United States

Securities and Exchange Commission

Washington, DC 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.            )

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

☐		Preliminary Proxy Statement
☐		Confidential, For Use of the Commission Only (as permitted by Rule 14a–6(e)(2))
☒		Definitive Proxy Statement
☐		Definitive Additional Materials
☐		Soliciting Material under Rule 14a-12
AUTOLIV, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
☒		No fee required.
☐		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
		(1)		Title of each class of securities to which transaction applies:
		(2)		Aggregate number of securities to which transactions applies:
		(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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☐		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
		(1)		Amount previously paid:
		(2)		Form, Schedule or Registration Statement No.:
		(3)		Filing Party:
		(4)		Date Filed:

 

 

 

 

March 27, 2020

Dear Stockholder,

It is my pleasure to invite you to the 2020 Annual Meeting of Stockholders of Autoliv, Inc. to be held on Thursday, May 7, 2020 at The Westin Book Cadillac Detroit Hotel, 1114 Washington Boulevard, Detroit, Michigan, USA commencing at 1:00 p.m. local time.

Information regarding the matters to be voted upon at this year’s Annual Meeting is included in the Notice of Annual Meeting of Stockholders and the Proxy Statement.

It is important that your shares are represented at the Annual Meeting. Therefore, please provide your proxy by following the instructions provided in the Proxy Statement and in the Notice of Internet Availability of Proxy Materials. This way, your shares will be voted as you direct even if you cannot attend the Annual Meeting.

A public news release announcing voting results will be published after the Annual Meeting.

The Autoliv, Inc. Annual Report for the fiscal year ended December 31, 2019 is being made available to stockholders with this Proxy Statement. These documents are available at www.autoliv.com.

On behalf of the entire Board of Directors, we look forward to seeing you at the Annual Meeting.

 

AUTOLIV, INC.

Box 70381 SE-107 24

Stockholm, Sweden

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON MAY 7, 2020

 

 

TO THE STOCKHOLDERS OF AUTOLIV, INC.,

NOTICE IS HEREBY GIVEN that the 2020 Annual Meeting of Stockholders of Autoliv, Inc. (“Autoliv” or the “Company”) will be held on Thursday, May 7, 2020 commencing at 1:00 p.m. local time at The Westin Book Cadillac Detroit Hotel, 1114 Washington Boulevard, Detroit, Michigan, USA to consider and vote upon:

 

1.

Election of ten directors to the Board of Directors of Autoliv for terms of office expiring on the date of the Annual Meeting of Stockholders in 2021 (see page 4 of the accompanying Proxy Statement).

 

2.

An advisory resolution to approve the compensation of the Company’s named executive officers (see page 53 of the accompanying Proxy Statement).

 

3.

Ratification of the appointment of Ernst & Young AB as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020 (see page 53 of the accompanying Proxy Statement).

 

4.

Any other business that may properly come before the Annual Meeting or any continuation, postponement or adjournment thereof.

The Board of Directors has fixed the close of business on March 11, 2020 as the record date for the Annual Meeting. All stockholders of record as of the close of business on that date are entitled to notice of, and to be present and vote at, the Annual Meeting and at any continuation thereof.

Attendance at the Annual Meeting will be limited to stockholders of record as of the record date, beneficial owners having evidence of ownership as of the record date, a maximum of one authorized representative of an absent stockholder, and invited guests of management. Any person claiming to be an authorized representative of a stockholder must, upon request, produce written evidence of such authorization.

The meeting will be conducted pursuant to the Company’s Third Restated By-Laws and rules of order prescribed by the Chairman of the Annual Meeting.

 

TABLE OF CONTENTS

 

		Page No.
INFORMATION CONCERNING VOTING AND SOLICITATION			1
Availability of Proxy Materials on the Internet			1
General			1
Who Can Vote			1
Shares Outstanding and Quorum			1
How to Vote			1
How Your Shares Will Be Voted			1
Voting on Matters Not in Proxy Statement			2
Revoking Proxies or Changing Your Vote			2
Voting Rights of Holders of SDRs			2
Non-Voting Shares, Abstentions and Broker			2
Vote Required to Approve Each Proposal at the Annual Meeting			2
Principal Executive Offices			3
Solicitation of Proxies			3
PROPOSAL 1 - ELECTION OF DIRECTORS			4
Nominees for Directors at the 2020 Annual Meeting			4
CORPORATE GOVERNANCE			8
Stockholder Engagement Efforts			8
Autoliv Sustainability Program			8
Board Independence			8
Retirement Age Policy and Director Tenure			8
Board Leadership Structure and Risk Oversight			9
Board Meetings			10
Board Compensation			10
Corporate Governance Guidelines and Codes of Conduct and Ethics			12
Policy on Attending the Annual Meeting			12
Related Person Transactions			12
Agreements with Stockholders			14
Communicating with the Board			14
Committees of the Board			15
The Audit Committee			15
The Leadership Development and Compensation Committee			15
The Nominating and Corporate Governance Committee			16
The Risk and Compliance Committee			16
Audit Committee Report			16
Nominating and Corporate Governance Committee Report			17
Leadership Development and Compensation Committee Duties, Procedures and Policies			18
Leadership Development and Compensation Committee Interlocks and Insider Participation			20
Leadership Development and Compensation Committee Report			20
The Swedish Corporate Governance Code			20
Forward-Looking Statements			21

 

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		Page No.
EXECUTIVE OFFICERS OF THE COMPANY			22
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			24
COMPENSATION DISCUSSION AND ANALYSIS			25
Introduction			25
Our Named Executive Officers in 2019			25
Executive Summary			25
Compensation Philosophy			26
Base Salaries			27
Non-Equity Incentives			28
Equity Incentives			29
Pension / Retirement and Other Post-Employment Benefits			31
Executive Compensation Responsibilities			32
Compensation Risk Assessment			33
2019 Executive Compensation Decisions			34
The Peer Groups			35
Decisions for 2019 Compensation			36
2019 Additional Benefits			37
Additional 2019 and 2020 Compensation Decisions			37
Results of Say-on-Pay			38
Material Changes to 2020 Compensation Program			39
Currency for Executive Compensation			39
Summary Compensation Table			40
2019 Grants of Plan-Based Awards Table			42
Outstanding Equity Awards at 2019 Fiscal Year-End			43
Pension Benefits			44
Nonqualified Deferred Compensation			46
Potential Payments Upon Termination or Change in Control			46
CEO Pay Ratio			51
PROPOSAL 2 - ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION			53
PROPOSAL 3 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS			53
DISCRETIONARY VOTING OF PROXIES ON OTHER MATTERS			55
OTHER MATTERS			55
Stockholder Proposals for 2020 Annual Meeting			55

 

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AUTOLIV, INC.

Box 70381 SE-107 24

Stockholm, Sweden

 

 

PROXY STATEMENT

 

 

INFORMATION CONCERNING VOTING AND SOLICITATION

Availability of Proxy Materials on the Internet

Our Board of Directors (the “Board”) made this Proxy Statement and the Company’s Annual Report for the fiscal year ended December 31, 2019 available to you on the Internet or, upon your request, has delivered printed versions of these materials to you by mail, in connection with the Board’s solicitation of proxies for use at our Annual Meeting of Stockholders, to be held on Thursday, May 7, 2020 commencing at 1:00 p.m. local time at The Westin Book Cadillac Detroit Hotel, 1114 Washington Blvd., Detroit, Michigan, 48226 USA and at any adjournment thereof (the “2020 Annual Meeting” or the “Annual Meeting”).

General

The date of this Proxy Statement is March 27, 2020, the approximate date on which this Proxy Statement and proxy card are first being mailed and made available on the Internet to stockholders entitled to vote at the Annual Meeting. The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 was publicly filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 21, 2020.

Who Can Vote

You are entitled to vote at the Annual Meeting if you were a stockholder of record of our common stock as of the close of business on March 11, 2020 (the “Record Date”). Each stockholder is entitled to one vote for each share of our common stock held on the Record Date. Our stockholders do not have cumulative voting rights.

Shares Outstanding and Quorum

At the close of business on the Record Date, 87,315,512 shares of our common stock were outstanding and entitled to vote and no shares of our preferred stock were outstanding. A majority of our common stock outstanding on the Record Date, present in person or represented by proxy, will constitute a quorum at the Annual Meeting.

How to Vote

If you are a stockholder of record, you may vote by proxy on the Internet or by telephone by following the instructions provided in the Notice of Internet Availability of Proxy Materials sent to you. If you requested printed copies of the proxy materials by mail, or have a printed proxy card, you may also vote by filling out the proxy card and returning it in the envelope provided. You may also vote in person at the Annual Meeting.

If you are a beneficial owner of shares held in “street name,” please refer to the instructions provided by your bank, broker or other nominee for voting your shares. If you wish to vote in person at the Annual Meeting, you must obtain a valid proxy from the organization that holds your shares and have proof of ownership of shares of our common stock as of the Record Date.

How Your Shares Will Be Voted

If you properly complete your proxy card and send it to the Company prior to the vote at the Annual Meeting, or submit your proxy electronically by Internet or by telephone before voting closes, your proxy (one of

 

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the individuals named in the proxy card) will vote your shares as you have directed. If you sign the proxy card but do not make specific choices, your proxy will vote your shares as recommended by the Board: (i) to elect the director nominees listed in “Election of Directors,” (ii) to approve the compensation of the Company’s named executive officers, and (iii) for the ratification of the appointment of Ernst & Young AB as the Company’s independent registered public accounting firm for the 2020 fiscal year.

Voting on Matters Not in Proxy Statement

The deadlines have passed for stockholders to (i) nominate directors for election to the Board and (ii) for other stockholder proposals to be brought before the Annual Meeting. Thus, only the Company may (i) substitute director nominees or (ii) bring other business before the Annual Meeting. The Company does not plan to substitute any director nominee, and the Company does not intend to raise any matter other than those described in this Proxy Statement at the Annual Meeting.

However, administrative and similar matters can arise at any annual meeting. To address such unforeseen matters, your proxy may exercise his or her discretion and authority to vote on such matters incidental to the conduct of the Annual Meeting only. Note that this authority is limited by applicable law, the proxy rules of the SEC, and the listing rules of the New York Stock Exchange (the “NYSE”).

Revoking Proxies or Changing Your Vote

You may revoke your proxy and change your vote before the taking of the vote at the Annual Meeting. Prior to the applicable cutoff time, you may change your vote on a later date via the Internet or by telephone (in which case only your latest Internet or telephone proxy submitted prior to the Annual Meeting will be counted), by signing and returning a new proxy card with a later date, or by attending the Annual Meeting and voting in person. However, your attendance at the Annual Meeting will not automatically revoke your proxy unless you properly vote at the Annual Meeting or specifically request that your prior proxy be revoked by delivering a written notice of revocation to Autoliv at its mailing address prior to the Annual Meeting.

Voting Rights of Holders of SDRs

Holders of Autoliv’s Swedish Depository Receipts (“SDRs”) are entitled to vote the shares of common stock of the Company underlying their SDRs at the 2020 Annual Meeting as if they directly held the common stock of the Company. Therefore, each holder of SDRs is entitled to one vote for each share of common stock underlying each SDR held on the Record Date. To have their votes counted at the 2020 Annual Meeting, SDR holders must give instructions as to the exercise of their voting rights by proxy or attend and represent their shares of common stock of the Company underlying the SDRs at the Annual Meeting in person.

Non-Voting Shares, Abstentions and Broker “Non-Votes”

Shares held by persons attending the Annual Meeting but not voting, shares represented by proxies that reflect abstentions to a proposal, and broker “non-votes” will be counted as present for purposes of determining a quorum. A broker “non-vote” occurs when a nominee holding shares for a beneficial owner has not received voting instructions from the beneficial owner and does not have discretionary authority to vote the shares. Brokers do not have discretionary authority to vote on Proposals 1 and 2 set forth below. Brokers generally have discretionary authority to vote on Proposal 3 set forth below.

Vote Required to Approve Each Proposal at the Annual Meeting

The following summary describes the vote required to approve each of the proposals at the Annual Meeting.

 

Proposal 1:

Directors will be elected by a plurality of the votes of the shares present or represented by proxy at the Annual Meeting and entitled to vote thereat. However, pursuant to the Autoliv, Inc. Corporate Governance Guidelines, if a director nominee in an uncontested election fails to receive

 

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the approval of a majority of the votes cast on his or her election by the stockholders, the nominee shall promptly offer his or her resignation to the Board for consideration. A committee consisting of the Board’s independent directors (which will exclude any director who is required to offer his or her resignation) shall consider all relevant factors and decide on behalf of the Board the action to be taken with respect to such offered resignation and will determine whether to accept or reject the resignation. The Company will publicly disclose the Board’s decision regarding any resignation offered under these circumstances with an explanation of how the decision was reached, including, if applicable, the reasons for rejecting the offered resignation. Abstentions and broker non-votes will have no effect on the election of directors.

 

Proposal 2:

The non-binding resolution to approve the compensation of the Company’s named executive officers as disclosed in this Proxy Statement requires the affirmative vote of a majority of the shares present or represented by proxy at the Annual Meeting and entitled to vote thereat. Abstentions will have the same effect as a vote against the proposal. Broker non-votes will have no effect in determining the outcome of the proposal.

 

Proposal 3:

The ratification of the selection of Ernst & Young AB as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020 requires the affirmative vote of a majority of the shares present or represented by proxy at the Annual Meeting and entitled to vote thereat. Abstentions will have the same effect as a vote against the ratification. Although brokers have discretionary authority to vote on the ratification, if a broker submits a non-vote, it will not be counted for purposes of the ratification but will be counted for the purposes of establishing a quorum.

Any other proposal brought before the Annual Meeting (if any) will be decided by a majority of the shares present or represented by proxy at the Annual Meeting and entitled to vote on the matter. Consequently, abstentions will have the same effect as a vote against the matter and broker non-votes will have no effect on the outcome of the matter.

Principal Executive Offices

The Company’s mailing address is Box 70381, SE-107 24 Stockholm, Sweden, and its principal executive offices are located at Klarabergsviadukten 70, Section B, 7th floor, Stockholm, Sweden SE-111 64. The Company’s telephone number is +46 8 587 20 600.

Solicitation of Proxies

The Company, on behalf of the Board, is soliciting the proxies and will bear the cost of the solicitation of proxies. In addition to solicitation over the Internet and by mail, the Company will reimburse banks, brokers and other custodians, nominees and fiduciaries for reasonable expenses incurred in forwarding proxy materials to beneficial owners of our stock and obtaining their proxies. Certain directors, officers and other employees of the Company, not specifically employed for this purpose, may solicit proxies, without additional remuneration, by personal interview, mail, telephone, facsimile or electronic mail. The Company has retained Georgeson LLC to assist in the solicitation of proxies for a fee of $14,500 plus expenses and Computershare AB for a fee of SEK 105,000, or approximately $11,000, plus expenses.

 

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PROPOSAL 1 - ELECTION OF DIRECTORS

The Company’s Third Restated By-Laws (the “By-Laws”) provide that the size of the Board shall be fixed from time to time exclusively by the Board. The Board has currently fixed the size of the Board at ten.

Mikael Bratt, Jan Carlson, Hasse Johansson, Leif Johansson, David E. Kepler, Franz-Josef Kortüm, Min Liu, Xiaozhi Liu, James M. Ringler, and Ted Senko, whose present terms will expire at the time of the Annual Meeting, are nominees for election at the 2020 Annual Meeting. Ms. Min Liu has been nominated by the Board to be elected at the 2020 Annual Meeting pursuant to the terms of a Cooperation Agreement between the Company and Cevian Capital II GP Limited (“Cevian”), and its affiliates (the “Cooperation Agreement”). Pursuant to the terms of the Cooperation Agreement, Ms. Liu will offer her resignation from the Board if Cevian no longer owns at least 8% of the then-outstanding shares of common stock of the Company. The Cooperation Agreement is described in further detail in the section entitled “Agreements with Stockholders—Cooperation Agreement with Cevian Capital II GP Limited” below.

If elected, the above nominees would serve until the 2021 annual meeting of stockholders and until his or her successor is elected and qualified, or until his or her earlier retirement, resignation, disqualification, removal or death. If any director nominee should become unavailable for election prior to the Annual Meeting, an event that currently is not anticipated by the Board, either the proxies will be voted in favor of the election of a substitute nominee or nominees proposed by the Board or the number of directors may be reduced accordingly. Each nominee has agreed to serve if elected, and the Board has no reason to believe that any nominee will be unable to serve.

Nominees for Directors at the 2020 Annual Meeting

Mikael Bratt, age 53, has been a director of Autoliv since September 2018 and has served as Autoliv’s President and Chief Executive Officer since June 29, 2018. Mr. Bratt previously served as President, Passive Safety from May 2016 until his promotion. In September 2019, Mr. Bratt joined the board of directors of Höganäs AB, a private Swedish metal powders company. Prior to joining Autoliv, Mr. Bratt spent approximately 30 years with the Volvo Group, a Swedish multinational automotive manufacturing company, including most recently as EVP Group Trucks Operations, part of the group executive management team since 2008, in which role he managed a team of 35,000 people, 50 factories, 60 distribution centers and an annual turnover of approximately $18 billion. Prior to this, he served as Chief Financial Officer of the Volvo Group. Mr. Bratt studied business administration at the University of Gothenburg, Sweden.

