BMW 2009 Annual Report Download - page 153

Chairman and Deputy Chairman of the Supervisory Board
and one member each selected by shareholder repre-
sentatives and employee representatives. Members of the
Mediation Committee: Prof. Dr.-Ing. Dr. h. c. Dr.-Ing. E. h.
Joachim Milberg, Manfred Schoch, Stefan Quandt, Stefan
Schmid.
Compensation Report
The BMW Group supports the endeavours of the German
Corporate Governance Code (GCGC) to increase trans-
parency in the disclosure of the components of compensa-
tion.
The following section therefore describes the principles
relating to the compensation of the Board of Management
and the stipulations set out in the statutes relating to the
compensation of the Supervisory Board. As well as dis-
cussing the structure of remuneration, the components of
compensation are also disclosed in absolute figures. In
accordance with the recommendations of the GCGC, the
compensation of each member of the Board of Manage-
ment and the Supervisory Board is disclosed by name and
analysed into components.
1. Compensation of the Board of Management
Responsibilities
Following the coming into force of the German Act on the
Appropriateness of Management Board Remuneration
(VorstAG) on 5 August 2009, supervisory boards became
responsible in Germany for determining and regularly ex-
amining the compensation of management boards. Pre-
viously, these tasks had been carried out within the BMW
Group by the Supervisory Board’s Personnel Committee,
which reported on its work at regular intervals and in detail
to the Supervisory Board. The Personnel Committee now
plays a preparatory role in the process of determining and
examining the remuneration of the Board of Management.
The Supervisory Board’s terms of reference have been
amended accordingly to take account of the change in al-
location of duties between the Personnel Committee and
the full Supervisory Board.
Principles of compensation
The Supervisory Board familiarised itself with the details
of the new act (VorstAG) in 2009 and fully supports the ob-
jective set out therein to bring about compensation
struc-
tures that promote sustainable and long-term oriented
business performance. The compensation model used for
the management boards should be attractive in the
con-
text of the competitive environment for highly qualified
executives. All compensation components should be ap-
propriate, both individually and in total, and should not
encourage an enterprise to take inappropriate risks.
The compensation of members of BMW AG’s Board of
Management is determined by the full Supervisory Board
on the basis of performance criteria and after taking into
account any remuneration received from Group compa-
nies. The Supervisory Board sets demanding and relevant
targets as the basis for variable compensation. The prin cipal
criteria for determining the appropriateness of compen-
sation are the nature of the tasks allocated to each member
of the Board of Management, an assessment of the per-
formance of those tasks and of the economic situation and
future prospects of the BMW Group, comparable levels of
compensation in the relevant sector and the compensation
structure in place elsewhere within the organisation.
Upper limits for compensation apply for all Board of Manage-
ment members. The Supervisory Board reviews the com-
pensation system at regular intervals, with regard to both
the structure and amount of the compensation. In doing so,
it takes note of compensation studies conducted by ex-
ternal
experts and considers – as it always has done in the
past – the compensation structures and the levels of com-
pensation
of staff and managers within the BMW Group.
The Personnel Committee and the Supervisory Board
engaged external experts to test the compatibility of the
compensation system for the Board of Management with
the latest legal requirements. This review reached the con-
clusion that the system in place at that stage was already
compatible with the changed requirements brought about
by the new VorstAG rules. This was most evident in the
fact that variable compensation was already based on a
period stretching over several years, during which both
positive and negative developments were taken into ac-
count. The Supervisory Board passed a resolution in 2009
setting out new bases of measurement for variable com-
pensation components during the period 2010 – 2012.
These bases of measurement will not be changed during
the period stated.
Compensation system, compensation components
The compensation of the Board of Management comprises
fixed and variable remuneration. Board of Management
members are also entitled to receive retirement benefits.
Under certain circumstances, the members of the Board
of Management are entitled to receive so-called “transi-
tional payments” until their retirement. In terms of the
overall compensation of current members of the Board of
Management, the Supervisory Board sets a compensation
target and a compensation framework with a high variable
proportion, taking into account the overall situation and
forecasts of the BMW Group.
151 Statement on Corporate Governance