Note 27 - Employees and remuneration

All amounts in SEKm unless otherwise stated

Employees and employee benefits

In 2012, the average number of employees was 59,478 (52,916), of whom 41,053 (36,590) were men and 18,425 (16,326) 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
	2012	2011
Europe	21,615	21,667
North America	9,152	9,178
Rest of world	28,711	22,071
Total	59,478	52,916


Salaries, other remuneration and employer contributions
	2012			2011
	Salaries and remuneration	Employer contri- butions	Total	Salaries and remuneration	Employer contri- butions	Total
Parent Company	857	490	1,347	857	387	1,244
(whereof pension costs)	—	(184)1)	(184)1)	—	(103)¹⁾	(103)¹⁾
Subsidiaries	12,928	2,782	15,710	12,280	2,713	14,993
(whereof pension costs)	—	(343)	(343)	—	(322)	(322)
Total Group	13,785	3,272	17,057	13,137	3,100	16,237
(whereof pension costs)	—	(527)	(527)	—	(425)	(425)

1) Includes SEK 9m (13), 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
	2012			2011
	Board members and senior managers	Other employees	Total	Board members and senior managers	Other employees	Total
Sweden
Parent Company	32	825	857	33	824	857
Other	217	12,711	12,928	185	12,095	12,280
Total Group	249	13,536	13,785	218	12,919	13,137

Of the Board members in the Group, 115 were men and 25 women, of whom 6 men and 3 women in the Parent Company. Senior managers in the Group consisted of 173 men and 52 women, of whom 11 men and 3 women in the Parent Company. The total pension cost for Board members and senior managers in the Group amounted to 42m (34) in 2012.

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 2012 refers to one fourth of the compensation authorized by the AGM in 2011, and three fourths of the compensation authorized by the AGM in 2012. Total compensation paid in cash in 2012 amounted to SEK 5.8m, of which SEK 5.2m referred to ordinary compensation and SEK 0.6m to committee work.


Compensation to Board members 2012
‘000 SEK	Ordinary compensation	Compen-sation for committee work	Total compen- sation
Marcus Wallenberg, Chairman	1 637	55	1 692
Ronnie Leten, Deputy Chairman (as from AGM 2012)	431	—	431
Peggy Bruzelius, Deputy Chairman (up to AGM 2012)	137	67	204
Lorna Davis	494	55	549
Hasse Johansson	494	85	579
John S. Lupo (up to AGM 2012)	119	—	119
Keith McLoughlin, President	—	—	—
Fredrik Persson (as from AGM 2012)	375	57	432
Ulrica Saxon	494	—	494
Torben Ballegaard Sørensen	494	161	655
Barbara Milian Thoralfsson	494	120	614
Ola Bertilsson	—	—	—
Gunilla Brandt	—	—	—
Ulf Carlsson	—	—	—
Total compensation 2012	5,169	600	5,769
Revaluation of synthetic shares from previous assignment period	1,888	—	1,888
Total compensation cost 2012, including revaluation of synthetic shares	7,057	600	7,657

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 2012, a total of 34,002 (35,923) synthetic shares were outstanding, having a total value of SEK 5.8m (3.9). 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, 2012. The cost from revaluation of synthetic shares during 2012 was SEK 1.9m. Cash settlements in 2012 amounted to SEK 0.5m (0).

Remuneration Committee

For information on the Remuneration Committee, see the Corporate governance report.

Remuneration guidelines for Group Management

The AGM in 2012 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 180 senior managers of the Group. For further information, see the section on Performance-share programs.

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 President, the annualized base salary for 2012 has been set at USD 1,450,000 (approximately SEK 9.9m).

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 further information on these programs, see the section on Performance-share 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 USD 800,000 (approximately SEK 5.4m) 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 2012, prior Presidents, and survivors is SEK 258m (245).

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 2012 was 2.6% (5.4).

Variable salary in 2012 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 Sector head has 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.

No payments for retention agreements were made in 2012. There are no extraordinary arrangements outstanding for retention purposes. Three individual members of Group Management are entitled to additional variable compensation arrangements. Such compensation shall be paid in instalments over one and two years, respectively, provided the member is still employed. These payments can amount to a maximum of SEK 6.0m in 2013. In 2012, SEK 6.0m was paid following extraordinary arrangements.