The Board believes Mr. Bratt’s years of experience with Autoliv and the automotive industry, including his current role as President and Chief Executive Officer, and his extensive knowledge of the Company, its operations, business, and industry support his re-election to the Board.

Jan Carlson, age 59, has been a director of Autoliv since May 2007 following his appointment as President and Chief Executive Officer of Autoliv on April 1, 2007 after serving in various executive positions with the company beginning in 1999. He has been Chairman of the Board since May 2014. Mr. Carlson served as President and Chief Executive Officer until resigning upon the completion of the spin-off of Veoneer, Inc. from the Company on June 29, 2018, at which time he became President and Chief Executive of Veoneer, Inc. Since the completion of the spin-off, Mr. Carlson has also served as Chairman of the Board of Directors of Veoneer, Inc. Since July 2010 until May 2020 at which time he will not seek re-election, Mr. Carlson has served on the board of directors of BorgWarner Inc., a product leader in highly engineered components and systems for vehicle powertrain applications worldwide. Mr. Carlson was elected to the Board of Telefonaktiebolaget LM Ericsson in February 2017. In addition, Mr. Carlson served on the board of Trelleborg AB from 2013 through 2017, and served on the board of directors of Zenuity AB, a private joint venture owned 50-50 by Veoneer, Inc. and Volvo Car Corporation, between April 2017 and June 2018. Prior to joining Autoliv, Mr. Carlson was President of Saab Combitech, a division within the Saab aircraft group specializing in commercializing military technologies. Mr. Carlson has a Master of Science degree in Physics and Electrical Engineering from the University of Linköping in Sweden.

The Board believes that through his many years of experience with Autoliv, including his former role as President and Chief Executive Officer, and the automotive industry in general Mr. Carlson brings extensive

 

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knowledge of the Company, its operations, business, and industry to the Board, which support his re-election to the Board.

Hasse Johansson, age 70, has been a director of Autoliv since March 2018 and is a member of the Audit Committee and Risk and Compliance Committee. Since 2010, Mr. Johansson has been managing director of Johansson Teknik & Form AB, a technology consulting company which he founded. From 2001 to 2009, Mr. Johansson was the Executive Vice President of Research & Development at Scania, a major automotive industry manufacturer of heavy trucks, buses, and other commercial vehicles. Prior to his time at Scania, Mr. Johansson worked for nearly 20 years at Mecel AB, an automotive software and systems development company he co-founded and in 1994 became a wholly-owned subsidiary of Delphi Corporation. Mr. Johansson currently serves as a member of the boards of directors of Electrolux AB, PowerCell Sweden AB, DevPort AB, and Swedish Electromagnet Investment AB, which are all Swedish public companies. Additionally, Mr. Johansson is a member of the Business Executives Council of the Royal Swedish Academy of Engineering Sciences. Mr. Johansson holds a Master of Science in Electrical Engineering from Chalmers University of Technology in Gothenburg, Sweden and holds more than 20 patents in combustion engine control and automotive electronics.

The Board believes Mr. Johansson’s prolific technical background in automotive and other industries, combined with his extensive board experience, support his re-election to the Board.

Leif Johansson, age 68, has been a director of Autoliv since February 2016, and is a member of the Leadership Development and Compensation Committee and Chair of the Nominating and Corporate Governance Committee. From 1997 to 2011, Mr. Johansson served as President and Chief Executive Officer of The Volvo Group. Before joining Volvo, Mr. Johansson held various positions at AB Electrolux, and served as its President and Chief Executive Officer from 1994 to 1997. Mr. Johansson is the Chairman of the Board of Astra Zeneca PLC, a position he has held since June 2012, and he previously served as Chairman of the Board of Telefonaktiebolaget LM Ericsson between 2011 and March 2018. In addition to his service on public company boards, Mr. Johansson is a board member of Ecolean AB (a private corporation), a member of the Royal Swedish Academy of Engineering Science, a board member of the European Round Table of Industrialists, a Delegate of the China Development Forum, and a member of the Council of Advisors of the Boao Forum for Asia. Mr. Johansson holds a Master of Science in Engineering from Chalmers University of Technology in Gothenburg, Sweden.

The Board believes that Mr. Johansson’s extensive executive and directorial experience on several international companies in the automotive, manufacturing and technology industries, combined with the knowledge gained through his service on various industry, economic and advocacy organizations, support his re-election to the Board.

David E. Kepler, age 67, has been a director of Autoliv since February 2015 and is a member of the Audit Committee and Chair of the Risk and Compliance Committee. Mr. Kepler was an Executive Vice President of the Dow Chemical Company, a multinational chemical, performance materials, and plastics company, from March 2008 through January 2015, and held the roles of Chief Sustainability Officer and Chief Information Officer. Mr. Kepler joined Dow in 1975 and was appointed its Vice President and CIO in 1998, Corporate Vice President in 2001, assumed responsibility for Business Services in 2004, and was appointed Executive Vice President in 2008. He has also been a member of the boards of directors of TD Bank Group since December 2013 and Teradata Corporation since November 2007. Mr. Kepler graduated from the University of California, Berkeley with a bachelor’s degree in Chemical Engineering, and serves as a trustee of the University.

The Board believes that Mr. Kepler’s executive experience as the chief information officer of a global company with additional expertise in corporate sustainability initiatives and risk management, and stature as a recognized leader in cyber-security are all qualities that support his re-election to the Board.

Franz-Josef Kortüm, age 69, has been a director of Autoliv since March 2014 and is a member of the Nominating and Corporate Governance Committee. Prior to joining Autoliv, Mr. Kortüm was Chief Executive Officer of Webasto SE, a producer of automobile roof systems and climate control systems for automobiles, boats and other vehicles, from 1998 to 2012, after joining the company in 1994. Mr. Kortüm was Chief Executive Officer of Audi AG from 1993 to 1994 and, prior to joining Audi, had a 16-year career with what is today Daimler AG in a

 

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variety of positions. In addition to his extensive management experience, Mr. Kortüm served as Vice Chairman of the Supervisory Board of Webasto SE since 2013 and as its Chairman since 2018 until August 2019, as a Member of the Advisory Board of Brose Fahrzeugteile GmbH & Co. KG since 2005 and as its Chairman since 2013, as a Member of the Supervisory Board of Wacker Chemie since 2003, and as a Member of the Supervisory Board of Schaeffler AG from 2010 to March 2014. From 2004 to 2012, Mr. Kortüm was a Member of the Managing Board of the VDA (German Association of the Automotive Industry). Mr. Kortüm has an MBA-equivalent degree in Business Administration from the University of Regensburg in Germany.

The Board believes that Mr. Kortüm brings a breadth of knowledge and skills related to the automotive industry to the Board. In addition, his corporate governance experience gained through his service on other boards support his re-election to the Board.

Min Liu, age 40, has been a director of Autoliv since May 2019 and is a member of the Audit Committee and the Leadership Development and Compensation Committee. She is a Vice President of Cevian Capital AG, an affiliate of Cevian Capital II GP Limited (“Cevian”). Since September 2015, Ms. Liu has been responsible for fundamental research on a variety of European companies in her role at Cevian. Prior to this role, Ms. Liu held several positions of increasing responsibility with The Boston Consulting Group, a global management consulting firm, in Germany between September 2004 and July 2015. Last serving as Principal, she led multiple projects in a broad set of industries, including the automotive sector. Ms. Liu has an MBA from Stanford University in addition to bachelor’s and master’s degrees in business information technology from Goettingen University.

The Board believes that Ms. Liu’s financial expertise and exposure to a wide variety of large, global industrial companies through her investment research and management experience support her re-election to the Board.

Xiaozhi Liu, age 64, has been a director of Autoliv since November 2011 and is a member of the Leadership Development and Compensation Committee and the Nominating and Corporate Governance Committee. In April 2019, Dr. Liu joined the boards of directors of Anheuser-Busch InBev SA/NV and Johnson Matthey PLC. She previously served as an independent director of Fuyao Glass Industry Group, a public company listed in Shanghai and Hong Kong, from October 2013 until October 2019. Dr. Liu began her career in the automotive industry in General Motor’s (“GM”) Delphi operations and has since worked in various executive positions in Germany, China and the U.S., where she rose to the position of Director of Electronics, Controls & Software for GM in Detroit, Chief Engineer and Chief Technology Officer of GM in China and Chairman and Chief Executive Officer of GM Taiwan. Between 2005 and 2006, she was the Chief Executive Officer and Vice Chairman of Fuyao Glass Industry Group Co. Ltd. In 2007, she became the President and Chief Executive Officer of NeoTek China, a supplier of automotive chassis and transmission parts, and served as Chairman of the company’s board of directors from 2008 through 2011. In 2009, she founded, and is the Chief Executive Officer of, her own company, ASL Automobile Science & Technology (Shanghai) Co., Ltd., which introduces and implements globally advanced technologies to Chinese companies. She has a Ph.D. and master’s degree in Chemical Engineering and Electrical Engineering, respectively, from Friedrich-Alexander University in Erlangen-Nuremburg, Germany and a bachelor’s degree in Electrical Engineering from the Jiaotong University in Xian, China.

The Board believes that Dr. Liu brings a unique and valuable set of skills to the Board, based on a combination of her global experience in engineering and technology in Asia, North America and Europe with her extensive management experience in the automotive industry. Dr. Liu’s knowledge and experience supports her re-election to the Board.

James M. Ringler, age 74, has been a director of Autoliv since January 2002 and is the Chair of the Leadership Development and Compensation Committee and a member of the Nominating and Corporate Governance Committee. Mr. Ringler has also been the Lead Independent Director since May 2017. He was, prior to his retirement, Vice Chairman of Illinois Tool Works Inc. between 1999 and 2004. Prior to joining Illinois Tool Works, Mr. Ringler was Chairman, President and Chief Executive Officer of Premark International, Inc., which merged with Illinois Tool Works in 1999. He serves on the Boards of Directors of the following public companies: Veoneer (since June 2018), TechnipFMC plc (since January 2017), JBT Corporation (since June 2008), and Teradata Corporation (since September 2007; was chairman from 2007 until January 2019). Mr. Ringler previously served on the Board of Directors of DowDuPont Inc. from 2001 until his retirement in March 2019. He is also a

 

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member of the board of directors of Reynolds Metals Company, a private company. Mr. Ringler holds a Bachelor of Science degree in Business Administration and an M.B.A. degree in Finance from the State University of New York.

The Board believes that Mr. Ringler’s business and management experience in multiple executive positions and his deep knowledge of corporate governance gained through his extensive service on the boards of directors of public companies in a wide variety of industries support Mr. Ringler’s re-election to the Board.

Thaddeus J. “Ted” Senko, age 64, has been a director of Autoliv since March 2018 and is the Chair of the Audit Committee and a member of the Risk and Compliance Committee. Prior to joining the Autoliv Board of Directors, Mr. Senko had an extensive career at KPMG LLP, a multinational professional services and accounting firm, from 1978 to 2017, providing enterprise risk management, compliance, and audit services to various public companies. At KPMG, he served as Audit Partner and SEC Reviewing Partner for eight years, Chief Audit Executive for four years, Global and National Partner in Charge of Internal Audit, Risk & Compliance Services for eight years, and Global Engagement Partner and Client Services Partner for seven years. Mr. Senko served on the Board of Duquesne University, a private university with approximately 10,000 students, from 2007 to 2016, chairing the Audit and Finance Committee and serving on the Executive and University Advancement Committee. Mr. Senko continues to serve on the university’s Business Advisory Council. Mr. Senko received a bachelor’s degree in business administration from Duquesne University.

The Board believes Mr. Senko’s financial, regulatory and risk expertise, experience in various auditing leadership roles and exposure to a wide variety of large audit clients within the global business community support his re-election to the Board.

THE BOARD RECOMMENDS A VOTE “FOR” EACH NOMINEE.

 

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CORPORATE GOVERNANCE

Stockholder Engagement Efforts

The Company engages with the Company’s stockholders throughout the year to ensure that management and the Board understand and consider the issues that matter most to them, to solicit their views and feedback on various matters, and to provide perspective on the Company’s policies and practices. During 2019, members of the Company’s management met with certain of the Company’s stockholders to listen to their concerns and discuss a variety of topics, including performance, strategy, capital allocation, corporate governance, compensation, environmental and sustainability efforts and other matters.

Autoliv Sustainability Program

Autoliv’s business is guided by our vision of Saving More Lives. Our products save over 30,000 lives a year and prevent ten times as many severe injuries. Our goal is to increase the number of lives saved to 100,000 a year by 2030. Our vision directly supports the UN Sustainable Development Goal #3: Good health and well-being, and its target of halving global deaths and injuries from road traffic accidents by 2030. In addition, the Company is committed to sound and ethical business practices that align with the goals and needs of our employees and the communities in which we operate, including limiting our environmental impact particularly by reducing energy and water consumption, waste, and emissions. As a reflection of the importance of these matters, we assign oversight responsibility for sustainability to the Nominating and Corporate Governance Committee. The Company also publishes an annual report describing our sustainability goals, practices and performance, in the areas of life-saving innovations, environment, health and safety of our employees, business ethics and supply chain. Our annual sustainability reports are publicly available on our website at https://www.autoliv.com/sustainability/sustainability-report.

Board Independence

The Board believes that generally it should have no fewer than seven and no more than eleven directors. The Board currently consists of ten members.

The Board has determined that all the director nominees, except Messrs. Bratt and Carlson, are independent directors under the applicable rules of the NYSE, the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated by the SEC. In making its independence determinations, the Board reviewed (i) information regarding relevant relationships, arrangements or transactions between the Company and each director or parties affiliated with such director, (ii) Company records and (iii) publicly available information. Mr. Bratt is not independent because he is a current officer of the Company, and Mr. Carlson is not independent because he served as an officer of the Company in the last three years.

The Board has also determined that none of the independent directors has a relationship with the Company other than as a director and/or a stockholder of the Company.

Retirement Age Policy and Director Tenure

It is the general policy of the Company that a director who has attained the age of 75 years during his or her term will not stand for re-election at the next annual meeting of stockholders.

For each director nomination recommendation, the Nominating and Corporate Governance Committee considers the issue of continuing director tenure and takes steps as may be appropriate to ensure that the Board maintains an openness to new ideas and a willingness to critically re-examine the status quo. An individual director’s repeated nomination is dependent upon such director’s performance evaluation, as well as a suitability review, each to be conducted by the Nominating and Corporate Governance Committee regarding each director nomination recommendation. The average tenure of the Board is 6.2 years and the median tenure is 4 years, with four newly appointed directors within the last three years.

 

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Board Leadership Structure and Risk Oversight

Board Leadership

The Board is responsible for selecting the Company’s Chairman of the Board (the “Chairman”) and Chief Executive Officer (the “CEO”). The Corporate Governance Guidelines permit the Board to determine the most appropriate leadership structure for the Company at any given time and give the Board the ability to choose a Chairman that it deems best for the Company. The Board periodically evaluates the Company’s leadership structure to determine what structure is in the best interests of the Company and its stockholders based on the current circumstances and needs of the Company.

The Board currently has a non-independent, non-CEO Chairman and a Lead Independent Director. The CEO and Chairman roles have been separated since June 2018 when Mr. Carlson stepped down as CEO of Autoliv to become the CEO of Veoneer. The Board determined in 2018 that a separate Chairman and CEO and a lead independent director, with Mr. Carlson as the Chairman, was the appropriate leadership structure for the Company. The Board continues to believe it is in the Company’s best interests for Mr. Carlson to serve as Chairman because his familiarity with the Company’s business enables him to effectively lead the Board in its discussion, consideration, and execution of the Company’s strategy.

The Board believes that having Mr. Carlson serve as a non-independent Chairman is appropriately balanced by the designation of a Lead Independent Director. In May 2019, the Board appointed James M. Ringler as Lead Independent Director to serve as the principal liaison between the Chairman and the other independent directors and to provide independent leadership of the Board’s affairs on behalf of the Company’s stockholders. Mr. Ringler presides over the executive sessions of the independent directors. The duties of the Lead Independent Director include, but are not necessarily limited to, the following:

 

•

Presides at all meetings of the Board at which the Chairman is not present, including chairing executive sessions of the independent directors;

 

•

Serves as liaison between the independent and non-management directors and the Chairman;

 

•

Has the authority to call meetings of the independent and non-management directors;

 

•

Approves meeting agendas of the full Board after they are prepared by the Chairman, assures that there is sufficient time for discussion of all agenda items, and facilitates approval of the number and frequency of Board meetings;

 

•

Is regularly apprised of inquiries from stockholders and involved in correspondence responding to these inquiries when appropriate, and if requested by stockholders, ensures that he or she is available, when appropriate, for consultation and direct communication;

 

•

Assists the Nominating and Corporate Governance Committee in its annual evaluation of the Chairman’s effectiveness, including an annual evaluation of his or her interactions with the directors and ability to provide leadership and direction to the full Board; and

 

•

Approves information sent to the Board, including the quality and timeliness of such information.

