Note 4 - Employees and personnel costs

Average number of employees

The average number of employees of the Group, as well as wages, salaries and other remuneration are shown in the following table. The average number of employees has been calculated by placing the number of hours in attendance in relation to the normal working time for each country. The information on the number of full-year employees and on wages, salaries and other remuneration refers to the period from May 1–April 30 for 2007/2008 and 2008/2009, and the period May 1–December 31 for 2009.

Sickness absence in the Parent Company

Salary and remuneration policy for senior executives 2009

The Annual General Meeting held on September 2, 2009 adopted the following principles. This Policy addresses salaries and other remuneration for Group Management, including the President and CEO, referred to below as "senior executives."

Remuneration Committee

The members of the Board of Directors appoint a Remuneration Committee for each fiscal year from within its own ranks. The task
of the Committee is to prepare proposals concerning salary and other remuneration for the President and CEO and to decide on
proposals concerning salaries and other remuneration for other
senior executives.

Basic principles

Remuneration to senior management at Hemtex is based on principles related to performance, competitiveness and merit. To reflect these principles, a variety of remuneration components are applied in various degrees. Accordingly, a combination of several components is used to reflect these remuneration components in a balanced manner.

The total remuneration to senior management comprises fixed salary, variable components in the form of annual variable remuneration and long-term variable remuneration, pension and other benefits. Together, these components form an integrated remuneration package.

Each fiscal year, the details of the total remuneration are presented to senior executives in the Annual Report for the current fiscal year, including previously determined long-term variable remuneration that has not yet fallen due for payment.

The relationship between fixed and variable salary and the connection between performance and remuneration

Fixed salary is determined on the basis that it must be competitive. The absolute level depends on the scope and complexity of the current position and the annual performance of the senior executive.

Performance is primarily reflected in the variable components with regard to both annual and long-term variable salary. Although variations may occur over time depending on the market for remuneration, the goal in terms of annual variable salary for senior management is currently 40% of fixed salary. Long-term salary is designed to comprise both warrants and employee stock options. For employee stock options, a given goal level must be attained for certain key data in order for this portion of the salary to achieve an outcome. The key data that is currently used is "Earnings per share." The outcome of employee stock options is limited through the implementation of a "ceiling" – in other words, a maximum outcome.

The relationship between fixed and variable salary shall reflect the Board’s assessment of a reasonable balance between fixed and variable remuneration components and prevailing market practice for senior managers.

Variable remuneration in brief

Annual variable remuneration is cash-based and related to the direct operational goal for budgeted Group earnings before appropriations and tax. This goal was approved by the Board of Directors.

Share-based, long-term variable remuneration plans are submitted to the Annual General Meeting for approval. The outcome of the plans depends on three different variables: the individual’s investment is shares, a long-term goal for earnings per share during the maturity in effect for each program and the share price trend.

Pension

Pension benefits shall be competitive in each native country. For members of senior management whose employment contract contains an agreement concerning pension benefits in addition to ITP, a supplementary premium is included. This premium amounts to a certain percentage based on fixed monthly salary, including bonuses for the President and CEO, and a certain percentage based on the fixed monthly salary of other members of senior management whose agreement includes this benefit.

The retirement age is normally 65, but can vary in individual cases.

Other benefits

The basic rule is that other benefits, such as company cars and healthcare plans, shall be competitive in the local market.

Benefits for the Board of Directors and senior executives

Board of Directors

The Chairman and members of the Board who were elected by the Annual General Meeting are paid fees as per decision by the Annual General Meeting.

The Chairman’s fee for the 2009 fiscal year amounts to SEK 227,000 (340,000). Other external members’ fees for the fiscal year amount to a total of SEK 452,000 (850,000). Fees for the Remuneration Committee amount to SEK 50,000 (100,000), in accordance with decision by the Annual General Meeting. The fees have been adjusted to the abbreviated fiscal year encompassing only eight months and for no fees being paid to Stein Petter Ski, representative of the Parent Company Hakon Invest AB.

Remuneration and other benefits to members of the Board in 2009

Remuneration and other benefits to members of the Board in 2008/2009

Remuneration and other benefits to members of the Board in 2007/2008

President

Erik Gumabon assumed the position of President on November 1, 2009. The remuneration paid from October–December 2009 includes remuneration for work carried out by Erik Gumabon prior to assuming the position of President. Erik Gumabon’s fixed monthly salary is SEK 245,000. No variable remuneration was paid in the fiscal year.

In addition, the President has taxable travel benefits, car benefit and healthcare insurance. In accordance with ITP 2, the President is covered by pension benefits with a standard retirement age of 65. Erik Gumabon is entitled to salary during an 12-month notification period in the event of termination by Hemtex. In the event of termination by the President, there is a six-month notification period. In the event that the President assumes a position outside Hemtex during the period of notification, the remuneration received by the President shall be deducted from the remuneration paid by Hemtex.

