Principles for remuneration of senior executives (item 16)
Guidelines for remuneration of senior executives
"Senior executives" refers to CEO, CFO, COO, CSO and CEO of Secure Thingz. The remuneration principles also apply to Board members to the extent that they receive remuneration outside the scope of their Board assignment. The guidelines are applicable to remuneration agreed, and amendments to remuneration already agreed after adoption of the guidelines by the AGM 2020. These guidelines do not apply to any remuneration that is decided on or approved by the general meeting.
Promotion of IAR Systems' business strategy, long-term interests and sustainability
IAR Systems' mission is to bring value to organizations that develop products for embedded systems. To achieve its targets, IAR Systems' strategy includes to offer customer value through user-friendliness, reliability and quality, to develop technologically leading software for embedded systems, to deepen relationships with existing customers by gradually expanding its range of products and services, to expand its customer base through an increased local presence worldwide and to actively establish close cooperation with the most important players in the market to create long-term customer value and a unique market position.
A condition for the successful implementation of I.A.R. Systems Group's business strategy and its long-term interests, including its sustainability, is that IAR Systems is able to continue to recruit and retain qualified employees, the basic principle being that the remuneration system for the CEO, senior executives and other employees is market-based and competitive. These guidelines enable I.A.R. Systems Group to offer the senior executives a competitive total remuneration.
I.A.R. Systems Group has ongoing long-term incentive programs in place that have been resolved by the AGM and which therefore are excluded from these guidelines. The performance criteria used to determine the outcome of I.A.R. Systems Group's long-term incentive programs have a close connection with the long-term value-making, including its sustainability. These performance criteria are currently related to the average growth of the group's net sales over a three-year period. The programs are further conditional upon the participant's own investment and certain holding periods of three years. For more information about the programs, please see I.A.R. Systems Group AB's Annual Report, Note 6.
Types of remuneration etc.
Remuneration of senior executives may consist of fixed salary, variable salary, pension and other customary benefits. Additionally, the general meeting may, irrespective of these guidelines, resolve on, among other things, share-related or share-price related remuneration.
Fixed salary shall be market-based and individually differentiated on the basis of the individual’s role, performance, results and responsibilities. As a rule, fixed salary is adjusted once a year.
Variable salary shall be proportionate to the responsibilities and powers of the individual in question. Variable salary is based on the attainment of predetermined performance targets in the areas of profit and sales, such as growth (Net Sales Growth) and earnings before interest and tax (EBIT) and "soft" individual goals linked to strategical and/or functional targets individually adjusted on the basis of responsibility and function. These targets shall be designed so as to contribute to IAR’s business strategy and long-term interests, including its sustainability. The amount of variable salary is based on the employees' fulfillment of these goals. The variable salary may not exceed 50 percent of the annual fixed salary.
The evaluation of whether the predetermined performance targets have been fulfilled shall be made at the end of the measurement period and be based on the determined financial basis for the relevant period.
Variable cash remuneration can be paid after the measurement period has ended or be subject to deferred payment.
Pension & other benefits
The CEO is covered by a pension plan corresponding to the cost of the ITP plan, but with a retirement age of 60, which raises the premium compared with a retirement age of 65. Other employees are covered by a pension plan corresponding to the cost of the ITP plan.
Other benefits may include, for example medical insurance (Sw. sjukvårdsförsäkring), phone benefits, meal benefits and company car and shall be provided to the extent this is considered to be in line with market conditions.
If the employment is terminated by the company, senior executives are entitled to termination benefits at unchanged terms and conditions over a period of 12 months in addition to non-pensionable severance pay of six months’ salaries. For senior executives, the notice period is six months.
Consulting fees to Board members
In the event that Board members perform work over and above their customary Board assignment, the Board shall, in specific cases, be able to decide on additional remuneration in the form of consulting fees.
Salary and employment conditions for employees
In the preparation of the Board of Directors’ proposal for these remuneration guidelines, salary and employment conditions for employees of the company have been taken into account by including information regarding the employee's total income, the components of the remuneration and the increase and growth rate over time, in the remuneration committee's and the Board of Directors' basis of decision when evaluating whether the guidelines and the limitations set out herein are reasonable.
The Board's remuneration committee, consisting of four Board members including the Chairman of the Board, who also serves as the Chairman of the remuneration committee, addresses and prepares remuneration issues relating to senior executives.
The remuneration committee prepares and drafts proposed resolutions relating to remuneration and terms and conditions of employment for the CEO, which are presented to the Board for approval. The Board evaluates the CEO's work on an annual basis.
The CEO approves the remuneration and terms and conditions of employment of other senior executives on the basis of the principles for remuneration of senior executives adopted at the AGM.
The remuneration committee's tasks also include preparing the Board of Directors' decision to propose guidelines for remuneration of senior executives. The Board shall prepare a proposal for new guidelines at least every fourth year and submit it to the general meeting. These guidelines shall be in force until new guidelines are adopted by the general meeting. The remuneration committee shall also monitor and evaluate programs for variable remuneration as well as the current remuneration structures and compensation levels in IAR Systems. The CEO and other senior executives do not participate in the Board of Directors' processing of and resolutions regarding remuneration-related matters in so far as they are affected by such matters.
Deviation from the guidelines
The Board of Directors has the right to temporarily deviate from these guidelines where there is special reason to do so and it is necessary in order to serve I.A.R. Systems Group's long-term interests, including its sustainability, or to ensure I.A.R. Systems Group's financial viability, for example, in connection with additional variable remuneration connected to specific achievements.