(Información remitida por la empresa firmante)
The Board of Directors has prepared a Remuneration report which is proposed to be approved by the Annual General Meeting. The Remuneration report is available on the company’s website, www.skf.com. Proposal under item 17
The main contents of the Board of Directors’ proposal are stated below. The complete proposal is available at the company and at the company’s website, www.skf.com.
At the Annual General Meeting in 2008 the SKF Group introduced a long-term performance share programme for senior managers and key employees. Since then, the Annual General Meeting has resolved each year upon a performance share programme.
The Board proposes, in order to continue to link the long-term interests of the participants and the shareholders, strengthening the SKF Group’s ability to attract and retain the best people and to contribute to the SKF Group’s business strategy, its long-term interests and sustainability, that a decision be taken at the Annual General Meeting 2023 on SKF’s Performance Share Programme 2023.
The programme is proposed to cover not more than 225 senior managers and key employees in the SKF Group with an opportunity to be allotted, free of charge, SKF B shares in accordance with the following principal terms and guidelines. Under the programme, not more than in total 1,000,000 SKF B shares may be allotted.
The allotment of shares shall be related to the level of achievement of the Total Value Added (TVA) target, as defined by the Board, and SKF’s CDP Climate Change score target[1]. The TVA performance measure is weighted 80% and the CDP Climate Change score performance measure is weighted 20%.
TVA performance measure
TVA is a simplified, economic value-added model promoting greater operating profit, capital efficiency and profitable growth. TVA is the operating profit, less the pre-tax cost of capital.
Over the three-year programme period (2023-2025), the TVA performance target range is set annually by the Board against the baseline of the actual TVA achieved in the previous year. The overall performance achievement for the TVA performance measure of the programme is the average of achievements of the annual TVA targets. In order for allocation of shares to take place, the average TVA development must exceed a certain minimum level (the threshold level). In addition to the threshold level, a target level is set. Maximum allotment is awarded if the target level is reached or exceeded. By way of example, if the TVA achievement year 1 is 80%, year 2 is 100% and year 3 is 0%, the overall performance achievement of the programme would then be 60% (80%+100%+0% / 3).
CDP Climate Change score performance measure
CDP is a global non-profit organization known for its assessments and scoring methodology to evaluate companies’ disclosure and performance relating to climate change and environmental impact. The CDP Climate Change score is based on an extensive questionnaire requiring disclosure and performance in the following categories: business strategy, financial planning & scenario analysis, emissions reduction initiatives, energy, governance, opportunity disclosure, risk disclosure, risk management processes, scope 1 & 2 emissions, scope 3 emissions, targets, and value chain engagement.
This comprehensive assessment and the resulting score are known across the investor and customer communities as a credible third-party view on companies’ approaches to climate change. The score ranges from A (leadership level) to D- (disclosure level). SKF received an A- in 2022 which is in the leadership band. This is higher than the Europe regional average of B, and higher than the metal product manufacturing sector average of C. The score is set annually and the bar is raised every year, reflecting increasing stakeholder expectations. SKF’s performance achievement and CDP score will therefore require continuous improvements.
The overall performance achievement for the CDP Climate Change score is the weighted average of the annual performance achievement, based on the following criteria:
For example, if SKF’s CDP score is B year 1, A- year 2 and A year 3, the overall performance achievement for the full programme period is 75% (50%+75%+100% / 3).
Provided that the performance measures of the programme are fully met, the participants of the programme may be allotted up to the following maximum number of shares per person within the various key groups:
CEO and President – shares corresponding to a value of 75% of the fixed base salary
Other members of Group Management – shares corresponding to 55% of the fixed base salary or 13,000 shares, whichever is higher
Managers of large business units and similar – 4,500 shares
Other senior managers – 3,000 shares
Other key persons – 1,250 shares
If the total outcome of the programme exceeds the threshold level for allotment of shares but the final allotment is below 5% of the target level, payment will be made in cash instead of shares, whereupon the amount of the cash payment shall correspond to the value of the shares calculated on the basis of the closing price for SKF’s B share the day before settlement.
Allotment of shares requires that the employment of a person covered by the programme is not terminated before the end of the programme period. If all the conditions included in SKF’s Performance Share Programme 2023 are met, allotment of shares shall be made free of charge following the expiry of the three-year calculation period, i.e. during 2026.
Before the number of shares to be allotted is finally determined, the Board shall examine whether the allotment is reasonable considering SKF’s financial results and position, the conditions on the stock market as well as other circumstances, and if not, as determined by the Board, reduce the number of shares to be awarded to the lower number of shares deemed appropriate by the Board.
The Board is furthermore entitled to introduce an alternative incentive solution for employees in countries where participation in SKF’s Performance Share Programme 2023 is not appropriate. Such alternative incentive solution shall, as far as practicable, be formulated employing the same conditions as SKF’s Performance Share Programme 2023.
The company has 455,351,068 shares in issue when this notice is issued. In order to comply with the obligations of SKF’s Performance Share Programme 2023, a maximum number of 1,000,000 B shares are required, corresponding to approximately 0.2% of the total number of outstanding shares.
Assuming maximum allocation under the Performance Share Programme 2023 and a share price of SEK 199, the cost, including social security cost, is estimated at approximately MSEK 239. On the basis of a share price of SEK 275, the cost, including social security cost, is estimated at approximately MSEK 330. In addition, the administrative costs are estimated at approximately MSEK 2.
The Board does not propose for the time being to take any action to hedge SKF’s obligations under the programme. Delivery of shares under the programme shall not take place until 2026.
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Number of shares and votes, and documentation
When this notice is issued, the total number of shares in the company are 455,351,068, represented by 29,403,933 series A shares and 425,947,135 series B shares, with a total number of votes of 71,998,646.5. The company holds no own shares.
The annual report, the audit report, the remuneration report, statements of the auditor, the Board of Directors’ remuneration report and complete proposal according to item 17 of the agenda together with the Nomination Committee’s reasoned statement will be available at the company’s headquarters at Sven Wingquists gata 2, 415 50 Gothenburg, and at the company’s website, www.skf.com, no later than from 2 March 2023 and will be sent to shareholders who request this and state their address.
Information at the Annual General Meeting, etc.
(CONTINUA)