 

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Risk Oversight

The Board is responsible for the oversight of risk management of the Company with various aspects of risk oversight delegated to its committees. The Audit Committee is responsible for monitoring financial risk and discussing risk oversight and management as part of its obligations under the NYSE’s listing standards. The Audit Committee is also responsible for reviewing the Company’s disclosure controls and procedures, including those related to internally and externally disclosing cybersecurity risks and incidents. The Risk and Compliance Committee is responsible for monitoring legal and regulatory risks and other compliance risks, including those related to ethics practices and information technology and security. The Risk and Compliance Committee periodically receives reports from and reviews with management the Company’s risk management program. The Leadership Development and Compensation Committee oversees the Company’s succession planning programs and policies related to recruiting, retaining, and developing management. The Risk and Compliance Committee is responsible for coordinating with the Audit Committee and other Board committees to discuss matters pertaining to risk oversight. In its meetings, the Board receives reports from various Board committees and management, including the CEO, the CFO, and General Counsel regarding the main strategic, operational, and financial risks the Company is facing and the steps that management is taking to address and mitigate such risks. Additionally, the Board will receive periodic risk-related updates from other members of management as necessary.

The Leadership Development and Compensation Committee has reviewed with management the design and operation of our incentive compensation arrangements for senior management, including executive officers, to determine whether such programs might encourage inappropriate risk-taking that could have a material adverse effect on the Company. The Leadership Development and Compensation Committee considered, among other things, the features of the Company’s compensation program that are designed to mitigate compensation-related risk, such as the performance objectives and target levels for incentive awards (which are based on overall Company performance), and the Company’s compensation recoupment policy. The Leadership Development and Compensation Committee concluded that any risks arising from the Company’s compensation plans, policies and practices are not reasonably likely to have a material adverse effect on the Company. For additional information regarding compensation risk, see page 33 of this Proxy Statement.

Board Meetings

The Board met four times during the year ended December 31, 2019. The Board also acted by written consent once during the year. All directors serving during 2019 participated in at least 80% of the total number of meetings of the Board and committees on which they served. Following each of the meetings of the full Board, the independent directors met in executive session without management participating, for a total of four times in 2019.

Board Compensation

Directors who are employees of the Company or any of its subsidiaries do not receive separate compensation for service on the Board or its committees. Non-employee directors receive an annual board retainer, which is higher for a non-employee Chairman of the Board. The committee chairs and the Lead Independent Director receive compensation in addition to the standard non-employee director retainer.

Effective beginning with 2017 service, the Board amended the Director Compensation Policy primarily to (i) provide for payments in advance, rather than in arrears, for a service year that runs from annual meeting to annual meeting, and (ii) provide that one-half of the annual retainer will be paid in the form of restricted stock units (RSUs), rather than fully-vested shares of stock, which RSUs will be granted on the date of the annual meeting and will vest on the earlier of (a) date of the next annual meeting, or (b) the one-year anniversary of the grant date. In addition, the Board revised the non-employee director stock ownership policy to require each non-employee director to acquire and hold shares of the Company’s common stock in an amount equivalent to five times the cash component of the annual Board retainer (as opposed to three times the annual base retainer as a whole), with five years for the existing directors to reach the new ownership requirements.

 

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Compensation levels for the non-employee directors elected in 2019 remain unchanged from 2017 levels and is as follows:

 

Annual Base Retainer (paid half in cash and half in RSUs)
All Non-Employee Directors		$	240,000
Annual Supplemental Retainers (paid half in cash and half in RSUs)
Non-Employee Chairman		$	150,000
Annual Supplemental Retainers (paid in cash)
Lead Independent Director		$	40,000
Audit Committee Chair		$	30,000
Leadership Development and Compensation Committee Chair		$	20,000
Nominating and Corporate Governance Committee Chair		$	20,000
Risk and Compliance Committee Chair		$	20,000

For the non-employee directors elected in 2020, the 2020-2021 service year annual base retainer will be raised to $260,000 with $120,000 paid in cash and $140,000 in RSUs. There are no other changes to the compensation levels for the non-employee directors.

Non-employee directors can elect to defer payment of a pre-determined percentage of their equity compensation under the Autoliv, Inc. 2004 Non-Employee Director Stock-Related Compensation Plan. In 2019, none of the directors elected to defer any of his or her equity compensation.

The following table sets forth the compensation that our non-employee directors earned during the year ended December 31, 2019 for services rendered as members of the Board.

2019 Director Compensation

 

Name		Fees Earned or Paid in Cash ($)(1)		Stock Awards ($)(2)(3)		Total ($)(1)(2)
Jan Carlson		195,000		195,000		390,000
Hasse Johansson		120,000		120,000		240,000
Leif Johansson		140,000		120,000		260,000
David Kepler		140,000		120,000		260,000
Franz-Josef Kortüm		120,000		120,000		240,000
Min Liu		70,000		120,000		190,000
Xiaozhi Liu		120,000		120,000		240,000
James M. Ringler		180,000		120,000		300,000
Ted Senko		150,000		120,000		270,000

 

(1)	The cash portion of director compensation is set in USD and converted to each director’s local currency, as applicable, at the then-current exchange rate on the quarterly date of payment. Reflects compensation earned for the calendar year.

 

(2)

Reflects the grant date fair value calculated in accordance with FASB Topic 718 of 861 restricted stock units granted on May 7, 2019, which restricted stock units will vest in one installment on the earlier of the date of the next annual meeting of stockholders or May 7, 2020, subject to the non-employee director’s continued service on the vesting date, subject to certain exceptions.

 

(3)	As of December 31, 2019, each of our non-employee independent directors held 1,633 unvested RSUs, including dividend equivalent rights (reflects whole numbers only).

 

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Corporate Governance Guidelines and Codes of Conduct and Ethics

The Board has adopted:

 

•

Corporate Governance Guidelines to guide the Board in the exercise of its responsibilities.

 

•

Standards of Business Conduct and Ethics that apply to all employees of the Company and to members of the Board (the “Code”).

The Company has also adopted a written policy regarding related person transactions (the “Related Person Transactions Policy”), which is part of the Code. The Company’s Corporate Governance Guidelines, the Codes the Related Person Transactions Policy, and any amendments or waivers related thereto, are posted on the Company’s website at www.autoliv.com – About Us – Governance – Ethics and Policies, and can also be obtained from the Company in print by request using the contact information below.

Policy on Attending the Annual Meeting

Under the Company’s Corporate Governance Guidelines, the Company’s policy is for all directors to attend the Annual Meeting. All current directors participated in the 2019 annual meeting of stockholders.

Related Person Transactions

As a general matter, the Company prefers to avoid related person transactions (as defined below). The Company recognizes, however, that certain related person transactions may not be inconsistent with the best interests of the Company and its stockholders. The Company’s policy is that all related person transactions must be reviewed and approved or ratified by the Audit Committee or, in certain circumstances, the Audit Committee Chair. As provided in the Related Person Transactions Policy, a “Related Person Transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which the Company (including any of its subsidiaries) was, is or will be a participant and in which any “Related Person” (as defined in the Related Person Transactions Policy) had, has or will have a direct or indirect interest. In determining whether to approve a related person transaction, the Audit Committee considers all of the known relevant facts and circumstances, including the benefit of the transaction to the Company, the terms of the agreement with the Related Person, the possible impact on a director’s independence, the availability of other sources for goods or services comparable to those provided by the Related Person, and any other information regarding the transaction or the Related Person that may be material.

Transactions with Veoneer relating to the Spin-Off

On June 29, 2018, Autoliv completed the spin-off of its former Electronics business, Veoneer, Inc. (“Veoneer”) to the Company’s stockholders, resulting in Autoliv and Veoneer being two independent, publicly-traded companies. As discussed above, Mr. Carlson, who was the CEO of Autoliv prior to the spin-off, is now a non-employee director and the Chairman of the Board of the Company and is also the Chief Executive Officer and Chairman of the Board of Directors of Veoneer. Since Mr. Carlson is a related person of the Company, certain transactions between the Company and Veoneer are considered related person transactions that were approved by the Audit Committee and require disclosure pursuant to Section 404(a) of Regulation S-K.

Relating to the spin-off and the internal reorganization of Autoliv that was completed in advance of the spin-off to transfer the Electronics business to Veoneer, the Company entered into several agreements with Veoneer that were approved or ratified by the Audit Committee. When reviewing these transactions, in addition to considering Mr. Carlson’s positions with Autoliv and Veoneer, the Audit Committee also considered (i) the amounts involved, to the extent quantifiable, (ii) the benefits to Autoliv of the transactions (iii) the lack of availability of other sources of comparable products or services, and (iv) that, due to the nature of the spin-off, the transactions are not comparable to the terms available to unaffiliated entities or persons.

Distribution Agreement: Relating to the internal reorganization, Autoliv and Veoneer entered into a Master Transfer Agreement, which was amended and restated effective as of the spin-off (the “Distribution Agreement”). The Distribution Agreement governs certain transfers of assets and assumptions of liabilities by each of Veoneer and Autoliv and the settlement or extinguishment of certain liabilities and other obligations among the companies.

 

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Substantially all of the assets and liabilities associated with the separated Electronics business were retained by or transferred to Veoneer or its subsidiaries and all other assets and liabilities were retained by or transferred to Autoliv or its subsidiaries. The Distribution Agreement also provided the principal corporate transactions required to effect the spin-off, certain conditions to the spin-off and provisions governing the relationship between us and Autoliv with respect to and resulting from the completion of the spin-off. The Distribution Agreement also provides for indemnification obligations designed to make the Company financially responsible for substantially all liabilities that may exist relating to its business activities, whether incurred prior to or after the completion of the internal reorganization, as well as those obligations of Autoliv assumed by us pursuant to the Master Transfer Agreement; provided, however, certain warranty, recall and product liabilities for Electronics products manufactured prior to the completion of the internal reorganization were retained by Autoliv and Autoliv will indemnify Veoneer for any losses associated with such warranty, recall, or product liabilities. At December 31, 2019, Autoliv’s indemnification liabilities under the Distribution Agreement are approximately $8 million.

Employee Matters Agreement: The Employee Matters Agreement governs Autoliv’s and Veoneer’s compensation and employee benefit obligations with respect to the current and former employees and non-employee directors of each company. Autoliv will be responsible for liabilities associated with Autoliv allocated employees and liabilities associated with former employees and Veoneer will be responsible for liabilities associated with Veoneer allocated employees, but Autoliv will retain and continue to be responsible for certain post-retirement liabilities relating to plans sponsored by Autoliv. The Employee Matters Agreement provided for the conversion of the outstanding awards granted under the Autoliv equity compensation programs into adjusted awards relating to both shares of Autoliv and Veoneer common stock.

Tax Matters Agreement: The Tax Matters Agreement governs the respective rights, responsibilities and obligations of Autoliv and Veoneer with respect to tax liabilities and benefits, tax attributes, tax contests and other tax sharing regarding U.S. federal, state, local and foreign income taxes, other tax matters and related tax returns. The agreement also specifies the portion, if any, of this tax liability for which Veoneer will bear responsibility and provides for certain indemnification provisions with respect to amounts for which they are not responsible. In addition, under the agreement, each party is expected to be responsible for any taxes imposed on Autoliv that arise from the failure of the Spin-offs and certain related transactions to qualify as a tax-free transaction for U.S. federal income tax purposes.

Transition Agreements. Autoliv and Veoneer entered into multiple agreements to provide each other with certain ongoing services for a limited amount of time following the completion of the spin-off. The Amended and Restated Transition Services Agreement provides that certain finance, information technology, human resources, facilities and other services will be provided between Autoliv and Veoneer for a limited time to help ensure an orderly transition following the spin-off. Each party will pay the other for any such services utilized at agreed amounts as set forth in the agreement. The services will terminate no later than April 1, 2020. Autoliv and Veoneer also entered into several Reseller Agreements to facilitate Veoneer’s ongoing use of critical assets such as leased facilities and intellectual property and transition the supply of products to customers who require involved processes to change suppliers. In 2019, Autoliv paid Veoneer an aggregate of $1.0 million for services provided under the Amended and Restated Transition Services Agreement and Veoneer paid Autoliv an aggregate of $6.0 million for services provided under the Amended and Restated Transition Services Agreements and the reseller agreements. Autoliv and Veoneer also entered into software sublicenses, a transitional trademark license and multiple lease guarantees to facilitate the transition following the completion of the spin-off.

Supply/Service Agreements. We entered into certain direct purchase and applications engineering agreements with Veoneer after the spin-off. In 2019, Autoliv paid Veoneer an aggregate of approximately $0.1 million for engineering services and $73.4 million for products (not including products sold through reseller agreements referenced above), and Veoneer paid Autoliv an aggregate of approximately $2.2 million for engineering services, under these commercial agreements.

Sublease Agreement: A subsidiary of Veoneer has subleased office space from a Company subsidiary under an agreement approved by the Company’s Audit Committee. The estimated value of this sublease to the Company is approximately $318,000 over the duration of the term based on current exchange rates between the US Dollar and the Swedish krona.

 

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Agreements with Stockholders

Cooperation Agreement with Cevian

On March 1, 2019, the Company entered into a Cooperation Agreement (the “Cooperation Agreement”) with Cevian Capital II GP Limited (“Cevian”), pursuant to which the Company agreed to nominate Ms. Liu for election to the Board at the 2019 annual meeting of stockholders. The Company agreed to nominate Ms. Liu or a replacement designee of Cevian at future annual meetings of Autoliv to elect directors, subject to the terms and conditions of the Cooperation Agreement.

The nomination of Ms. Liu for election at the 2019 annual meeting of stockholders and her inclusion on future slates of directors during the Standstill Period (defined below) is conditioned upon Cevian owning at least 8% of the outstanding shares of common stock of the Company. Ms. Liu will offer her resignation from the Board if Cevian no longer owns at least 8% of the then-outstanding shares of common stock of Autoliv.

Under the terms of the Cooperation Agreement, Cevian agreed to certain standstill restrictions including restrictions on Cevian (i) acquiring more than 19.9% of the common stock of Company, (ii) soliciting or granting proxies to vote shares of the Company’s common stock, (iii) initiating stockholder proposals for consideration by the Company’s stockholders, (iv) nominating directors for election to the Board, (v) making public announcements or communications regarding a plan or proposal to the Board, including its management plans, and (vi) submitting proposals for or offers of certain extraordinary transactions involving the Company, in each case, subject to certain qualifications or exceptions.

The foregoing standstill restrictions began upon Ms. Liu’s election to the Board and terminate automatically upon the earliest of (i) 30 days following the time Ms. Liu (or her replacement, as applicable) no longer serves on the Company’s Board, (ii) the fifth business day after Cevian delivers written notice the Company of a material breach of the Cooperation Agreement by the Company if such breach is not cured within the notice period, (iii) the announcement by the Company of a definitive agreement with respect to certain transactions that would result in the acquisition by any person or group of more than 50% of the outstanding shares of the Company’s common stock, or (iv) the commencement of certain tender or exchange offers which if consummated would result in the acquisition by any person or group of more than 50% of the outstanding shares of the Company’s common stock (the “Standstill Period”). The Cooperation Agreement will terminate upon the expiration of the Standstill Period or any other date established by mutual written agreement of the parties.

The Cooperation Agreement contains mutual non-disparagement provisions and requires Cevian to keep confidential any non-public information it receives by reason of Ms. Liu’s role as a director and to abstain from trading in securities in violation of applicable law while in possession of confidential or material non-public information. The Cooperation Agreement is governed by Delaware law. The parties agree that any legal action related to the Cooperation Agreement will be brought in the federal or state courts located in Wilmington, Delaware.

Communicating with the Board

Any stockholder or other interested party who desires to communicate with the Board, the lead independent director, or the independent directors regarding the Company can do so by writing to such person(s) at the following address:

Board/Independent Directors c/o Executive Vice President Legal, Affairs; General Counsel; and Secretary

Autoliv, Inc., Box 70381

SE-107 24 Stockholm, Sweden

Fax: +46 8 587 20633

E-mail: legalaffairs@autoliv.com

Communications with the Board or the independent directors may be sent anonymously and are not screened. Such communications will be distributed to the specific director(s) requested by the stockholder or interested party, to the Board or to sessions of independent directors as a group.

