Telefonaktiebolaget LM Ericsson's (NASDAQ: ERIC) Annual General Meeting of
shareholders will be held on Friday, April 11, 2014 at 3.00 p.m. at Stockholm
Waterfront Congress Centre, Nils Ericsons Plan 4, Stockholm.
The Nomination Committee proposes inter alia:
* Re-election of the Chairman of the Board of Directors, of all other Board
members and of the auditor (item 9.3 and 9.6)
* Increase of the individual Board fee and of the fee to the Chairman of the
Board of Directors and unchanged fees for work on the Committees of the
Board of Directors (item 9.2)
The Board of Directors proposes inter alia:
* A dividend of SEK 3 per share (item 8.3)
* Continued Long-Term Variable Compensation Program consisting of an all
employee Stock Purchase Plan, a Key Contributor Retention Plan and an
Executive Performance Stock Plan (item 11)
Welcome to Telefonaktiebolaget LM Ericsson's Annual general meeting 2014
Telefonaktiebolaget LM Ericsson's shareholders are invited to participate in the
Annual General Meeting of shareholders to be held on Friday, April 11, 2014 at
3.00 p.m. at Stockholm Waterfront Congress Centre, Nils Ericsons Plan 4,
Stockholm. Registration to the Annual General Meeting starts at 1.30 p.m.
Registration and notice of attendance
Shareholders who wish to attend the Annual General Meeting must
* be recorded in the share register kept by Euroclear Sweden AB, the Swedish
securities registry, on Saturday April 5, 2014; and
* give notice of attendance to the Company at the latest on Monday, April
7, 2014. Notice of attendance can be given by telephone +46 (0)8 402 90 54
on weekdays between 10 a.m. and 4 p.m or on Ericsson's website
www.ericsson.com.
Notice may also be given in writing to:
Telefonaktiebolaget LM Ericsson
General Meeting of Shareholders
Box 7835
SE-103 98 Stockholm
Sweden
When giving notice of attendance, please state name, date of birth or
registration number, address, telephone number and number of attending
assistants, if any.
The Annual General Meeting will be conducted in Swedish and simultaneously
interpreted into English.
Shares registered in the name of a nominee
In addition to giving notice of attendance, shareholders having their shares
registered in the name of a nominee, must request the nominee to temporarily
enter the shareholder into the share register as per Saturday April 5, 2014, in
order to be entitled to attend the Annual General Meeting. Since the record date
for attending the Annual General Meeting is a Saturday, the shareholder should
inform the nominee to that effect well before Friday, April 4, 2014.
Proxy
Shareholders represented by proxy shall issue a power of attorney for the
representative. A power of attorney issued by a legal entity must be accompanied
by a copy of the entity's certificate of registration (should no such
certificate exist, a corresponding document of authority must be submitted). In
order to facilitate the registration at the Annual General Meeting, the power of
attorney in the original, certificate of registration and other documents of
authority should be sent to the Company in advance to the address above for
receipt by Thursday, April 10, 2014. Forms of power of attorney in Swedish and
English are available on Ericsson's website, www.ericsson.com.
Agenda
1. Election of the Chairman of the Annual General Meeting.
2. Preparation and approval of the voting list.
3. Approval of the agenda of the Annual General Meeting.
4. Determination whether the Annual General Meeting has been properly
convened.
5. Election of two persons approving the minutes.
6. Presentation of the annual report, the auditors' report, the consolidated
accounts, the auditors' report on the consolidated accounts and the
auditor's report whether the guidelines for remuneration to group management
have been complied with, as well as the auditors' presentation of the audit
work during 2013.
7. The President's speech and questions from the shareholders to the Board of
Directors and the management.
8. Resolutions with respect to
8.1 adoption of the income statement and the balance sheet, the consolidated
income statement and the consolidated balance sheet;
8.2 discharge of liability for the members of the Board of Directors and the
President; and
8.3 the appropriation of the profit in accordance with the approved balance
sheet and determination of the record date for dividend.
9. Presentation of the proposals of the Nomination Committee, election of the
Board of Directors etc.
9.1 Determination of the number of Board members and deputies of the Board of
Directors to be elected by the Annual General Meeting.
9.2 Determination of the fees payable to members of the Board of Directors
elected by the Annual General Meeting and members of the Committees of the Board
of Directors elected by the Annual General Meeting.
9.3 Election of the Chairman of the Board of Directors, other Board
members and deputies of the Board of Directors.
9.4 Determination of the fees payable to the auditor.
9.5 Determination of the number of auditors.
9.6 Election of auditor.
10. Resolution on the Guidelines for remuneration to Group management.
11. Long-Term Variable Compensation Program 2014.
11.1 Resolution on implementation of the Stock Purchase Plan.
11.2 Resolution on transfer of treasury stock for the Stock Purchase Plan.
11.3 Resolution on Equity Swap Agreement with third party in relation to the
Stock Purchase Plan.
11.4 Resolution on implementation of the Key Contributor Retention Plan.
11.5 Resolution on transfer of treasury stock for the Key Contributor
Retention Plan.
11.6 Resolution on Equity Swap Agreement with third party in relation to the
Key Contributor Retention Plan.
11.7 Resolution on implementation of the Executive Performance Stock Plan.
11.8 Resolution on transfer of treasury stock for the Executive Performance
Stock Plan.
11.9 Resolution on Equity Swap Agreement with third party in relation to the
Executive Performance Stock Plan.
