Remuneration at Ericsson is based on the principles of

• performance,
• competitiveness and
• fairness

Our remuneration policy, together with the mix of several remuneration elements, is designed to reflect these remuneration principles in a balanced way by creating an integral remuneration package.
 

For our senior management, total remuneration consists of

• fixed salary,
• short-term variable remuneration,
• long-term variable remuneration,
• pension and
• other benefits

If the size of any of these elements should be increased or decreased, at least one other element has to change where the competitive position should remain unchanged.
 

This section outlines with specific references to senior management how we implement our remuneration policy throughout Ericsson in line with corporate governance best practice.
 

For details of Board Directors’ fees and remuneration of senior management comprising the Group Management Team, including the CEO, hereafter referred to as “Group Management” , see:
Notes to the Consolidated Financial Statements – Note C29, “Information regarding Employees, Members of the Board of Directors and Management”. 
 

The Company is required to submit the formal remuneration policy for senior management for shareholder approval at the Annual General Meeting (AGM).
The Board of Directors proposal for 2009, which remains materially the same as the 2008 policy, was resolved by the AGM.
The remuneration policy , together with resolutions relating to the Company’s long-term variable remuneration plans are included in the Minutes kept at the Annual General Meeting.

• Remuneration policy, resolved by the AGM 2009 
• The Company’s long-term variable remuneration plans, resolved by the AGM 2009 

The auditors’ opinion on how we have followed our policy during 2008 is also included in the Minutes kept at the AGM 2009.

Remuneration processes by the nature of their sensitivity require clear controls. Within Ericsson these controls are built on three foundations: Audit controls, our internal system that requires two levels of managers to approve any remuneration decision and Board of Directors and Remuneration Committee authorization.
 

The Remuneration Committee advises the Board of Directors on an ongoing basis on the remuneration of Group Management, including fixed salaries, pensions, other benefits and short-term and long-term variable remuneration. The Remuneration Committee also approves variable remuneration outcomes, prepares remuneration related proposals for Board and shareholder approval and develops and monitors the remuneration policy, strategies and general guidelines for employee remuneration.
 

The Committee considers pay and employment conditions throughout the Company when dealing with Group Management remuneration.
 

The Remuneration Committee is chaired by Michael Treschow and its other members are Nancy McKinstry, Börje Ekholm and Karin Åberg, all of whom are non-executive directors and independent as required by the Swedish Code of Corporate Governance. The Chairman continues to ensure that the Company maintains contact, as necessary, with its principal shareholders on the subject of remuneration.
 

The Company’s General Counsel acts as secretary to the Committee and the CEO, the Senior Vice President Human Resources & Organization and the Vice President Compensation & Benefits attend the Remuneration Committee meetings by invitation and assist the Committee in its considerations, except when issues relating to their own remuneration are being discussed or decided.
 

The Remuneration Committee has appointed an independent expert advisor, Gerrit Aronson, to assist and advice the Committee. Gerrit Aronson provided no other services to the Company during 2008. The Remuneration Committee is also provided with national and international pay data collected from external survey providers and can call on other independent expertise should it so require.
 

The purpose and function of the Remuneration Committee will continue going forward and its terms of reference can be found here. These terms of reference, together with the remuneration policy, are reviewed annually in light of matters such as changes to corporate governance best practice or changes to accounting, legislation, political opinion or business practices among peers. This helps to ensure that the policy continues to provide Ericsson with a competitive remuneration strategy and, in accordance with Swedish law, the policy for senior management is brought to shareholders annually for approval.