C31. Human resources

2018

C31. Human resources

Employees, salaries, and social security expenses

During 2016, the number of employees from continuing operations decreased by 312 to 21,030 at year-end from 21,342 at year-end 2015. The number of employees in discontinued operations decreased by 566 to 4,987 from 5,553 at year-end 2015. The major part of the decrease comes from divestment of Nepal and Spain.

The average number of full-time employees by country was as follows.

Country	Jan–Dec 2016		Jan–Dec 2015
Country	Total (number)	of whom men (%)	Total (number)	of whom men (%)
Sweden	8,109	61.8	8,172	60.5
Finland	3,276	65.4	3,326	59.9
Norway	1,099	65.2	1,158	64.8
Denmark	1,161	69.7	1,132	70.3
Lithuania	2,885	50.1	2,978	50.9
Latvia	982	47.8	958	48.2
Estonia	1,888	58.8	1,931	54.5
Spain	78	64.2	103	64.1
Russian Federation	33	48.5	37	54.1
United Kingdom	49	71.4	49	63.3
Other countries	262	69.8	192	70.3
Total from continuing operations	19,822	60.5	20,036	58.7
Kazakhstan	1,877	43.0	1,801	41.6
Azerbaijan	716	61.7	820	54.5
Uzbekistan	1,032	63.7	953	62.1
Tajikistan	603	68.5	569	67.0
Georgia	375	46.3	357	45.4
Moldova	295	42.0	344	46.8
Nepal	130	74.2	522	73.9
Other countries	48	66.7	48	58.3
Total from discontinued operations	5,076	52.3	5,414	53.7
Total	24,898	58.8	25,450	57.7

In total, for 2016 and 2015 operations were conducted in 28 and 29 countries, respectively, of which continuing operations were conducted in 21 countries.

The share of female and male senior executives was as follows. Boards of directors refer to board members in all consolidated group companies. Other senior executives include presidents and other members of executive management teams at the group level, region level and company level.

Percent	Dec 31, 2016		Dec 31, 2015
Percent	Boards of directors	Other senior executives	Boards of directors	Other senior executives
Women	24.4	33.5	26.1	32.6
Men	75.6	66.5	73.9	67.4
Total continuing operations	100.0	100.0	100.0	100.0
Women	4.2	35.4	3.4	34.7
Men	95.8	64.6	96.6	65.3
Total discontinued operations	100.0	100.0	100.0	100.0

Total salaries and other remuneration, along with social security expenses and other personnel expenses, were as follows.

SEK in millions	Jan–Dec 2016	Jan–Dec 2015
Salaries and other remuneration	9,534	9,408
Social security expenses
Employer’s social security contributions	2,056	1,992
Pension expenses	1,156	1,298
Total social security expenses	3,211	3,291
Capitalized work by employees	-1,092	-969
Other personnel expenses	453	441
Total personnel expenses recognized by nature, continuing operations	12,105	12,171
Total personnel expenses, discontinued operations	1,096	1,495

Salaries and other remuneration were divided between senior executives and other employees as follows. Variable pay was expensed in the respective year, but disbursed in the following year.

SEK in millions	Jan–Dec 2016		Jan–Dec 2015
SEK in millions	Senior executives (of which variable pay)	Other employees	Senior executives (of which variable pay)	Other employees
Salaries and other remuneration, continuing operations	216 (16)	9,318	188 (11)	9,220
Salaries and other remuneration, discontinued operations	28 (3)	878	25 (1)	1,216

Pension expenses for all senior executives totaled SEK 27 million in 2016 and SEK 32 million in 2015.

In 2016 and 2015, employee profit-sharing costs in Telia Company’s Finnish subsidiaries amounted to SEK 70 million and SEK 38 million, respectively. In addition to this employee profit-sharing system, all Telia Company regions apply performance-based variable compensation for different groups of employees. In Sweden, for example, all permanent employees are included in variable compensation schemes, one type for the sales force and one for all other staff.

Long-term incentive program (LTI)

The 2010 to 2016 Annual General Meetings in Telia Company AB resolved to implement performance share programs (PSP), to be offered to a selected group of senior executives and key positions within the group. Members of the Group Executive Management team are excluded. If the pre-defined financial performance conditions are met during the defined performance period, participants in the programs shall receive a number of Telia Company shares (performance shares) at a share price of SEK 0. The financial targets include a minimum level which must be achieved in order for any allotment of performance shares to occur at all, as well as a maximum level over which no additional allottment of performance shares will occur. Each program shall in total comprise no more than 1,360,000 (PSP 2013), 2,090,000 (PSP 2014), 3,793,200 (PSP 2015) and 2,370,400 (PSP 2016) Telia Company shares, corresponding to approximately 0.03 percent of the total number of outstanding shares for PSP 2013, 0.05 percent for PSP 2014, 0.08 for PSP 2015 and 0.04 for PSP 2016, respectively.