12. Resolution on transfer of treasury stock in relation to the resolutions on
the Long-Term Variable Remuneration Programs 2010, 2011, 2012 and 2013.
13. Resolution on proposal from the shareholder Einar Hellbom that the Annual
General Meeting resolve to delegate to the Board of Directors to review how
shares are to be given equal voting rights and to present a proposal to
that effect at the Annual General Meeting 2015.
14. Resolution on proposals from the shareholder Thorwald Arvidsson that the
Annual General Meeting resolve to delegate to the Board of Directors:
14.1 to take necessary action to create a shareholders' association in the
company;
14.2 to write to the Government of Sweden, requesting a prompt appointment of
a commission instructed to propose legislation on the abolishment of voting
power differences in Swedish limited liability companies; and
14.3 to prepare a proposal regarding board representation for the small and
midsize shareholders.
15. Resolution on proposal from the shareholder Thorwald Arvidsson to amend the
articles of association.
16. Resolution on proposal from the shareholder Thorwald Arvidsson for an
examination through a special examiner under the Swedish Companies Act
(2005:551), chapter 10, section 21 (Sw. särskild granskning) to make clear
whether the company has acted contrary to sanctions resolved by relevant
international bodies. The audit should primarily concern the company's
exports to Iran.
17. Closing of the Annual General Meeting.
Item 1 Chairman of the Annual General Meeting
The Nomination Committee proposes that Advokat Sven Unger be elected Chairman of
the Annual General Meeting of shareholders 2014.
Item 8.3 Dividend and record date
The Board of Directors proposes a dividend of SEK 3 per share and Wednesday,
April 16, 2014, as record date for dividend. Assuming this date will be the
record day, Euroclear Sweden AB is expected to disburse dividends on Wednesday,
April 23, 2014.
Item 9.1-9.3 Number of Board members and deputies to be elected by the Annual
General Meeting, Directors' fees, election of the Chairman and other members of
the Board of Directors
The Nomination Committee, appointed in accordance with the Instruction for the
Nomination Committee resolved by the Annual General Meeting 2012, is composed
of the Chairman of the Committee, Carl-Olof By (AB Industrivärden and Svenska
Handelsbankens Pensionsstiftelse), Petra Hedengran (Investor AB), Johan Held
(AFA Försäkring), Marianne Nilsson (Swedbank Robur Fonder) and Leif Johansson
(Chairman of the Board of Directors).
Item 9.1 Number of Board members and deputies of the Board of Directors to be
elected by the Annual General Meeting
According to the articles of association, the Board shall consist of no less
than five and no more than twelve Board members, with no more than six deputies.
The Nomination Committee proposes that the number of Board members elected by
the Annual General Meeting of shareholders remain twelve and that no deputies be
elected.
Item 9.2 Fees payable to members of the Board of Directors elected by the Annual
General Meeting and to members of the Committees of the Board elected by the
Annual General Meeting
The Nomination Committee proposes that fees to non-employed Board members
elected by the Annual General Meeting and non-employed members of the Committees
of the Board elected by the Annual General Meeting be paid as follows:
* SEK 3,975,000 to the Chairman of the Board of Directors (previously SEK
3,850,000);
* SEK 950,000 each to the other Board members (previously SEK 900,000);
* SEK 350,000 to the Chairman of the Audit Committee (unchanged);
* SEK 250,000 each to the other members of the Audit Committee
(unchanged);
* SEK 200,000 each to the Chairmen of the Finance and the Remuneration
Committee (unchanged); and
* SEK 175,000 each to the other members of the Finance and the
Remuneration Committee (unchanged).
It is important that Board fees are maintained at an appropriate level to make
it possible to recruit the best possible international competence to the Board
of Directors of Ericsson and to make it possible to keep such competence. The
Nomination Committee has compared the Board fees in Ericsson with Board fees in
other international high-tech companies. The Nomination Committee has concluded
that compared with the Board fees in companies of equal size and complexity,
Ericsson's Board fees are lower. When assessing the level of fees it must be
considered that the Ericsson group has customers in more than 180 countries and
that sales amount to more than SEK 200 billion.
Against this background, the Nomination Committee considers well-justified the
proposed increases of the individual Board fee from SEK 900,000 to SEK 950,000
and of the fee to the Chairman of the Board from SEK 3,850,000 to SEK 3,975,000.
The Nomination Committee considers that the fees for Committee work are
reasonable, and proposes that these fees remain unchanged.
The proposal of the Nomination Committee implies all in all an increase of the
fees of approximately 4.2 percent compared with the total fees to the Board
members for Board and Committee work resolved by the Annual General Meeting
2013.
Fees in the form of synthetic shares
Background
The Nomination Committee believes that it is appropriate that Board members
elected by the shareholders hold shares in Ericsson, in order to strengthen the
Board members' and the shareholders' mutual interests in the company. The
Nomination Committee recommends Board members elected by the shareholders to,
during a five year period, build a holding of shares or synthetic shares in
Ericsson at least corresponding to the value of the annual Board fee (after tax)
(excluding fees for Committee work), and that such holding be kept during the
time the Board member remain Board member in Ericsson.
To make it possible for Board members to create an economic interest in the
company and considering that it is in many cases difficult for Board members to
trade in the company's share due to applicable insider rules, the Nomination
Committee proposes that the Board members should, as previously, be offered the
possibility of receiving part of the Board fees in the form of synthetic
shares. A synthetic share constitutes a right to receive payment of an amount
which corresponds to the market value of a share of series B in the Company on
NASDAQ OMX Stockholm at the time of payment.
