Guidelines for executive remuneration
1. Introduction and objective
These guidelines shall be applicable to remuneration to the EMT of Volvo Cars. These guidelines are applicable to remuneration agreed, and amendments to remuneration already agreed, after its adoption by the annual general meeting on 3 April 2025. These guidelines do not apply to any remuneration decided or approved by the general meeting.
1.1 The guidelines’ promotion of the company’s business strategy, long-term interests and sustainability:
The company purpose is to provide “Freedom to Move” in a personal, sustainable and safe way. The business strategy focuses on maintaining a stable and strong platform for continued profitable and sustainable growth through increased engaging relationships with consumers, sustainable products and business, safe mobility with leading technology and a purpose-driven organisation. For more information regarding the company’s business strategy, please see the strategic direction section of the annual report.
A prerequisite for the successful implementation of the company’s strategy and safeguarding of its long-term interests, including its sustainability, is the company’s ability to recruit and retain qualified personnel. To this end, it is necessary that the company offers total competitive remuneration.
These guidelines enable the company to offer the EMT a competitive total remuneration.
Variable remuneration covered by these guidelines shall aim at promoting the company’s business strategy and long-term interest, including its sustainability.
2. Types of remuneration
The total remuneration package for the EMT may consist of the following components:
- Fixed remuneration
- Variable remuneration
- Pension benefits
- Other benefits
The components of remuneration shall be in accordance with local market practice.
Additionally, the general meeting may – irrespective of these guidelines – resolve on, among other things, share-related or share price-related remuneration. Please refer to Share-based or share price-related incentive programmes below.
2.1 Variable remuneration
The satisfaction of criteria for awarding short-term variable cash remuneration shall be measured over a period of one year, whereas the satisfaction of criteria for awarding long-term variable remuneration shall be measured over a period of three years.
For the CEO, the short-term variable cash remuneration may not amount to more than 200 per cent of the annual fixed base salary on December 31 at the end of each performance year, and the long-term variable remuneration may not amount to more than 150 per cent of the annual fixed base salary the year the programme was implemented. For the other EMT members, the short-term variable cash remuneration may vary but not amount to more than 140 per cent of the annual fixed base salary on December 31 at the end of each performance year, and the long-term variable remuneration may vary but not amount to more than 120 per cent of the annual fixed base salary the year the programme was implemented. For information on the criteria for awarding short- and long-term variable remuneration, please refer to Criteria for awarding variable remuneration below.
2.1.1 Extraordinary arrangements
Further variable remuneration may also be paid out in extraordinary circumstances, provided that such arrangement is of a one-time nature and is agreed on an individual basis for management recruitment or retention purposes or as compensation for extraordinary efforts beyond the individual’s ordinary assignment. Such remuneration shall be in line with market practice and may for example include a one-time cash payment, retention bonus or severance payment in case of a change of control, or similar. The remuneration may not amount to more than the annual fixed base salary for 1 year and shall not be paid more than once a year per individual. Resolutions on such compensation shall be made by the People Committee based on a proposal from the CEO if an EMT member (other than the CEO) is concerned and by the People Committee and the Chairperson of the Board of Directors, or the Vice Chairperson as delegated, if it relates to the CEO.
2.1.2 Share-based or share price-related incentive programmes
The Board of Directors may, irrespective of these guidelines, propose the general meetings to resolve on long-term share-based or share price-related incentive programmes. During the previous annual general meetings held from 2022 and onwards, the Board of Directors proposed, and the annual general meetings approved long-term share-based incentive programmes comprising, amongst others, the EMT. The Board of Directors intends to propose forthcoming annual general meetings to approve similar incentive programmes. No new long- term variable cash programmes will therefore be offered to the EMT as long as there is a long- term share-based program in place.
2.1.3 Criteria for awarding variable remuneration
The variable short-term cash remuneration shall be linked to predetermined and measurable criteria which can be financial or non-financial. The criteria for the variable short-term remuneration shall be determined yearly by the People Committee.
Variable long-term remuneration, which is not approved by the annual general meeting, if any, shall be linked to the satisfaction of certain financial performance conditions determined by the People Committee and measured over the term of the programme.
For both short-term and long-term variable remuneration, the criteria may also be individualized, quantitative or qualitative objectives. The criteria shall be designed to contribute to the company’s business strategy and long-term interests, including its sustainability.
To which extent the criteria for awarding variable remuneration have been satisfied shall be evaluated when the measurement period has ended. The People Committee is responsible for the evaluation. For financial objectives, the evaluation shall be based on the latest financial information made public by the company.