 

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Committees of the Board

There are four standing committees of the Board: the (i) Audit Committee, (ii) Leadership Development and Compensation Committee, (iii) Nominating and Corporate Governance Committee, and (iv) Risk and Compliance Committee. The Board has determined that all members of the Board committees qualify as independent directors under the applicable rules of the NYSE, the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated by the SEC. While no formal policy exists regarding the attendance of the CEO and the Chairman at committee meetings, the practice of the Board is that the CEO and the Chairman are routinely invited to attend committee meetings and excuse them when matters relating to them are discussed or when the committees go into executive session. The Lead Independent Director is also invited to attend all committee meetings. The following table shows the composition of the committees of the Board:

 

		January 1, 2019 – May 6, 2019		May 7, 2019 – Present
Audit Committee		Ted Senko (Chair)     Hasse Johansson     David E. Kepler		Ted Senko (Chair) Hasse Johansson David E. Kepler Min Liu
Leadership Development and Compensation Committee		James M. Ringler (Chair)     Leif Johansson     Xiaozhi Liu		James M. Ringler (Chair) Leif Johansson Min Liu Xiaozhi Liu
Nominating and Corporate Governance Committee		Leif Johansson (Chair)     Franz-Josef Kortüm     Xiaozhi Liu     James M. Ringler		Leif Johansson (Chair) Franz-Josef Kortüm Xiaozhi Liu James M. Ringler
Risk and Compliance Committee		David E. Kepler (Chair)     Hasse Johansson     Ted Senko		David E. Kepler (Chair) Hasse Johansson Ted Senko

The Audit Committee appoints, subject to stockholder ratification, the Company’s independent registered public accounting firm and is responsible for the compensation, retention and oversight of the work of the independent registered public accounting firm and for any special assignments given to such auditors. The Audit Committee reviews the independence of the independent registered public accounting firm and considers whether there should be a regular rotation of the independent registered public accounting firm. The Audit Committee also evaluates the selection of the lead audit partner, including their qualifications and performance. The Audit Committee also (i) reviews the annual audit and its scope, including the independent registered public accounting firm ’ letter of comments and management’s responses thereto; (ii) reviews the performance of the independent registered public accounting firm , including the lead audit partner; (iii) approves any non-audit services provided to the Company by its independent registered public accounting firm; (iv) reviews possible violations of the Company’s business ethics and conflicts of interest policies; (v) reviews any major accounting changes made or contemplated; (vi) reviews the effectiveness and efficiency of the Company’s internal audit staff; and (vii) monitors financial risk and discusses risk oversight and management as part of its obligations under the NYSE’s listing standards. The Audit Committee also oversees cybersecurity, receiving regular cybersecurity updates from Autoliv’s management team. In addition, the Audit Committee confirms that no restrictions have been imposed by Company personnel on the scope of the independent registered public accounting firm’s examinations. The Audit Committee is also responsible for the review and approval of related person transactions. Members of this committee are Messrs. Senko (Chair), H. Johansson, Kepler, and Ms. M. Liu. The Audit Committee met eight times in 2019.

The Leadership Development and Compensation Committee advises the Board with respect to the compensation to be paid to the directors and executive officers of the Company and is responsible for approving the terms of contracts for the senior executives of the Company. The committee also administers the Company’s cash and stock incentive plans and reviews and discusses with management the Company’s Compensation Discussion and Analysis (“CD&A”) included in this Proxy Statement. The Leadership Development and Compensation Committee assists the Board in developing principles and policies related to management succession and the recruiting, motivation, education, diversity, retention, and ongoing development of senior management. Members of this committee are Mr. Ringler (Chair), Mr. L. Johansson, Ms. M. Liu, and Dr. X. Liu. The Leadership Development and Compensation Committee met five times in 2019.

 

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The Nominating and Corporate Governance Committee identifies and recommends individuals qualified to serve as members of the Board and assists the Board by reviewing the composition of the Board and its committees, monitoring a process to assess Board effectiveness, and developing and implementing the Company’s Corporate Governance Guidelines. The committee also reviews sustainability and corporate responsibility activities for the Company. The Nominating and Corporate Governance Committee will consider stockholder nominees for election to the Board if timely advance written notice of such nominees is received by the Secretary of the Company at its principal executive offices in accordance with the By-Laws, a copy of which may be obtained by written request to the Company’s Secretary or on the Company’s website at www.autoliv.com – About Us – Governance – Certificate and Bylaws. Members of this committee are Messrs. L. Johansson (Chair), Kortüm, and Ringler and Dr. X. Liu. The Nominating and Corporate Governance Committee met four times in 2019.

The Risk and Compliance Committee was formed as a special committee of the Board in June 2011, and was made a standing committee in December 2018, to assist the Board in overseeing the Company’s compliance program with respect to (i) compliance with the laws and regulations applicable to the Company’s business and (ii) compliance with the Company’s Standards of Business Conduct and Ethics and related policies by employees, officers, directors and other agents and associates of the Company that are designed to support lawful and ethical business conduct by the Company and its employees and promote a culture of compliance. The Risk and Compliance committee reviews with and receives reports from management on the Company’s risk framework. The Risk and Compliance Committee also oversees risks relevant to our information technology environment and the investigation of any alleged noncompliance with law or the Company’s compliance programs policies or procedures that is reported to the Risk and Compliance Committee (except any relating to financial compliance, which are overseen by the Audit Committee). Members of this committee are Messrs. Kepler (Chair), H. Johansson, and Senko. The Risk and Compliance Committee works closely with the other committees of the Board and has three members that also serve on the Audit Committee, one of which serves as the Chair. The Risk and Compliance Committee met four times in 2019.

Audit Committee Report

The Audit Committee of the Board is responsible for providing independent, objective oversight of the Company’s accounting functions and internal controls.

The Audit Committee acts pursuant to a written charter. The committee’s current charter is posted on the Company’s website at www.autoliv.com – About Us – Governance – Board of Directors – Committees and can also be obtained free of charge in print by request from the Company using the contact information below. Each member of the Audit Committee is “independent” as defined in, and is qualified to serve on the committee pursuant to, the rules of the NYSE, the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated by the SEC. Each member is financially literate and possesses accounting or related financial management expertise, and Mr. Senko has been determined by the Board to qualify as an “audit committee financial expert” as defined by the SEC. Pursuant to the charter of the Audit Committee, no member of the Audit Committee may serve on the audit committee of more than two other public companies unless the Board determines that such simultaneous service would not impair the ability of such Audit Committee member to effectively serve on the Audit Committee. The Audit Committee reviews the Company’s financial reporting process on behalf of the Board. In fulfilling its responsibilities, the Audit Committee has reviewed and discussed the audited financial statements contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 2019 with the Company’s management and independent registered public accounting firm. The Company’s management is responsible for the financial statements and the reporting process, including the system of internal controls. The independent registered public accounting firm is responsible for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the U.S.

The Audit Committee discussed with the independent registered public accounting firm the matters required to be discussed under the applicable auditing standards of the Public Company Accounting Oversight Board (“PCAOB”). In addition, the Company’s independent registered public accounting firm provided to the Audit Committee the written disclosures required by the PCAOB’s applicable requirements regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence. The Audit Committee has discussed with the independent registered public accounting firm the independent registered public

 

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accounting firm’s independence. The Audit Committee reviews and oversees the independence of the independent registered public accounting firm and has concluded that the independent registered public accounting firm’s provision of non-audit services to the Company is compatible with the independent registered public accounting firm’s independence. In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board (and the Board approved) that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, for filing with the SEC.

The Audit Committee can be contacted regarding accounting, internal accounting controls, or auditing matters as follows:

The Audit Committee

c/o Executive Vice President, Legal Affairs; General Counsel; and Secretary

Autoliv, Inc., Box 70381

SE-107 24 Stockholm, Sweden

Fax: +46 8 587 20 633

E-mail: legalaffairs@autoliv.com

Communications with the committee are not screened and can be made anonymously. The Chair of the committee will receive all such communications after it has been determined that the contents represent a message to the committee.

Ted Senko, Chair

Hasse Johansson

David E. Kepler

Min Liu

Nominating and Corporate Governance Committee Report

The Nominating and Corporate Governance Committee of the Board is responsible for identifying and recommending to the Board individuals who are qualified to serve as directors and contribute as Board committee members. The Nominating and Corporate Governance Committee further advises the Board on composition and procedures of committees and is responsible for maintaining the Company’s Corporate Governance Guidelines and overseeing the evaluation of the Board and its committees and members of the Company’s management.

The Nominating and Corporate Governance Committee acts pursuant to a written charter. A copy of the committee’s charter is available on the Company’s website at www.autoliv.com – About Us – Governance – Board of Directors – Committees and can also be obtained free of charge in print by request from the Company using the contact information below. Each of the members of the committee is “independent” as defined in, and is qualified to serve on the committee pursuant to, the applicable rules of the NYSE, the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated by the SEC.

The Nominating and Corporate Governance Committee considered and recommended that Mr. Mikael Bratt, Mr. Jan Carlson, Mr. Hasse Johansson, Mr. Leif Johansson, Mr. David E. Kepler, Mr. Franz-Josef Kortüm, Ms. Min Liu, Dr. Xiaozhi Liu, Mr. James M. Ringler, and Mr. Ted Senko be nominated for election by the stockholders at the Annual Meeting. Dr. Liu, Ms. Liu and Messrs. H. Johansson, L. Johansson, Kepler, Kortüm, Ringler, and Senko are each “independent” as defined in the applicable rules of the NYSE, the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated by the SEC.

The Nominating and Corporate Governance Committee will consider a director candidate nominated by a stockholder provided such nomination is submitted to the committee within the period set forth in Article II, Section 6 of the By-Laws. In considering candidates submitted by stockholders, the Nominating and Corporate Governance Committee will take into consideration the needs of the Board and the candidate’s qualifications.

The Nominating and Corporate Governance Committee seeks a Board of Directors of individuals with a diverse range of experiences, views, and backgrounds. When considering possible candidates for election as a director, the committee evaluates whether a candidate has (i) attained a position of leadership in the candidate’s

 

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area of expertise, (ii) business and financial experience relevant to the Company, (iii) demonstrated sound business judgment, (iv) expertise relevant to the Company’s lines of business, (v) independence from management, (vi) the ability to serve on standing committees, and (vii) the ability to serve the interests of all stockholders. The committee also considers attributes such as diversity of race, ethnicity, gender, age, and cultural background when selecting director nominees and seeks director nominees that reflect the global operations of the Company. The current Board nominees consist of citizens or residents of multiple countries, including the U.S., Sweden, Switzerland, China, and Germany, and directors with a diverse range of backgrounds, perspectives, and management, operating, finance, and engineering skills and experiences. The Nominating and Corporate Governance Committee continues to look for opportunities to further progress its diversity initiatives.

The Nominating and Corporate Governance Committee periodically engages firms that specialize in identifying director candidates. The Nominating and Corporate Governance Committee also, from time to time, identifies potential director nominees by asking current directors and executive officers to notify the committee if they become aware of persons meeting the criteria described above. As described above, the Nominating and Corporate Governance Committee will also consider candidates recommended by stockholders. Once a person has been identified by the Nominating and Corporate Governance Committee as a potential candidate, the committee collects and reviews publicly available information regarding the person to determine whether further consideration should be given to the person’s candidacy. If the Nominating and Corporate Governance Committee determines that the candidate warrants further consideration, the Chair of the committee or another member of the committee will contact such person. Generally, if the person expresses a willingness to be considered to serve on the Board, the Nominating and Corporate Governance Committee will request information from the candidate, review the candidate’s accomplishments and qualifications in light of the qualifications of any individuals the committee might be considering, and conduct one or more interviews with the candidate. In certain instances, committee members may contact one or more references provided by the candidate or may contact other members of the business community or other persons that may have first-hand knowledge of the candidate’s accomplishments. The Nominating and Corporate Governance Committee’s evaluation process does not vary when a candidate is recommended by a stockholder. The Nominating and Corporate Governance Committee can be contacted as follows:

The Nominating and Corporate Governance Committee

c/o Executive Vice President, Legal Affairs; General Counsel; and Secretary

Autoliv, Inc., Box 70381

SE-107 24 Stockholm, Sweden

Fax: +46 8 587 20 633

E-mail: legalaffairs@autoliv.com

Communications with the committee are not screened and can be made anonymously. The Chair of the committee receives all such communications after it has been determined that the content represents a message to the committee.

Leif Johansson, Chair

Franz-Josef Kortüm

Xiaozhi Liu

James M. Ringler

Leadership Development and Compensation Committee Duties, Procedures and Policies

The Leadership Development and Compensation Committee acts pursuant to a written charter. The charter is posted on the Company’s website at www.autoliv.com – About Us – Governance – Board of Directors – Committees, and can also be obtained free of charge in print by request from the Company using the contact information below. Each member of the Leadership Development and Compensation Committee has been determined by the Board to be “independent” as defined in, and is qualified to serve on the committee pursuant to, the rules of the NYSE, the Sarbanes-Oxley Act of 2002, and the rules and regulations promulgated by the SEC.

The Leadership Development and Compensation Committee is responsible for (i) reviewing annually the Company’s executive compensation plans in light of the Company’s goals and objectives of such plans; (ii) evaluating annually the performance of the Chief Executive Officer in light of the goals and objectives of the

 

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Company’s executive compensation plans and, together with the other independent directors, determining, and approving the Chief Executive Officer’s compensation level based on this evaluation; (iii) evaluating annually the performance of the other executive officers of the Company in light of the goals and objectives of the Company’s executive compensation plans, and setting the compensation of such other executive officers based on this evaluation; (iv) evaluating annually the appropriate level of compensation for Board and committee service by non-employee directors; (v) reviewing and approving any severance or termination arrangements to be made with any executive officer of the Company; (vi) reviewing perquisites or other personal benefits to the Company’s executive officers and directors and recommending any changes to the Board; (vii) developing the Company’s plans for management succession and recruiting, retaining, and developing management; (viii) reviewing and discussing with management the CD&A, beginning on page 25 of this Proxy Statement, and based on that review and discussion, recommending to the Board that the CD&A be included in the Company’s annual proxy statement or annual report on Form 10-K; (ix) preparing the Leadership Development and Compensation Committee Report for inclusion in the annual proxy statement or annual report on Form 10-K; (x) reviewing the description of the Leadership Development and Compensation Committee’s process and procedures for the consideration and determination of executive officer and director compensation to be included in the Company’s annual proxy statement or annual report on Form 10-K; (xi) reviewing the results of the most recent stockholder advisory vote on executive compensation and recommending to the Board the frequency of such vote; and (xii) performing such duties and responsibilities as may be assigned by the Board under the terms of the Company’s general compensation plans and other employee benefit plans, including oversight of pay equality on behalf of the Board.

The Leadership Development and Compensation Committee from time to time uses independent compensation consultants to provide advice and ongoing recommendations regarding executive compensation. In 2018, the Leadership Development and Compensation Committee engaged Frederic W. Cook & Co., Inc. (“FW Cook”) as its independent advisor. FW Cook reported directly to the Leadership Development and Compensation Committee with respect to executive compensation matters. In 2019, the Company also engaged Willis Towers Watson (“Towers Watson”) as a compensation consultant. For additional information regarding the role of each of these compensation consultants and the scope of their engagement, see page 32 of this Proxy Statement.

The Leadership Development and Compensation Committee considered the independence of Towers Watson and FW Cook under the SEC rules and NYSE listing standards. The Leadership Development and Compensation Committee also received a letter from each of Towers Watson and FW Cook addressing their independence. The Leadership Development and Compensation Committee considered the following factors in determining the independence of the compensation consultants: (i) other services provided to the Company by each of Towers Watson and FW Cook; (ii) fees paid by the Company as a percentage of each consultant’s total revenue; (iii) policies or procedures maintained by Towers Watson and FW Cook that are designed to prevent a conflict of interest; (iv) any business or personal relationships between the individual consultants involved in the engagement and any member of the Leadership Development and Compensation Committee; (v) any Company stock owned by the individual consultants involved in the engagement; and (vi) any business or personal relationships between the Company’s executive officers and Towers Watson or FW Cook or the individual consultants involved in the engagement. The Leadership Development and Compensation Committee discussed these independence factors and concluded that the work of Towers Watson and FW Cook did not raise any conflicts of interest.

The Leadership Development and Compensation Committee may form subcommittees for any purpose it deems appropriate and may delegate to any subcommittee such power and authority as it deems appropriate provided that no subcommittee shall consist of fewer than two members and that the Leadership Development and Compensation Committee shall not delegate any power or authority required by any law, regulation or listing standard to be exercised by the Leadership Development and Compensation Committee as a whole. Under the Company’s 1997 Stock Incentive Plan, as amended and restated (the “1997 Plan”), the Leadership Development and Compensation Committee may, to the extent that any such action will not prevent the 1997 Plan from complying with applicable rules and regulations, delegate any of its authority thereunder to such persons as it deems appropriate. In addition, the Leadership Development and Compensation Committee has delegated to the CEO the authority to determine certain grants under the Company’s long-term incentive plan, subject to established grant limits. The Leadership Development and Compensation Committee reviews the compensation levels set by the CEO under the long-term incentive program.

 

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The Company’s Executive Vice President, Human Resources and Sustainability generally acts as Secretary of the Leadership Development and Compensation Committee.

The Leadership Development and Compensation Committee can be contacted as follows:

The Leadership Development and Compensation Committee

c/o Executive Vice President, Legal Affairs; General Counsel; and Secretary

Autoliv, Inc., Box 70381

SE-107 24 Stockholm, Sweden

Fax: +46 8 587 20 633

E-mail: legalaffairs@autoliv.com

Communications with the committee are not screened and can be made anonymously. The Chair of the committee receives all such communications after it has been determined that the content represents a message to the committee.