Proposal
The Nomination Committee therefore proposes that the Annual General Meeting of
shareholders 2014 resolve that part of the fees to the Directors, in respect of
their Board assignment (however, not in respect of Committee work), may be paid
in the form of synthetic shares, on the following terms and conditions.
* A nominated Director shall be able to choose to receive the fee in respect
of his or her Board assignment, according to the following four
alternatives:
i. 25 percent in cash - 75 percent in synthetic shares
ii. 50 percent in cash - 50 percent in synthetic shares
iii. 75 percent in cash - 25 percent in synthetic shares
iv. 100 percent in cash.
* The number of synthetic shares to be allocated shall be valued to an average
of the market price of shares of series B in the Company on NASDAQ OMX
Stockholm during a period of five trading days immediately following the
publication of Ericsson's interim report for the first quarter of 2014. The
synthetic shares are vested during the term of office, with 25 percent per
quarter of the year.
* The synthetic shares give a right to, following the publication of
Ericsson's year-end financial statement in 2019, receive payment of a cash
amount per synthetic share corresponding to the market price of shares of
series B in the Company at the time of payment.
* An amount corresponding to dividend in respect of shares of series B in the
Company, resolved by the Annual General Meeting during the holding period,
shall be disbursed at the same time as the cash amount.
* Should the Director's assignment to the Board of Directors come to an end no
later than during the third calendar year after the year in which the
Annual General Meeting resolved on allocation of the synthetic shares,
payment may take place the year after the assignment came to an end.
* The number of synthetic shares may be subject to recalculation in the event
of bonus issues, split, rights issues and similar measures, under the terms
and conditions for the synthetic shares.
The complete terms and conditions for the synthetic shares are described in
Exhibit 1 to the Nomination Committee's proposal.
The financial difference for the Company, should all Directors receive part of
their fees in the form of synthetic shares compared with the fees being paid in
cash only, is assessed to be very limited.
Item 9.3 Election of the Chairman of the Board of Directors, other Board members
and deputies of the Board of Directors
The Nomination Committee proposes that the following persons be elected Board
members:
Chairman of the Board:
re-election: Leif Johansson.
Other Board members:
re-election: Roxanne S. Austin, Sir Peter L. Bonfield, Nora Denzel, Börje
Ekholm, Alexander Izosimov, Ulf J. Johansson, Sverker Martin-Löf, Kristin Skogen
Lund, Hans Vestberg, Jacob Wallenberg and Pär Östberg.
In the composition of the Board of Directors, the Nomination Committee
considers, among other things, necessary experience and competence but also the
value of diversity, gender balance and renewal. The Nomination Committee also
assesses the appropriateness of the number of members of the Board. At the
Annual General Meeting 2013, three new Board members were elected to the Board
of Directors of Ericsson and the percentage of women on the Board increased to
25% of Board members elected by the shareholders, an increase considered
positive by the Nomination Committee.
In its appraisal of qualifications and performance of the individual Board
members, the Nomination Committee takes into account the competence and
experience of each individual member along with the individual member's
contribution to the Board work as a whole. The Nomination Committee considers it
important that Board members can devote the necessary time and care required to
fulfill their tasks as Board members in Ericsson, and has therefore also
familiarized itself with the proposed Board members' engagements outside of
Ericsson and the time they require.
The Nomination Committee has further thoroughly familiarized itself with the
Board work and the work of individual Board members. The Nomination Committee is
of the opinion that the current Board and Board work is well functioning and
that the Board fulfils high expectations in terms of composition and that the
Board as well as the individual Board members fulfil high expectations in terms
of expertise. All Board members contribute meritoriously with their respective
expertise. The Nomination Committee has noted that Board members in Ericsson
have high Board meeting attendance and that they are well prepared at the
meetings. After thorough discussion and evaluation, the Nomination Committee is
of the opinion that the proposed Board members have sufficient time to fulfil
their tasks as Board members in Ericsson and the Nomination Committee has not
seen reason to propose any amendments in the composition of the Board at the
Annual General Meeting 2014.
Information regarding proposed Board members
Information regarding the proposed Board members is presented in Exhibit 2 to
the Nomination Committee's proposal.
Independence of Board members
The Nomination Committee has made the following assessments in terms of
applicable Swedish independence requirements:
i. The Nomination Committee considers that at least the following Board members
are independent of the Company and its senior management:
a. Roxanne S. Austin
b. Sir Peter L. Bonfield
c. Nora Denzel
d. Börje Ekholm
e. Alexander Izosimov
f. Leif Johansson
g. Ulf J. Johansson
h. Kristin Skogen Lund
i. Pär Östberg
ii. From among the Board members reported in (i) above, the Nomination
Committee considers that at least the following are independent of the
Company's major shareholders:
a. Roxanne S. Austin
b. Sir Peter L. Bonfield
c. Nora Denzel
d. Alexander Izosimov
e. Leif Johansson
f. Ulf J. Johansson
g. Kristin Skogen Lund
Moreover, the Nomination Committee considers that at least the following Board
members are independent in respect of all applicable independence requirements:
a. Roxanne S. Austin
b. Sir Peter L. Bonfield
c. Nora Denzel
d. Alexander Izosimov
e. Leif Johansson
f. Ulf J. Johansson
g. Kristin Skogen Lund
Item 9.4 Fees payable to the auditor
The Nomination Committee proposes, like previous years, that the auditor fees be
paid against approved account.
