shares.

For 2010, the long-term incentive (LTI) programs resulted in a cost of SEK 85m (including SEK 25m in employer contribution cost) compared to a cost of SEK 28m in 2009 (including SEK 8m in employer contribution cost). The total provision for employer contribution in the balance sheet amounted to SEK 37m (8).

Repurchased shares for LTI programs

The company uses repurchased Electrolux B-shares to meet the company’s obligations under the share programs. The shares will be distributed to share-program participants if performance targets are met. Electrolux intends to sell additional shares on the market in connection with the distribution of shares under the program in order to cover the payment of employer contributions.

Delivery of shares for the 2007 program

The 2007 performance-share program did not meet the entry level and no shares were distributed.