Statement of the
Securities Council 2002:01
January 9, 2002
Incentive programs for senior executives and other employees have become
quite common among listed Swedish companies in recent years. More than
half of all listed companies have one or more incentive programs based
on shares, convertibles, warrants, synthetic options, employee stock options
or call options. Among the country's largest companies, the percentage
is even higher.
Normally, the assumption behind these programs is that executives and
other employees will be more committed to a company if its performance
directly affects their personal income and wealth. Another important factor
is being able to offer competent executives and others employment terms
that are competitive also from an international perspective. On the other
hand, there are fears that incentive programs, which can be difficult
for shareholders to evaluate, give executives and other employees an unjustified
advantage at the expense of shareholders and that trust in the company
could suffer if large allotments are made to key decision-makers who have
had or are perceived to have had the opportunity to affect the decision-making
Incentive programs can be designed in many different ways, and not all
programs are related to the Securities Council's goal to promote best
practices in the stock market. When the incentive takes the form of shares
or their derivatives, there is a clear connection in this respect, however.
This is also true of certain types of programs that in practical terms
are so similar that questions regarding these programs are usually treated
as stock market questions. One example is synthetic options, which entitle
their holders to receive a cash amount related to a share's performance
rather than the shares themselves, but whose payment is often secured
through some form of share-related arrangement.
For practical purposes, it is very important that companies considering
a share-based incentive program comply with the Act pertaining to Certain
Directed Issues in Stock Market Companies, etc. (1987:464) - the so-called
Leo Act - which in several respects has more stringent decision-making
rules on the issue and transfer of shares and certain other financial
instruments by listed companies to board members, the managing director
or other employees.
Firstly, the Leo Act states that issue decisions must always be made
by the general meeting. In other words, the board of a listed company
may not decide on an issue for the company's employees, for example, with
the support of the authorization of the general meeting. Secondly, the
Leo Act demands a significantly higher voting majority than the Companies
Act. According to the Leo Act, the general meeting's decision is valid
only if it carries the support of shareholders with at least nine tenths
of both the the votes cast and the shares represented at the general meeting.
Further, the Leo Act declares that a decision to issue shares in a subsidiary
that is not publicly listed must be approved by the general meeting of
the listed parent company of the same group.
So as not to circumvent the Leo Act's rules on issue decisions by issuing
the instruments to a subsidiary in the same group which then transfers
them to board members, the managing director or other employees, these
special rules apply to decisions on such transfers as well.
The Leo Act also contains certain rules on information provided to shareholders
on the incentive programs covered by the Act. On the other hand, it does
not contain any substantive rules or guidelines for such programs. When
the Act was adopted, the Government acknowledged the need for such guidelines
but decided not to introduce any laws to that effect pending the outcome
of the self-regulation then being adopted by the stock market (Government
bill 1986/87:76, p. 22 f.). A prime example of which was the creation
of the Securities Council, which then had just begun its work.
In numerous statements since then, the Council has examined various forms
of incentive programs. It has released four declarations of principle
on the topic following plenary sessions (AMN 1987:11, 1989:1, 1994:6 and
1998:3) and a relatively large number of statements on individual cases,
some of which are confidential. Other agencies and groups, including an
association of Swedish institutional investors with significant holdings
in listed companies, have issued statements on related issues. In practice,
this has created a need for a declaration of principle that summarizes
the Council's views, so that information will not have to be searched
for in far too many places.
Now that the entire issue is being reviewed, there is an opportunity
to consider whether the Council should modify its views given developments
that have taken place. It is natural, of course, that policy on these
issues may have to be adapted to current conditions from time to time.
Several key elements in these developments are of particular interest.
