Peab : Corporate governance reports 2022

CORPORATE GOVERNANCE REPORT

Corporate governance report 2022

Peab is a Swedish public limited liability company listed on Nasdaq Stock- holm, Large Cap. Peab's corporate governance is based on the Swedish Company Act, the Swedish Code of Corporate Governance (www.bolags- styrning.se), Nasdaq Stockholm's regulations for issuers as well as Peab's articles of association, Code of Conduct, policies and other internal rules that Peab's Board of Directors have adopted. This report is presented by the Board of Directors of Peab AB but it is not a part of the formal annual financial reports.

Shareholders, Annual General Meeting, the nomination procedure and diversity policy

All shareholders can use their right to vote at the Annual General Meeting (AGM) which is Peab's highest decision-making body.

The process of nominating members of the Board of Directors and the auditor to the AGM follows the nomination procedure established at the previous AGM. In order to create diversity and breadth in the Board regarding experience, expertise and background, the Nomination Committee applied the following diversity policy when nominating Board members to the 2022 AGM (consistent with wording in the Swedish Code of Corporate Governance, p 4.1): The Board should have a composition appropriate for the company's operations, phase of development and other relevant circumstances. Board members elected by the shareholders' meeting should collectively exhibit diversity and breadth of qualifications, experience and background. The company should strive for gender balance on the Board." Half of the members of the Board elected by the AGM are female and half are male.

The AGM was held on May 5, 2022 in Grevie, Båstad Municipality. Shareholders could vote in the AGM either personally, through agents, or through postal voting in accordance with Peab's articles of association. A total of 327 shareholders, representing more than 77.5 percent of the total

number of votes in the company, participated in the voting procedures. Of these 325 participated in person, or via agents at the AGM. Two shareholders used postal voting.

The AGM decided to adopt "Principles for the appointment and instruction for the Nomination Committee in Peab AB (publ)", according to which the Nomination Committee for the 2023 AGM should consist of four representatives - one representative for each of the three largest shareholders according to the share register per September 30, 2022 that wish to nominate a member of the Nomination Committee, as well as the Chairman of the Board. If any or some of the three major shareholders abstain from nominating a member of the Nomination Committee the Chairman of the Board must offer other major shareholders the opportunity to nominate a member. If such an offer is made it should be in sequence to the major shareholders (i.e. first to the fourth largest shareholder, then to the fifth major shareholder etc.). This procedure should be repeated until the Nomination Committee consists of four members, including the Chairman of the Board. Mats Paulsson, Peab's Profit-Sharing Foundation and the Kamprad Family Foundation have made it known that they do not wish to participate in the Nomination Committee for the AGM 2023. State Street Bank and Trust Co, W9 have not answered the request.

Therefore the Nomination Committee for the 2023 AGM has the following composition:

• Anders Sundström, Ekhaga Utveckling AB
• Ulf Liljedahl, AB Axel Granlund
• Suzanne Sandler, Handelsbanken Funds
• Anders Runevad, Chairman of the Board of Peab AB

The Nomination Committee has appointed Ulf Liljedahl as Chairman of the Nomination Committee. The main task of the Nomination Committee is to prepare suggestions for Board members as well as remuneration for Board and committee work. The Nomination Committee should also propose an accountant and accountant remuneration, Chairman of the AGM and, if needed, changes in the instructions to the Nomination Committee.

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Owner and Board

Election	Election	Nomination
Auditors		Committee
Information	Proposal

Annual General Meeting

(shareholders)

Election

Board of Directors

Goals, Policies,	Reports
CEO	Internal control
instructions

CEO and executive management

Finance Committee

Remuneration Committee

Audit Committee

CEO

Remuneration Council

Crisis management

Ethical Council

Sponsoring Council

Investment group

Tender Council

Development Council

Business area management

Executive management

Group functions

Construction

Civil Engineering

Industry

Project Development

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Board meetings, attendance 2022

