In general, Volvo is in compliance with the Swedish regulations relating to the organisation and procedures of the Annual General Meeting.
Under ITEMS 14.1-14.10, the (re-)election of the board of directors is proposed.In light of concerns over aggregate time commitments, ECGS recommends to vote OPPOSE to the (re-)election of: Ms. Martina Merz (ITEM 14.7).
Under ITEM 18, the board of directors seeks approval of the Company's executive remuneration guidelines. Although no (material) changes are proposed, ECGS is missing an actual LT component (with a performance measurement period of at least 3 years) under the guidelines. ECGS therefore recommends to vote OPPOSE.
ITEM 19 is a proposal made by a shareholder. ECGS does not support the proposal and accordingly recommends to vote OPPOSE.Finally, ECGS notes that Volvo announced in October 2018 that it had detected that an emissions control component used in certain markets is degrading more quickly than expected, which could cause the engines to exceed emissions limits for nitrogen oxides (NOX). The degradation is due to a materials issue that occurs over time. In connection with the detection the Company made a provision of SEK 7 billion relating to the estimated costs to address the issue.
Volvo is a manufacturer of trucks, buses, construction equipment and marine and industrial engines. Co.'s activities are organized into six areas: Group Trucks, which sells and markets trucks under Eicher, Mack, Renault Trucks, UD Trucks and Volvo brands; Construction Equipment, which includes equipment for construction and related industries; Buses, which includes buses and bus chassis for city, intercity and coach traffic; Volvo Penta, which manufactures engines and drive systems for boats and commercial craft; Governmental Sales, which manufactures special-purpose vehicles; and Volvo Financial Services, providing customer financing and leasing, dealer financing and fee based products.
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Since new management came on board in 2015, Volvo has improved on a yearly basis looking at almost every metric, although it has benefitted from rising end-markets and FX tailwinds. It is now time for the management team’s final exam to show the quality of the company has improved. Over the next 12 months we should see falling volumes for Trucks and VCE. Volvo needs to prove that it can manage the downturn well; we believe it will. BUY reiterated with a trimmed target price of SEK168 (172).
Item 3: Approve the Remuneration ReportThe remuneration structure is satisfactory, though accelerated vesting is possible. Potential and actual total variable remuneration exceed guidelines, but not very much. They are moderate in comparison with UK market practice. Overall, the quantum during the year was not excessive. We recommend shareholders vote in favor.
Item 3: Approve the Remuneration Report The structure is weighted more heavily towards short-term performance. One of the performance metrics for the LTI is the payment of sustainable dividends, which is not considered appropriate as executives can potentially influence the payout level. The LTI also includes relative TSR as a performance metric. Nevertheless, the quantum is not excessive and even maximum potential amounts are moderate. On balance, we recommend shareholders vote in favor. Item 4: Approve the Remuneration PolicyThe main concern with the Company's remuneration policy is that pa...
Item 2: Approve the Remuneration ReportThe remuneration structure is unsatisfactory. The main concern at the Company is that the potential maximum incentive pay including the bonus, matching shares on the deferred portion of the bonus and the LTI amounts to 1000% of base salary, which is considered grossly excessive. Actual incentive pay during the year was1.6 times the ECGS limit. Furthermore, variable remuneration is overly reliant on a single performance metric, benchmark profit before tax. A second performance criteria will be used in the coming year. We note that the Company has adjusted ...
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