For example, we cannot overlook the fact that listed Swedish companies
continue to become more international and that competition for key employees
is growing as a result. Another notable trend is toward greater transparency
in accounting and disclosure principles, which gives shareholders and
the stock market as a whole a better opportunity to follow and assess
companies. A third trend that deserves watching is the strong emphasis,
particularly from the Government, on active corporate ownership (see,
e.g. Government bill 1997/98:99, p. 75 f.). Many of the categories of
shareholders that account for a substantial share of the Swedish market
capitalization also play a much more active ownership role than they did
just a decade ago. Particularly with the latter in mind, there is good
reason to now issue a statement of principle to the effect that, when
a decision has the support of shareholders with at least nine tenths of
both the votes cast and the shares represented at the general meeting
in accordance with the Leo Act, there have to be strong reasons to believe
that the decision is in contravention of generally accepted practices
in the stock market. This naturally assumes that the information provided
to shareholders has been thorough and adequate and that those who are
affected by the decision have not themselves drafted the proposal.
The following statement is intended to replace the Council's previous
statements on incentives, so that for practical purposes it will not be
necessary to refer back to these earlier statements. For this reason,
no references are made in this document to any previous statements.
Experience has shown that a declaration of principle of this type can
never be all-encompassing. As a result, the issues in question may be
elaborated upon in future statements regarding individual cases.
In the opinion of the Council, the principles in the following sections
should be observed not only by publicly listed companies, i.e. companies
listed on a stock exchange or other authorized marketplace, but also by
other companies with a diversified ownership base, provided their shares
are traded by the public in an organized fashion through a securities
institution. Diversified ownership in this case refers to companies with
at least 200 shareholders. On the other hand, the Council does not feel
that the principles should apply to companies that have made preparations
to become publicly listed as long as their ownership base is not yet diversified
and their shares are not traded in an organized fashion.
2. Programs based on shares, convertibles or warrants
This section covers incentive programs based on shares, convertible debentures
or warrants issued or transferred to those covered by the program.
2.1 Form for decision-making
As noted above, the Leo Act applies when listed companies or subsidiaries
of such companies make decisions to issue new shares, convertible debentures
or debentures with warrants and the issue covers board members, the managing
director or other employees of the issuing company or other companies
in the same group. It also applies to transfers of such instruments to
The Council considers, as previously stated, that generally accepted
practices in the Swedish stock market require that the Leo Act's decision-making
rules also apply to other companies with diversified ownership if their
shares are publicly traded in an organized fashion through a securities
institution. This means, for example, that an issue or transfer to the
individuals in question in such companies should be implemented only if
the decision has the support of shareholders with at least nine tenths
of both the votes cast and the shares represented at the general meeting.
If the issue is implemented by a subsidiary with a limited ownership base,
the question of whether to authorize the issue should also be taken up
at the general meeting of the company with diversified ownership that
is the parent company of the group, whereupon the same majority requirements
should apply. In both cases, the Council feels that the board's proposal
should have the support of enough shareholders at the general meeting
to fulfill the majority requirement. This condition should be clearly
stated in the notice of the meeting.
Decisions on incentive programs can be made by either the annual general
meeting or an extraordinary general meeting. In the opinion of the Council,
an effort should be made, however, to bring such programs before the annual
general meeting, where shareholders have a better opportunity to weigh
the proposal against a more thorough and up-to-date description of the
company's development and position than at an extraordinary general meeting.
If an incentive program is brought before an extraordinary general meeting,
the board should call the meeting in the same way and as far in advance
as the annual meeting. Moreover, it is important that the board ensures
as far as possible that the information provided to shareholders is no
less thorough than if the proposal had been brought before the annual
With regard then to the individuals in question, the Council feels that
for the process to conform to the stock market's generally accepted practices
the Leo Act's rules should apply not only to issues or transfers to board
members, the managing director or other employees, but also to issues
to individuals who are poised to assume such positions, e.g. a person
nominated for a directorship or a future managing director. In the opinion
of the Council, circumventing the Leo Act's rules to implement an issue
or authorize a transfer to anyone who has left the board or the company
after having had the opportunity to impact the decision may also violate
generally accepted practices.
The stock market's generally accepted practices also require compliance
with the Leo Act's rules on issues and sales to the public in the event
notices of acceptance from the circle of individuals covered by the Leo
Act could be given priority status.
One particular question in connection with transfers is what applies
with regard to the scope of authorization. According to the Leo Act, to
be valid a decision to transfer shares that a listed company owns in a
subsidiary should be made by the general meeting of the listed company.