The President is bound by a non-competition agreement for a period of six months following termination of employment. As remuneration for this, Hemtex shall pay remuneration equivalent to the difference between his fixed cash monthly salary from Hemtex at the time of termination and the (lower) income he subsequently earns in his new position during the period of non-competition. However, remuneration from Hemtex shall not exceed 60% of the fixed, cash salary from Hemtex.

Outgoing President

Göran Ydstrand was President between March 1, 2009 and September 30, 2009. The salary paid up until September 2009 amounted to SEK 1,175,000. In accordance with Göran Ydstrand’s employment contract, a lump sum corresponding to 24 monthly salaries totaling SEK 5,640, 000 was subsequently paid. Under the contract, Göran Ydstrand was entitled to leave Hemtex will immediate effect in the event of significant changes to the ownership structure or major organizational changes decided by the owners or the Board, and receive severance pay corresponding to 24 monthly salaries. 

In addition to salary, Göran Ydstrand had a taxable residence and travel benefit, a car benefit and health-care insurance during his period of employment. He was covered by pension benefits under the ITP 2 plan with a standard retirement age of 60. The pension premium was to amount to 38.75% of the fixed salary exceeding 7.5 income base amounts. Göran Ydstrand was also entitled to enter additional occupational pension solutions with premiums of 8.75% of the fixed salary, to be paid between the ages of 60–65.

Outgoing President

Anders Jansson was President until November 10, 2008. Salary paid until November 2008 amounted to SEK 1,645,000, after which a monthly salary of SEK 255,000 is being paid until November 2010. No variable remuneration was paid in the fiscal year 2008/2009.

The pension expense for the fiscal year amounted to SEK 848,000 (1,436,000). These pension benefits were based on a general pension plan with surcharges for a pension premium on 12% of the current pension-based salary. Pension-based salary is defined as basic salary plus an average of the variable remuneration during the past three years. The retirement age is 60.

Other members of company management

Basic salaries for the other seven (eight) members of the company management team amounting to SEK 5,010,000 (7,730,000) were paid. Bonuses amounted to SEK 0 (0). Bonuses comprise a maximum of 40% of fixed salaries. Pension expenses for the fiscal year totaled SEK 1,646,000 (2,420,000). Pension benefits are based on the national pension scheme. Pensionable salary is defined as the basic salary plus an average of the variable remuneration during the preceding three years. All members of company management have a company car. The retirement age is 65. In the event of termination of employment by the employer, salary payment will continue unchanged for 12 months. In the event of termination of employment by the employee, salary payment will continue for six months.

Net profit for the year was charged with severance pay totaling SEK 3.8 M for two members of company management. 

Incentive program 2007–2010

At the Annual General Meeting on September 5, 2007, it was decided to introduce long-term incentive programs for senior executives within the Hemtex Group through the issue of warrants and employee stock options in Hemtex AB. Costs of SEK 0 (0.3) for employee stock options were charged to the fiscal year in accordance with IFRS 2 and UFR 7.

Within the framework for both programs, senior executives at the time acquired 120,000 warrants at market price and an allocation of 120,000 employee stock options free of charge. Each option/warrant entitles the holder to one new share subscription. Of the persons who participated in the 2007 options program, only three remain employees at Hemtex, of which two are members of Group Management. Of the members of current management, two persons each hold 15,000 warrants and 15,000 employee stock options.

A condition for entitlement to exercise employee stock options is that the increases stated in the conditions pertaining to earnings per share are achieved during the fiscal years 2007/2008–2009/2010 for the Group.

Employee stock options are not transferrable and the exercise of employee stock options assumes that the options holder is still employed by the Hemtex Group. Another condition for entitlement to exercise employee stock options is that the Group’s earnings per share increase during the fiscal years 2007/2008–2009/2010, according to adopted annual reports (profit for the year divided by a weighted average number of shares during the year) compared with the preceding fiscal year, so that the profit increase per share dur-ing each fiscal year corresponds to at least an increase in earnings per share according to the table below.

Hemtex has chosen the Black & Scholes model for warrant evaluation. The market price established on October 5, 2007, which was paid for each warrant, amounted to SEK 15.80 per warrant, which resulted in SEK 1,896,000 being paid in October 2007 to Hemtex AB. The issue price established after the control period, September 12–25, amounted to SEK 151 per share. The subscription period for shares supported by paid warrants and allocated employee stock options may occur during the period, June 1 until July 31, 2010.

The maximum dilution effect for the incentive program is estimated to be 0.82% of the share capital (meaning the same percentage dilution by the number of votes), assuming full exercise of all warrants and employee stock options. More detailed information on the incentive program is available on the company’s website under the corporate governance section. The incentive program will not give rise to any dilutive effects since all of the options are “out of money”.

 
* Pertains to the abbreviated fiscal year May 1–December 31, 2009.