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

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

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

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.