Guidelines for Remuneration to Senior Management Adopted by the Annual General Meeting 2023
The Annual General Meeting 2023 resolved in accordance with the proposal from the board on the following guidelines for remuneration of senior executives.
Who the guidelines cover, and their applicability
These guidelines for remuneration of senior executives cover the CEO and other members of group management. The guidelines should be applied to compensation agreed, and amendments to compensation previously agreed, after the guidelines have been adopted by the AGM 2023. Regarding employment terms in other legislatures than Sweden, the relevant adaptations should be made to comply with mandatory local regulation or practice, for the overall purpose of these guidelines to be met. These guidelines do not cover compensation resolved by the AGM.
The board is entitled to temporarily depart from these guidelines wholly or partly if there are special reasons for this in an individual case, and a departure is necessary to serve the Company’s long-term interests and sustainability, or to ensure the Company’s profitability. If such departure occurs, this should be stated in the Remuneration Report at the following AGM. These guidelines apply to the period from the AGM 2023 until next AGM. Matters regarding departure from the guidelines should be subject to consultation by the Remuneration Committee, and decision by the board.
The guidelines’ promotion of the Company’s business strategy, long-term interests, and sustainability
Enea’s ambition is to be a global software company, with a strong and leading position in the markets that it addresses, with yearly sales growth, high profitability, and healthy cash flows. Organic growth is the foundation of the operations, and work is ongoing to develop, rationalize and optimize it. Strategic and complementary acquisitions will be continuously screened, and if considered to add value for customers and shareholders within a well-considered risk level, Enea will attempt to execute such acquisitions. For more information on Enea’s strategy and target, see www.enea.com.
The board’s opinion is that the Company’s ability to attract, motivate and retain high-performing staff and managers is critical for a successful implementation of the Company’s business strategy and protection of the Company’s long-term interests, including sustainability. This entails the Company being able to offer competitive benefits packages. Total compensation should contain a variable component linked to the individual performance of staff and managers, but that is also synchronized with the Company’s profitability and long-term sustainability.
Forms of compensation, etc.
Remuneration and other employment terms of senior executives should be at market levels. Remuneration consists of basic salary, variable remuneration and pensions. Additionally – and independent of these guidelines – the general meeting is entitled to resolve on share or share price-based payments.
Fixed basic salary
The CEO and other senior executives shall be offered a fixed annual cash salary, at a level aimed at attracting and retaining senior executives with such professional and personal skills as are required to promote Enea’s results. As a starting point, the fixed salary shall be determined per calendar year and normally be reviewed annually.
Short-term incentive program (STI)
Enea’s STI program has three parts. Two of these parts relate to the Company achieving specific financial targets, while one is determined by the achievement of individual targets. Most of the variable compensation is linked to the Company’s financial targets, while the individual targets correspond to a smaller proportion of variable compensation.
The criteria applied as regards the Company’s financial targets are linked to long-term targets decided by the board at any given time, such as sales, EBIT and EBITDA. The criteria applying to the individual targets shall be decided prior to the end of the first quarter of the financial year that the compensation relates to, and shall be as specific as the criteria relating to the Company’s financial targets. The criteria are designed to promote the Company’s business strategy, long-term interests, as well as sustainability, and accordingly, the Company’s long-term value creation.
The outcome of compensation is subject to consultation by the Remuneration Committee and decided by the board for the CEO. For other senior executives, the outcome of compensation is consulted and decided by the Remuneration Committee. Payment of compensation is executed as soon as possible after the board meeting where the Company’s annual financial statement is approved for the vesting year. The Company is not entitled to reclaim this compensation.
For the CEO, the STI may be a maximum of 100 percent of the fixed basic salary and may be a maximum of 50 percent of the total compensation excluding LTI. For other senior executives, the STI may be a maximum of 150 percent of the fixed basic salary and may be a maximum of 60 percent of the total compensation excluding LTI.
