Share based long-term variable remuneration plans are submitted each year for approval by shareholders at the Annual General Meeting. For Group Management the payout is determined by three specific variables: The individual’s own investment in shares, a long-term financial target at Group level and the share price development.
 

All long-term variable remuneration plans are designed to form part of a well-balanced total remuneration and their central role in Ericsson’s remuneration system was positively confirmed in our extensive review during 2007, reported in last year’s annual report.
 

Ericsson has no formal guidelines for equity ownership but the long-term variable remuneration facilitates that Group Management and a large proportion of Ericsson’s employees build up a significant personal ownership in the Company’s stock over time. This is achieved through a combination of personal investment and share-based remuneration made up of three different but linked plans:

• The all employee Stock Purchase Plan,
• the Key Contributor Retention Plan and
• the Executive Performance Stock Plan.

See also:

• Notes to the Consolidated Financial Statements – Note C29, “Information regarding Employees, Members of the Board of Directors and Management”. 
• The long-term variable remuneration program for 2009, resolved by the AGM 2009-05-12 
• The Brochure LTV 2009 in brief 
  

The all employee Stock Purchase Plan is designed to offer, where practicable, an incentive for all employees to participate in the Company, reinforcing a “One Ericsson” aligned with shareholder interests. Employees can save up to 7.5 percent (CEO 9 percent) of gross fixed salary for purchase of class B shares at market price on the OMX NASDAQ Stockholm or ADSs at NASDAQ (contribution shares) during a twelve-month period.
 

If the contribution shares are retained by the employee for three years after the investment and employment with the Ericsson Group continues during that time, the employee’s shares will be matched with a corresponding number of class B shares or ADSs free of consideration.
 

The plan was introduced 2002 and employees in 94 countries participate. In December 2008 the number of participants was 19,000 or approximately 25 percent of employees.
Participants save each month, beginning with August payroll, towards quarterly investments. These investments (in November, February, May and August) are matched on the third anniversary of each such investment and hence the matching spans over two financial years and two tax years.

The Key Contributor Retention Plan is part of Ericsson’s talent management strategy and is designed to give individuals recognition for performance, critical skills and potential as well as encourage retention of key employees.
 

Under the program, operating units around the world are given quotas that total no more than 10 percent of employees world-wide. Each unit then draws up a nominations list of individuals that have been identified according to performance, critical skills and potential. The nominations are moderated in management teams locally and reviewed by both local and corporate Human Resources to ensure that there is a minimum of bias and a strong belief in the system.
 

Participants selected obtain one extra matching share in addition to the one matching share for each contribution share purchased under the Stock Purchase Plan during a twelve month program period. The plan was introduced in 2004.

The Executive Performance Stock Plan was also first introduced in 2004. The plan is designed to focus management on driving earnings and provide competitive remuneration. Senior executives, including Group Management, are selected to obtain up to four or six extra shares (performance matching shares) in addition to the one matching share for each contribution share purchased under the all employee Stock Purchase Plan.
For the programs since 2006, the CEO is allowed to invest up to 9 percent of fixed salary in contribution shares and may obtain up to eight performance matching shares in addition to the Stock Purchase Plan matching share for each contribution share.
 

The performance matching is subject to the fulfillment of an Earnings per Share (EPS) performance target.
The past and continued use of average annual EPS growth relative to challenging and stretching targets as a performance measure reflects the Company’s ongoing strategy of adding shareholder value through the long-term improvement of profitability. Furthermore, the use of a constant and key financial performance measure alongside the inherent share price focus of the co-investment principle ensures close alignment with the long-term interests of shareholders whilst providing clear, transparent and continuous line-of-sight for participants.
 

The Remuneration Committee has been satisfied that the present approach remains preferable to other measures, including those that reflect relative performance, but alternative measures are considered on an ongoing basis.
 

The performance targets are not capable of being retested after the end of the three-year performance period. If the minimum required performance is not achieved, all matching shares subject to performance will lapse. The Board may also reduce the number of performance matching shares, if deemed appropriate, considering the Company’s financial results and position, conditions on the stock market and other relevant circumstances at the time of matching.