Leadership Development and Compensation Committee Interlocks and Insider Participation

The Leadership Development and Compensation Committee is comprised exclusively of directors who have never been employed by the Company and who are “independent” as defined in the applicable rules of the NYSE, the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated by the SEC. No executive officer of the Company served as a member of the compensation committee of another entity, one of whose executive officers served on the Company’s Leadership Development and Compensation Committee. No executive officer of the Company served as a director of another entity, one of whose executive officers either served on the compensation committee of such entity or served as a director of the Company (i.e. no interlocks exist).

Leadership Development and Compensation Committee Report¹

The Leadership Development and Compensation Committee has reviewed and discussed with management the Company’s Compensation Discussion and Analysis and, based on such review and discussions, has recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into the Company’s 2019 Annual Report on Form 10-K.

James M. Ringler, Chair

Leif Johansson

Min Liu

Xiaozhi Liu

The Swedish Corporate Governance Code

Swedish companies with shares admitted to trading on a regulated market in Sweden, including the Nasdaq Stockholm, are subject to the Swedish Corporate Governance Code (the “Swedish Code”). This is a codification of best practices for Swedish listed companies based on Swedish practices and circumstances. The Swedish Code follows a “comply or disclose” approach; its recommendations are not binding on companies but if its recommendations are not complied with, the deviation must be explained. A non-Swedish company listed in Sweden can elect to either apply the Swedish Code or the corresponding local rules and codes where the company’s shares have their primary listing or where the company is headquartered. As a Delaware corporation with its primary listing on the NYSE, the Company has elected to apply U.S. corporate governance rules and standards. This section and other parts of this Proxy Statement provide detailed information on various subjects covered by the Swedish Code.

 

1

The material in this report is not soliciting material, is not deemed filed with the SEC and is not incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, whether made on, before, or after the date of this Proxy Statement and irrespective of any general incorporation language in such filing.

 

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In addition to, and consistent with, these statutory laws and regulations, Autoliv is governed by its own charter documents and internal standards and policies through its Restated Certificate of Incorporation, Third Restated By-Laws, Corporate Governance Guidelines, and Standards of Business Conduct and Ethics. These charter documents and internal standards and policies guide and assist the Board in the exercise of its responsibilities and reflect the Board’s commitment to fostering a culture of integrity and monitoring the effectiveness of policy and decision-making, both at the Board and management level. The Board views corporate governance as an integral part of the basic operations of the Company and a necessary element for long-term, sustainable growth in stockholder value.

Forward-Looking Statements

This Proxy Statement contains statements that are not historical facts but rather forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include those that address activities, events, or developments that the Company or its management believes or anticipates may occur in the future. All forward-looking statements are based upon our current expectations, various assumptions and/or data available from third parties. Our expectations and assumptions are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that such forward-looking statements will materialize or prove to be correct as forward-looking statements are inherently subject to known and unknown risks, uncertainties and other factors which may cause actual future results, performance or achievements to differ materially from the future results, performance or achievements expressed in or implied by such forward-looking statements.

In some cases, you can identify these statements by forward-looking words such as “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “may,” “likely,” “might,” “would,” “should,” “could,” or the negative of these terms and other comparable terminology, although not all forward-looking statements contain such words.

Because these forward-looking statements involve risks and uncertainties, the outcome could differ materially from those set out in the forward-looking statements for a variety of reasons, including without limitation: changes in light vehicle production; fluctuation in vehicle production schedules for which the Company is a supplier; changes in general industry and market conditions or regional growth or decline; changes in and the successful execution of our capacity alignment, restructuring and cost reduction initiatives and the market reaction thereto; loss of business from increased competition; higher raw material, fuel and energy costs; changes in consumer and customer preferences for end products; customer losses; changes in regulatory conditions; customer bankruptcies; consolidations or restructuring or divestiture of customer brands; unfavorable fluctuations in currencies or interest rates among the various jurisdictions in which we operate; component shortages; market acceptance of our new products; costs or difficulties related to the integration of any new or acquired businesses and technologies; continued uncertainty in pricing negotiations with customers; successful integration of acquisitions and operations of joint ventures; successful implementation of strategic partnerships and collaborations; our ability to be awarded new business; product liability, warranty and recall claims and investigations and other litigation and customer reactions thereto; higher expenses for our pension and other postretirement benefits including higher funding needs for our pension plans; work stoppages or other labor issues; possible adverse results of pending or future litigation or infringement claims; our ability to protect our intellectual property rights; negative impacts of antitrust investigations or other governmental investigations and associated litigation relating to the conduct of our business; tax assessments by governmental authorities and changes in our effective tax rate; dependence on key personnel; legislative or regulatory changes impacting or limiting our business; political conditions; dependence on and relationships with customers and suppliers; and other risks and uncertainties identified in Item 1A “Risk Factors” in our Annual Report for the fiscal year ended December 31, 2019 and in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report for the fiscal year ended December 31, 2019.

For any forward-looking statements contained in this or any other document, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we assume no obligation to update publicly or revise any forward-looking statements in light of new information or future events, except as required by law.

 

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INFORMATION ABOUT OUR EXECUTIVE OFFICERS

Set forth below is information regarding the current executive officers of the Company who are not also directors (information about Mr. Mikael Bratt, President and Chief Executive Officer, can be found on page 4 of this Proxy Statement):

Svante Mogefors, age 65, Group Vice President Quality from April 2005 to June 2018 then Executive Vice President, Quality. Mr. Mogefors additionally served as the acting Vice President, Operations following the departure of Mr. Carpenter in September 2018 until August 2019. In March 2009, Mr. Mogefors took the additional role of Vice President Manufacturing. Mr. Mogefors initially joined Autoliv in 1985 and has experience in several roles within the Company, including in the areas of product development, process implementations, and quality control. Between 1990 and 1996, Mr. Mogefors was for a period President of Lesjöfors Herrljunga AB and for another period President of Moelven E-Modul AB. Mr. Mogefors holds a Master of Science degree from the Chalmers University of Technology in Gothenburg, Sweden.

Anthony Nellis, age 52, Executive Vice President, Legal Affairs, General Counsel, and Secretary since June 2018. From 2002 until his appointment to his current position, Mr. Nellis served in a number of positions in the Autoliv Legal Department with increasing responsibilities. Most recently, he served as Vice President Legal, Autoliv Passive Safety, a segment of Autoliv, between July 2014 until June 2018. He served as Vice President, Legal for Autoliv Asia from May 2010 until July 2014. Overlapping with that role, he served as the Interim Vice President, General Counsel, and Secretary from January 2014 to December 2014. Prior to joining Autoliv, Mr. Nellis was a commercial litigator with Kitch Drutchas from 1996 to 2002. Mr. Nellis has a B.A. from Alma College and a J.D. from the University of Detroit.

Sherry Vasa, age 53, Executive Vice President Human Resources and Sustainability since June 2018. Ms. Vasa first joined the company in February 1992 and has held positions of increasing responsibilities. From September 2014 through June 2018, she served as Vice President Human Resources for Autoliv Passive Safety, a segment of Autoliv, Prior to that role. Ms. Vasa served as Vice President, Human Resources for Autoliv Asia, a division, from August 2011 through September 2014. Ms. Vasa has a B.A. from Chadron State College.

Jordi Lombarte, age 52, Chief Technology Officer since April 2018. Mr. Lombarte first joined Autoliv in 1992. During the course of a twenty-five year career with Autoliv, he has held numerous positions of increasing responsibility. Prior to his current role, Mr. Lombarte served as Vice President Engineering of Autoliv Passive Safety, a segment of Autoliv, between April 2017 and April 2018. Prior to that, he served as Vice President Engineering, Autoliv Americas, a division, from August 2013 to April 2017 after serving as Global Senior Director of Seatbelt Development between September 2008 and August 2013. Mr. Lombarte has a Master’s Degree in Mechanical Engineering from Escola Tecnica Superior d’Enginyers Industrials de Terrasa.

Daniel Garceau, age 52, President, Autoliv Americas since April 2018, after being PAS President North America since September 2014 and PAS Vice President Airbags Americas since March 2011. Mr. Garceau started at Morton International in 1993 prior to the 1997 Autoliv merger and has held various positions of increasing responsibility in Engineering and Operations including Director of Quality European Airbags and Plant Manager. From 2008 to 2010, Mr. Garceau worked for the corporate office of Danaher Corporation as a corporate director of the Danaher Business System (DBS). Mr. Garceau holds a Bachelor of Science degree in Mechanical Engineering from The University of Michigan and an MBA from Utah State University.

Brad Murray, age 60, President Autoliv Asia, a division, since April 2018. Mr. Murray began his career with Autoliv in 1987. His two most recent roles have been as President Autoliv Japan and ASEAN from September 2014 through April 2018 and President Autoliv Japan from January 2001 through September 2014. He has a BSc. in Mechanical Engineering from Brigham Young University and an MBA from University of Phoenix.

Jennifer Cheng, age 54, President Autoliv China, a division, since April 2018. Ms. Cheng previously served as PAS President TCH since April 2015 and PAS Vice President China Technical Center since November 2013. Before serving in those roles, she served as PAS Autoliv China Vice President for Seat Belts between 2010 and November 2013. She began her career with Autoliv as NHA General Manager in November 2006. Before joining Autoliv, Ms. Cheng served various roles of increasing responsibility with BorgWarner between 1998 and 2008. Ms. Cheng has a B.S. degree in Nuclear Power and Engineering from Shanghai Jiaotong University and an MBA from the joint program between Ningbo University and Canberra University.

 

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Frithjof Oldorff, age 53, President Autoliv Europe since September 2019. From July 2013 until September 2019, he previously served as President of Gentherm, Inc.’s Automotive Business Unit with assignments first in Odelzhausen, Germany then in Northville, Michigan, USA. Preceding that, he held various positions with Faurecia, an operations role with Freudenberg, and was COO of W.E.T. Automotive Systems. Mr. Oldorff has diploma in Industrial Engineering from the Technical University in Darmstadt, Germany.

Christian Hanke, age 51, Vice President, Corporate Control since November 2016. Mr. Hanke also serves as our Interim Chief Financial Officer since the departure of Mr. Mats Backman from the Company on February 28, 2019. From April 2013 until November 2016, Mr. Hanke served as Vice President, International Financial Controller and head of Accounting operations for Nasdaq based in Stockholm, Sweden. From December 2007 to March 2013, he served in various roles of increasing responsibility with American Express based in Stockholm, Sweden. Prior thereto Mr. Hanke began his career with Coopers & Lybrand. Mr. Hanke is a certified public accountant in the state of Massachusetts and has a BSc in Business Administration and Economics from Uppsala University, Sweden.

Christian Swahn, age 49, Executive Vice President, Global Supply Chain Management since August 2019. His previously served as Senior Vice President of Purchasing for Volvo Bus Corporation from April 2016 until August 2019. From October 2013 to March 2016 he served as Purchasing Director of Industrial Market and Global Categories of SKF AB. Pervious roles also include positions with Volvo Penta and Finnveden. Mr. Swahn holds a Master of Science in Mechanical Engineering from the KTH Royal Institute of Technology in Stockholm, Sweden and an Executive MBA from the School of Business, Economics and Law in Gothenburg, Sweden.

Magnus Jarlegren, age 41, Executive Vice President, Operations since August 2019. From 2014 until August 2019, Mr. Jarlegren was employed by Sandvik Coromant and various affiliates, first as Vice President of Production and then as Vice President of Supply. Prior to that, Mr. Jarlegren began his work in consulting first with three years with Solving EFESO and then ten years with McKinsey & Co. Mr. Jarlegren studied Mechanical Engineering from Chalmers University of Technology in Gothenburg, Sweden.

Fredrik Westin, age 47, Chief Financial Officer and Executive Vice President, Finance since May 2, 2020. From 2015 through 2019, Mr. Westin served as Chief Financial Officer at Sandvik Mining and Rock Technology, The Netherlands. From 2014 to 2015, Mr. Westin served as Chief Financial Officer and Vice President of Finance, Information Technology, Integration & Change Office for Johnson Controls’ Global Automotive Interiors business from 2014 to 2015, based in Japan. Prior to that, Mr. Westin held roles with Johnson Controls in Germany, China and Japan from 2006 to 2014. Mr. Westin began his career with Volkswagen in 1998 and served in various leadership roles with WestLB from 2002 through 2006. Mr. Westin holds an MBA from Insead, France, and an MSc in Mechanical Engineering from RWTH Aachen, Germany.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial ownership of our common stock as of December 31, 2019 for each person known by us to beneficially own more than 5% of our common stock, except where otherwise noted, and as of March 13, 2020 for (i) each of our directors and nominees; (ii) our named executive officers (as defined on page 25 of this Proxy Statement); and (iii) our directors, named executive officers and executive officers as a group.

 

		Common Stock Beneficially Owned(1)(2)
Name of Beneficial Owner		Number of Shares				Percent of Total
5% Stockholders
Cevian Capital II GP Limited(3)			8,376,924				9.6
11-15 Seaton Place
St. Helier, Jersey JE4 0QH, Channel Islands
Alecta pensionsförsäkring, ömsesidigt(4)			5,676,200				6.5
Regeringsgatan 107, SE-103 73
Stockholm, Sweden
AMF Pensionsförsäkring AB(5)			5,280,275				6.1
Klara Södra Kyrkogata 18
SE-113 88, Stockholm, Sweden
Directors
Jan Carlson			82,083				*
Hasse Johansson			627				*
Leif Johansson			14,644				*
David E. Kepler			3,541				*
Franz-Josef Kortüm			3,751				*
Min Liu			0				*
Xiaozhi Liu			5,290				*
James M. Ringler			6,684				*
Ted Senko			690				*
Currently Employed Named Executive Officers
Mikael Bratt			4,097				*
Jordi Lombarte			1,957				*
Daniel Garceau(7)			820				*
Brad Murray			6,911				*
Formerly Employed Named Executive Officers
Christian Hanke(8)			478				*
Mats Backman(9)			1,621				*
Michael Hague(10)			299				*
All directors, named executive officers and executive officers as a group (23 individuals)(6)			159,765				*

* Less than 1%

 

(1)	Based on 87,315,512 shares of the Company’s common stock outstanding as of February 29, 2020 except as noted below. The figures in the table and notes thereto represent beneficial ownership and sole voting and investment power except where indicated.

 

(2)	Includes restricted stock units that vested on February 19, 2020 and shares which the following individuals have the right to acquire upon exercise of options exercisable within 60 days: Jan Carlson – 18,726 shares, Brad Murray – 5,825.

 

(3)	The number of shares owned was provided by Cevian Capital II GP Limited (“Cevian”) pursuant to Amendment No. 5 to its Schedule 13D filed with the SEC on March 1, 2019, indicating beneficial ownership as of March 1, 2019. Cevian reported sole power to vote and dispose of all such shares.

 

(4)

The number of shares owned was provided by Alecta pensionsförsäkring, ömsesidigt pursuant to Amendment No. 7 to its Schedule 13G filed with the SEC on January 21, 2020, indicating beneficial ownership as of December 31, 2019. Alecta pensionsförsäkring, ömsesidigt reported sole power to vote and dispose of all such shares.

 

(5)

The number of shares owned was provided by AMF Pensionsförsäkring AB, pursuant to Amendment No. 7 to its Schedule 13G filed with the SEC on January 30, 2020, indicating beneficial ownership as of December 31, 2019. AMF Pensionsförsäkring AB reported sole power to vote and dispose of 3,450,000 shares and shared power to vote and dispose of 1,830,275 shares.

 

(6)	Includes 35,030 shares issuable upon exercise of options exercisable within 60 days and restricted stock units that vested on February 19, 2020.

 

(7)	Notified of intention to resigned employment effective no later August 10, 2020.

 

(8)	Resigned employment effective as of March 1, 2020.

 

(9)	Resigned employment effective as of February 28, 2019.

 

(10)	Employment ended as of April 12, 2019.

 

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COMPENSATION DISCUSSION AND ANALYSIS

Introduction

This Compensation Discussion and Analysis (CD&A) describes the material elements of compensation awarded to, earned by, or paid to each of the Company’s “named executive officers” during the last completed fiscal year, and discusses the principles and decisions underlying our executive compensation policies and the most important factors relevant to an analysis of these decisions and policies.

Our Named Executive Officers in 2019

In accordance with the relevant rules and regulations promulgated by the SEC, our “named executive officers” include anyone who served as the CEO or CFO during 2019, and three other executive officers who had the highest total compensation during 2019. In addition, our named executive officers for 2019 include a former executive who left his role during 2019.

These named executive officers for 2019 are as follows:

 

•

Mikael Bratt (President and CEO)

 

•

Christian Hanke (Interim CFO and VP, Corporate Control)

 

•

Mats Backman (Former Executive Vice President, Finance and CFO)

 

•

Brad Murray (President, Asia)

 

•

Daniel Garceau (President, Americas)1

 

•

Jordi Lombarte (Chief Technology Officer)

 

•

Michael Hague (Former President, Europe)

Executive Summary

The following is a brief overview of the fiscal year 2019 compensation program for our named executive officers:

 

•

Total compensation for our named executive officers in 2019 generally consists of base salary, annual non-equity incentives, long-term equity incentives, retirement/pension related benefits, and other benefits.

