Incentive plans

Short term incentive

The variable salary is capped in relation to the fixed salary and reflects the market practice in the country of residence. To promote managements’ shareholding in the company at least half of the short term incentive shall be used to purchase and hold shares. If a group management team member doesn’t undertake to purchase shares for at least half of the received cash award net of income tax and to retain such shares, the maximum short term incentive is reduced by 20 percentage points. The shares shall be retained for a period of not less than three years.

The short term incentive shall primarily be based on specific, clear, predetermined and measurable financial or operational criteria set by the Board of Directors in relation to the President, and by the Compensation Committee in relation to the group management team. A maximum of 25 percent of the short term variable salary may be based on individual objectives established by the Board of Directors in relation to the President, and by the Compensation Committee in relation to the group management team. Performance targets for the Short Term Incentive are determined in the beginning of each year. In 2011 for the CEO and heads of staff functions the performance measure is improvement of operating profit less a 12 percent charge for the average operating capital. Twenty-five percent of the division Presidents’ incentive is based on the same measure and the majority of their incentive is based on measures specific for their division. 

In the event that the pay out of the incentive is made based on performance that is proven to be manifestly misstated, the Board may decide to reclaim whole or a part of what has been paid. In its decision to reclaim any amount the Board may, in its sole discretion, reduce the amount to be reclaimed based on the executive’s lack of direct involvement in the performance and reporting of performance which has been manifestly misstated as well as any depreciation of value of shares purchased for the incentive. 

Swedish Match executive long term incentive plan

In 2010 Swedish Match AB’s Board of Directors has decided to implement an Executive Long Term Incentive Plan in the Group. Under the Plan eligible executives may, after a three year performance period, receive a cash bonus based on the actual performance of the Swedish Match Group in the performance period. Executives participating in the Plan are obliged to purchase shares for any cash bonus received under the Plan net after tax and to hold such shares for a period of two years after purchase.

The final award under the Plan will be dependent on the actual performance during the performance period in relation to annual performance targets determined each year by the Compensation Committee. The annual performance criteria and targets will be determined when the Group’s full year result is known for the preceding year and will be communicated to the executives in the beginning of each year.

If an Executive’s employment is terminated by the executive, or if the employment is terminated by the employing company for cause prior to the Settlement Date the executive is not entitled to a final award under the Plan.

The performance on which the award is based will be determined by the Compensation Committee in the beginning of the Holding Period. The final award will be calculated based on the aggregated Actual Performance in the performance period compared with the aggregated performance thresholds and performance targets during the performance period. In determining the actual performance the Compensation Committee may in its sole discretion adjust for certain factors. In 2011 the performance measure is improvement of the Operating Profit less 12 percent charge on the operating capital.

In the event that the final award is made based on performance that is proven to be manifestly misstated the Board may decide to reclaim whole or a part of the final award. In its decision to reclaim any amount the Board may, in its sole discretion, reduce the amount to be reclaimed based on the executive’s lack of direct involvement in the performance and reporting of performance which has been manifestly misstated as well as any depreciation of value of shares purchased for the final award.

In 2011 the maximum award to the CEO and other members of the group management is equal to 45 percent of their respective annual base salary (with one exemption). The maximum award to other participating executives are 800 000 SEK and the total costs for other participants in the Plan, excluding social security charges, shall not exceed 25 MSEK.