How much leeway the general meeting has to authorize the board to set
the conditions for such a transfer is not expressly stated in the Act.
But considering the purpose of the Act and the stock market's generally
accepted practices, it should be handled in the same way as a share issue,
i.e. the board can be authorized to implement the general meeting's decision
but does have any maneuverability of its own (DsFi 1986:21, p. 121; Government
bill 1986/87:76, p. 34 f.). This does not prevent the general meeting's
decision from being designed in a way that gives the board the authority
to transfer shares at a price in a predetermined relation to the share
price at the time of transfer.
Some incentive programs are designed in a way that the company issues
shares, convertibles or warrants to a third party, such as a subsidiary,
which in turn, according to an agreement with the company, transfers the
instruments or issues call options on them to the company's employees.
In the opinion of the Council, the stock market's generally accepted practices
require that the general meeting decide on such option programs in accordance
with the Leo Act's decision-making rules. This means here as well that
the conditions for the transfer or the call options should be set by the
general meeting without any room for maneuverability by the board in terms
of implementing the decision.
To comply with generally accepted practices, programs in which a company
issues shares, convertibles or warrants to a special purpose company in
which employees of the employer company are offered the opportunity to
become shareholders should also be decided on by the general meeting in
accordance with the Leo Act's rules.
In conclusion, the Council feels that any effort to blatantly circumvent
the Leo Act's decision-making rules normally will be considered a show
of disregard for generally accepted practices of the stock market.
An important question in connection with any issue of shares, convertible
debentures or debentures with warrants that deviates from shareholders'
preferential rights is the level of dilution shareholders have to accept.
This also applies to issues that are part of incentive programs.
The term dilution can mean different things. If it refers to a change
in the value of existing owners' shares, the degree of dilution is determined
by the size of the issue and any difference between the issue price and
the share price. The higher the volume issued and the lower the issue
price in relation to the share price, the greater the dilution.
Because of the difficulty in predicting share prices in advance, the
term dilution is often used for practical purposes in another sense, i.e.
as the percentage increase in the number of shares that an issue can lead
to. This information can provide a basis for calculating the dilution
of shareholders' share of the company's earnings.
The Council sees no reason, given its task, to set an upper dilution
limit in either regard.
An incentive program based on a company's outstanding shares, convertibles
or warrants gives or can give those covered by the program the right to
share in the company's future earnings. Consequently, it is important
that shareholders receive information to help them assess the instruments'
market value and are informed of the price at which the instruments can
be acquired. If there is no established market value for the instruments
in question, a theoretical market value should be calculated using a widely
accepted valuation model, e.g. Black & Scholes. If the instruments
are issued by a company whose shares are not publicly listed or reliably
priced, the value of the convertible or option and of the underlying share
should be calculated, when appropriate, by an independent expert, e.g.
a securities institution. Since theoretical calculations of market value
are always highly dependent on the assumptions that are made with regard
to the variables in the models, shareholders should have the opportunity
to find out how the values were calculated.
This requirement to provide information on the instruments' market value
does not prevent the company from encouraging participation in an incentive
program by financially contributing wholly or in part to purchases. The
instruments are then assigned a price below market value or are offered
free of charge. One prerequisite, naturally, is that the company, because
of the incentive program's presumed positive effects, considers that it
will receive full compensation for the instruments in question.
The question of what constitutes generally accepted practices in the
stock market with regard to incentive programs also involves the size
of allotments to individuals covered by the program. The Council feels
that, while there is no reason from the standpoint of the stock market's
accepted practices to devise a standardized ratio between allotments and
an individual's salary and other benefits, it is important that allotments
are kept at a reasonable level. What constitutes a reasonable allotment
must be determined by those who make the proposal - and ultimately by
the shareholders - in light of, among other things, the company's size,
international scope and competitive situation. An overall judgment must
also take into account whether there are other incentive programs for
the individuals in question and other circumstances relevant to the particular
case, such as salaries and other benefits.
If an issue is not fully subscribed, no one with a subscription entitlement
should be given a higher allotment than the highest amount stipulated
in the terms of the issue for the individual in question. The general
meeting should provide comprehensive rules on the procedures in the event
of an over- or undersubscription.