Recalculation of final allotments of performance shares shall take place in the event of an intervening bonus issue, a split, a rights issue and/or other similar events.

Performance share program 2012 to 2014

Financial targets are earnings per share (EPS) and total shareholder return (TSR). The maximum number of performance shares a participant can receive corresponds to 30 percent of the participant’s annual base salary. The final allotments of performance shares will be based 50 percent on EPS development for each of the three years of the performance period in relation to EPS for the preceding year and 50 percent on TSR during the full performance period of three years in relation to TSR of a group of comparable telecom companies defined by the Board of Directors.

Participation in the program requires that the participant has invested in or allocated already held Telia Company shares to the program corresponding to a value of 2 percent of the participant’s annual base salary. The maximum financial outcome for a participant, and the maximum number of performance shares that may finally be allotted in a program, shall be capped at such number of performance shares which aggregated market value corresponds to 37.5 percent of each participant’s base salary.

PSP 2013 vested during the spring 2016 and 122,986 shares were distributed to 71 participants remaining in the program. Final performance of PSP 2013 was 5.63 percent (of maximum 30 percent). Telia Company AB acquired 118,398 own shares in April 2016, to an average price of SEK 38.6519 to cover the commitments under the PSP 2013 program. Telia Company AB already held 4,588 own shares.

Performance share program 2015 to 2016

Financial targets are earnings before interest, tax, depreciation and amortization (EBITDA) and total shareholder return (TSR). The maximum number of performance shares a participant can receive corresponds to 30 percent of the participant’s annual base salary. The final allotments of performance shares will be based 50 percent on accumulated EBITDA and 50 percent on TSR during the full performance period of three years. TSR is measured in relation to TSR of a group of comparable telecom companies defined by the Board of Directors.

Participants are not required to invest in Telia Company shares. The final number of performance shares awarded shall be capped at such number where the aggregated market value corresponds to 60 percent of each participant’s base salary.

The summarized performance share program activity in 2016 was as follows.

Performance share program	2016/2019	2015/2018	2014/2017	2013/2016
Participants
Number of participants, December 31, 2015	–	191	136	75
New participants in 2016	202	–	–	–
Terminated employments in 2016	-7	-39	-25	-4
Vested employees in 2016	–	–	–	-71
Number of participants, December 31, 20161	195	152	111	–
Allotted shares
Preliminary allotments, December 31, 2015	–	777,530	105,545	129,210
Preliminary allotments in 2016	1,012,823	–	44,626	–
Forfeited shares	–	0	0	0
Cancelled shares	-57,907	-182,598	-32,021	-6,224
Final allotments	–	–	–	-122,986
Number of allotted shares, December 31, 2016	954,916	594,932	118,150	–

1) 25 participants, in total for all performance share programs, are part of discontinued operations.

The estimated fair values at the date of allotment and the assumptions used when estimating the achievements of the performance conditions were as follows.

Performance share program	2016/2019	2015/2018	2014/2017	2013/2016
Fair value at the date of allotment (SEK in millions)	28	41	19	15
Assumptions used (percentages)
Achievement of EBITDA-based performance condition	50	50	–	–
Achievement of EPS-based performance condition	–	–	50	50
Achievement of TSR-based performance condition was based on
Estimated volatility, Telia Company	20	18	21	21
Estimated volatility, peer group companies	17-31	15-36	21-35	20-27
Average reciprocal correlation between Telia Company and the peer group companies	43	33	37	41
Risk-free interest rate	-0.4	-0.3	0.9	1.0

The achievement of the TSR-based performance condition was estimated using a Monte Carlo simulation model.

The estimated fair value of each performance share program and related social security expenses are amortized to expense over the performance period. Total personnel expenses were as follows.

SEK in millions	Jan–Dec 2016	Jan–Dec 2015
Salaries and other remuneration	28	23
Social security expenses	7	6
Total personnel expenses, performance share programs	35	29

Remuneration to corporate officers

Board of Directors

As resolved by the 2016 Annual General Meeting of shareholders (AGM) in Telia Company AB, annual remuneration is paid to the members of the Board of Directors in the amount of SEK 1,600,000 (SEK 1,550,000) to the Chair, SEK 775,000 (SEK 750,000) to the Vice-Chair and SEK 545,000 (SEK 530,000) to each of the other directors, elected by the AGM. In addition, annual remuneration is paid to the members of the Board’s Audit Committee in the amount of SEK 200,000 (SEK 150,000) to the Chair and SEK 150,000 (SEK 100,000) to each of the other members. Additional annual remuneration is also paid to the members of the Board’s Remuneration Committee in the amount of SEK 70,000 (SEK 65,000) to the Chair and SEK 50,000 (SEK 45,000) to each of the other members. Remuneration to the Chair of the Sustainability and Ethics Committee is SEK 70,000 (SEK 150,000) and SEK 50,000 (SEK 100,000) is paid to each of the other members.