 

•

During 2019, the Leadership Development and Compensation Committee (the “Compensation Committee”) approved a new long-term equity incentive (LTI) program to more closely reflect market practice and align pay delivery with our financial performance. For executive officers, seventy-five percent (75%) of the grant value consisted of performance shares (PSs) and twenty-five percent (25%) of the grant value consisted of restricted stock units (RSUs). PSs granted in 2019 were based on the Company’s Order Intake Ratio (35%) and EPS Growth in relation to Light Vehicle Production Growth (65%).

 

•

The compensation of our named executive officers is significantly affected by our financial results. Our annual non-equity incentive awards for 2019 were based on Adjusted Operating Margin (50%) and Adjusted Cash Conversion (50%). As a result of achievement of the performance goals, each executive officer earned 75% of the target payout.

 

•

Starting in 2019, to mitigate potential compensation-related risk, the Company implemented a double-trigger acceleration feature for unvested equity in the event of a qualifying termination following a change in control, instead of the previous single-trigger acceleration.

 

•

Based on the 2019 compensation risk assessment, the Compensation Committee concluded that our compensation programs do not create risks that are reasonably likely to have a material adverse effect on Autoliv.

 

1	Mr. Garceau notified the Company of his intention to resign his employment no later than August 10, 2020.

 

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Management Transitions

 

•

Mr. Backman resigned from his employment effective February 28, 2019. The Company appointed Mr. Hanke as the Company’s Interim Chief Financial Officer after the departure of Mr. Backman.

 

•

On April 12, 2019, Mr. Hague separated from employment with the Company. A description of Mr. Hague’s separation agreement with the Company is set forth below under “Potential Payments Upon Termination or Change in Control”.

 

•

On November 26, 2019, the Company announced the appointment of Fredrik Westin as the Company’s new Chief Financial Officer and Executive Vice President, Finance, to be effective no later than March 1, 2020. Mr. Westin succeeds Mr. Hanke, who resigned from his employment with the Company effective March 2, 2020. A description of Mr. Hanke’s employment conditions with the Company is set forth below under “Additional 2019/2020 Compensation Decisions”.

 

•

Mr. Garceau notified the Company of his intention to resigned from his employment effective no later than August 10, 2020.

Compensation Philosophy

Our Compensation Philosophy for our executive management is set forth below.

 

Dimension		Description
Main Principles		The Company believes that to achieve its strategic and financial objectives, it is necessary to attract, motivate, and retain exceptional management talent. In addition, total compensation offered to our executive management should provide a shared responsibility for overall Company results which is aligned with the interests of the Company’s stockholders. Our compensation strategy is therefore based on principles of performance, competitiveness and fairness.
Compensation Objectives		To meet our compensation philosophy, the compensation programs we provide have the following objectives:   Objective A: Offer total compensation and benefits sufficient to attract, motivate, and retain the management talent necessary to ensure the Company’s continued success. Objective B: Align the interests of the executives and the stockholders. Objective C: Reward performance in a given year and over a sustained period using straightforward programs to communicate our performance expectations. Objective D: Encourage company-wide cooperation among members of the executive, divisional, and functional management teams and throughout the Company.
Compensation Mix		The Company seeks a balanced distribution of fixed and variable incentive compensation elements over time by using several components of compensation. Total compensation for our named executive officers consists of base salary, annual non-equity incentives, long-term equity incentives, retirement/pension, and other benefits. The Company believes that a balanced compensation structure focuses our executive officers on increasing long-term stockholder value while providing fewer incentives for undue risk in the short-term.
Component 1 Base Salary		Supporting Objective A   Purpose: Provides a set level of pay warranted by position and sustained individual performance. A competitive base salary is important to attract and retain an appropriate caliber of talent for the position.

 

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Dimension		Description
Component 2 Short-Term Incentive		Supporting Objectives A, B, C, & D   Purpose: Recognizes short-term performance against established annual financial performance goals and creates focus and engagement in delivering results.   Annual non-equity incentive awards are always capped and directly tied to the Company’s and/or divisional performance.
Component 3 Stock Incentive		Supporting Objectives A, B, C & D   Purpose: Provides our executive officers with incentives to build longer-term value for our stockholders while promoting retention of critical executives.
Component 4 Pension / Retirement and Other Benefits		Supporting Objective A   Purpose: Provides additional value for our executives by competitive and market- aligned benefits. All newly hired or promoted senior executives participate in defined contribution plans rather than defined benefit plans (except certain senior executives that participate in location-specific defined benefits plans).
Market and Market Position		The Compensation Committee’s objective is to consider and, where appropriate, approximate the market median for base salaries as well as total direct compensation of the relevant market data primarily linked to the country in which the named executive officer is located. The Committee also may take a relevant international peer group comparison into account as a secondary input to compensation setting process.
How to Use Market Data		We consider the competitive environment of our significant operations and market locations to provide a compensation package that optimizes value to the participant and cost to the Company. The Compensation Committee and management believe that it is their responsibility to use discretion and make informed judgments as to individual compensation packages or pay levels that may occasionally deviate above or below our target pay strategy based on such factors as:   1. Individual performance and potential relative to market. 2. Long-term succession planning and talent management. 3. Business conditions in our industry or the market overall as well as business or regulatory conditions in the executive’s area of responsibility. 4. Cases where individuals are asked to step into new roles and responsibilities for specific projects or strategic initiatives.

Base Salaries

Initial base salaries are primarily a function of the Compensation Committee’s assessment of (i) market compensation levels, (ii) the references made to base salary in our compensation philosophy for executive management, (iii) the compensation required to attract and retain the executive, and (iv) the Company’s need to fill the position either internally or externally. Also, in deciding compensation levels during the compensation review at the beginning of 2019, one of the Compensation Committee’s objectives was for base salaries and total direct compensation to approximate the market median of the relevant market data linked to the country in which the named executive officer is located. As part of the 2019 compensation review in December 2018, the Compensation Committee increased base salaries for our named executive officers between 0.5% to 5.0%, consistent with general market practice, but also considering adjustments necessary to reflect an individual’s performance, responsibilities and retention needs.

 

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Non-Equity Incentives

Members of our executive management team, including our named executive officers, are eligible to earn an annual non-equity incentive award based on achievement against pre-established performance criteria. Target payout amounts are reflected as a percentage of the executive’s base salary, as set forth in the following table.

 

Annual Non-Equity Incentive Opportunity for Our Named Executive Officers in 2019
Named Executive Officer		Incentive as a % of Base Salary
		Threshold		Target		Maximum
Mikael Bratt		0%		50%		100%
Christian Hanke1		0%		25%		50%
Mats Backman		0%		45%		90%
Brad Murray		0%		45%		90%
Daniel Garceau		0%		45%		90%
Jordi Lombarte		0%		35%		70%
Mike Hague		0%		45%		90%

 

(1)

Limited to the service period as Interim CFO, the target non-equity incentive opportunity for Mr. Hanke was based on his fixed compensation (including both base salary and temporary interim assignment allowance) instead of base salary only.

Our annual non-equity incentive award program used a limited number of performance criteria for many years. The Company believes that using a limited number of established measures critical for the success of our business provides clear direction to our executives and promotes our goal of a “one Autoliv” approach through shared responsibility for overall results. In addition, the Company believes that a limited number of performance metrics enhances the transparency of our annual incentive program and provides easy-to-understand information to our investors. Finally, we believe that a limited number of metrics based on overall company performance rather than individual or local performance mitigates the risk of excessive risk-taking that could arise from individual performance-based incentives. We still believe this simple, transparent approach supports good corporate governance, a belief that is evidenced by the program operating with limited changes for several years.

The Company, however, recognizes that using a limited number of performance metrics has limitations. For instance, when the overall market for the Company’s products is impacted by extraordinary economic circumstances, it may result in no annual non-equity incentive awards being attainable, even if the Company out-performs its competitors and the overall market generally. Similarly, extraordinary, non-recurring events may also impact whether annual non-equity incentive awards are attained or not, resulting in unintended incentives for management.

For the year 2019, the performance criteria for our annual non-equity incentive award program were as follows:

“Adjusted Operating Margin” – Reported US GAAP EBIT adjusted for costs related to Antitrust matters, restructuring (capacity alignment) and separation costs, in relation to the Company’s net sales, expressed in %. Fifty percent (50%) of the non-equity incentive award was based on Adjusted Operating Margin.

Payments on Adjusted Operating Margin achievement:

 

•

No annual incentive payment if the Adjusted Operating Margin was equal to or less than 9.5%.

 

•

If the Adjusted Operating Margin was equal to or more than 11.5%, the incentive payment would be equal to two times the target amount for the respective performance period, the maximum payout.

 

•

If the Adjusted Operating Margin was between 9.5% and 11.5%, the incentive payment would be calculated through linear interpolation (“along a straight line”) between said levels.

 

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“Adjusted Cash Conversion” – Free cash flow (operating cash flow minus Capex, net) in relation to Net Income (income after tax), both adjusted for antitrust, capacity alignment and spin-off related costs, expressed in %. Fifty percent (50%) of the non-equity incentive award was based on Adjusted Cash Conversion.

Payments on Adjusted Cash Conversion achievement:

 

•

No annual incentive payment if the Adjusted Cash Conversion was equal to or less than 50%.

 

•

If the Adjusted Cash Conversion was equal to or more than 90%, the incentive payment would be equal to two times the target amount for the respective performance period, the maximum payout.

 

•

If the Adjusted Cash Conversion was between 50% and 90%, the incentive payment would be calculated through linear interpolation (“along a straight line”) between said levels.

Actual Adjusted Operating Margin for 2019 was 9.1% and Actual Adjusted Cash Conversion for 2019 was 80.2%, resulting in an annual non-equity incentive award of 75% of the target opportunity.

For a reconciliation of these measures, see Annex A.

Actual Non-Equity Incentive Award Levels

Over the last several years, the amount of the non-equity incentive awards earned by our named executive officers has varied greatly, as reflected in the table below.

 

Actual Pay-Out Annual Non-Equity Incentive Program
Year		Messrs. Bratt, Murray, Hague, Garceau and Lombarte		Messrs. Hanke and Backman
2019(1)		0.75 x target		0.75 x target
2018		0.50 x target		0.50 x target
2017		0.89 x target		1.00 x target

 

(1)	Messrs. Hague and Backman were not employees at the time of the 2019 payout and received no payment.

The Compensation Committee may exercise its discretion, subject to the terms and conditions of the Company’s compensation plans, to propose certain adjustments to performance metrics. The Compensation Committee did not exercise such discretion in 2019.

Changes to Non-Equity Incentive Program. For information regarding the changes we implemented to our Non-Equity Incentive Program in 2020, see “Material Changes to 2020 Compensation Program” later in this CD&A.

Equity Incentives

Long-term equity incentives (LTI) for our named executive officers and other key employees represents a significant part of their total direct compensation. In 2019, the LTI program had 300 participants, compared to 401 participants in 2018 and 374 participants in 2017. The number of 2019 LTI participants decreased as a result of Veoneer’s spin-off from Autoliv.

In 2016 and 2017, the approved target value of our named executive officers’ LTI mix was comprised of PSs (50%) and RSUs (50%). In connection with the spin-off of Veoneer, these awards were converted to Autoliv RSUs and Veoneer RSUs. There were no PSs vesting in 2019 as all outstanding PSs were converted to RSUs during the spin-off in 2018. A reconciliation of the performance conversions from PSs to RSUs were provided as an annex to our proxy statement issued in March 2019.

 

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For 2018, the Compensation Committee only granted RSUs (100%) due to the difficulty of setting performance targets during the year in which the spin-off was completed.

For our executive officers, equity incentives granted in 2019 consist of both PSs (75%) and RSUs (25%). The Compensation Committee determined 2019 grant levels by first reviewing competitive market pay levels and trends provided by its independent consultant, historical grant levels, and the recommendations of our CEO for grants to senior executives excluding himself (for more information, please refer to the “2019 Executive Compensation Decisions” section below). The Compensation Committee also considered the total direct compensation of our named executive officers relative to the median levels of total direct compensation of our peer groups, subject to any modifications the Compensation Committee believed appropriate based on individual performance, industry conditions, and other criteria as discussed in the “Compensation Philosophy” above. The Compensation Committee delegated to the CEO the authority for the determination and allocation of certain grants below our named executive officers, subject to established grant limits and the Compensation Committee’s review.

Restricted Stock Units (“RSUs”). We believe that RSUs provide a powerful tool to retain valuable executives because:

 

•

RSUs are easy to understand and communicate;

 

•

Due to the three-year vesting schedule, RSUs encourage the executive to stay with the Company or forfeit significant accumulated value; and

 

•

RSUs also mitigate excessive risk-taking by focusing management on long-term value creation and ownership accumulation that provides alignment with stockholders.

RSUs granted in 2019 cliff-vest on the third anniversary of the grant date, subject to the grantee’s continued employment with the Company on such vesting date, subject to limited exceptions.

Performance Shares (“PSs”). We believe that PSs focus and direct the efforts of our executives toward the attainment of critical multi-year corporate objectives as well as further encourage employment retention because:

 

•

The performance metrics selected for the PSs are reflected in our long-term value creation; and

 

•

Due to the three-year performance period, PSs parallel the RSUs in encouraging the executive to stay with the Company or forfeit potential significant accumulated value.

PSs granted in 2019 may be earned based on the Company’s achievement of performance goals related to Order Intake Ratio (35%) and EPS Growth in relation to Light Vehicle Production Growth (65%). The Committee believes these metrics are supportive of the Company’s strategic objectives and support the creation of long-term shareholder value.

Treatment Upon Change in Control. The 1997 Plan provides that outstanding equity awards will become fully vested upon the occurrence of a change in control (“CiC”). However, the Compensation Committee approved a “double-trigger” for LTI awards granted in 2019, such that the awards assumed by the acquiring company in a CiC will become fully vested only upon the holder’s subsequent qualifying termination. If the awards are not assumed by the acquiring entity, then they will become fully vested upon the CiC.

Dividend Equivalents. Commencing with the February 2017 grant, dividend equivalent rights were introduced for PSs and RSUs. Any cash dividend paid with respect to our common stock for which the record date occurs on or after the grant date and the payment date occurs on or before the vesting date results in a credit of additional PSs and RSUs, which additional PSs and RSUs are subject to the same vesting schedule as the underlying PSs and RSUs.

How We Value Equity Awards. For accounting purposes and when internally assessing and communicating equity compensation, we use a model which assumes that the value of an RSU and a PS at target performance level is the closing price for a share of our common stock on the NYSE on the day of the grant.

 

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Annual Grant Date. The annual grant date for our stock incentive program is in the first quarter of the fiscal year, following publication of our fourth quarter financial results. This is done to enhance corporate governance procedures and to avoid unintended burdens to participants because of routine “black-out periods.”

Changes to LTI Program. For information regarding the changes we implemented to our Long-Term Incentive Program in 2020, see “Material Changes to 2020 Compensation Program” later in this CD&A.

Pension / Retirement and Other Post-Employment Benefits

Autoliv provides certain supplemental retirement/pension and other post-employment benefits, in addition to the mandatory programs required by applicable national statutes and maintains defined benefit or defined contribution plans for our named executive officers that are competitive with customary local practice. The programs’ terms are as follows:

Defined Contribution Programs (individual retirement investment from Company contributions). Since 2007, all newly hired senior executives participate only in defined contribution plans rather than defined benefit plans (except for certain senior executives that participate in location-specific defined benefit plans, e.g. Mr. Murray and Mr. Hanke).

The Company contributes a percentage of each executive’s annual base salary to the plan, as follows:

 

Retirement – Defined Contribution Level
Name		Level of Contribution
Mikael Bratt		40% of base salary
Mats Backman		35% of base salary
Brad Murray1		See below description about 401(k) plan and “Nonqualified Deferred Compensation” table
Dan Garceau1
Jordi Lombarte1
Michael Hague2

 

(1)	Comprises contributions to both 401(k) and non-qualified contribution plans for Messrs. Murray, Garceau, and Lombarte

 

(2)	Comprises contributions to 401(k) for Mr. Hague.

Messrs. Murray, Garceau, Lombarte and Hague participated in a 401(k) plan available to U.S.-based employees in 2019. Under this plan, the Company makes an employer matching contribution equal to 100% of the first 3%, and then equal to 50% of the next 2% of employee contributions (expressed as percentage of base pay), up to certain limits. Messrs. Murray, Garceau and Lombarte also participated in a non-qualified defined contribution plan. Mr. Hanke does not participate in a defined contribution plan.

Defined Benefits Program. Mr. Murray participates in a U.S. tax-qualified defined benefit plan and an excess pension plan. Additional information regarding these plans is described later under “Pension Benefits. Mr. Hanke participates in a mandatory, multi-employer defined benefit plan (ITP 2) in Sweden. Other than Mr. Murray and Mr. Hanke, none of our named executive officers are parties to a defined benefit arrangement with the Company.

