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–December 31 for 2009 and from January 1–December 31, 2010.

The Group’s pension expenses for company management, plus four former executives who are leaving the company (a total of 12) amount to SEK 4,705,000 (3,534,000). For the Board of Directors (six members), pension expenses amount to SEK 0 (0).

The Hemtex Group currently has both defined-benefit and defined-contribution plans. All employees in Sweden are covered by the Alecta ITP supplementary employment pension plan, which is a defined-benefit plan but is recognized as a defined-contribution plan in accordance with a statement from the Swedish Financial Reporting Board (URF 3). At present, Alecta is unable to provide such information that would make it possible to recognize this ITP plan as a defined-benefit plan. Pensions in Finland and Denmark are defined-contribution pension plans. Obligations regarding expenses for defined-contribution plans are recognized as an expense through profit or loss when they occur.

Sickness absence in the Parent Company

Sickness absence during the period May 1–December 31, 2009 and January 1–December 31, 2010.

Salary and remuneration policy for senior executives 2010

The Annual General Meeting held on April 12, 2010 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.

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.

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 2010 fiscal year amounted to SEK 340,000 (227,000). Fees for other external members’ fees totaled SEK 680,000 (452,000) for the fiscal year. Fees for the Remuneration Committee amounted to SEK 100,000 (50,000), in accordance with a resolution by the Annual General Meeting. Fees for the Audit Committee amounted to SEK 100,000 (0), in accordance with a resolution by the Annual General Meeting. No fee was paid to Stein Petter Ski, representative of the Parent Company Hakon Invest AB.

President 

Erik Gumabon assumed the position of President on November 1, 2010. 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 a 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 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. The salary was expensed and disbursed in the 2009 financial statements.

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 was paid until November 2010.

The pension expense for the fiscal year amounted to SEK 1,165,000 (848,000). 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. The aforementioned costs were expensed in the 2008/2009 financial statements. The amounts pertain to payments made in January–February 2010.

Other members of company management

Basic salaries for the other ten (seven) members of the company management team amounting to SEK 8,766,000 (5,010,000) 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 2,705,000 (1,646,000). 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, including social security costs, totaling SEK 4.8 M (3.8) for two (2) members of company management.

Share Program 2010

The AGM on April 12, 2010 resolved to introduce a combined share-matching and performance-share program (Share Program 2010) targeted at the President and CEO and senior executives. The program comprised a total of 12 people. In brief, Share Program 2010 entailed that the participants actively purchased shares in the company during May 2010 through NASDAQ OMX Stockholm (Saving Shares), and thereafter had to retain these shares for at least three years (the vesting period).

On condition that the participants remain employed and still hold their Saving Shares at the end of the vesting period, the participant received free of charge one Hemtex share (Matching Share) and a maximum of a further three Hemtex shares (Performance Shares) for each Saving Share held. A precondition for allotment of Performance Shares is that Hemtex achieves certain performance requirements and that the company’s equity/assets ratio, in accordance with an established balance sheet for fiscal years 2010, 2011 and 2012, does not fall below 25%. The share program comprises a maximum total of 55,000 Saving Shares, 55,000 Matching Shares and 165,000 Performance Shares. In total, the maximum number of Matching and Performance Shares is 220,000.

The cost of the 2010 Share Program, calculated in accordance with IFRS 2, is SEK 2.3 M and social security fees amount to SEK 1.0 M. The total cost is estimated to be SEK 3.3 M, including social security fees. The cost of the Share Program, in accordance with IFRS 2, is being accrued straight line over three years, adjusted for changes in the anticipated vesting of Matching and Performance Shares. The social security fees are remeasured on a continuous basis in line with the share price.

During May 2010, all participants in Share Program 2010 purchased shares in Hemtex AB. The President and CEO purchased 10,000 Saving Shares and other senior executives purchased a total of 45,000 Saving Shares.

Of those covered by the Share Program, nine remained employed by the company on December 31, 2010.

The 2010 Annual General Meeting authorized the Board of Directors to make decisions concerning the acquisition of Hemtex shares on the stock market to enable transfers of Matching Shares and Performance Shares under Share Program 2010 and to cover certain costs associated with Share Program 2010. No shares have been bought back to date.

Incentive program 2007–2010

The 2007 Annual General Meeting resolved to introduce an incentive program for the Hemtex Executive Management Group, whereby senior executives were offered a combination of warrants and employee stock options providing entitlement to the subscription of Hemtex shares. Within the framework of the program, a total of seven of the then senior executives of the company acquired 120,000 warrants at market price and were allotted 120,000 employee stock options free of charge.

A condition for entitlement to exercise the employee stock options was that a specified increase in earnings per share in Hemtex was achieved during the fiscal years 2007/2008 to 2009/2010. Since this target was not achieved, no stock options could be exercised. Because the subscription price of shares subscribed for on the basis of the warrants far exceeded the prevailing price of the Hemtex share, a number of the warrants within the framework of the incentive program were never exercised.