		Independent in	Independent					Presence
		relation to the com-	in relation	Attendance		Presence	Remu-	Remu-		Presence
		pany and executive	to the major	Board	Audit	Audit	neration	neration	Finance	Finance
	AGM elected members	management	shareholders	meetings	Committee	Committee	Committee	Committee	Committee	Committee
	Anders Runevad	Yes	Yes	9/9			C	3/3	C	6/6
	Magdalena Gerger	Yes	Yes	9/9	M	4/4
	Karl-Axel Granlund	Yes	Yes	9/9			M	3/3	M	5/6
	Kerstin Lindell	Yes	Yes	9/9	M	4/4
	Fredrik Paulsson	No	No	9/9			M	3/3	M	6/6
	Malin Persson	Yes	Yes	9/9
	Lars Sköld	Yes	Yes	9/9	C	4/4
	Liselott Kilaas	Yes	Yes	9/9	M	4/4
									Employee representatives
	Maria Doberck, ordinary		9/9
	Patrik Svensson, ordinary		9/9
	Kim Thomsen, ordinary		9/9
	Peter Johansson, deputy		9/9
Cecilia Krusing, deputy		8/9

C - Chairman M - Member

The Board of Directors and its work

Peab's Board of Directors is ultimately responsible for the company's ope- rations. According to Peab's articles of association the Board of Directors must be made up of no fewer than five and no more than nine members in addition to the statutory employee representatives. The members of the Board of Directors are elected annually by the AGM. It was decided at the 2022 AGM that the Board of Directors would consist of eight members. The following persons were elected as members of the Board of Directors, all reelected:

• Karl-AxelGranlund
• Magdalena Gerger
• Liselott Kilaas
• Kerstin Lindell
• Fredrik Paulsson
• Malin Persson
• Anders Runevad
• Lars Sköld

Anders Runevad was appointed Chairman of the Board by the AGM. The members of the Board of Directors elected by the shareholders are remunerated as members of the Board and, where applicable, as members of committees in accordance with the decisions taken by the AGM. Board member remuneration is reported in note 9 in the Annual Report.

The following employee representatives were appointed by the employee unions at the 2022 AGM: Maria Doberck, Patrik Svensson och Kim Thomsen (members), Peter Johansson and Cecilia Krusing (deputies).

The Board of Directors held nine meetings in 2022, of which five were ordinary Board meetings (including the constitutional meeting) and four additional Board meetings, one held per capsulam.

Members of executive management have given reports at the Board meetings. The principle company accountant has been present at two ordinary Board meeting. The Board's work follows the work program adopted by the Board of Directors.

The Board evaluates its work on an annual basis and to evaluate the nominations to the 2022 AGM the Chairman of the Board produced and compiled an inquiry consisting of 49 questions which all the Board members and deputies answered. Regarding the evaluation of the Chairman of the Board, the Chairman of the Nomination Committee has approved the inquiry's contents and compiled it. In the evaluation the Board of Directors stated that they are well aware of the company's targets and strategies, core values, business idea and Code of Conduct and that Board members are experienced in, and knowledgeable about, sustainability issues that are essential

to Peab. The result of the evaluation was reported at a Board meeting and Nomination Committee meeting in preparation for nomination.

Information about the Board members is presented on page 162 and is included in the Corporate governance report.

The Audit Committee

Members during 2022, after the AGM and constitutional Board meeting:

• Lars Sköld, Chairman
• Magdalena Gerger
• Kerstin Lindell
• Liselott Kilaas

The Audit Committee prepares the work of the Board of Directors by monitoring and ensuring the quality of company financial reports and maintains regular contact with the company accountant regarding the scope and focus of the auditing as well as their view of company risks. In addition, the Audit Committee monitors what other services besides auditing are performed by the company accountants, it evaluates the auditing work and informs the Nomination Committee about the evaluation. It also assists the Nomination Committee in proposals of auditors and remuneration for

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auditing work. Representatives of executive management give reports on relevant issues at Audit Committee meetings. The Audit Committee held four meetings in 2022. The principle company accountant participated in the relevant sections of three of these meetings. The Audit Committee regularly reports to the Board of Directors.

The Finance Committee

Members during 2022, after the AGM and constitutional Board meeting:

• Anders Runevad, Chairman
• Karl-AxelGranlund
• Fredrik Paulsson

The Finance Committee has the mandate to make decisions in between Board meetings on financial matters such as currency, interest and investment positions in accordance with the Finance Policy established by the Board. Within the framework established by the Board the Finance Committee also makes decisions regarding some company acquisitions, individual investments in property and tenders. Representatives of executive management give reports on relevant issues at Finance Committee meetings. The Finance Committee held six meetings during 2022. The Finance Committee regularly reports to the Board of Directors.

