Corporate Governance
Autoliv is an American company incorporated under the laws of the State of
Delaware.
In addition to Federal or State law or regulations, Autoliv is governed
primarily by the following documents that are all available on Autoliv's website
(www.autoliv.com under Governance).
The Certificate of Incorporation contains stipulations regarding such things as the total number of shares, the types of shares, and the powers of the Company and its directors. The By-laws focus on the organizational structure of the Company, including the Shareholders' Meeting, the Board and the Executive officers.
Shareholders' meeting
The Shareholders' Meeting elects the Board of Directors. Shareholders also
adopted, in 1997, the Autoliv Inc. Stock Incentive Plan. (Further information
about the Plan is disclosed in the Proxy Statement).
At the Shareholders' Meeting each shareholder is entitled to one
vote for each share of common stock. Shareholders can vote by sending proxy
cards to the Company.
Only such business shall be conducted at a Meeting that has been
properly brought before the Meeting.
The board
The Board of Directors is the ultimate decision-making body of Autoliv, except
with respect to matters reserved to shareholders. The Board is entrusted with,
and responsible for, overseeing the assets and business affairs of the Company.
To assist the Board in the exercise of its responsibilities, it
adopted in 2003 Corporate Governance Guidelines which reflect its commitment
to monitor the effectiveness of policy and decision making both at the Board
and management level. The purpose is to enhance long-term shareholder value
and to assure the vitality of Autoliv for its customers, employees and other
individuals and organizations that depend on the Company.
To achieve this purpose, the Board monitors the performance of the
Company in relation to its goals, strategy, competitors, etc., and the performance
of the Chief Executive Officer (CEO) and provides constructive advice and feedback.
The Board is free to choose its Chairman in a way that it deems
best for the Company, and hence does not require the separation of the officer
of the Chairman of the Board and the CEO as is the case today.
The Board has full access to Management and to Autoliv's outside
advisors.
The work of the Board is reported annually in the Proxy Statement
that is distributed to the shareholders with this annual report.
According to the Certificate of Incorporation the number of directors
may be fixed from time to time exclusively by the Board, and the directors are
divided into three classes for terms of three years. The Board believes that
it should generally have no fewer than nine and no more than twelve directors.
Directors
Directors are expected to spend the time and effort necessary to properly discharge
their responsibilities, and accordingly, regularly attend meetings of the Board
and committees on which directors sit. Directors are also expected to attend
the Annual General Meetings of Shareholders.
The Board is responsible for nominating members for election to
the Board and for filling vacancies on the Board that may occur between annual
meetings of shareholders.
The Nominating and Corporate Governance Committee is responsible
for identifying, screening and recommending candidates to the Board. The Committee
will consider director candidates nominated by shareholders.
Nominees for director are selected on the basis of i.a. experience,
knowledge, skill, expertise, integrity, understanding of Autoliv's business
environment and willingness to devote adequate time and effort to the Board.
The Board must be comprised of a majority of directors who qualify
as independent under the listing standards of the New York Stock Exchange. Normally
no more than one management executive may serve on the Board. Currently, all
directors are independent except for the CEO.
On an annual basis, the Board reviews the relations that each director
has with the Company to assess independence. Directors who are also employees
of Autoliv are generally expected to resign from the Board at the same time
as their employment with the Company ends.
It is the general policy of Autoliv that no director having attained
the age of 70 years may be nominated for re-election to the Board.
New directors are provided information about Autoliv's business
and operations, strategic plans, significant financial, accounting and risk
management issues, compliance programs and various codes and guidelines. Each
new director will normally visit Company operations.
Board Compensation
A director who is also an officer of the Company shall not receive additional
compensation for service as a director. Compensation for non- employee directors
should be competitive and encourage increased ownership of Autoliv stock through
the payment of a portion of director compensation in Autoliv shares.
Current Board compensation is disclosed in Autoliv's Proxy Statement
together with the compensation to the five most highly compensated senior executives.
Directors' fees are the only compensation that the members of the Audit Committee
can receive from Autoliv.
The Nominating and Corporate Governance Committee sponsors an annual
self-assessment of the Board's performance as well as the performance of each
committee of the Board. The results of such assessments are discussed with the
full Board and each committee.
Board Meetings
There must be five regularly scheduled meetings of the Board each year, and
at least one regularly scheduled meeting of the Board must be held quarterly.
The meetings of the Board generally follow a Master Agenda which
is discussed and agreed in the beginning of each year, but any director is free
to raise any other subjects.
The independent directors normally meet in executive sessions in
conjunction with each meeting of the Board and shall meet at least four times
a year. The lead independent Director is presently the Chairman of the Board.
