Note 27 - Employees and remuneration

All amounts in SEKm unless otherwise stated

Employees and employee benefits

In 2011, the average number of employees was 52,916 (51,544), of whom 36,590 (33,748) were men and 16,326 (17,796) 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 www.electrolux.com/employees-by-country


Average number of employees, by geographical area
	Group
	2011	2010
Europe	21,667	23,030
North America	9,178	10,076
Rest of world	22,071	18,438
Total	52,916	51,544


Salaries, other remuneration and employer contributions
	2011			2010
	Salaries and remuneration	Employer contri- butions	Total	Salaries and remuneration	Employer contri- butions	Total
Parent Company	857	387	1,244	831	575	1,406
(whereof pension costs)	—	(103)¹⁾	(103)¹⁾	—	(246)¹⁾	(246)¹⁾
Subsidiaries	12,280	2,713	14,993	11,847	3,122	14,969
(whereof pension costs)	—	(322)	(322)	—	(495)	(495)
Total Group	13,137	3,100	16,237	12,678	3,697	16,375
(whereof pension costs)	—	(425)	(425)	—	(741)	(741)

1) Includes SEK 13m (12), referring to the President’s predecessors according to local GAAP (the cost for the current President is included in his home country).


Salaries and remuneration for Board members, senior managers and other employees
	2011			2010
	Board members and senior managers	Other employees	Total	Board members and senior managers	Other employees	Total
Sweden
Parent Company	33	824	857	44	787	831
Other	185	12,095	12,280	198	11,649	11,847
Total Group	218	12,919	13,137	242	12,436	12,678

Of the Board members in the Group, 120 were men and 37 women, of whom 5 men and 4 women in the Parent Company. Senior managers in the Group consisted of 178 men and 52 women, of whom 8 men and 3 women in the Parent Company. The total pension cost for Board members and senior managers in the Group amounted to 34m (33) in 2011.

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 2011 refers to one fourth of the compensation authorized by the AGM in 2010, and three fourths of the compensation authorized by the AGM in 2011. Total compensation paid in cash in 2011 amounted to SEK 5.4m, of which SEK 4.8m referred to ordinary compensation and SEK 0.6m to committee work.


Compensation to Board members 2011
‘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	475	37	512
Hasse Johansson	475	57	532
John S. Lupo	475	—	475
Keith McLoughlin, President	—	—	—
Johan Molin (up to AGM 2011)	119	18	137
Torben Ballegaard Sørensen	475	85	560
Ulrica Saxon (as from AGM 2011)	356	—	356
Caroline Sundewall (up to AGM 2011)	119	28	147
Barbara Milian Thoralfsson	475	120	595
Ola Bertilsson	—	—	—
Gunilla Brandt	—	—	—
Ulf Carlsson	—	—	—
Total compensation 2011	5,119	600	5,719
Revaluation of synthetic shares from previous assignment period	–3,027	—	–3,027
Total compensation cost 2011, including revaluation of synthetic shares	2,092	600	2,692

Synthetic shares

The AGM in 2008, 2009 and 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 Class 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 2008/2009, 2009/2010 and 2010/2011 terms 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 fifth year after the AGM decision, of a cash amount per synthetic share corresponding to the price for a Class 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. At the end of 2011, a total of 35,923 (34,465) synthetic shares were outstanding, having a total value of SEK 3.9m (6.6). The accrued value of the synthetic shares has been calculated as the number of synthetic shares times the volume weighted average price of a Class B share in Electrolux as of December 31, 2011. The income from revaluation of synthetic shares during 2011 was SEK 3.0m. No cash settlements took place in 2011.

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 2011, the Committee members were Barbara Milian Thoralfsson (Chairman), Marcus Wallenberg and Johan Molin up to April. From April, Johan Molin was replaced by Lorna Davis.

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 2011.

Remuneration guidelines for Group Management

The AGM in 2011 approved the proposed remuneration guide-lines. 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.

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 9,878,000 (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.

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 5,185,000 (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 2011, prior Presidents, and survivors is SEK 245m (155).

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 2011 was 5.4% (3.5).

Variable salary in 2011 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 2011, no payments for retention agreements were made. There are no further extraordinary arrangements outstanding for retention purposes. Individual members of Group Management are entitled to additional variable compensation arrangements agreed in connection with the recruitment. The compensation shall be paid in instalments provided the member is still employed until the end of 2012 and 2013. These payments will be SEK 6.0m in 2012. In 2011 SEK 3.2m has been paid as recruitment compensation.