The Remuneration Committee

Members during 2022, after the AGM and constitutional Board meeting:

• Anders Runevad, Chairman
• Karl-AxelGranlund
• Fredrik Paulsson

The Remuneration Committee prepares decisions by the Board concerning remuneration principles, salaries and other employment terms for senior officers, and monitors and evaluates ongoing, and during the year termina- ted, programs for variable remuneration for senior officers. The Remuneration Committee also monitors and evaluates application of the Remuneration Policy established annually by the AGM as well as current remuneration structures and remuneration levels in the Group. The Remuneration Committee makes proposals to the Board of Directors regarding the CEO's salary and other terms, according to the Remuneration Policy established annually by the AGM. The Remuneration Committee also decides the salaries and other terms for other senior officers based on proposals from the CEO. Representatives of executive management give reports on relevant issues at Remuneration Committee meetings. The Remuneration Committee held three meetings in 2022. The Remuneration Committee regularly reports to the Board of Directors.

Remuneration to executive management

The 2022 AGM approved the Remuneration Policy for executive manage- ment. The Remuneration Policy is available on Peab's website, www.peab. com. Information about salaries and other remuneration to the CEO and members of executive management can be found in note 9 in the Annual Report, and on our website.

Incentive program

Peab has no outstanding share or share-related incentive programs for the Board of Directors or executive management.

Auditors

Under Peab's articles of association one or two auditors are elected by the AGM. At the AGM in 2022 Ernst & Young AB was reelected as the company auditor with the authorized public accountant Jonas Svensson as principle company accountant until the end of the AGM 2023.

In addition to auditing, the accountant has only provided services for Peab in the form of accounting advisement and certain analyses in connection with acquisitions and divestments as well as expertise in sustainability reporting.

Executive management

The President and CEO leads the company according to the framework established by the Board of Directors and is responsible for the administration and control of the Group. During 2022 executive management consisted of the President and CEO, the CFO, the COO, the CCO, the CSO and the Business Area Managers of Construction, Civil Engineering and Project Development, in total eight persons.

Executive management meetings are held once a month and focus is on managing the business, following up the business plan and strategic matters. Peab's Board of Directors has also given executive management the overall responsibility for managing and monitoring the integration of sustainability work in the business. Heads of Group functions and other officers are called to attend meetings as needed.

Information about the President and CEO and other members of executive management is presented on page 163.

Business areas

Group operations are run in four business areas: Construction, Civil Engi- neering, Industry and Project Development. The business areas Construc- tion, Civil Engineering and Project Development have a management team led by the Business Area Manager and otherwise consist of operational managers and managers of support functions in the business areas. The Business Area Managers are responsible for running operations in the line organization by delegating responsibility and authorizations. Business Area Managers are responsible for ensuring that their business units in the Group maintain good internal control and work according to established policies as well as other adopted documents, processes and tools.

Operations in Business Area Industry are more diversified than the other business areas and are run by the Managing Directors for the five major companies in the business area who then report individually to an appointed member in executive management. Each Managing Director in the companies in Business Area Industry is responsible for ensuring their companies maintain good internal control and follow relevant policies as well as other adopted documents, processes and tools.

Group functions

The Group functions support both executive management and operations in the business areas, strategically and in day-to-day operations.

Business governance

Executive management adopts comprehensive goals and strategies for the business in the Group's business plan. According to the business plan for 2022 Peab works with three financial targets and six non-financial targets. The non-financial targets are also Peab's sustainability targets. The Group's business plan is broken down and is processed in the various business areas, regions and companies that establish their own business plans.

To provide support for a cross-functional workflow within the Group, executive management has delegated some work and decisions to a number of councils and groups consisting of representatives for different group functions and, in certain cases, representatives of business area manage- ment. Every council or group has a specific mandate and decision-making process, and they all report to executive management.

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An important part of corporate governance in Peab's decentralized organization is the Group's core values: Down-to-earth, Developing, Personal and Reliable. Peab's Code of Conduct and many of the Group's internal regulations and guidelines are built on these core values. Communication of, and teaching, these core values is continuous and structured.

Internal control and governing

The purpose of the governance and internal control process is to provide the Board, management and other stakeholders with a reasonable assurance that Peab's targets are met regarding business management concerning an appropriate and efficient organization and management of the organization. Reliable internal and external reporting as well as following applicable laws, regulations and other rules are intrinsic parts of the process.