2.2 Pension benefits
For the CEO, pension benefits shall be a defined contribution scheme, and the pension premiums may amount to not more than 50 per cent of the annual fixed base salary. Variable remuneration shall not qualify for pension benefits.
For other EMT members, pension benefits shall be a defined contribution scheme, and the pension premiums may amount to not more than 30 per cent of the annual fixed base salary. No current EMT members have a defined benefit pension. However, defined benefit pension can be offered to future EMT members as part of a pre-existing agreement. To the extent that variable remuneration qualifies for pension benefits under the applicable collective bargaining agreement, the pension benefits shall be deducted from the payment and paid as pension.
2.3 Other benefits
Other benefits may include, for example, medical insurance, annual health check-up and company cars. Such benefits may amount to not more than 20 per cent of the annual fixed base salary.
For employments governed by rules other than Swedish, pension benefits and other benefits may be duly adjusted for compliance with mandatory rules or established local practice, taking into account, to the extent possible, the overall purpose of these guidelines.
EMT members who are expatriates (i.e., are sent on an international assignment and are not on a local employment contract) may receive additional remuneration and other benefits determined in line with the company’s International Assignment Instruction which may include (but are not limited to) relocation cost, cost of living allowance, housing, schooling, home travel allowance and tax assistance. Such benefits may amount to no more than 160 per cent of the annual fixed base salary.
2.4 Clawback
The Board of Directors shall have the possibility, in accordance with applicable law or contractual provisions, to in whole or in part reclaim variable remuneration paid on incorrect grounds.
3. Termination of employment
Upon termination of an employment, the notice period may not exceed twelve (12) months. Fixed base salary during the notice period and severance pay may together not exceed an amount corresponding to the individual’s fixed base salary for two (2) years, subject to applicable law.
When termination is made by the EMT member, the notice period may not exceed twelve (12) months, without any right to severance pay.
Additionally, remuneration may be paid for non-compete undertakings. Such remuneration shall compensate for loss of income and shall only be paid in so far as the previously employed executive is not entitled to severance pay. The remuneration may amount to not more than 60 per cent of the monthly fixed base salary at the time of termination of employment and be paid during the time the non-compete undertaking applies, however not for more than twelve (12) months following the termination of employment.
4. 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 on the employees’ total income, the components of the remuneration and increase and growth rate over time, in the People Committee’s and the Board of Directors’ basis of decision when evaluating whether the guidelines and the limitations set out herein are reasonable.
5. Share ownership guidelines for members of the EMT
Since the Board of Directors believes that long-term share ownership is an important way to create alignment between the EMT members and Volvo Cars’ shareholders, it has implemented the following policy of share ownership for members of the EMT.
As per the policy, the Board of Directors expects the CEO and other members of the EMT to accumulate personal holdings in shares with a market value corresponding to the value of 100 per cent of the EMT member’s gross annual fixed base salary. When calculating the value of the personal holdings, the market value of the shares at each investment instance shall be used. It is expected that the personal holding of shares be established within five years from the listing of the company and, for new hires, within five years from commencement of employment with the group as CEO or as a member of the EMT. The CEO and other members of the EMT shall retain shares allotted (net after taxes payable) under future incentive programmes to achieve the expected share ownership. Further, upon reaching the recommended share ownership level, it is expected that the CEO and the other members of the EMT maintain shares of such value for the duration of their appointment as CEO or the other member of the EMT.
6. Remuneration guidelines governance
The Board of Directors has established the People Committee, whose tasks include preparing the Board of Directors’ decision to propose guidelines for EMT remuneration. The Board of Directors shall prepare a proposal for new guidelines at least every fourth year and submit it to the general meeting. The guidelines shall be in force until new guidelines are adopted by the general meeting.
The People Committee shall also monitor and evaluate variable pay programmes, the application of the guidelines for executive remuneration as well as the current remuneration structures and compensation levels in the company.
The members of the People Committee are independent of the company and its executive management. Neither the CEO nor any other EMT member participate in the Board of Directors’ decision-making process on any resolutions regarding remuneration-related matters so far as that could potentially affect their own remuneration.
7. Deviation from the guidelines
The Board of Directors may temporarily resolve to deviate from the guidelines, in whole or in part, if in a specific case there is special cause for the deviation and a deviation is necessary to serve the company’s long-term interests, including its sustainability, or to ensure the company’s financial viability. The People Committee’s tasks shall include preparation of any resolutions to deviate from the guidelines.