Long-term incentive program (LTI)
Senior executives are eligible for incentive programs that are basically share, or share price, related. An incentive program shall be designed to increase participants’ commitment to the Company’s progress, and be implemented on market terms. Share and share price-related incentive programs are subject to resolution by the general meeting, and accordingly, are not covered by these guidelines.
The CEO’s agreed retirement age is 67, while other senior executives do not have any specifically agreed retirement age.
Pension agreements for the CEO are decided by the board following proposal from the Remuneration Committee. Other senior executives in Sweden have pension agreements that are within the framework of the ITP plan with an expected retirement age of 65 years and pension provisions are related to the employee’s salary. Other senior executives in countries other than Sweden may be covered by corresponding local pension plans in their respective home countries. In all cases, the pension shall constitute a maximum of 30 percent of the total remuneration excluding LTI. Pension premiums are paid on an ongoing basis. In addition to the aforementioned pension benefits, the Company has no pension obligations to senior executives.
Senior executives employed in countries other than Sweden are subject to local pension plans in their respective home countries. Such plans are consistent with those offered to other employees in the same countries. Accordingly, in terms of retirement age and any additional pension obligations, there may be some variation in employment terms in other legislatures than Sweden where mandatory local regulation or practice requires, and accordingly, the overall purpose of these guidelines should still be met.
Other benefits may include, among others, life insurance, medical insurance, car benefit and parking space. Premiums and other costs arising from such benefits may in total amount to a maximum of 10 percent of the fixed annual salary.
Notice period and severance pay
The employment or service contracts of senior executives shall apply until further notice, or for a specific period. For the CEO, a six-month notice period applies for termination by the Company. In addition to dismissal pay, the CEO is entitled to severance pay of six times the fixed monthly salary less any remuneration received from new employment or assignments for the CEO. During the notice period, the employment contract and associated benefits apply. For other senior executives, maximum notice periods of nine months apply to termination by the Company. Apart from dismissal pay, other senior executives are not entitled to severance pay. Applicable employment contracts and associated benefits apply during notice periods. Where severance pay is due, no other benefits are payable after the end of the notice period.
Salary and employment terms of employees
Consultation on the board’s proposal on guidelines for remuneration of senior executives considers salary and employment terms of the Company’s employees. Information on employees’ total compensation, the components of such compensation, as well as increases and rates of increase of compensation over time, have been collated and served as part of the decision-support data for the Remuneration Committee and the board when appraising the reasonableness of the guidelines and their ensuing limitations.
The board shall prepare a proposal for new guidelines when a need for significant amendments arise, although at least every fourth year. The board’s proposal is subject to consultation by the board’s Remuneration Committee. The chairman of the board shall serve as chairman of the Remuneration Committee. With the aim of resolving conflicts of interest, other Board members elected by the AGM that are members of the Remuneration Committee shall be independent in relation to the Company and its management.
The duties of the Remuneration Committee shall include monitoring and evaluating application of the guidelines for remuneration of senior executives as approved by the AGM. When the Remuneration Committee has consulted on the proposal, it is referred to the board for decision. The CEO or other members of group management shall not participate in the board’s consideration of, and decisions on, remuneration-related issues, to the extent they are affected by these issues.
If the AGM does not resolve to adopt the guidelines as proposed, the board shall submit a new proposal no later than at the next AGM. In such case, remuneration shall be paid in accordance with the guidelines that applied previously.
In consultation of these issues, external advisors may be appointed as considered necessary.
Review of guidelines
The board has not received any comments from shareholders regarding the current guidelines for remuneration of senior executives. The boards’ proposal for guidelines for remuneration to senior executives corresponds in all material respects to existing guidelines, except in regards to (i) simplifying the basis for calculating fixed basic salary, (ii) certain clarifications have been made regarding pension, (iii) wording has been introduced under what conditions other benefits may be paid, and that (iv) the criteria with regard to the Company’s goals when it comes to short-term incentive programs (STI) shall be linked to the long-term goals decided by the board (previously sales and EBIT).