Item 9.5 Number of auditors
According to the articles of association, the company shall have no less than
one and no more than three registered public accounting firms as auditor. The
Nomination Committee proposes that the company should have one registered public
accounting firm as auditor.
Item 9.6 Election of auditor
The Nomination Committee proposes that PricewaterhouseCoopers AB be appointed
auditor for the period as of the end of the Annual General Meeting 2014 until
the end of the Annual General Meeting 2015.
Item 10 Guidelines for remuneration to Group management
The Board of Directors proposes that the Annual General Meeting resolve on the
following guidelines for remuneration to Group management for the period up to
the 2015 Annual General Meeting. Compared to the guidelines resolved by the
2013 Annual General Meeting, a reference to the normally applicable pensionable
age has been deleted. Information on estimated costs for variable remuneration
is appended to the proposal.
Guidelines for remuneration to Group management
For Group management consisting of the Executive Leadership Team, including the
President and CEO, total remuneration consists of fixed salary, short- and long-
term variable compensation, pension and other benefits.
The following guidelines apply to the remuneration of the Executive Leadership
Team:
* Variable compensation is in cash and stock-based programs awarded against
specific business targets derived from the long-term business plan approved
by the Board of Directors. Targets may include financial targets at either
Group or unit level, operational targets, employee engagement targets and
customer satisfaction targets.
* All benefits, including pension benefits, follow the competitive practice in
the home country taking total compensation into account.
* By way of exception, additional arrangements can be made when deemed
necessary. An additional arrangement can be renewed but each such
arrangement shall be limited in time and shall not exceed a period of 36
months and twice the remuneration that the individual would have received
had no additional arrangement been made.
* The mutual notice period may be no more than six months. Upon termination of
employment by the Company, severance pay amounting to a maximum of 18 months
fixed salary is paid. Notice of termination given by the employee due to
significant structural changes, or other events that in a determining manner
affect the content of work or the condition for the position, is equated
with notice of termination served by the Company.
+------------------------------------------------------------------------------+
|Appendix to proposal on Guidelines for remuneration to Group management. |
|Details of our Remuneration Policy and how we deliver on our policy and |
|guidelines, including information on previously decided long term variable |
|remuneration that has not yet become due for payment, can be found in the |
|Remuneration Report and in Note C28, "Information regarding Members of the |
|Board of Directors, the Group Management and Employees" in the annual report |
|2013. |
| |
|With the current composition of the Executive Leadership Team, the Company's |
|cost during 2014 for variable remuneration to the Executive Leadership Team |
|can, at a constant share price, be estimated to amount to between 0 and 220 |
|percent of the aggregate fixed salary cost, all excluding social security |
|costs. |
| |
+------------------------------------------------------------------------------+
Item 11.1-11.9 Long-Term Variable Compensation Program 2014 (LTV 2014) including
the Board of Directors' proposal for resolutions on implementation of an all
employee Stock Purchase Plan, a Key Contributor Retention Plan and an Executive
Performance Stock Plan and, under each plan respectively, transfer of treasury
stock
The LTV program is an integral part of the Company's remuneration strategy, in
particular the Board of Directors wishes to encourage all employees to become
and remain shareholders and the leadership to build significant equity holdings.
Following the Board of Directors' annual evaluation of total remuneration and
ongoing programs, it proposes to make no changes to the structure of Ericsson's
Long-Term Variable Compensation Program.
It is anticipated that the LTV 2014 will require up to 27.6 million shares,
corresponding to a dilution of up to 0.86 percent of the total number of
outstanding shares, at a cost between SEK 1,126 million and SEK 1,984 million
unevenly distributed over the years 2014-2018. The number of shares covered by
ongoing programs as per 31 December, 2013, amounts to approximately 64 million
shares, corresponding to approximately 1.97 percent of the number of
outstanding shares.
Three plans
The LTV 2014 builds on a common platform, but consists of three separate plans.
The Stock Purchase Plan is an all employee plan and is designed to create an
incentive for all employees to become shareholders. The aim is to secure
commitment to long-term value creation throughout Ericsson.
The Key Contributor Retention Plan is part of Ericsson's talent strategy and is
designed to ensure long-term retention of top-talent with critical skills vital
to Ericsson's future performance. Up to ten percent of the Company's employees
are defined as "key contributors", based on a rigorous selection process
incorporating elements such as individual performance, possession of critical
skills and future potential. The Remuneration Committee of the Board of
Directors monitors the selection process and nominations for bias of factors
such as seniority, gender, age and frequency of award.
The Executive Performance Stock Plan is designed to encourage long-term value
creation in alignment with shareholders' interests. The plan is offered to a
defined group of senior managers, up to 0.5 percent of the total employee
population. The aim is to attract, retain and motivate executives in a
competitive market through performance-based share related incentives and to
encourage the build-up of significant equity stakes.
The Executive Performance Stock Plan 2011 introduced three new performance
measures of Net Sales Growth, Operating Income Growth and Cash Conversion to
better reflect the business strategy and long term value creation of the
Company. The Executive Performance Stock Plans 2012 and 2013 include the same
criteria and it is proposed that the Executive Performance Stock Plan 2014 shall
have the same performance criteria for the period 2014 - 2016.
