Other Group information
The Group’s Parent Company, Essity Aktiebolag (publ), is a holding company with the main task of owning and managing shares in a number of business group companies and performing Group-wide management and administrative functions. The company’s corporate registration number is 556325-5511 and it is domiciled in Stockholm, Sweden. The company’s address is PO Box 200, SE-101 23 Stockholm. In 2019, the Parent Company recognized operating income of SEK 209m (192) and profit before appropriations and tax of SEK 4,098m (17,102). Investments in property, plant and equipment totaled SEK 14m (1) during the year. Cash and cash equivalents at year-end amounted to SEK 0m (0).
Research and development (R&D)
Research and development (R&D) costs during the year amounted to SEK –1,485m (–1,320), corresponding to about 1.2% of consolidated net sales. R&D is coordinated and conducted from a global perspective. Product development is carried out in close cooperation with the local units, as well as through direct collaboration with customers.
Holdings of treasury shares
Essity Aktiebolag (publ) holds no treasury shares.
In 2019, 58,129 Class A shares were converted into Class B shares. The proportion of Class A shares was 9.1% at year-end.
The Board of Directors proposes an increase in the dividend of 9% to SEK 6.25 (5.75) per share or SEK 4,390m (4,038). The record date for entitlement to receive dividends is proposed as April 6, 2020. The Board is of the opinion that the company’s and the Group’s equity after the proposed dividend is sufficiently high in relation to the nature, scope and risks of the operations, solvency requirements, liquidity and financial position and provides scope for the company and the Group to fulfill its obligations and conduct desirable investments.
Essity’s statutory sustainability report, in accordance with the requirements of the Swedish Annual Accounts Act, can be found in the chapters Risks and risk management, Materiality analysis and Sustainability governance, in the Non-financial notes and in the Board of Directors’ Report. The company’s business model can be found in the chapter Business model. This sustainability report for Essity Aktiebolag (publ) encompasses the entire Group. More information on non-financial accounting principles can be found in Note H1.
Guidelines for remuneration of senior executives
Guidelines agreed by the most recent AGM and a description of the company’s application of these can be found in Note C2.
Following changes to statutory requirements for the content of the guidelines, the Board has decided to propose the following new guidelines to the 2020 AGM concerning remuneration of senior executives in the Essity Group:
“These guidelines shall govern remuneration to directors, the President, vice presidents and other senior executives. The guidelines do not include remuneration decided upon by the General Meeting.
Successful implementation of the company’s business strategy and the fostering of the company’s long-term interests, including its sustainability, require that the company is able, through competitive remuneration on market terms, to recruit, incentivize and retain skilled employees. The total remuneration package must therefore be on market terms and competitive on the executive’s field of profession, and must be related to the executive’s responsibilities, powers and performance. The remuneration may comprise fixed salary, variable remuneration, other benefits and pension. The company’s business strategy is presented in the company’s Annual and Sustainability Report.
Variable remuneration shall be based on results relative to established short-term (one year) and long-term financial targets, targets which contribute thereto or to the performance of the company’s share. Remuneration shall be aimed at promoting the company’s business strategy and long-term interests, including its sustainability. Furthermore, variable remuneration shall be paid as cash remuneration and shall not be included in the basis for pension computation. The short-term element shall not exceed 100 per cent of annual fixed salary and the long-term element shall not exceed 50 per cent of annual fixed salary.
Short-term performance targets shall include organic growth, product development, earnings, cash flow, capital efficiency, sustainability, return, individual targets or a combination thereof.
Long-term performance targets shall be linked to the performance of the company’s class B share measured as TSR index (Total Shareholder Return) compared with MSCI Household products Index, Consumer staples, which includes shares of competing companies, over a three-year period, where maximum outcome requires that the performance of the Essity share exceeds the benchmark index by more than 5 per cent over a multi-year period. Payment of cash remuneration for achieved long-term performance targets shall also be subject to a requirement that one-half of such paid remuneration after tax shall be used for investment by the recipient in Essity shares. Such shares may not be divested during a period of three years from the date of purchase; among other things, to create a shared ownership interest between the participants in the program and the shareholders.
The company shall have the possibility to withhold payment of variable remuneration where necessary and possible according to law, provided there are special reasons for so doing and such a measure is necessary to meet the company’s long-term interests, including its sustainability. Furthermore, the company shall have the possibility provided by law to demand repayment of any variable remuneration paid based on erroneous grounds.
Pension and other benefits
Pension benefits shall be contribution-defined, and the annual premium shall not exceed 40 per cent of the fixed annual salary. The retirement age shall normally be 65.
Other, lesser benefits may include medical insurance, company car, fitness allowance as well as membership and service fees, training/education and other support.
A notice of termination period of not more than two years shall apply upon termination of the employment relationship where the termination is initiated by the company, and of not more than one year where the termination is initiated by the executive. There shall be no severance pay.
Decision-making process and reporting
Matters relating to remuneration to senior executives shall be addressed by the Board’s Remuneration Committee and, with respect to the President, decided upon by the Board. The duties of the Remuneration Committee shall also include preparing board decisions regarding proposals for guidelines for remuneration to senior executives, performing oversight as well as monitoring and assessing the application thereof. When the Board or the Remuneration Committee addresses and decides on remuneration-related matters, senior executives may not be present insofar as the matter relates to them and, with respect to the calculation of variable remuneration, an audit certificate must be obtained before any decision is taken regarding payment. In the preparation of the remuneration guidelines, consideration has been given to salary and employment conditions for the company’s other employees, such as information regarding total remuneration, components of the remuneration as well as the increase in remuneration and the rate of increase over time, and the company’s equality of opportunity policy.
The Board shall prepare a remuneration report.
Application of, and deviation from, the guidelines
The Board may decide to temporarily deviate from the guidelines, wholly or in part, if there are special reasons for so doing in an individual case and deviation is necessary to satisfy the company’s long-term interests, including its sustainability. The duties of the Remuneration Committee include preparing board decisions on remuneration issues, including decisions regarding deviations from the guidelines. With respect to employment relationships governed by rules other than Swedish rules, appropriate adjustments shall take place with respect to pension benefits and other benefits to ensure compliance with such rules or local practice, whereupon the overarching purpose of these guidelines shall be attained as far as possible. The guidelines shall not take precedence over mandatory terms or employment law legislation or collective agreements. Nor shall they apply to already executed agreements.
For more information about the company’s application of applicable remuneration guidelines, see the note entitled “Remuneration of senior executives” in the company’s Annual and Sustainability Report.
These guidelines shall apply commencing the 2020 Annual General Meeting until further notice.”
For information on the company’s calculated expenses for remuneration of senior executives, see Note C2.