Remuneration to Board members

SEK in thousands	Board1	Audit Committee	Remuneration Committee	Sustainability and Ethics Committee	Total remuneration
Board of Directors, AGM 2016
Marie Ehrling, Chair	1,586	136	69	64	1,855
Olli-Pekka Kallasvuo, Vice-Chair	768		49		817
Susanna Campbell	392		36		428
Mikko Kosonen	541			92	633
Nina Linander	541	186			727
Martin Lorentzon	541	28		28	597
Anna Settman	392			36	428
Olaf Swantee	392	108			500
Board of Directors 2015-2016
Mats Jansson	150		13		163
Per-Arne Sandström	150	28			178
Kersti Strandqvist	150			28	178
Total	5,602	486	166	249	6,502

SEK in thousands	Board	Audit Committee	Remuneration Committee	Sustainability and Ethics Committee	Total remuneration
Board of Directors, AGM 2015
Marie Ehrling, Chair	1,466	100	65	100	1,731
Olli-Pekka Kallasvuo, Vice-Chair	750	–	45	–	795
Mats Jansson	514	–	45	–	559
Mikko Kosonen	514	–	–	150	664
Nina Linander	514	150	–	–	664
Martin Lorentzon	514	100	–	100	714
Per-Arne Sandström	514	100	–	–	614
Kersti Strandqvist	514	–	–	100	614
Total	5,297	450	155	450	6,353

1) Board remuneration, remuneration for Audit Committee, remuneration for Remuneration Committee and remuneration for Sustainability and EthicCommittee are presented in separate columns above. The remuneration is paid monthly. Marie Ehrling, Olli-Pekka Kallasvuo, Mikko Kosonen, Nina Linander and Martin Lorentzon were re-elected at the AGM 2016. New Board members are Susanna Campbell, Anna Settman and Olaf Swantee. Numbers may not add up due to rounding.

Group Executive Management

The Chief Executive Officer (CEO) and the “Other members of the Group Executive Management” referring to the two EVPs and the six SVPs directly reporting to the CEO, constituted the Telia Company Group Executive Management.

The 2016 Annual General Meeting decided to approve the following guidelines for remuneration to the Group Executive Management.

Telia Company’s objective is to offer remuneration levels and other employment conditions required to attract, retain and motivate high calibre executives needed to maintain the success of the business. Remuneration should be built upon a total reward approach allowing for a market relevant – but not market leading – and cost effective executive remuneration based on the following compensation components: (1) base salary; (2) pension; and (3) other benefits. The base salary should reflect the competence required in the position and the responsibility, complexity and the business contribution of the executive. The base salary should also reflect the performance of the executive and consequently be individual and differentiated. Pension and other retirement benefits should be based on the defined contribution method.

The termination period may be up to six (6) months (twelve (12) for the CEO) when given by the employee and up to twelve (12) months when given by the Company. In case the termination is given by the Company, the individual may be entitled to a severance payment up to twelve (12) months.

The severance payment is not included when calculating vacation pay or pension benefits. The severance payment will be reduced if the executive should receive income from either a new employer or conducting his/her own business.

The executive may be entitled to a company car benefit, health care provisions, travel insurance etc. in accordance with local labor market practice. The Board of Directors are allowed to make minor deviations on an individual basis from the principles stated above.

Acting Group Executive Management members keep their previous terms regarding Short term and Long term variable pay, pension and benefits remain during the acting period. They also keep their existing notice periods.

Remuneration to the CEO and other permanent members of Group Executive Management consists of base salary, certain taxable benefits and pension benefits. As per December 31, 2016, Telia Company does not operate any share related incentive program in relation to the CEO, and other permanent members of Group Executive Management.

Applying the remuneration policy adopted at the AGM, the CEO’s total remuneration package is decided by the Board of Directors based on the recommendation of its Remuneration Committee.

Total remuneration packages to other members of Group Executive Management are approved by the Remuneration Committee, based on the CEO’s recommendation.

