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Remuneration guidelines

Guidelines for remuneration to senior executives

At the 2024 Annual General Meeting, the Board of Directors’ proposal for guidelines for remuneration to the company’s senior executives was adopted. The guidelines also include remuneration to Karnell’s  Board members, to the extent that they receive remuneration outside their Board assignments or are employed by the Company. The guidelines apply to agreements entered into after the 2024 Annual General Meeting resolved to adopt the guidelines, and in the event that changes are made to existing agreements after this date. The guidelines do not apply to remuneration resolved by the Annual General Meeting.

The guidelines’ promotion of the Company’s business strategy, long-term interests and sustainability

For information about the Company’s business strategy, see Karnell’s website www.karnell.se.

The successful implementation of the Company’s business strategy and the safeguarding of the Company’s long-term interests, including its sustainability, requires that the Company is able to attract, motivate and retain qualified senior executives. This requires that the Company can offer competitive remuneration. These guidelines enable the Company to offer senior executives competitive total remuneration.

Variable remuneration covered by these guidelines shall aim to promote the Company’s business strategy and long-term interests, including its sustainability. This is ensured by linking the financial and non-financial targets that determine whether variable remuneration is to be paid with the Company’s business strategy. The variable remuneration is further explained under the heading “Variable remuneration” below.

The Company has implemented certain long-term share-based incentive programs. All future such programs will be resolved by the Annual General Meeting and are therefore excluded from these guidelines.

Forms of compensation, etc.

The remuneration shall be in line with market conditions and may consist of the following components: fixed cash salary, variable cash remuneration, pension benefits and other benefits. In addition, and independently of these guidelines, the Annual General Meeting may decide on, for example, share- and share price-related remuneration. Fixed salary and variable cash remuneration shall be proportionate to the senior executive’s responsibilities and qualifications.

Fixed salary
The fixed salary shall consist of a fixed annual cash salary. The fixed salary must be market-adapted and determined with regard to responsibility, competence and performance. The fixed salary is revised every year.

Variable cash remuneration
Fulfilment of the criteria for payment of variable cash remuneration shall be measurable over a period of one year. The variable cash remuneration shall amount to a maximum of 50 per cent of the total annual base salary.

The senior executives’ variable cash remuneration shall be linked to predetermined and measurable criteria, which may be financial or non-financial. The criteria can also be individualized, quantified, or qualified goals. The criteria shall also be designed to contribute to the Company’s business strategy and long-term interests, for example by being clearly anchored in the business strategy or by promoting the senior executive’s long-term development.

When the measurement period for fulfilment of criteria for payment of variable cash remuneration has ended, it shall be assessed/determined to what extent the criteria have been met. The Company’s Board of Directors, in consultation with the Remuneration Committee, is responsible for the assessment of the variable cash remuneration to the CEO. For variable cash remuneration to other senior executives, the CEO, in consultation with the Remuneration Committee, is responsible for the assessment. Board members who are employed by the Company shall not receive variable cash remuneration. For financial targets, the assessment shall be based on the latest financial information published by the Company.

The terms and conditions for variable cash remuneration shall be formulated in such a way that enables the Board of Directors, in exceptional financial circumstances, to limit or stop payment of variable cash remuneration when such remuneration is deemed unreasonable and not compatible with the Company’s obligations to its shareholders, employees and other stakeholders. Furthermore, it shall be possible to limit or stop the payment of variable cash remuneration if the Board of Directors decides that this is appropriate for other reasons. The Board of Directors shall also have the right to reclaim already paid variable cash remuneration if it is later discovered that a senior executive has violated the Company’s values, policies, standards or instructions.

In addition to the variable cash remuneration that may be paid in accordance with the above, the Company shall be able to pay cash remuneration linked to senior executives’ acquisition of shares or share-related instruments within the framework of incentive programs, where this follows from the Annual General Meeting’s resolution on the incentive program. Such additional cash remuneration shall be limited to 50 percent of the executive’s total annual base salary.

Pension
Pension benefits shall only include specific supplementary pension benefits, unless the senior executives are subject to specific benefit pensions in accordance with applicable collective agreement terms. The fixed supplementary pension benefit shall be no more than 35 percent of the fixed annual basic salary. The CEO’s variable cash remuneration shall not qualify for pension benefits. Other senior executives’ variable cash remuneration shall qualify for pension benefits unless otherwise stated in the senior executives’ individual agreements.

Other benefits
Other benefits may include, for example, life insurance, health insurance, and car benefits. Such benefits may amount to a maximum of 15 percent of the fixed annual salary.

With regard to employment relationships that are subject to rules other than Swedish, with regard to pension benefits and other benefits, appropriate adjustments may be made to comply with such mandatory rules or established local practice, in which case the overall purpose of these guidelines shall nevertheless be met as far as possible.

Any senior executives who are seconded to or from Sweden may receive additional remuneration and other benefits to the extent reasonable in light of the special circumstances linked to the arrangement, whereby the overall purpose of these guidelines shall nevertheless be met as far as possible. Such benefits may not exceed 35 percent of the fixed annual salary in total.

Remuneration for board members who are not employed by the Company

Board members elected by the Annual General Meeting who are not employed by the Company shall, in special cases, be able to receive consultancy fees or other market-based remuneration for work performed on behalf of the Company in addition to their work on the Board of Directors. The Board of Directors shall decide whether such consultancy fees or other market-based remuneration shall be paid.

Termination of employment

In the event of termination of employment by the Company, the notice period shall not exceed twelve months. Fixed salary during the notice period and severance pay shall not exceed an amount corresponding to the fixed annual salary for 24 months. When termination is made by a senior executive, the notice period shall not exceed six months, without the right to severance pay.

In addition, compensation may be paid for non-compete commitments. Such compensation shall compensate for loss of income and shall only be paid to the extent that the previously employed senior executive is not entitled to severance pay. Any new income from employment, or remuneration as a consultant, must be deducted against the severance pay.

Salary and terms of employment for employees

In the preparation of the Board’s proposal for these remuneration guidelines, salary and terms of employment for the Company’s employees have been taken into account by providing information on the employees’ total remuneration, the components of the remuneration and the increase and rate of increase of the remuneration over time as part of the Remuneration Committee’s and the Board’s basis for decision when evaluating whether the guidelines and the limitations set out herein are reasonable. The development of the difference between the remuneration of senior executives and that of other employees will be reported in Karnell’s remuneration report.

The decision-making process for establishing, reviewing and applying the Guidelines

The Board of Directors shall prepare proposals for new guidelines at least every four years and present the proposal for decision at the Annual General Meeting. The guidelines shall apply until new guidelines have been adopted by the Annual General Meeting but shall be evaluated annually by the Remuneration Committee, which shall thereafter, where applicable, present proposed amendments to the guidelines. The Remuneration Committee shall also monitor and evaluate any ongoing and completed programs for variable remuneration for senior executives, the application of guidelines for remuneration to senior executives and current remuneration structures and remuneration levels in the Company. The Board’s consideration of and decisions on remuneration-related matters are not attended by the Executive Chairman of the Board, the CEO or other members of Group Management, to the extent that they are affected by the issues.

Deviations from the guidelines

The Board of Directors may decide to temporarily deviate from the guidelines in whole or in part, if there are special reasons for doing so in an individual case and a deviation is necessary to meet the Company’s long-term interests, including its sustainability, or to ensure the Company’s financial viability.