Normally the Board visits one or several of the Company's business
operations at least once a year.
Committee matters
There are three standing committees of the Board: Audit Committee, Compensation
Committee, and Nominating and Corporate Governance Committee.
All members of the standing board committees are determined by the
Board to qualify as independent directors. The committees operate under written
charters and issue yearly reports that are disclosed in the Proxy Statement.
Audit Committee
The Audit Committee appoints, in its sole discretion (subject to shareholder
ratification), the firm of independent auditors that audit the annual financial
statements. The committee is also responsible for the compensation, retention
and oversight of the work of the external auditors as well as for any special
assignments given to the auditors.
The committee also reviews the annual audit and its scope, including
the independent auditors' letter of comments and management's responses thereto;
possible violations of Autoliv's business ethics and conflicts of interest policies;
any major accounting changes made or contemplated; and the effectiveness and
efficiency of Autoliv's internal audit staff. In addition, the committee confirms
that no restrictions have been imposed by Company personnel in terms of the
scope of the independent auditors' examinations. Members of this committee are
Messrs. Welin (Chairman), Aronson, Carlsson, Kunerth, Lorch and Stewart. Each
of the Audit Committee members possesses financial literacy and accounting or
related financial management expertise, and Mr. Welin is determined by the Board
to qualify as a financial expert.
Compensation Committee
The Compensation Committee advises the Board with respect to the compensation
to be paid to the directors and approves and advises the Board with respect
to the terms of contracts to be entered into with the senior executives. The
Committee also administers Autoliv's incentive plans.
Members of this committee are Messrs. Stone (Chairman), Aronson,
Medina, Ringler, Stewart and Welin.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee assist the Board in identifying
potential candidates to the Board, reviewing the composition of the Board and
its committees, monitoring a process to assess Board effectiveness and developing
and implementing Autoliv's Corporate Governance Guidelines.
The 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.
Members of this committee are Messrs. Stewart (Chairman), Aronson,
Carlsson, Kunerth, Lorch, Medina, Ringler, Sekiya, Stone and Welin.
Leadership development
The Board is responsible for identifying potential candidates for, and selecting
the CEO.
The Board is also responsible for an annual performance review of
the CEO, and a summary report is discussed amongst independent directors in
executive sessions and thereafter with the CEO.
The Board must plan for the succession to the position of the CEO
and be assisted by the CEO who shall prepare and distribute to the Board an
annual report on succession planning for senior officers.
The Board must determine that satisfactory systems are in effect
for education, development and succession of senior and mid-level management.
Shareholders rights plan
The Autoliv Board adopted a Shareholder Rights Plan in 1997 to defer concise
take-over tactics and to encourage third parties interested in acquiring the
Company to negotiate with the Board to preserve the best interest of all Company
stockholders.
Each share carries a right to buy one-hundredth of a share of preferred
stock of the Company for $150 subject to adjustment. The right is exercisable
only if a person acquires beneficial ownership of 15% or more of the Company's
common stock or commence a tender or exchange offer in order to acquire such
ownership.
In such an event, each right entitles the holder to purchase, at
the right's then current exercise price, Autoliv common stock having a value
of twice the right's then current exercise price.
The rights will not be exercisable if a tender or exchange offer
for all outstanding shares of the Company is deemed by a majority of the Board
of Directors not affiliated with the acquirer to be in the interest of Autoliv
and its shareholders. The Company will generally be entitled to redeem the rights
at $0.01 per right at any time until 10 business days following a public announcement
that a 15% or greater position has been acquired.
The rights will expire on December 4, 2007.
Ethical codes
To maintain the highest legal and ethical standards, the Board has adopted
three Codes of Business Conduct and Ethics. Two of them are specific for senior
officers and directors, respectively, while the third code is general for all
employees.
Employees are encouraged to report any violations of law or the
Autoliv Codes, and no individual will suffer retaliation for reporting in good
faith violations of law or the Codes.
Reports can be made to Autoliv's Compliance Counsel or by calling
the Corporate Compliance "Hotline" - a toll free number - and leave a message
anonymously on the voice mail.
Board contact
The Board, the independent directors, as well as the Committees of the Board
can be contacted through its Chairmen as follows:
The Board/Independent Directors/Relevant Committee
c/o Vice President Legal Affairs
Autoliv Inc. / Box 70381
SE-107 24 Stockholm, Sweden
Phone: +46 (8) 5872.0608
Fax: +46 (8) 5872.0633
E-mail: jorgen.svensson@autoliv.com
Contact can be made anonymously and communication with the independent directors
is not screened.
The relevant Chairman receives all such communication after it has
been determined that the content represents a message to such Chairman.