The members of Group Management participate in the Group’s long-term performance programs. These programs comprise the performance-share program introduced in 2004. For further information on these programs, see the section on Performance-share programs.

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.

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.


Compensation paid to Group Management
	2012					2011
’000 SEK	Annual fixed salary¹⁾	Variable salary paid 2012²⁾	Total salary	Long-term PSP (value of shares awarded)	Other remunera- tion³⁾	Annual fixed salary¹⁾	Variable salary paid 2011²⁾	Total salary	Long-term PSP (value of shares awarded)	Other remunera- tion³⁾
President	9,875	1,738	11,613	2,824	1,814	9,878	10,503	20,380	—	2,340
Other members of Group Management⁴⁾	48,640	10,136	58,776	15,530	9,540	43,641	31,066	74,707	—	7,443
Total	58,515	11,874	70,389	18,354	11,354	53,519	41,569	95,088	—	9,783

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 February 2012, other members of Group Management comprised 12 people after the appointments of the Chief Design Officer and Chief Financial Officer. In 2011, other members of Group Management comprised of 11 people.


Compensation cost incurred for Group Management
	2012						2011
’000 SEK	Annual fixed salary	Variable salary incurred 2012 but paid 2013	Long- term PSP (cost)¹⁾	Other remuner- ation²⁾	Total pension contri-bution	Social contri-bution	Annual fixed salary	Variable salary incurred 2011 but paid 2012	Long- term PSP (cost)¹⁾	Other remuner- ation²⁾	Total pension contri-bution	Social contri-bution
President	9,875	8,299	1,293	1,814	5,387	1,811	9,878	1,654	1,415	1,183	5,185	1,458
Other members of Group Management	48,640	36,179	5,060	9,540	22,704	14,609	43,641	8,805	1,236	6,993	16,333	9,358
Totalt	58,515	44,478	6,353	11,354	28,091	16,420	53,519	10,459	2,651	8,175	21,518	10,816

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.

During 2012, a new pension plan was introduced for new Group Management members. The employer contribution, including contributions for ITP, alternative ITP and any supplementary disability and survivor’s benefits, is in total 35% of annual base salary. The retirement age is 65 years.

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 2010, 2011 and 2012

The Annual General Meeting in 2012 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.

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 and 2012 programs. 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. 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 180 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
	2012 Maximum number of B-shares ¹⁾	2011 Maximum number of B-shares ¹⁾	2010 Maximum number of B-shares ¹⁾	2012 Maximum value, SEK ^{2) 3)}	2011 Maximum value, SEK ^{2) 3)}	2010 Maximum value, SEK ^{2) 3)}
President	38,614	34,825	29,654	5,000,000	5,000,000	5,000,000
Other members of Group Management	13,901	12,537	10,676	1,800,000	1,800,000	1,800,000
Other senior managers, cat. C	10,426	9,403	8,007	1,350,000	1,350,000	1,350,000
Other senior managers, cat. B	6,951	6,269	5,338	900,000	900,000	900,000
Other senior managers, cat. A	5,213	4,702	4,004	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 168.62 for 2010, SEK 143.58 for 2011 and SEK 129.49 for 2012, 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 2010, 2011 and 2012 programs is SEK 145.56 per share.
2) Total maximum value for all participants at grant is SEK 168m for the performance-share programs 2010 and 2011 and SEK 166m for the 2012 program.
3) The 2010 program does not meet the entry level. The current expectation is that the 2011 program will not meet the entry level and that the 2012 program will meet the entry level.

If performance is beween minimum and maximum, the total cost for the 2012 performance-share program over a three-year period is estimated at SEK 105m, including costs for employer contributions. If the maximum level is attained, the cost is estimated at a maximum of SEK 195m. The distribution of shares under this program will result in an estimated maximum increase of 0.7% in the number of outstanding shares.

For 2012, LTI programs resulted in a cost of SEK 32m (including a cost of SEK 7m in employer contribution) compared to a cost of SEK 17m in 2011 (including an income of SEK 4m in employer contribution). The total provision for employer contribution in the balance sheet amounted to SEK 11m (31).

Repurchased shares for LTI programs

The company uses repurchased Electrolux Class 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 2009 program

The 2009 performance-share program met the maximum level and Electrolux Class B shares were delivered to the participants. The selling of the shares is restricted until December 2013 with the exception of selling shares to cover for personal taxes in connection with the delivery.