Retiree Medical Plan. Mr. Murray is eligible to participate in a retiree medical plan, available to all employees employed in the U.S. that were hired prior to January 1, 2004, at which time the plan was frozen to new participants. Effective from December 31, 2014, the retirement arrangement was adjusted so that eligible participants, including Mr. Murray, are covered by a Health Retirement Account (“HRA”), pursuant to which, upon attaining age 55 and a minimum of 15 years of service, the Company will provide an annual benefit of $3,000 to an HRA upon retirement prior to age 65 and an annual benefit of $875 to an HRA after age 65. This annual benefit will be reduced if the participant retires prior to age 60. This plan may be terminated at any time for both current employees and current retirees/participants with no obligation of benefit payout.

 

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Termination / Severance Agreements. Except for Messrs. Murray and Hanke, each of our named executive officers has an employment agreement with the Company, pursuant to which they are entitled to certain severance benefits in the event of termination of employment. A detailed summary of the terms of these agreements is provided on page 46 of this Proxy Statement. Mr. Murray has an international assignment agreement that provides certain terms of employment and he had a change-in-control (“CiC”) severance agreement with the Company until January 2020, pursuant to which he was entitled to certain severance benefits in the event of his termination of employment in connection with a CiC.

In December 2010, the Board approved a policy limiting future CiC agreements to a “double-trigger” arrangement, which means that the severance benefit is not provided unless the participant incurs an involuntary termination or diminution of duties within a designated period following a CiC. In addition, in November 2011, the Board approved a policy providing that new hires will receive CiC severance benefits, if at all, in accordance with local market practice, as opposed to all officers receiving the same CiC severance benefits by reason of being an officer. The “change-in-control” definition contained in the 1997 Plan and Mr. Murray’s CiC now expired severance arrangement are predicated on actual consummation of a corporate transaction, such as a merger, rather than upon stockholder approval of the transaction. This avoids an inadvertent “early trigger” of any CiC provisions should the transaction fail to close.

We do not provide tax gross-up protection for CiC excise taxes (i.e., U.S. taxes under Section 4999 of the United States Internal Revenue Code of 1986, as amended (the “U.S. Internal Revenue Code”) applied to change-in-control payments that exceed certain amounts under Section 280G) to our named executive officers.

Executive Compensation Responsibilities

Role of the Compensation Committee

The Compensation Committee annually reviews our named executive officers’ pay levels and target incentive opportunities versus the competitive market and considers information provided by (i) the consultants regarding trends, (ii) input from the Executive Vice President, Human Resources and Sustainability, (iii) the CEO’s recommendations as to compensation for our named executive officers (other than himself), and (iv) other relevant factors as discussed above in the “Compensation Philosophy” section.

Role of the Independent Compensation Committee Consultant

The Compensation Committee regularly engages an independent advisor, who reports directly to the Compensation Committee. The independent advisor attends routine meetings of the Compensation Committee and provides independent perspective and advice to the Compensation Committee on various aspects of the Company’s total compensation system and the market environment in which the Company operates. Additional information regarding the role of the Compensation Committee’s advisor, FW Cook, is found later in this CD&A in the “2019 Executive Compensation Decisions” section.

Role of the Management Consultant

Management periodically solicits the advice of external compensation consultants to ensure that the Company’s compensation program is competitive with compensation programs offered by the companies in its peer group and companies in the markets in which the named executive officers are located. In setting the compensation at the beginning of 2019, Towers Watson assisted management with reviewing the Company’s compensation program for executives, as described in more detail below.

Role of the Chief Executive Officer

Our CEO regularly participates in the meetings of the Compensation Committee. The CEO and Executive Vice President, Human Resources and Sustainability work together to develop a recommendation to present to the Compensation Committee with respect to compensation packages for each of our named executive officers, other than the CEO. As a result, our CEO generally has a significant influence on the compensation paid to the other named executive officers. In addition, the Compensation Committee has delegated the authority for the

 

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determination of certain grants to employees other than executive officers under our long-term incentive plan to the CEO, subject to established grant limits. The Compensation Committee regularly holds executive sessions, excusing the CEO from the meeting, to discuss matters related to the CEO’s compensation.

Policies and Practices that Govern Executive Compensation at Autoliv

Stock Ownership Guidelines. Effective January 1, 2013, and as amended and restated in December 2015, the Company adopted stock ownership guidelines for its executive officers. Pursuant to these guidelines, each executive officer is expected to accumulate and hold shares of Company common stock having a value at least equal to (i) 2x his annual base salary, in the case of the CEO, and (ii) 1x annual base salary, in the case of each executive other than the CEO. Executives are expected to make continuous progress toward their respective ownership requirements. Until the executive has satisfied the stock ownership guidelines, he or she will be required to retain 75% of the net shares received upon settlement of restricted stock units granted on or after January 1, 2013. For purposes of these stock ownership guidelines, “net shares” are those shares held by the executive after deducting any shares withheld by the Company or sold by the executive for the sole purpose of satisfying the executive’s tax liabilities and related fees, if any, related to the settlement event.

Policy Against Hedging, Short-Selling and Pledging. Any employee or non-employee director holding Autoliv securities is prohibited from engaging in hedging, short-selling, or pledging.

Compensation Recoupment Policy. Our Board is authorized to recoup earned incentive compensation in the event of a material restatement of the Company’s financial results due to fraud, intentional misconduct, negligence, or dereliction of duties by the executive officer. It is also authorized to recoup equity compensation in the event an executive is found acting in a manner that is harmful to the interests of the Company such as a violation of Company policy.

Compensation Risk Assessment

The Compensation Committee annually considers potential risks when reviewing and approving our compensation program. We have designed our compensation program, including our incentive compensation plans, with specific features to address potential risks while rewarding employees for achieving long-term financial and strategic objectives through prudent business judgment and appropriate risk taking. The following elements have been incorporated in our compensation program for executive officers:

 

•

A Balanced Mix of Compensation Components – The target compensation-mix for our executive officers is composed of base salary, annual cash incentives, long-term equity incentives and retirement/pension provisions, representing a mix that is not overly weighted toward short-term cash incentives.

 

•

Long-term Incentives – Our long-term incentives are equity-based and generally have a three-year vesting schedule to complement our annual cash-based incentives. In 2019, the Company increased the weight for performance shares to 75% and reduced the weight for RSUs to 25% for all executive and senior management roles.

 

•

Performance Factors – Our group-common incentive compensation plans normally use Company-wide goals. Annual cash incentives for participants in 2019 depended on Operating Income Margin and Cash Conversion performance. Performance shares for the program introduced in 2019 depended on the Company’s Order Intake Ratio and EPS Growth (in relation to global light vehicle production growth)

 

•

Capped Incentive Awards – Annual incentive awards are capped at 200% of target.

 

•

Stock Ownership Guidelines – Our guidelines call for meaningful share ownership, which aligns the interests of our executive officers with the long-term interests of our stockholders.

 

•

Clawback Policy – Our Board is authorized to recoup earned incentive compensation in the event of a material restatement of the Company’s financial results due to fraud, intentional misconduct, negligence, or dereliction of duties by the executive officer.

Additionally, the Compensation Committee annually considers an assessment of compensation-related risks including an inventory of incentive arrangements below the executive level. Based on this assessment, the

 

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Compensation Committee concluded that our compensation program does not create risks that are reasonably likely to have a material adverse effect on Autoliv. In making this determination, the Compensation Committee reviewed the key design elements of our compensation program in relation to industry “best practices” as presented by FW Cook, the Compensation Committee’s independent compensation consultant, as well as the means by which any potential risks may be mitigated, such as through our internal controls and oversight by management and the Board of Directors.

Starting in 2019, to mitigate potential compensation-related risk, the Company began requiring double-trigger acceleration of unvested equity in the event of a covered termination following a change in control, instead of the previous single-trigger acceleration.

2019 Executive Compensation Decisions

The Process

The total compensation of our named executive officers is reviewed annually. The Compensation Committee considers changes in the compensation levels after it reviews the relevant peer group or local market data (per position). The Compensation Committee uses this information as one input in its decision-making process. In addition to market data, the Compensation Committee also reviews the Company’s financial performance, the named executive officers’ individual performance, input from the Executive Vice President, Human Resources, and the recommendations of the CEO with respect to the compensation packages for the named executive officers other than himself. The Compensation Committee reviews, provides feedback, and approves the final recommendations for the compensation of our named executive officers.

The Compensation Committee reviewed and decided on the 2019 compensation for our executives during its meeting held in December 2018. The review was supported by the comprehensive analysis and market review prepared by Towers Watson.

The Advisors

Throughout the decision-making process for 2019 compensation, which included the Compensation Committee’s December 2018 meeting and all 2019 meetings, the Compensation Committee engaged FW Cook who reported directly to the Compensation Committee. During 2019, FW Cook attended most of the Compensation Committee’s meetings and provided input for each meeting, including:

 

(i)

independent perspective and advice to the Compensation Committee on various aspects of the Company’s total compensation system;

 

(ii)

information about the market environments in which the Company operates, including guidance regarding compensation trends, compensation levels and compensation mix within the market;

 

(iii)

the regulatory developments in executive and director compensation;

 

(iv)

recommendations regarding program design and structure; and

 

(v)

recommendations regarding compensation levels and mix for our executive officers and Board members.

FW Cook did not provide any additional services to the Company other than those described herein.

In 2018, the Company engaged Towers Watson to assist in setting the compensation for 2019. At the direction of management, Towers Watson was assigned specific tasks related to the compensation of our senior executive officers, including: (i) review of peer group and pay changes in the 2018 employment market, (ii) compilation of peer groups for our named executive officers, and (iii) compensation analysis for the Compensation Committee.

 

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The Peer Groups

In line with the principles of our compensation philosophy applicable as of December 2018 for the compensation review of our named executive officers, the Compensation Committee reviewed the most current compensation data available in selected markets, including market data from Sweden and the U.S. Towers Watson used its proprietary non-disclosed compensation database to assess local market compensation levels for executive roles operating within the general, automotive, and manufacturing industries. Such market assessments are based on our named executive officers’ roles, characteristics, and responsibilities including job function, reporting level, and other organizational financial and organizational scope measures, including revenue responsibility, employees, and geographical responsibility. The market data contained information regarding the assessed level of base salary, total cash compensation, total direct compensation, and total compensation.

Swedish Peer Group

Messrs. Bratt and Backman. In considering 2019 compensation for our named executive officers based in Sweden, the Compensation Committee reviewed, among other factors, market data (base salary, total target cash compensation, total direct compensation, and total compensation) from a peer group consisting of large-cap Swedish companies that have global industrial operations of substantial size in major manufacturing markets of North America, Europe, and Asia (the “Swedish Peer Group”) headquartered in Sweden and with executives based in Sweden with Swedish employment conditions. The Swedish Peer Group used by the Compensation Committee in connection with its review of 2019 compensation consisted of the following companies:

 

AB Volvo		Alfa Laval		Assa Abloy		Atlas Copco		Electrolux		Ericsson
Sandvik		Scania		Skanska		SKF		SSAB		Stora Enso

Two companies were removed from the Swedish Peer Group for 2019 as compared to 2018 because of the lack of data availability: Husqvarna and Volvo Car Group (a subsidiary of Zhejiang Geely Holding).

U.S. Peer Group

Mr. Murray, Garceau and Lombarte. In considering 2019 compensation for our named executive officers based in the U.S., the Compensation Committee reviewed, among other factors, market data (base salary, total target cash compensation, total direct compensation, and total compensation) from a peer group consisting of U.S. companies that were selected based on market capitalization, total revenue, and number of employees.

Our U.S. Peer Group was changed by the Committee significantly before the 2019 compensation review following a comprehensive review of companies based on data availability, relevancy, and size.

The following is the U.S. Peer Group used by the Compensation Committee to review 2019 compensation.

 

BorgWarner Inc.

Continental AG

Cooper-Standard Holdings

Dana Incorporated

DENSO Corporation

Goodyear Tire & Rubber

Ingersoll-Rand PLC

Jabil Inc.

Johnson Controls International PLC

Lear Corporation

Oshkosh Corporation

Parker-Hannifin Corporation

Snap-on Incorporated

SPX Corporation

Stanley Black&Decker, Inc.

Tenneco Inc.

Terex Corporation

The Timken Company

Trinity Industries, Inc.

YAZAKI Corporation

ZF TRW Automotive Corp.

Companies in bold above are new additions to the peer group compared to the 2018 U.S. Peer Group.

Note: The following eleven (11) companies included in the 2018 U.S. Peer Group were removed when creating the 2019 U.S. Peer Group for the reasons noted above: Faurecia S.A., Eaton Corporation, Whirlpool Corporation, Northrop Grumman

 

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Corporation, Textron Inc., L3 Technologies Inc., Harman International, Rockwell Collins Inc., Rockwell Automation Inc., Spirit AeroSystems Holdings, Harris Corporation.

Compensation Benchmarking for Divisional Presidents Not Based in Sweden or USA

In considering 2019 compensation for Mr. Hague, the Compensation Committee considered information provided by Towers Watson about German executive pay levels in relevant companies in general industry survey data.

Decisions for 2019 Compensation

The following section of this CD&A focuses on the decisions linked to compensation paid to our named executive officers for 2019.

The Compensation Committee reviews the compensation for the executives taking into consideration internal, external, and personal factors, including, but not limited to, the current market position of each respective named executive officer. Although the market analysis provides additional input for compensation decisions, the Company is aware that the limited number of peer companies in Sweden and potential changes to peer groups based on data availability may result in inconsistencies in a year-over-year analysis.

Mikael Bratt. As compared to 2018, Mr. Bratt’s:

 

•

base salary increased by 5.0% (in Swedish Kronor);

 

•

target non-equity incentive level (as % of base salary) and the associated cap remained unchanged;

 

•

approved grant value for stock incentive program participation increased by 10%; and

 

•

retirement plan contribution level (as % of base salary) remained unchanged.

Brad Murray. As compared to 2018, Mr. Murray’s:

 

•

base salary (which includes an international assignment allowance) increased by 0.5% (in USD);

 

•

target non-equity incentive level (as % of base salary) and the associated cap remained unchanged;

 

•

approved grant value for stock incentive program participation remained unchanged (in USD); and

 

•

retirement plan contributions and defined benefit plan components remained unchanged.

In addition to the annual compensation review described above, Mr. Murray signed an employment agreement addendum with the Company as of April 24, 2019. Further details about his employment agreement addendum are described under the section “Additional 2019 and 2020 Compensation Decisions”.

Mr. Murray also signed a new international assignment agreement with the company on January 23, 2020. Further details about his new international assignment agreement are described under the section “Additional 2019 and 2020 Compensation Decisions”.

Dan Garceau. As compared to 2018, Mr. Garceau’s:

 

•

base salary increased by 3.0% (in USD);

 

•

target non-equity incentive level (as % of base salary) and the associated cap remained unchanged;

 

•

approved grant value for stock incentive program participation remained unchanged (in USD); and

 

•

retirement plan contributions remained unchanged.

Jordi Lombarte. As compared to 2018, Mr. Lombarte’s:

 

•

base salary increased by 3.0% (in USD);

 

•

target non-equity incentive level (as % of base salary) and the associated cap remained unchanged;

 

•

approved grant value for stock incentive program participation remained unchanged (in USD); and

 

•

retirement plan contributions remained unchanged.

 

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Michael Hague. As compared to 2018, Mr. Hague’s:

 

•

base salary increased by 2.0% (in USD);

 

•

target non-equity incentive level (as % of base salary) and the associated cap remained unchanged;

 

•

approved grant value for stock incentive program participation remained unchanged (in USD); and

 

•

retirement plan contributions remained unchanged.

Mr. Hague signed a Mutual Separation Agreement with the Company as of July 1, 2019. Further details about the conditions of his separation agreement are described under the section “Potential Payments Upon Termination and Change in Control”.

Mats Backman. Mr. Backman’s resignation was effective February 2019; accordingly, the Compensation Committee did not make any adjustments to Mr. Backman’s compensation in 2019.

Christian Hanke. Mr. Hanke was not an executive officer at the time of the Compensation Committee’s December 2018 compensation review and, accordingly, was not included in its compensation review by the Compensation Committee. His 2019 compensation was determined within the senior management compensation review process. The Compensation Committee reviewed his compensation at the time of his assignment as Interim CFO and made limited adjustments to the compensation at that time, as described in “Additional 2019 and 2020 Compensation Decisions”.

2019 Additional Benefits

The Company’s executive compensation program also includes certain retirement / pension benefits (see page 44 of this Proxy Statement) and certain other items of compensation, such as a company car. The Compensation Committee believes these benefits are appropriate for each of our named executive officers.

Additional 2019 and 2020 Compensation Decisions

Mr. Hanke’s Temporary Compensation Arrangements as Interim CFO

As described above, in connection with his assignment as Interim Chief Financial Officer, effective March 1, 2019, the Compensation Committee approved an additional temporary cash allowance equivalent to 50% of his base salary on a monthly basis. The allowance was considered to be a part of his base salary for the purposes of calculating his annual non-equity incentive payment which payment was pro-rated for the period of time during which he served as Interim CFO. All other terms and conditions of Mr. Hanke’s agreement remained unchanged.