Remuneration and other benefits during the year, capital value of pension commitments

SEK in thousands	Base salary	Other remuneration1	Other benefits²	Pension expense³	Total remuneration	Capital value of pension commitment5
Group Executive Management, 2016
Johan Dennelind, CEO	15,794	1,358	75	6,204	23,431	–
Other members of Group Executive Management (including 2 EVPs and 6 SVPs)	41,507	3,371	1,383	12,835	59,095	1,351
Total	57,301	4,729	1,457	19,039	82,526	1,351
Other former members of Group Executive Management
Other former members of Group Executive Management (1 individual)⁴	2,670	11	226	946	4,592	–
Other former CEOs and EVPs (8 individuals)	–	–	–	–	–	169,921
Total	2,670	11	226	946	4,592	169,921
Grand total	59,971	4,740	1,683	19,984	87,118	171,272

SEK in thousands	Base salary	Other remuneration	Other benefits	Pension expense	Total remuneration	Capital value of pension commitment
Group Executive Management, 2015
Johan Dennelind, CEO	14,490	147	74	5,685	20,396	–
Other members of Group Executive Management (including 2 EVPs and 6 SVPs)	36,032	1,589	1,174	11,045	49,840	1,167
Total	50,522	1,736	1,249	16,730	70,236	1,167
Other former members of Group Executive Management
Other former members of Group Executive Management (5 individuals)	33,828	715	376	8,301	43,219	9,615
Other former CEOs and EVPs (8 individuals)	–	–	–	–	–	168,468
Total	33,828	715	376	8,301	43,219	178,083
Grand total	84,349	2,450	1,624	25,031	113,455	179,250

1) Other remuneration for the CEO is holiday allowance SEK 359,359 (SEK 144,846), payment for unused vacation days SEK 998,808 and minor taxable expenses SEK 220 (SEK 2,060). Other remuneration for Other Memebers of Group Executive management includes payment for unused vacation days.

2) Other benefits refer to company cars and a number of other taxable benefits. Other benefits for the CEO refer to car allowance SEK 60,000 (SEK 60,000) and health insurance SEK 14,630 (SEK 14,400).

3) See further disclosures concerning the terms and conditions of pension benefits below.

4) Other former members of Group Executive Management is one individual who has been a temporary member of the Group Executive Management.

5) Capital value of pension commitment includes defined benefit plans for eight former CEOs and EVPs (left Telia Company before 2016).

Comments on the table related to 2015 can be found in the Annual and Sustainability Report 2015. Numbers may not add up due to rounding.

Pension benefits

Telia Company offers permanent members of the Group Executive Management defined contribution pension schemes. A defined contribution scheme provides premium contributions to the pension scheme as a percentage of the pensionable salary. The level of pension benefits at retirement will be determined by the contributions paid and the return on investments and the costs associated to the plan. The reasons behind the change in the capital value of defined benefit pension commitments are due to changes in discount rate and retirement benefits paid to retirees.

CEO

The CEO is eligible to a defined contribution pension scheme with contributions corresponding to 4.5 percent of base salary up to 7.5 income base amounts and to 30 percent for such salary above 7.5 income base amounts. In addition, contributions of 10 percent of base salary are paid into the scheme. These contributions add up to a total pension contribution per annum of SEK 6,204,229 (compared to base salary for 2016 SEK 15,794,100 representing 39.3 percent). The contributions into the scheme are vested immediately. The income base amount is determined annually by the Swedish Government and was SEK 59,300 for 2016.

The retirement age is variable. Contributions to the pension scheme will cease at retirement or earlier if leaving the company for any other reason.

Other members of Group Executive Management

The EVPs and the SVPs are eligible to defined contribution pension schemes similar to the ITP plan section 1 providing contributions corresponding to 4.5 percent of their base salary up to 7.5 income base amounts and 30 percent of such salary above 7.5 income base amounts. Two members of Group Executive Mangement have an additional contribution of 10 percent of their base salary. The contributions to the pension schemes are vested immediately. The retirement age for members of Group Executive Management is 65 or variable.

Other former members of Group Executive Management

During the year there has been one member with a temporary acting position within Group Executive Management. This individual is participating in ITP plan section 1.

Defined pension benefits earned by former CEOs and EVPs until 2008 are pledged and calculated as capital values (debt) until all their lifelong pensions are fully paid out by Telia Company. Their pensions are paid out from the age of 60. Within the total capital value for this category of SEK 169,920,843 (SEK 168,467,937), the capital value for Marie Ehrling of SEK 8,075,343 (SEK 8,121,577) is included relating to her period as president of Telia Company Sweden during 2002–2006. Pension is paid to Marie Ehrling in the amount of SEK 705,180 (SEK 411,355). Since 2008, Telia Company does not offer any defined benefit pension schemes to CEOs and EVPs.