The three performance criteria for the Executive Performance Stock Plan 2014
are:
* Net Sales Growth: Up to one third of the award will vest if the compound
annual growth rate of consolidated net sales is between 2 and 8 percent
comparing 2016 financial results to 2013, which corresponds to consolidated
sales of SEK 239 billion and SEK 284 billion for the financial year 2016.
* Operating Income Growth: Up to one third of the award will vest if the
compound annual growth rate of consolidated operating income is between 5
and 15 percent comparing 2016 financial results to 2013, which corresponds
to operating income of SEK 18 billion and SEK 24 billion for the financial
year 2016.
* Cash Conversion: Up to one third of the award will vest if cash conversion
is at or above 70 percent during each of the years 2014-2016 and vesting one
ninth of the total award for each year the target is achieved.
Financing
The Board of Directors has considered different financing methods for transfer
of shares to employees under the LTV 2014, such as transfer of treasury stock
and an equity swap agreement with a third party.
The Board of Directors considers transfer of treasury stock as the most cost
efficient and flexible method to transfer shares under the LTV 2014.
Costs
The total effect on the income statement of the LTV 2014, including financing
costs, is estimated to range between SEK 1,126 million and SEK 1,984 million
unevenly distributed over the years 2014-2018. The costs constitute 3 percent
of Ericsson's total remuneration costs 2013, including social security fees,
amounting to SEK 65 billion.
The calculations are conservative and based on assumptions of present
participation rate in the Stock Purchase Plan and full participation in the Key
Contributor Retention Plan and the Executive Performance Stock Plan, at maximum
contribution levels and with maximum vesting levels for the latter plan.
Costs affecting the income statement, but not the cash flow
Compensation costs, corresponding to the value of matching shares transferred to
employees, are estimated to range between SEK 1,034 million and SEK 1,285
million, depending on the fulfillment of the performance targets of the
Executive Performance Stock Plan.[1] The compensation costs are distributed over
the LTV 2014 period, i.e. 2014-2018.
Social security charges as a result of transfer of shares to employees depend on
the performance against the Executive Performance Stock Plan targets and based
on an assumed average share price at matching between SEK 30 and SEK 175, the
costs are estimated to range between SEK 92 million and SEK 699 million. The
social security costs are expected to occur mainly during 2017-2018.
Costs affecting the income statement and the cash flow
Plan administration costs have been estimated to SEK 10 million, distributed
over the LTV 2014 period, i.e. 2014-2018.
The administration cost for transfer of shares by way of an equity swap
agreement is estimated to approximately SEK 175 million.
Dilution
The Company has approximately 3.3 billion shares in issue. As per 31 December,
2013, the Company held 74 million shares in treasury. The number of shares
allocated to ongoing programs as per 31 December, 2013, amounts to
approximately 64 million shares, corresponding to approximately 1.97 percent of
the number of outstanding shares. However, it is not likely that all shares
allocated for ongoing programs will be required. In order to implement the LTV
2014, a total of up to 27.6 million shares are required, which corresponds to
approximately 0.86 percent of the total number of outstanding shares. The
effect on important key figures is only marginal.
Proposals
The Long-Term Variable Compensation Program 2014 (LTV 2014)
The Board of Directors proposes that the Annual General Meeting resolve on the
implementation of (1) a Stock Purchase Plan, (2) a Key Contributor Retention
Plan, and (3) an Executive Performance Stock Plan.
In order to implement the LTV 2014, the Board of Directors proposes that no more
than in total 22,800,000 shares of series B in Telefonaktiebolaget LM Ericsson
(hereinafter referred to as "the Company" or "Ericsson") may be transferred to
employees in the Ericsson Group and, moreover, that 4,800,000 shares may be sold
on NASDAQ OMX Stockholm in order to cover, inter alia, social security payments.
The Board of Directors proposes that the Annual General Meeting resolve in
accordance with the proposals set out below.
Item 11.1 Implementation of the Stock Purchase Plan
All employees within the Ericsson Group, except for what is mentioned in the
fourth paragraph below, will be offered to participate in the Stock Purchase
Plan.
Employees who participate in the Stock Purchase Plan shall, during a 12 month
period from the implementation of the plan, be able to invest up to 7.5 percent
of gross fixed salary in shares of series B in the Company on NASDAQ OMX
Stockholm or in ADSs on NASDAQ New York. The CEO shall have the right to invest
up to 10 percent of gross fixed salary and 10 percent of short term variable
compensation for purchase of shares.
If the purchased shares are retained by the employee for three years from the
investment date and the employment with the Ericsson Group continues during
that time, the employee will be given a corresponding number of shares of series
B or ADSs, free of consideration.
Participation in the Stock Purchase Plan presupposes that such participation is
legally possible in the various jurisdictions concerned and that the
administrative costs and financial efforts are reasonable in the opinion of the
Company.
Item 11.2 Transfer of treasury stock for the Stock Purchase Plan
a. Transfer of treasury stock to employees
Transfer of no more than 10,000,000 shares of series B in the Company may occur
on the following terms and conditions:
* The right to acquire shares shall be granted to such persons within the
Ericsson Group covered by the terms and conditions of the Stock Purchase
Plan. Furthermore, subsidiaries within the Ericsson Group shall have the
right to acquire shares, free of consideration, and such subsidiaries shall
be obligated to immediately transfer, free of consideration, shares to
their employees covered by the terms and conditions of the Stock Purchase
Plan.