2.5 Board members' participation
One issue often discussed in Sweden and other countries is whether board
members of a listed company should be able to participate in share-related
incentive programs for the company's employees. When reference is made
here and in the following to board members, it is primarily to board members
who are not employees of the company or other companies in the same group
or who have similar relationships to the listed company. The Leo Act assumes
that an issue can be offered to board members. Issues to board members
are also common in several countries in which Swedish companies are active
to a significant extent.
One complicating factor, although the question has not been fully addressed
by the courts, is that board members are presumably prevented due to conflicts
of interest from proposing to the general meeting an incentive program
in which they can benefit (see, e.g., SOU 1995:44 p. 207). Although such
proposals probably could circumvent conflict of interest rules if presented
to the general meeting by one or more outside shareholders, there would
certainly be suspicions in such cases that the board in reality stands
behind the proposal.
Incentive programs for senior executives or employees in general are
such an important question for any company that the board in practice
must participate in the preparations and take responsibility for the programs.
The value represented by the instruments in these cases can never be exact.
Nonetheless when an issue of this type is reviewed by the general meeting,
the board is the guarantor that the valuation has been done in an acceptable
manner, that any subsidies are reported openly and that the other terms
are reasonable. In the opinion of the Council and from the standpoint
of generally accepted practices, board members should not participate
in incentive programs for key decision-makers or employees in general
unless there are special reasons for their doing so. One such reason would
be that the board member actually is active in the company in the same
way as an employee. If it is felt that an allotment to one or more board
members should be allowed for this or similar reasons, the question should
be brought up as a separate decision point at the general meeting.
Another question concerns incentive programs designed solely for board
members. Provided that such a program has not been prepared by a board
member or the company's management and it is not the board that presents
the proposal to the general meeting, the Council feels that the general
meeting must be free to decide - with the majority requirement prescribed
by the Leo Act - whether such a program is acceptable in light of the
conditions faced by the company, naturally taking into account the administrative
costs of such a special program. It is important as well that the proposal
contains a motivation that helps shareholders to make a well-founded decision.
Obviously, it is also important that information is provided on how the
entire issue has been prepared and that gives shareholders a basis for
judging whether the company has subsidized the program.
The Council is of the opinion that the points stated above should also
apply to incentive programs to those who are not members of the board
but are likely to be elected board members. In this case as well, the
Council does not feel it is appropriate that the incentive proposal is
prepared by the board.
It has been claimed for various reasons that incentive programs for board
members based on convertibles or warrants are more debatable on principle
than programs in which board members directly acquire shares in the company.
The main argument is that predetermined dates for converting or subscribing
for shares may lead to suspicions that the board is not sufficiently focused
on the company's long-term interests. There are strong differences in
opinion in this regard, however. The Council feels that the choice between
different share-related incentives is a question for shareholders and
that no one form of incentive can in and of itself be considered to contravene
generally accepted practices.
What is stated here with regard to incentive programs for board members
also applies to arrangements through which board fees are paid in the
form of shares, convertibles or warrants.
From the standpoint of the stock market's generally accepted practices,
board members who are also shareholders of the company should not participate
in the general meeting's decisions on any form of incentive program in
which they are involved.
3. Programs based on synthetic options, employee stock options, etc.
Certain types of incentive programs do not necessarily dilute shareholders'
interests, although they do generate a cost for the company. To the extent
these programs allot employees options or rights that are immediately
tied to the price of the company's shares, questions will naturally arise
regarding generally accepted practices in the stock market. The most important
examples of such programs from a practical standpoint are those based
on synthetic options and employee stock options.
Incentive programs based on synthetic options do not give option holders
the right to acquire a share (or any other instrument) at a specific future
date. Instead, the options entitle them to receive a cash amount, the
size of which is dependent on the price on the expiration date of a share
in the company that issued the option - the option in this sense is synthetic.