Mr. Murray’s International Assignment Agreement Addendum

On April 24, 2019, Mr. Murray signed an addendum to his existing temporary international assignment agreement (that would automatically cease as of March 31, 2020 unless extended by mutual agreement). The addendum included a retention arrangement that provided that all of his outstanding stock incentive grants would be forfeited, but an equivalent lump-sum payment would be made at the end of the assignment period, unless his employment was terminated for cause. All other terms and conditions of Mr. Murray’s agreement remained unchanged.

Mr. Murray’s International Assignment Agreement

On January 23, 2020, Mr. Murray signed a new international assignment agreement, pursuant to which he agreed to remain employed by the Company through December 31, 2020. The agreement included the following clauses to encourage the retention of Mr. Murray until the end of the assignment period:

 

•

Mr. Murray will continue to be based in Japan until the end of the assignment.

 

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•

He will continue to be eligible for his base salary, international assignment allowance, short-term incentive for 2020, long-term incentive grant in 2020, his existing retirement and pension solutions, international assignment benefits and tax equalization according to the company’s international assignment policies.

 

•

If Mr. Murray’s employment is terminated for any reason other than for cause , then any RSUs and PSUs granted to him in February 2018 and February 2019 that remain outstanding as of the date of termination will be cancelled and he will receive: (i) a lump sum cash payment equivalent to the value of forfeited RSUs, calculated based on the Company’s share price on the date of termination (the “RSU Cash Payment”); and (ii) a lump sum cash payment equivalent to the value of the forfeited PSUs, if any, calculated based on the Company’s share price on the original vesting date and based on actual performance results. If Mr. Murray’s employment is terminated at the end of the assignment period, then any RSUs and PSUs granted to Mr. Murray in February 2020 that remain outstanding as of the date of termination will be forfeited and he will receive the RSU Cash Payment and PSU Cash Payment in respect thereof. In addition, for a period of 12 months following Mr. Murray’s termination of employment for any reason, the Company will subsidize Mr. Murray’s medical and dental benefits provided to local employees in the U.S. by continuing to pay the employer-portion of the premium costs.

 

•

Mr. Murray is prohibited from competing with the Company for a period of 12 months following his termination of employment for any reason other than a termination by the Company without cause. If the non-competition covenant becomes operative, then the Company will pay to Mr. Murray up to a maximum of 60% of his salary as consideration for such covenant.

 

•

The Change-in-Control Severance Agreement dated August 15, 1999, amended December 15, 2008 terminated and is void.

 

•

The agreement preserves Mr. Murray’s previously-agreed upon retention payment of $800,000, pursuant to the original terms and conditions thereof.

Mr. Westin’s Employment Agreement

Mr. Westin entered into an employment agreement with the Company effective March 1, 2020 or an earlier date to be agreed upon by the parties (the “Agreement”), which provides for the following key compensation and benefits:

 

•

annual base salary of 5,500,000 SEK (i.e. approx. $590,000);

 

•

target non-equity incentive award equal to 45% of base salary, subject to achievement of applicable performance goals;

 

•

participation in LTI program commencing in 2020, with an initial maximum grant date value of $208,333; and

 

•

participation in the Swedish pension scheme and private health insurance program, provision of a company car, and certain other perquisite and benefit programs on the same basis as similarly situated senior executives.

Mr. Westin will receive a 1,000,000 SEK (i.e. approx. $107,000) sign-on cash award payable within one month following his commencement of employment. He will also receive, on his first day of employment, a sign-on award of RSUs (“Sign-on RSUs”) having a grant date value of 4,000,000 SEK (i.e. approx. $429,000), which Sign-on RSUs will vest in three equal installments over the three-year period following the grant. The Sign-on RSUs will be granted in addition to the annual LTI award described above.

In addition, upon a qualifying termination of Mr. Westin’s employment (which includes an involuntary termination without cause or a resignation by him for “good reason”), he is entitled to receive a lump sum severance payment equal to 1.5 times his base salary, subject to Mr. Westin’s entry into a settlement agreement, which shall include, for example, a general release of claims, non-competition provision, and other covenants.

Results of Say-on-Pay

At our 2019 annual meeting of stockholders held on May 7, 2019, approximately 83.9% of the stockholders who voted on the “say-on-pay” proposal approved the compensation of our named executive officers,

 

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while approximately 13.9% voted against (with approximately 2.2% abstaining). In considering the results of this most recent advisory vote on executive compensation, the Compensation Committee concluded that the stockholder vote continues to reflect favorable stockholder support of the compensation paid to our named executive officers and the compensation philosophy and objectives of the Company.

At the annual meeting of stockholders on May 9, 2017, our stockholders expressed a preference that advisory votes on executive compensation occur every year. In accordance with the results of this vote, the Board determined to implement an advisory vote on executive compensation every year until the next required vote on the frequency of stockholder votes on the compensation of executives, which will occur at the 2023 annual meeting.

Material Changes to 2020 Compensation Program

 

•

Autoliv’s non-equity incentive program for 2020 will be based 50% on the Company’s Adjusted Operating Income (in USD) and 50% on the Company’s Adjusted Cash Conversion (in %).

 

•

Named executive officers and certain other senior officers received 75% of their 2020 LTI grant value in performance shares and 25% in RSUs that cliff vest on the third anniversary of the grant subject to the officer’s continued employment. 70% of the 2020 performance shares may be earned based on achievement of goals related to the Company’s EPS Growth in relation to Light Vehicle Production Growth and 30% may be earned based on achievement of goals related to the Company’s Order Intake Ratio (in %). Order Intake Ratio is the projected sales for the lifetime of each program awarded to Autoliv in relation to projected sales available for award in the market.

Currencies for Executive Compensation

The Company generally sets cash-based compensation (including for all our named executive officers) in the local currency of the country of service with limited exceptions. Accordingly, the Company set compensation in Swedish kronor (“SEK”) for Messrs. Bratt, Hanke and Backman, and in U.S. dollars (“USD”) for Messrs. Murray, Garceau, Hague and Lombarte, except for the annual target grant value of the LTI awards for which the compensation is set in USD for all our named executive officers. For historic numbers, we have converted the compensation paid in prior years by the same exchange rate we applied for 2019 compensation to facilitate comparison. While the historic amounts paid do not change, amounts reflecting historic figures in this Proxy Statement may differ significantly from disclosure in previous years due to fluctuations in exchange rates. We also note that the exchange rate prevailing at the time of the Compensation Committee’s review of compensation may vary significantly from the exchange rates prevailing at the time this Proxy Statement is prepared. As a result, the year-to-year percentage changes in compensation reviewed and approved by the Compensation Committee may differ significantly from the percentage changes in compensation presented in this Proxy Statement due to fluctuations in exchange rates.

 

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Summary Compensation Table (1)

The following table shows information concerning the annual compensation for services provided by our named executive officers in the fiscal years ended December 31 in the periods 2017, 2018 and 2019.

 

Name and Principal Position		Year				Salary $		Bonus $				Stock Awards $ (2)				Non-Equity Incentive Plan Compensation $				Change in Pension Value and Nonqualified Deferred Compensation Earnings $ (3)		All Other Compensation $ (4)		Total ($)
Mikael Bratt(6) President and CEO			2019			1,041,649(5)			-				550,035				380,349			-		427,147		2,399,180
			2018			843,418			-				371,289				155,211			-		335,581		1,705,499
			2017			669,736			-				371,392				268,229			-		263,498		1,572,856
Christian Hanke(6) Interim CFO; VP Corporate Control			2019			265,615(5)			-				79,169				49,333			-		76,621		470,737
Mats Backman Former CFO, Executive VP Finance			2019			214,444(5)			-				-				-			-		38,300		252,744
			2018			603,656			-				371,289				135,823			-		533,686		1,644,453
			2017			580,438			-				371,392				261,197			-		221,484		1,434,511
Brad Murray(6) President, Asia			2019			418,240			-				199,956				141,156			671,700		1,370,852		2,801,903
			2018			414,099			-				141,504				86,661			155,900		494,329		1,292,493
Dan Garceau(6) Former President, Americas			2019			517,202			-				199,956				174,556			-		82,329		974,043
			2018			492,109			-				125,040				84,494			-		85,389		787,032
Jordi Lombarte(6) Executive Vice President, Chief Technology Officer			2019			442,900			-				199,956				116,261			-		180,746		939,863
Michael Hague(6) Former President, Europe			2019			559,627(5)			-				199,956				-			-		1,200,923		1,960,506
			2018			504,858			-				125,040				93,189			-		347,391		1,070,479

 

(1)

The amounts contained in the table were paid in SEK, USD, EUR and JPY. All amounts have been converted to U.S. dollars using the following exchange rates: 1 USD = 9.3171 SEK = 0.8930 EUR = 109.2018 JPY. Amounts are rounded to the nearest whole number and, as a result of such rounding, the amounts reflected in the “Total” column may differ slightly from the sum of amounts set forth in each individual column.

 

(2)

The numbers reflect the aggregate grant date fair value of the RSUs granted in each respective year and the PSs granted in 2017 and 2019, calculated in accordance with FASB Topic 718 for 2017 and 2019. The fair value of the RSUs granted in 2017, 2018 and 2019 and PSs granted in 2017 and 2019 was calculated based on the closing price per share of stock on the grant date. The grant date fair value of the PSs was computed by multiplying (i) the target number of PSs awarded to each named executive officer, which was the assumed probable outcome as of the grant date, by (ii) the grant date fair value per share used for financial reporting purposes. Assuming, instead, that the highest level of performance conditions would be achieved, the grant date fair values of the PSs would have been as follows: (i) 2017: Mr. Bratt ($371,392); $; Mr. Backman ($371,392), and (ii) 2019: Mr. Bratt ($825,053); Mr. Hanke ($118,753); Mr. Murray ($299,934); Mr. Garceau ($299,934); Mr. Lombarte ($299,934); and Mr. Hague ($299,934).

 

(3)

All amounts relate to Change in Pension Value as used for accounting purposes according to U.S. GAAP.

 

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(4)

The following table reflects the items that are included in the All Other Compensation column for 2019.

 

2019 All Other Compensation
Name		Perquisites $ (a)		Company Contributions to Defined Contribution Plans $ (b)		Tax Payment $ (c)		Vacation Supplement $ (d)		Other allowances / payments $ (e)		Severance $ (f)		TOTAL $
Mikael Bratt		12,715		405,706		0		8,726		0		0			427,147
Christian Hanke		2,339		72,490		0		1,792		0		0			76,621
Mats Backman		1,879		35,213		0		1,207		0		0			38,300
Brad Murray		241,683		34,616		872,434		0		222,119		0			1,370,852
Dan Garceau		42,186		40,144		0		0		0		0			82,329
Jordi Lombarte		144,682		36,063		0		0		0		0			180,746
Michael Hague		80,499		11,200		166,591		0		127,894		814,740			1,200,923

 

a.

For Messrs. Bratt, Hanke and Backman, reflects the value of a company car, fuel, parking, and company-paid healthcare benefits. For Mr. Murray, reflects the value of a company car, fuel, company-paid healthcare benefits, home leave airline tickets ($42,681), and company paid housing and utilities ($169,371). For Mr. Garceau, reflects an auto allowance ($25,200), fuel and company-paid healthcare benefits. For Mr. Lombarte, reflects an auto allowance ($25,200), Company-provided housing ($85,578) (which benefit will not be continued beyond August 2020), home leave airline tickets, fuel and company-paid healthcare benefits. For Mr. Hague. reflects the value of a company car, fuel, Company-paid housing and utilities ($45,626), language lessons, and company-paid healthcare benefits. For all perquisites, the value reported reflects the aggregate incremental cost to the Company of providing the benefit. The Company determined the cost of the company car based on the value of the lease payment/amortization or car allowance paid, as applicable.

 

b.

Reflects for Messrs. Bratt and Backman contributions to the named executive officer’s defined contribution plans in Sweden. Reflects for Mr. Hanke premiums paid in to his pension plan in Sweden. Reflects for Mr. Murray matching contributions to the U.S. 401(k) plan and $23,416 matching contributions to the Autoliv North America Non-Qualified Retirement Plan. Reflects for Mr. Garceau matching contributions to the U.S. 401(k) plan and $28,944 in matching contributions to the Autoliv North America Non-Qualified Retirement Plan. Reflects for Mr. Hague matching contributions to the U.S. 401(k) plan. Reflects for Mr. Lombarte matching contributions to the U.S. 401(k) plan and $24,786 in matching contributions to the Autoliv North America Non-Qualified Retirement Plan. Reflects for Mr. Hague matching contributions to the U.S. 401(k) plan.

 

c.

Per the terms of the Company’s international assignment policies and respective agreements for Messrs. Murray and Hague, they are entitled to tax equalization benefits whereby the Company will cover the difference between (i) a hypothetical home country tax and (ii) worldwide actual taxes. Reflects for Mr. Murray tax gross-up payments on the 2019 benefits related to his international assignment to Japan ($20,957) and the tax equalization payment related to compensation earned in 2018 ($851,477). Reflects for Mr. Hague tax gross-up payments related to his 2019 income and benefits related to his international assignment to Germany ($35,231) and the tax equalization payment related to compensation earned in 2018 ($131,360). Tax equalization ensures that the tax costs incurred by Mr. Murray and Mr. Hague on the international assignment are equivalent to what the tax costs would have been had each remained in the U.S. The tax equalization amounts were not paid to these officers but were paid directly to the appropriate tax authorities. The tax equalization payments for 2019 compensation were not final or paid at the time of the filing last year’s Proxy Statement. In reporting compensation for Mr. Murray and Hague in our proxy statement filed in March 2019, the tax equalization values for 2017 compensation were not included as they were not NEOs in 2017. Messrs. Murray and Hague first became NEOs with respect to calendar year 2018. For this reason, this one-year delay in availability of tax equalization amounts created a big difference in reported total compensation levels for 2018 and 2019.

 

d.

Reflects the vacation supplement required by Swedish labor law.

 

e.

Reflects for Mr. Murray a net foreign service allowance pursuant to his international assignment agreement. Reflects for Mr. Hague a cash allowance contractually paid to him as 25% of his base salary in lieu of retirement contributions.

 

f.

Reflects a lump sum severance payment equal to 18 months’ base salary.

 

(5)

Includes payment of unused vacation days for Mr. Bratt ($27,385), Mr. Hanke ($2,507), Mr. Backman ($117,548), and Mr. Hague ($48,049). For Mr. Hanke also includes his allowance as acting EVP Finance and CFO described above.

 

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(6)

Messrs. Murray, Garceau and Hague were not named executive officers in 2017. Messrs. Hanke and Lombarte were not named executive officers in either 2017 or 2018. Messrs. Bratt, Murray, Garceau and Hague all entered into new roles during 2018; as a result, their total 2018 compensation reflects compensation for a partial year of service in their current roles. The increase in total compensation from 2018 to 2019 reflects, in part, the fact that they had only served in their current role for part of 2018, as compared to compensation for service in their current role for a full year in 2019.

2019 Grants of Plan-Based Awards Table

The following table summarizes grants of plan-based awards to named executive officers made in the year ended December 31, 2019.

 

						Estimated Possible Payouts under Non-Equity Incentive Plan Awards												Estimated Possible Payouts under Equity Incentive Plan Awards (1)												All Other Stock Awards: Number of Shares of Stock or Units (#)(2)				Grant date Fair Value of Stock Awards ($)
		Grant Date				Threshold ($)				Target ($)				Maximum ($)				Threshold (#)				Target (#)				Maximum (#)
Mikael Bratt			02/18/2019				-				-				-				-				5,273				10,546				-				412,507
			02/18/2019				-				-				-				-				-				-				1,758				137,528
							-				507,132				1,014,264				-				-				-				-				-
Christian Hanke			02/18/2019				-				-				-				-				759				1,518				-				59,377
			02/18/2019				-				-				-				-				-				-				253				19,792
							-				65,777				131,554				-				-				-				-				-
Brad Murray			02/18/2019				-				-				-				-				1,917				3,834				-				149,967
			02/18/2019				-				-				-				-				-				-				639				49,989
							-				188,208				376,416				-				-				-				-				-
Dan Garceau			02/18/2019				-				-				-				-				1,917				3,834				-				149,967
			02/18/2019				-				-				-				-				-				-				639				49,989
							-				232,741				465,482				-				-				-				-				-
Jordi Lombarte			02/18/2019				-				-				-				-				1,917				3,834				-				149,967
			02/18/2019				-				-				-				-				-				-				639				49,989
							-				155,015				310,030				-				-				-				-				-
Michael Hague			02/18/2019				-				-				-				-				1,917				3,834				-				149,967
			02/18/2019				-				-				-				-				-				-				639				49,989
							-				224,054				448,107				-				-				-				-				-

 

(1)

Reflects RSUs granted in 2019 under our 1997 Plan.

 

(2)

Reflects PSs granted in 2019 under our 1997 Plan.

 

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