* The employee shall have the right to receive shares during the period when
the employee is entitled to receive shares pursuant to the terms and
conditions of the Stock Purchase Plan, i.e. during the period from November
2014 up to and including November 2018.
* Employees covered by the terms and conditions of the Stock Purchase Plan
shall receive shares of series B in the Company, free of consideration.
b. Transfer of treasury stock on an exchange
The Company shall have the right to, prior to the Annual General Meeting in
2015, transfer no more than 2,000,000 shares of series B in the Company, in
order to cover certain expenses, mainly social security payments. Transfer of
the shares shall be effected on NASDAQ OMX Stockholm at a price within the at
each time prevailing price interval for the share.
Item 11.3 Equity Swap Agreement with third party in relation to the Stock
Purchase Plan
In the event that the required majority is not reached under item 11.2 above,
the financial exposure of the Stock Purchase Plan shall be hedged by the
Company entering into an equity swap agreement with a third party, under which
the third party shall, in its own name, acquire and transfer shares in the
Company to employees covered by the Stock Purchase Plan.
Item 11.4 Implementation of the Key Contributor Retention Plan
In addition to the regular matching of one share pursuant to the Stock Purchase
Plan described above, up to 10 percent of the employees (presently approximately
10,000 persons) are selected as key contributors and will be offered additional
matching shares, free of consideration, within the Key Contributor Retention
Plan.
If the shares purchased in accordance with the terms and conditions of the Stock
Purchase Plan are retained by an employee for three years from the investment
date and the employment with the Ericsson Group continues during that time, the
employee will be entitled to an additional matching share, free of
consideration, for every share purchased, in addition to the regular matching
of one share.
Participation in the Key Contributor Retention Plan presupposes that such
participation is legally possible in the various jurisdictions concerned and
that the administrative costs and financial efforts are reasonable in the
opinion of the Company. The Board of Directors shall however be entitled, but
not obligated, to arrange for an alternative cash plan for key contributors in
specific jurisdictions, should any of the aforementioned presuppositions prove
not to be at hand. Such alternative cash plan shall, as far as practical
correspond to the terms and conditions of the Key Contributor Retention Plan.
Item 11.5 Transfer of treasury stock for the Key Contributor Retention Plan
a. Transfer of treasury stock to employees
Transfer of no more than 8,300,000 shares of series B in the Company may occur
on the following terms and conditions.
* The right to acquire shares shall be granted to such persons within the
Ericsson Group covered by the terms and conditions of the Key Contributor
Retention Plan. Furthermore, subsidiaries within the Ericsson Group shall
have the right to acquire shares, free of consideration, and such
subsidiaries shall be obligated to immediately transfer, free of
consideration, shares to their employees covered by the terms and conditions
of the Key Contributor Retention Plan.
* The employee shall have the right to receive shares during the period when
the employee is entitled to receive shares pursuant to the terms and
conditions of the Key Contributor Retention Plan, i.e. during the period
from November 2014 up to and including November 2018.
* Employees covered by the terms and conditions of the Key Contributor
Retention Plan shall receive shares of series B in the Company, free of
consideration.
b. Transfer of treasury stock on an exchange
The Company shall have the right to, prior to the Annual General Meeting
in 2015, transfer no more than 1,700,000 shares of series B in the Company, in
order to cover certain expenses, mainly social security payments. Transfer of
the shares shall be effected on NASDAQ OMX Stockholm at a price within the at
each time prevailing price interval for the share.
Item 11.6 Equity Swap Agreement with third party in relation to the Key
Contributor Retention Plan
In the event that the required majority is not reached under item 11.5 above,
the financial exposure of the Key Contributor Retention Plan shall be hedged by
the Company entering into an equity swap agreement with a third party, under
which the third party shall, in its own name, acquire and transfer shares in the
Company to employees covered by the Key Contributor Retention Plan.
Item 11.7 Implementation of the Executive Performance Stock Plan
In addition to the regular matching of shares pursuant to the Stock Purchase
Plan described above, senior managers, up to 0.5 percent of the employees
(presently approximately 500 persons, although it is anticipated that the number
of participants will be lower) will be offered an additional matching of shares,
free of consideration, within the Executive Performance Stock Plan.
If the shares purchased in accordance with the terms and conditions of the Stock
Purchase Plan are retained by an employee for three years from the investment
date and the employment with the Ericsson Group continues during that time, the
employee will be entitled to the following matching of shares, free of
consideration, in addition to the regular matching of one share:
* The President may be entitled to an additional performance match of up
to nine shares for each one purchased.
* Other senior managers may be entitled to an additional performance match
of up to either four or six shares for each one purchased.
The nomination of senior managers will be on the basis of position, seniority
and performance at the discretion of the Remuneration Committee, which will
approve participation and matching share opportunity.
The terms and conditions of the additional performance match under the Executive
Performance Stock Plan will be based on the outcome of three targets, which are
independent of each other and have equal weighting. The three targets are:
* Up to one third of the award shall vest provided the compound annual growth
rate (CAGR) of consolidated net sales between year 0 (2013 financial year)
and year 3 (2016 financial year) is between 2 and 8 percent, which
corresponds to consolidated sales of SEK 239 billion and SEK 284 billion for
the financial year 2016. The net sales for the base year (2013 financial
year) has been adjusted for the impact of the Samsung IPR agreement.
Matching will begin at a threshold level of 2 percent CAGR and increase on a
linear scale to full vesting of this third of the award at 8 percent CAGR.