Peab's Board of Directors is responsible for ensuring that there are efficient procedures and systems for Group governance and control of financial reporting. The principles of this process are established in the Policy for Internal Governance and Control and are based on COSO's (Committee of Sponsoring Organizations of the Treadway Commission) framework for internal control and are described below.

Control environment

The control environment is founded on Peab's core values: Down-to-earth, Developing, Personal and Reliable and comprises our organization's structure, internal regulations and governing documents, delegation and limitation of responsibility, competence recruitment and monitoring internal governance and control. The Board is ultimately responsible for the general governance of Peab and control over the risks that accompany the business as well as its sustainability work. Executive management is responsible for developing and implementing Peab's internal governance and control structure in operations, including our organization's structure, responsibility delegation and mandates, competence recruitment and follow-up. The Board, executive management and other senior officers should in word, deed and decision be models of integrity and ethics, follow Peab's core values and, in general, walk the talk.

Information and communication

Executive management is responsible for communicating, in a way that is relevant and clear to our organization, Peab's targets and risk levels as well as how internal governance and control works. This is done through different information and communication forums like Peab's intranet, Peab's business management system and documented reporting channels regarding financial and non-financial targets.

Risk analysis

Risk analyses are carried out based on the established targets in different sections and levels of Peab's business. Risk analysis on an operational and project level is performed according to the process described in Peab's business management system. An overriding risk analysis that includes risk management of every identified material risk is performed annually in each business area and thereafter by executive management, after which it is reported to the Board. A detailed description of risks and risk management in Peab is found in the section Risks and risk management.

Control activities

Each year the Board adopts the Board's working program, instructions for the CEO and Board committees, Peab's Code of Conduct, Finance Policy, Information Policy, Policy for Internal Governance and Control and Related Party Policy. The AGM annually adopts the Remuneration Policy.

Executive management adopts any other company policies annually. Each business area and/or Group function is responsible for any other internal regulations. The other main control activities take place in daily operations based on each individual employee's responsibility for self-monitoring related to their position, defined work method, processes and steering documents that are available through Peab's business management system and Peab's intranet.

Examples of governing documents are those concerning decision-making authorization for any kind of major decision, which includes requirements for special approval by executive management or a body appointed by executive management to handle the acquisition or divestment of property, operations and other major investments as well as the tender process, with predefined levels for each position. The principles for appointing board members and signatories in Group companies are adopted by executive management.

Peab has a whistle-blowing system that is open for both employees and other stakeholders that makes it possible for the reporter to remain ano- nymous. The Chairman of the Ethical Council annually informs the Board of Directors regarding deviations from the Code of Conduct and other irregularities.

Monitoring

The Board regularly monitors and evaluates how effective Peab's internal governance and control structure is through the information the Board receives from executive management and Board committees. Every ordinary board meeting reviews Peab's financial situation and position as well as a reconciliation of financial targets. Review and monitoring non-financial targets, including sustainability work, follows a special schedule at the ordinary board meetings. Before a board meeting members receive extensive reports regarding Peab's development. A corresponding review is made by executive management and business area management. An evaluation regarding governance and control of financial reporting is conducted at the first ordinary board meeting of the Board of Directors after the end of the financial year.

The Board of Directors has for the business year 2022 assessed the need for an internal auditing department and concluded the established control structure in Peab ensures sufficient management and control of the Group. At this time there is therefore no need for an internal auditing function in the company.

Other mandatory information in accordance with chapter 6, section 6 of the Annual Accounts Act

• Direct and indirect shareholdings in the company that represent at least a tenth of the number of votes of all the shares in the company are presented in the Board of Directors' report under The Peab share.
• There are no limits in articles of association regarding how many votes individual shareholders can have at the AGM, which is also made clear in the Board of Directors' report under The Peab share.
• The articles of association stipulate that the appointment of Board members takes place at the company's AGM. The articles of associa- tion do not contain any stipulations regarding the dismissal of Board members or changes in the articles of association.
• Authorization of the Board by the AGM to decide on new issues of Peab shares is presented in the Board of Directors' report under The Peab share.
• Authorization of the Board by the AGM to decide on the purchase of own shares is presented in the Board of Directors' report under Hol- dings of own shares.

Deviations from the code

Peab has not deviated from the code.

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