Atlas Copco AB (“Atlas Copco”) remuneration report 2022
This remuneration report provides an outline of how the guidelines for executive remuneration in Atlas Copco (the “remuneration guidelines”), adopted by the annual general meeting of Atlas Copco 2020, have been implemented in 2022. The report provides details on the remuneration of Atlas Copco’s President and CEO. In addition, the report contains a summary of Atlas Copco’s outstanding share and share-price related incentive programs. The report has been prepared in compliance with Chapter 8, Sections 53 a and 53 b of the Swedish Companies Act (2005:551) and the Swedish Corporate Governance Code and Remuneration Rules issued by the Swedish Corporate Governance Board. Information required by Chapter 5, Sections 40-44 of the Annual Accounts Act (1995:1554) is available in note 5 on p. 81-83 in the Atlas Copco Annual report 2022 (the “annual report 2022”).
Information on the work of the remuneration committee in 2022 is set out in the corporate governance report, which is available on p. 51-60 in the annual report 2022.
Remuneration of the board of directors (the “Board”) is not covered by this report. Such remuneration is resolved annually by the annual general meeting and disclosed in note 5 on p. 81 in the annual report 2022.
A few comments on the remuneration report 2021 have been received. These have been reported to the Remuneration Committee and have been considered not to give rise to any changes.
Key Developments 2022
Overall company performance in 2022
The performance of the Atlas Copco Group in 2022 is presented in the annual report 2022 which can be accessed at www.atlascopcogroup.com.
Overview of the application of the remuneration guidelines in 2022
The remuneration guidelines have been applied without deviation.
Under the remuneration guidelines, remuneration of executive management shall be market competitive and may consist of the following components: base salary, variable compensation, pension benefits and other benefits. The remuneration guidelines, adopted by the annual general meeting 2020, can be accessed at www.atlascopcogroup.com where also the auditor’s yearly reports regarding the company’s compliance with the remuneration guidelines are available.
In addition to remuneration covered by the remuneration guidelines, the annual general meetings of Atlas Copco have for a number of years resolved to implement share and share price related programs i.e. long-term incentive programs.
Total remuneration of the President and CEO
Table 1 below sets out Atlas Copco’s President and CEO’s total remuneration for 2022 (KSEK).
|President and CEO||Fixed remuneration||Variable remuneration||Extraordinary items||Pension fees||Total remuneration||Proportion of fixed and variable remuneration|
|14 820||-||6 836||41 562||64/36|
Performance of the President and CEO on variable compensation
The performance criteria for the President and CEO’s variable compensation have been selected to contribute to the company’s long term and sustainable development. Set out in Table 2 below are the performance criteria decided by the Board in January 2022 and a description of how the criteria for payment of variable compensation have been applied during the financial year.
|President and CEO||Description of the performance criteria||Relative weighting of the performance criteria1||
a) Measured performance
b) Actual outcome (KSEK)
|Mats Rahmström||Group Economic Value Added (EVA)2||80%||a) 15 235 MSEK|
|b) 12 480|
|Group average Net Working Capital as percentage of sales||10%||a) 21,1%|
|b) 1 560|
Reduce the Group’s greenhouse gas emissions in line with the goals of the Paris Agreement, Science Based Targets:3
- Scope 1 and 2
- Scope 3
|a) 108,0 ktCO2|
|a) 219 823 ktCO2|
Comparative information on the change of remuneration and company performance
Year 2020 was the first reported financial year and the year over year development, over five years, will be reported and added annually as it becomes available. Table 3 below sets out actual outcome.
|Mats Rahmström, President and CEO||27 396 KSEK||35 940 KSEK||41 562 KSEK|
|EVA||9 420 MSEK||12 090 MSEK||15 235 MSEK|
|Profit for the period||14 783 MSEK||18 134 MSEK||23 482 MSEK|
Average remuneration on a full-time equivalent basis of employees
|Employees of Atlas Copco AB4||1 083 KSEK||1 118 KSEK||1 218 KSEK|
Outstanding share and share-price related incentive programs
At the Atlas Copco annual general meeting 2016–2022 respectively, it was decided to implement performance-based personnel stock option programs. The decision to grant options was made in April each year and the options were issued in March the following year (issue date). The number of options issued for each program year depended on the value creation in the Atlas Copco Group, measured as EVA, for the respective program year. For the 2022 option program, the number of options varies on a linear basis within a preset EVA interval. The size of each plan and the limits of the interval have been proposed by the Board and approved by each annual general meeting and are compatible with the long-term business plan of the Atlas Copco Group.
In connection to the issue, the exercise price was calculated as 110% of the average trading price for series A shares during a ten-day period following the date of the publishing of the fourth quarter report. The options were issued without compensation paid by the employee and the options remain the property of the employee only to the extent that they are exercisable at the time employment is terminated. The 2016–2022 programs have a term of seven years. The options in the 2016–2022 programs are not transferable and become exercisable at 100% three years after grant.
The 2016–2022 programs include a requirement for group management and division presidents to purchase and keep Atlas Copco A shares for 10% of their gross base salary in order to be granted options. A lower amount of investment will reduce the number of options proportionately. Further, group management and division presidents who have invested in Atlas Copco A shares will have the right (a “matching option”) to purchase one matching share per each share purchased at a price equal to 75% of the average trading price for series A shares during a ten-day period following the date of the publishing of the fourth quarter report. This right applies from three years after grant until the expiration of the stock option program.
The Board had the right to decide to implement an alternative incentive solution (SARs) for key persons in such countries where the grant of personnel options was not feasible.
More information about share and share price related long-term incentive programs, outstanding and completed in 2022, can be found in the annual report 2022 note 5 on p. 82-83 and note 23 on p. 99-101.