An employee stock option - a term referred to in Swedish tax legislation
(see Government bill 1997/98:133) - usually means a future right allotted
by an employer company or other group company allowing an employee to
acquire securities in the company for a predetermined price from the company
itself or a designated third party. While similar to a call option, such
options cannot be transferred and therefore are not considered as securities
from either a civil or a tax law perspective. Normally, the employee cannot
exercise such options until a certain period has elapsed and only if he
or she is still employed by the company.
Neither synthetic options nor employee stock options dilute a company's
shares in a true sense. However, since the company's costs to redeem such
options are dependent on its share's performance and thus cannot be determined
at the time the options are allotted, it is common for companies to try
to protect ("hedge") their risk exposure. This can be done,
for example, by acquiring and then transferring its own shares, by issuing
shares, convertibles or warrants, or through a swap agreement with a securities
institution. Depending on the method used, these types of incentive programs,
in combination with hedges, therefore can also lead to a dilution.
What is stated in this section also applies to incentive programs where
a company issues call options on its own shares even when they are not
employee stock options.
3.1 Forms for decision-making
From a company law perspective, there is nothing to prevent decisions
on incentive programs based on synthetic options or employee stock options
from being made by the board. This complies with the Company Act's rules
on the delegation of responsibilities within a corporate structure. The
Leo Act is not applicable in this situation.
The Council also feels that decisions to issue synthetic options or employee
stock options may be made by the board without contravening the stock
market's generally accepted practices. In this case the board is the guarantor
of the program, to ensure that costs and allotments are designed in a
way that protects shareholders' interests and that the program meets with
generally accepted practices.
If an incentive program based on synthetic options or employee stock
options is very large and is expected to be of material significance to
the company - for example, if the costs of the program could considerably
impact the company's results - it may be appropriate to submit the program
to the general meeting for approval.
With both synthetic options and employee stock options, the arrangements
that have been made to settle the options and limit the company's risk
exposure may have to be approved by the general meeting. This is true,
for example, if the decision on the option program is combined with the
issue of shares, convertibles or warrants to a third party that has pledged
to the company to use them to settle employee stock options or if the
company repurchases and then transfers its own shares to the option holders.
According to the provisions of the Companies Act (1975:1385), the decision-making
rules of the Leo Act should be applied in the latter case. In the opinion
of the Council, the Leo Act's rules should also be applied in the former,
i.e. if shares, convertibles or warrants are issued as part of an employee
stock option program and in order that those with subscription entitlements,
acting on behalf of the issuing company, can subscribe for the instruments
and deliver them to the option holders (cf. section 2.1 above).
As noted above, incentive programs based on synthetic options are distinguished
by the fact that they are settled in cash. Cash settlements can mean significant
costs for the company. Employee stock options can also result in significant
costs for the company, especially considering the social security charges
that normally result from the exercise of such options.
From the standpoint of the stock market's generally accepted practices,
it is important that shareholders are informed how much the program could
cost given various scenarios for the company's share price performance,
which is perhaps most easily done using examples. It is also very important
to provide information on arrangements that the company may have taken
to limit its risk. If the structure of the program allows, shareholders
should also be informed of the options' actual or estimated market value
as well as of any subsidy for the program from the company, in the same
way as with warrant programs, for example. With issues by a company whose
shares are not publicly listed or reliably priced, the market value of
the instruments should be determined by an independent expert, e.g. a
What is stated above in section 2.4 also applies to the size of allotments
in incentive programs based on synthetic options, employee stock options
or call options on a company's own shares.
3.4 Board members' participation
What is stated above in section 2.5 also applies to board members' participation
in incentive programs based on synthetic options, employee stock options
or call options on a company's own shares.
4. Programs based on call options issued by others
This section covers incentive programs based on non-standardized call
options on shares in an employer company or another company in the same
group and which are issued by someone other than the employer company.
4.1 Forms for decision-making
The question of how call option programs of this type should be decided
on to meet the stock market's generally accepted practices is more complex
than the other forms of incentive programs previously covered. The discussion
is therefore divided into two subsections. Section 4.1.1 covers decision-making
procedures for option programs based on shares in an employer company,
while option programs based on shares in other companies in the group
to which the employer company belongs are covered in section 4.1.2.