The members of Group Management participate in the Group’s long-term performance programs. These programs comprise the performance-share program introduced in 2004.

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.


Compensation paid to Group Management
	2011					2010
’000 SEK	Annual fixed salary¹⁾	Variable salary paid 2011²⁾	Total salary	Long-term PSP (value of shares awarded)	Other remunera- tion³⁾	Annual fixed salary¹⁾	Variable salary paid 2010²⁾	Total salary	Long-term PSP (value of shares awarded)	Other remunera- tion³⁾
President⁴⁾	9,878	10,503	20,380	—	2,340	9,593	9,460	19,053	—	—
Other members of Group Management⁵⁾	43,641	31,066	74,707	—	7,443	49,928	47,694	97,622	—	22,901
Total	53,519	41,569	95,088	—	9,783	59,521	57,154	116,675	—	22,901

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. For the President variable salary paid in 2011 refers to his previous position as Chief Operations Officer Major Appliances.
3) Includes conditional variable compensation, allowances and other benefits as housing and company car.
4) As of January 1, 2011, Keith McLoughlin and up to January 1, 2011, Hans Stråberg.
5) As of February 2011, other members of Group Management comprised 11 people after the appointments of the Chief Technology Officer and the Chief Marketing Officer. In 2010, other members of Group Management comprised of 11 people.


Compensation cost incurred for Group Management
	2011						2010
’000 SEK	Annual fixed salary	Variable salary incurred 2011 but paid 2012	Long- term PSP (cost)¹⁾	Other remuner- ation²⁾	Total pension contri-bution³⁾	Social contri-bution	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
President	9,878	1,654	1,415	1,183	5,185	1,458	9,593	9,680	–891	—	5,795	6,014
Other members of Group Management	43,641	8,805	1,236	6,993	16,333	9,358	50,144	52,425	11,781	—	66,820	10,586
Totalt	53,519	10,459	2,651	8,175	21,518	10,816	59,737	62,105	10,890	—	72,615	16,600

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, allowances 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 of AB Electrolux.

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.

One member is covered by a closed supplementary plan in which contributions equal 35% of the pensionable salary. The member is 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.

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.

Performance-share programs 2009, 2010 and 2011

The Annual General Meeting in 2011 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 Class B shares.

Under the 2010 and 2011 programs, the allocation is determined by two main factors. First, the participant should invest in Electrolux Class 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 for the 2010 program and 17% for the 2011 program. 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 2009 program, the remaining shares must be held for another two years; for the 2010 and 2011 programs, 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 Class B shares.

Number of potential shares per category and year
	2011 Maximum number of B-shares ¹⁾	2010 Maximum number of B-shares ¹⁾	2009 Maximum number of B-shares ¹⁾	2011 Maximum value, SEK ^{2) 3)}	2010 Maximum value, SEK ^{2) 3)}	2009 Maximum value, SEK ^{2) 3)}
President	34,825	29,654	54,235	5,000,000	5,000,000	5,000,000
Other members of Group Management	12,537	10,676	19,525	1,800,000	1,800,000	1,800,000
Other senior managers, cat. C	9,403	8,007	14,644	1,350,000	1,350,000	1,350,000
Other senior managers, cat. B	6,269	5,338	9,763	900,000	900,000	900,000
Other senior managers, cat. A	4,702	4,004	7,322	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 92.19 for 2009, SEK 168.62 for 2010 and SEK 143.58 for 2011, calculated as the average closing price of the Electrolux Class 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 2009, 2010 and 2011 programs is SEK 129.22 per share.
2) Total maximum value for all participants at grant is SEK 146m for the 2009 program and SEK 168m for the performance-share programs 2010 and 2011.
3) The 2009 program meets the maximum level. The current expectation is that the performance of the 2010 and 2011 programs will not meet the entry level.

If performance is in the middle, i.e., beween minimum and maximum, the total cost for the 2011 performance-share program over a three-year period is estimated at SEK 125m, including costs for employer contributions. If the maximum level is attained, the cost is estimated at a maximum of SEK 242m. The distribution of shares under this program will result in an estimated maximum increase of 0.6% in the number of outstanding shares.

For 2011, LTI programs resulted in a cost of SEK 17m (including an income of SEK 4m in employer contribution) compared to a cost of SEK 85m in 2010 (including SEK 25m in employer contribution cost). The total provision for employer contribution in the balance sheet amounted to SEK 31m (37).

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 2008 program

The 2008 performance-share program did not meet the entry level and no shares were distributed.