News; May 11, 2007 CET

Remuneration issues arouse interest

As usual, the subject of remuneration paid to the Board of Directors and management prompted questions at the Meeting, despite the fact that these motions on the agenda actually contained no new information.

The level proposed for Board fees was the same as that adopted by the Extraordinary General Meeting held in December last year.

Peter Lundkvist, representing the Third Swedish National Pension Fund, was one of those who voted against the Board fees.

"While we agree with the Nominating Committee that the fees were previously too low, we nevertheless cannot support this increase, which is far too high and has proceeded much too rapidly. We do not think it is reasonable," he said.

Nominating Committee Chairman Mads Eg Gensmann replied that the increased dividends are a consequence of a detailed evaluation of the Board of Directors during the past year.

"We noted then that the company needs reinforcement with foreign skills, in which case the Board fees must be on par with international standards. The benchmarking investigation we conducted resulted in a compromise. The level is still below that which prevails in the US market and more at the level applicable in Europe."

Mads Eg Gensmann also pointed out another reason for raising the fees.

"A condition linked to the fees is that Board members are expected to invest the entire amount after tax in shares in the company, since we feel it is important that they build up a substantial holding in the company."

In his role as Chairman of the Compensation Committee, Bernt Magnusson also addressed the matter of remuneration to senior executives.

"Here too the discussion boils down to differences between Swedish and foreign shareholders. As it happens, the Swedish shareholders have largely elected to sell their holdings in the company, with the result that 80 percent of the share capital is now owned by foreign investors. It is clear that this has an influence. Nevertheless, remuneration to the company's senior executives is around the average within Swedish industry, while it is lower in an international comparison.

"However, the guidelines for remuneration are well conceived and are aimed at ensuring that the company can recruit and retain employees with the highest competence.

"They should also foster Group unity and be simple, long-term, measurable and attuned to market conditions, and the variable component should always have a ceiling," said Bernt Magnusson.