4.1.1 Call option programs involving shares in an employer company
or its subsidiaries
When the managing director or other key decision-makers in a listed company
on their own and on market terms purchase call options on shares in their
own company (the employer company), it does not necessarily raise any
questions regarding the stock market's generally accepted practices other
than disclosure obligations. If the options are acquired from an independent
party, e.g. a securities institution or a shareholder, and the acquisition
is made without the participation of the employer company, the stock market's
generally accepted practices require only that the board is informed of
the transaction and that information on the holding is provided in the
If, however, the employer company plays a role in establishing the option
program, e.g. by initiating, financing or managing the program, the Council
feels that approval for the employer company's participation should be
given by the board. Likewise, the purchase of options from an independent
party on anything other than market terms should first be approved by
If the options are issued by the employer company's parent company and
it in turn is a listed company, the Council considers that the decision
should be approved by the parent company's general meeting in a form similar
to what is specified in the Leo Act. This of course applies regardless
of whether or not the employer company is listed. It is worth noting that
the Leo Act, in contrast with the Insider Act, does not allow any exceptions
in the event a listed company settles a call option by assigning the underlying
asset. Because the general meeting has approved the option program with
a Leo majority, no further approval by the general meeting would be considered
necessary if the option holder decides to exercise the option.
4.1.2 Call option program involving shares in other companies
The majority of call option programs give option holders the right to
acquire shares in their employer company. However, there are also programs
that permit the purchase of shares in other companies either in the same
group or outside the group. One example is when a listed company creates
an option program for key decision-makers in an unlisted subsidiary and
bases it on call options on shares in the parent company issued by an
outside party. The Leo Act and the considerations that serve as the basis
for the Act are inappropriate in this case. In the opinion of the Council,
it is sufficient that the parent company's approval of the option program
comes from the board.
There are other cases where employees of a listed company are offered
call options or warrants in the company's parent company or another company
that is a shareholder of the listed company. If the shareholder is a customer
of the listed company or has other business ties with it, the risk that
other shareholders in the listed company will be placed at a disadvantage
as a result of the program motivates, in the opinion of the Council, that
the decision to approve the program normally be made by the listed company's
general meeting. Such a decision could be made with a simple majority,
but the shareholder that made the offer should abstain from voting.
Incentive programs based on call options issued by someone outside an
employer company in principle always run the risk of affecting the objectivity
of those covered by the program toward the option issuer. Consequently,
generally accepted practices normally would require that the call option
program be designed on fair market terms, unless the board has approved
otherwise. With call option programs as well, it would be in keeping with
generally accepted practices that the employer company facilitate employees'
participation by wholly or partly contributing financially to the program,
if such subsidies are reported openly.
What is stated above in section 2.4 also applies to the size of allotments
in incentive programs based on call options.
4.4 Board members' participation
When a board member of a listed company on his/her own and on market
terms acquires call options on shares in the company, it does not necessarily
raise any issues regarding the stock market's generally accepted practices
other than disclosure obligations. If the options are acquired from an
independent party, e.g. a securities institution or a shareholder, and
the acquisition is made without the participation of the company, the
stock market's generally accepted practices require only that the board
is informed of the transaction and that information on the holding is
provided in the annual report.
The Council does not see any obstacles in principle that would prevent
a company from helping an outside party to issue call options to the company's
board members. However, in light of the risk of improper influence in
the relationship with the option issuer or others, board members' participation
in such a program should be submitted to the general meeting for approval.
In this way, shareholders have the opportunity to decide on the suitability
of the arrangement. In this case a simple majority should be sufficient
to carry the general meeting's vote.
In the event call options are issued by shareholders in the company,
the Council considers that generally accepted practices require that the
option issuer not participate in the general meeting's decision. This
reduces the risk of a future allegiance between the board members in question
and the option issuer.
With regard to call option programs in a subsidiary, what has been stated
above applies to the board members of the parent company. The Council
sees nothing to prevent board members of a subsidiary from participating
in the program, unless they are also members of the parent company's board.
As to board members of the subsidiary who are also on the board of the
parent company, the principle should be that members who have participated
in the decision of the parent company board on - or otherwise participated
in the execution of - the option agreement should not be among those covered
by the agreement, unless the decision on the parent company's participation
is made by the parent company's general meeting.