* Up to one third of the award shall vest provided the compound annual growth
rate (CAGR) of consolidated operating income between year 0 (2013 financial
year) and year 3 (2016 financial year) is between 5 and 15 percent, which
corresponds to consolidated operating income of SEK 18 billion and SEK 24
billion for the financial year 2016. The net sales for the base year (2013
financial year) has been adjusted for the impact of the Samsung IPR
agreement. Matching will begin at a threshold level of 5 percent CAGR and
increase on a linear scale to full vesting of this third of the award at 15
percent CAGR.
* Up to one third of the award will be based on the cash conversion during
each of the years during the performance period, calculated as cash flow
from operating activities divided by net income reconciled to cash. One
ninth of the total award will vest for any year, i.e. financial years
2014, 2015 and 2016, if cash conversion is at or above 70 percent.
The Board of Directors considers that long-term value creation will be reflected
in the success of these targets, aligning executives with long-term shareholder
interests. There will be no allocation of shares if none of the threshold
levels have been achieved, i.e. CAGR is less than 2 percent for net sales and
less than 5 percent for operating income, and a 70 percent cash conversion has
not been achieved during the performance period. The minimum matching at the
threshold levels is 0. The maximum number of performance matching shares - 4
shares, 6 shares and 9 shares respectively - will be allocated if the maximum
performance levels of CAGR of 8 percent for net sales and 15 percent for
operating income have been achieved, or exceeded, and a cash conversion of 70
percent or more has been achieved each year during the period.
Before the number of performance shares to be matched are finally determined,
the Board of Directors shall examine whether the performance matching is
reasonable considering the Company's financial results and position, conditions
on the stock market and other circumstances, and if not, as determined by the
Board of Directors, reduce the number of performance shares to be matched to the
lower number of shares deemed appropriate by the Board of Directors. When
undertaking its evaluation of performance outcomes the Board of Directors will
consider, in particular, the impact of larger acquisitions, divestitures, the
creation of joint ventures and any other significant capital event on the three
targets on a case by case basis.
Item 11.8 Transfer of treasury stock for the Executive Performance Stock Plan
a) Transfer of treasury stock to employees
Transfer of no more than 4,500,000 shares of series B in the Company may occur
on the following terms and conditions.
* The right to acquire shares shall be granted to such persons within the
Ericsson Group covered by the terms and conditions of the Executive
Performance Stock Plan. Furthermore, subsidiaries within the Ericsson Group
shall have the right to acquire shares, free of consideration, and such
subsidiaries shall be obligated to immediately transfer, free of
consideration, shares to their employees covered by the terms and conditions
of the Executive Performance Stock Plan.
* The employee shall have the right to receive shares during the period when
the employee is entitled to receive shares pursuant to the terms and
conditions of the Executive Performance Stock Plan, i.e. during the period
from November 2014 up to and including November 2018.
* Employees covered by the terms and conditions of the Executive Performance
Stock Plan shall receive shares of series B in the Company, free of
consideration.
b) Transfer of treasury stock on an exchange
The Company shall have the right to, prior to the Annual General Meeting in
2015, transfer no more than 1,100,000 shares of series B in the Company, in
order to cover certain expenses, mainly social security payments. Transfer of
the shares shall be effected on NASDAQ OMX Stockholm at a price within the at
each time prevailing price interval for the share.
Item 11.9 Equity Swap Agreement with third party in relation to the Executive
Performance Stock Plan
In the event that the required majority is not reached under item 11.8 above,
the financial exposure of the Executive Performance Stock Plan shall be hedged
by the Company entering into an equity swap agreement with a third party, under
which the third party shall, in its own name, acquire and transfer shares in the
Company to employees covered by the Executive Performance Stock Plan.
Majority rules
The resolutions of the Annual General Meeting implementation of the three plans
according to items 11.1, 11.4 and 11.7 above require that more than half of the
votes cast at the Annual General Meeting approve the proposals. The Annual
General Meeting's resolutions on transfers of treasury stock to employees and on
an exchange according to items 11.2, 11.5 and 11.8 above, shall be adopted as
one resolution for each of the three items, and require that shareholders
representing at least nine-tenths of the votes cast as well as the shares
represented at the Annual General Meeting approve the proposals. A valid
resolution in accordance with the proposals for an equity swap agreement under
items 11.3, 11.6 and 11.9 above requires that more than half of the votes cast
at the Annual General Meeting approve the proposals.
Description of ongoing variable compensation programs
The Company's ongoing variable compensation programs are described in detail in
the Annual Report 2013 in the note to the Consolidated Financial Statements,
Note C28 and on the Company's website. The Remuneration Report published in the
Annual Report outlines how the Company implements its guidelines on remuneration
to Group management in line with the Swedish Corporate Governance Code.
Item 12 The Board of Directors' proposal for resolution on transfer of treasury
stock in relation to the resolutions on the Long-Term Variable Remuneration
Programs 2010, 2011, 2012 and 2013
Background
The Annual General Meetings 2010, 2011, 2012 and 2013 resolved on a right for
the Company to transfer in total not more than 19,200,000 shares of series B in
the Company on a stock exchange to cover certain payments, mainly social
security charges, which may occur in relation to the Long-Term Variable
Remuneration Programs 2010, 2011, 2012 and 2013.
Each resolution has for legal reasons only been valid up to the following Annual
General Meeting. Resolutions on transfer of treasury stock for the purpose of
the above mentioned programs have therefore been repeated at the subsequent
Annual General Meeting.
