Corporate Governance
This section should be read in conjunction with the proxy statement, which is distributed to all registered Autoliv shareholders together with this annual report. Please also refer to page 29-31 about Risk Management and page 32 about Internal Control in this report.
Autoliv is a U.S. company incorporated under the laws of the State of Delaware.
In addition to Federal or State law and regulations, Autoliv is governed primarily by the following documents. All of them are available on Autoliv's corporate website www.autoliv.com under Governance.
–Restated Certificate of Incorporation of Autoliv, Inc.
–Restated By-laws of Autoliv, Inc.
–Corporate Governance Guidelines
–Charters of the standing Committees of the Board
–Code of Business Conduct and Ethics
–Code of Conduct and Ethics for Directors
–Code of Conduct and Ethics for Senior Officers.
Shareholders' Meeting
The Shareholders' Meeting elects the Board of Directors. Shareholders also adopted the Autoliv Inc. Stock Incentive Plan in 1997 and as further amended.
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 Shareholders´ Meeting that has been properly brought before the meeting. Stockholder proposals for the 2007 annual meeting must be received by the Company before November 8, 2006.
The board
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 has adopted 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 the 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 for example 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.
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 the Company are generally expected to resign from the Board at the same time as their employment with the Company ends.
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.
Board Compensation
A director who is also an officer of the Company does not receive additional compensation for service as a director.
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. In 2005, the Board visited and reviewed the Company's operations in Spain.
Committee Matters
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.
There are three standing committees of the Board:
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.
Each of the Audit Committee members possesses financial literacy and accounting or related financial management expertise.
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.
Nominating and Corporate
Governance Committee
The Nominating and Corporate Governance Committee assists 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.
Leadership Development
The Board is responsible for identifying potential candidates for, as well as 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.
Shareholder 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 (see Note 13).
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 (for contact see page 60) or by calling the Corporate Compliance "Hotline" – a toll free number – and leave a message anonymously on the voice mail.
Meetings and committees1)
  Nominating &
    Independent2) Board Audit Compensation Corp.gov Nationality
S. Jay Stewart Yes 5/5 7/7 2/2 3/3 US
Per-Olof Aronson Yes 5/5 7/7 2/2 - SWE
Sune Carlsson Yes 5/5 7/7 2/2 - SWE
Walter Kunerth Yes 5/5 7/7 - 3/3 GER
George A. Lorch Yes 5/5 7/7 2/2 - US
Lars Nyberg Yes 4/5 7/7 - 3/3 SWE
James M. Ringler Yes 5/5 - 2/2 3/3 US
Tetsou Sekiya Yes 5/5 - 2/2 3/3 JPN
Per Welin3) Yes 5/5 7/7 - 3/3 SWE
William E. Johnston Jr.4) Yes 1/1 - 0/0 0/0 US
Lars Westerberg No 5/5 - - - SWE
1) Attended meetings in relation to total meetings. 2) Under the rules of the New York Stock Exchange, the Sarbanes Oxley Act and the SEC. 3) Qualifies as audit committee financial expert. 4) Elected at the last meeting of the year.