One specific question that arises is whether board members of a parent
company that issues call options to employees of a subsidiary can participate
in the option program. The answer to that question must be that board
members of the parent company who are not employed by the parent company
or subsidiary normally should not be part of the program. The board of
the parent company proposes the program to the general meeting and in
that sense is also a guarantor of its reasonability. Therefore, members
of the board normally should not take part in the program.
In line with what the Council has stated above, there must be strong
reasons of principle to justify that a decision on an incentive program
that has the support of shareholders with at least nine tenths of both
the votes cast and the shares represented at the meeting, in accordance
with the Leo Act, can be deemed to circumvent the generally accepted practices
of the stock market. One prerequisite, however, is that the shareholders
have received thorough and adequate information on which to base their
The board's proposal to the general meeting should provide shareholders
with information on, among other things:
- the reason for the proposal,
- the categories of individuals in the company who are affected by the
- the volume of the instruments in question that will be issued,
- the interest rate and life-span of convertible debentures as well
as whether or not the loan is subordinated,
- the conversion or subscription price or the settlement amount,
- the instrument's market value and the price at which the instrument
can be acquired and, when appropriate, how the market value is calculated
and who conducted the valuation,
- the size of allotments,
- possible dilution and how it is calculated as well as the effects
it could have on key financial ratios,
- the maximum cost of the program for the company given examples of
its future share price,
- any measures have been taken to hedge the program,
- the maximum cost to hedge the program and any social security charges,
- in what forms the proposal has been prepared, and
- the majority requirements that will be applied to the general meeting's
The proposal should make it possible to judge the assumptions on which
various calculations have been based.
Depending on the design of the proposed program, other information may
also have to be provided to the general meeting. The list of issues brought
up in this section is not intended to be all-inclusive.
So that shareholders can evaluate the proposed incentive program from
a broader perspective, an overall description of the company's other share-related
incentive programs should be provided as well.
The board's complete proposal should automatically be sent to shareholders
who have notified the company of their intention to attend the general
meeting. Other interested parties should be able to obtain it from the
company's homepage. The proposal should be made available at least two
weeks before the general meeting, which should be stated in the notice
of the meeting.
In keeping with the Companies Act and the Leo Act, the main points of
the proposal for the incentive program that will be decided on by the
general meeting should be indicated in the notice of the meeting. In the
opinion of the Council, this should also apply in cases where the Leo
Act's decision-making rules are applied in accordance with generally accepted
practices in the stock market without being specifically mandated by the
In the event the board decides on or approves an incentive program (synthetic
options, employee stock options and call options) without submitting it
to the general meeting, appropriate sections of the information mentioned
here should be announced publicly. The information should be released
immediately after the board's decision.
Shareholders must also have the opportunity to monitor the incentive
program while it remains in effect. In its annual report, the company
should therefore describe events and results during the most recent fiscal
year for both new and old incentive programs, and it should give an overall
view of all current programs.
This statement replaces AMN 1987:11, 1989:1, 1994:6 and 1998:3. Neither
should statements on individual incentive programs issued prior to this
statement be considered guiding.
The following Council members have participated in this case, which was
brought before a plenary session: Johan Munck (Chairman), Leif Thorsson
(Vice Chairman), Carl-Johan Åberg (Vice Chairman), Lars Bredin (Vice
Chairman), Elisabet Annell, Ulf Aspenberg, Claes Beyer, Peggy Bruzelius,
Claes Dahlbäck, Bo Damberg, Bo Eklöf, Stefan Erneholm, Bo Hedén,
Sigvard Heurlin, Anders Lannebo, Per Lundberg, Ulf Magnusson, Tor Marthin,
Lennart Ribohn, Jan Stenberg, Gunnar Widhagen, and experts Jan-Mikael
Bexhed, Peter Bäärnhielm, Hans Edenhammar, Adine Grate Axén,
Sören Lindström, Göran Nyström, Michael Orrgard, Lars
Pehrson and Eva Persson.
On behalf of the Securities Council