In accordance with the resolutions on transfer of in total not more than
19,200,000 shares,
618,400 shares of series B have been transferred up to March 1, 2014.
Proposal
The Board of Directors proposes that the Annual General Meeting resolve that the
Company shall have the right to transfer, prior to the Annual General Meeting
2015, not more than 18,581,600 shares of series B in the Company, or the lower
number of shares of series B, which as per April 11, 2014 remains of the
original 19,200,000 shares, for the purpose of covering certain payments,
primarily social security charges that may occur in relation to the Long-Term
Variable Remuneration Programs 2010, 2011, 2012 and 2013. Transfer of shares
shall be effected on NASDAQ OMX Stockholm at a price within the, at each time,
prevailing price interval for the share.
Majority rules
The resolution of the Annual General Meeting on a transfer of treasury stock
requires that shareholders holding at least two-thirds of the votes cast as well
as the shares represented at the Annual General Meeting vote in favor of the
proposal.
Items 13 - 16 Proposals from shareholders
The proposals under item 13, 14 and 16 are set out in the agenda.
Item 15 Proposal to amend the articles of association
The shareholder Thorwald Arvidsson proposes that the articles of association be
amended as follows, provided that Thorwald Arvidsson's proposal regarding
sending a request to the Swedish Government is not approved (item 14.2).
§ 5
The number of shares shall amount to no less than 3,000,000,000 and no more than
12,000,000,000. All shares shall carry equal rights.
§ 6
Deleted.
§ 7
Deleted.
(Numbering in the articles of association to be amended accordingly.)
Thorwald Arvidsson proposes that the Board of Directors be authorized to take
such measures as may be required as a consequence of the above amendment of the
articles of association.
Majority rules
The resolutions of the Annual General Meeting under items 13 and 14 require that
shareholders representing more than half of the votes cast at the meeting vote
in favor of the proposals. The resolution of the Annual General Meeting to amend
the articles of association under item 15 is valid if all shareholders
represented at the meeting vote in favor of the proposal and those shareholders
represent at least nine-tenths of all shares in the company, alternatively if
shareholders representing at least two-thirds of the votes cast as well as the
shares represented at the meeting vote in favor of the proposal and holders of
half of all shares of series A and nine-tenths of the shares of series A
represented at the meeting agree to the change. The resolution of the Annual
General Meeting on examination through a special examiner under item 16 requires
that shareholders of at least one-tenth of all shares in the company or of at
least one-third of the shares represented at the meeting, vote in favor of the
proposal or that shareholders with more than half of the votes cast vote in
favor of the proposal.
Shares and votes
There are in total 3,305,051,735 shares in the Company; 261,755,983 shares of
series A and 3,043,295,752 shares of series B, corresponding to in total
566,085,558.2 votes. The Company's holding of treasury stock amounts to
71,296,217 shares of series B, corresponding to 7,129,621.7 votes.
Information at the Annual General Meeting
The Board of Directors and the President shall, if any shareholder so requests
and the Board of Directors believes that it can be done without material harm to
the Company, provide information regarding circumstances that may affect the
assessment of an item on the agenda and circumstances that can affect the
assessment of the Company's or its subsidiaries' financial situation and the
Company's relation to other companies within the Group.
Documents
The complete proposals of the Nomination Committee with respect to Items 1 and
9 above, including Exhibit 1 and 2 to the Nomination Committee's proposals, and
the proposals from shareholders (in original language) under items 13 - 16, are
available at the Company's website www.ericsson.com. The documents will be sent
upon request to shareholders providing their address to the company. In respect
of all other items, complete proposals are provided under the respective item in
the Notice.
The Annual Report and the Auditor's Report as well as the Auditor's report
regarding Guidelines for remuneration to Group Management will be made available
at the Company and posted on the Company's website www.ericsson.com no later
than three weeks prior to the Annual General Meeting. The documents will be sent
upon request to shareholders providing their address to the company.
Stockholm, March 2014
THE BOARD OF DIRECTORS
NOTES TO EDITORS
Download high-resolution photos and broadcast-quality video at
www.ericsson.com/press
Ericsson is a world-leading provider of communications technology and services.
We are enabling the Networked Society with efficient real-time solutions that
allow us all to study, work and live our lives more freely, in sustainable
societies around the world.
Our offering comprises services, software and infrastructure within Information
and Communications Technology for telecom operators and other industries. Today
40 percent of the world's mobile traffic goes through Ericsson networks and we
support customers' networks servicing more than 2.5 billion subscriptions.
We are more than 110,000 people working with customers in more than 180
countries. Founded in 1876, Ericsson is headquartered in Stockholm, Sweden. In
2013 the company's net sales were SEK 227.4 billion (USD 34.9 billion). Ericsson
is listed on NASDAQ OMX, Stockholm and NASDAQ, New York stock exchanges.
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FOR FURTHER INFORMATION, PLEASE CONTACT
Ericsson Corporate Communications
Phone: +46 10 719 69 92
E-mail: media.relations@ericsson.com
Ericsson Investor Relations
Phone: +46 10 719 00 00
E-mail: investor.relations@ericsson.com
[1] The compensation costs for an alternative Key Contributor Retention Cash
Program may vary depending on the development of the stock price during the
qualifying period. This has been disregarded in the calculations since these
costs represent a minor part of the overall compensation costs.
[HUG#1766694]
