BMW 2010 Annual Report Download - page 156

154
140 STATEMENT ON
CORPORATE GOVERNANCE
(Part of Management Report)
140 Information on the Company’s
Governing Constitution
142 Declaration of the Board of
Management and of the
Supervisory
Board pursuant to
§ 161 AktG
143 Members of the Board of
Management
144 Members of the Supervisory Board
147 Information on Work Procedures
of the Management Board and
Supervisory Board
154 Compensation Report
162 Information on Corporate
Governance Practices
163 Compliance in the BMW Group
Compensation Report
The following section describes the principles relating to
the compensation of the Board of Management and the
stipulations set out in the statutes relating to the
com-
pensation of the Supervisory Board. In addition to dis-
cussing the compensation system, the com ponents of
compensation are also disclosed in absolute figures.
Furthermore, the compensation of each member of the
Board of Management and the Supervisory Board for the
financial year 2010 is disclosed by name and analysed
into components.
1. Compensation of the Board of Management
Responsibilities; approval by shareholders in 2010
The Supervisory Board is responsible for determining and
regularly reviewing the Board of Management’s compen-
sation. The Personnel Committee plays a preparatory role
in this process.
The compensation system in place for the Board of
Management for the financial year 2010 was approved by
shareholders at the Annual General Meeting 2010 as part
of a consultative process (“Say on Pay”) with a majority
vote of 97.66%.
Principles of compensation
The compensation structure is designed to promote sus-
tainable business development. At the same time, the
compensation model used for the Board of Management
should be attractive in the context of the competitive
en-
vironment for highly qualified executives. All compensa-
tion components should be appropriate, both individually
and in total, and should not encourage the Board of Man-
agement to take on inappropriate risks for the company.
The compensation of members of the
Board of Manage-
ment is determined by the full Supervisory Board on
thebasis of performance criteria and after taking into ac-
count 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 com-
pensation are the nature of the tasks allocated to each
member of the Board of Management, an assessment of
the performance of those tasks, the economic situation,
the performance and future prospects of the BMW Group
as well as comparable levels of compensation in the
relevant sector and the compensation structure in place
elsewhere within the organisation.
Variable compensation in the form of corporate related
earnings- and
performance-related bonus is based on
aperiod stretching
over several years, during which both
positive and negative developments are taken into ac-
count.
The Personnel Committee and the Supervisory Board
engaged external experts to test the compatibility of the
compensation system in place in 2009 with the Act on
the Appropriateness of Management Board Remunera-
tion (VorstAG). The understanding gained in that process
was taken into account in amended contracts agreed on
mutual terms with all members of the Board of Manage-
ment with effect from 1 January 2010.
The Supervisory Board reviews the compensation system
at regular intervals, with regard to both the structure and
amount of the compensation of the Board of Manage-
ment. The Personnel Committee also makes use of remu-
neration studies.
Recommendations made by an inde-
pendent external remuneration expert and suggestions
made by investors and analysts are also considered in
theconsultative process. The Supervisory Board also
con siders the compensation structures and the levels of
compensation of staff and managers within the BMW
Group.
Compensation system, compensation components
The compensation of the Board of Management com-
prises
both fixed and variable remuneration. In terms of
the overall compensation of current members of the
Board of Management, the Supervisory Board sets a com-
pensation target and a compensation framework with a
high variable proportion, taking into account the overall
situation and forecasts of the BMW Group. Contracts
with members of the Board of Management signed be-
fore 1 January 2010 contain a performance-related fixed
amount (defined benefit). In certain circumstances, Board
of Management members are entitled under contracts
signed before 1 January 2010 to receive so-called “transi-
tional payments” until their retirement.
Fixed remuneration comprises a base salary (paid
monthly) and other remuneration elements. Other
remuneration elements comprise mainly the use of com-
pany
cars as well as the payment of insurance premiums,
contributions towards security systems and an annual
medical check-up.
The salary of each member of the Board of Management
is euro 420,000 p. a. during the first term of appointment
and euro 480,000 p. a. from the beginning of the second
term. The salary of the Chairman of the Board of Manage-
ment is euro 840,000 p. a.
The variable compensation of the Board of Management
(bonus) is made up of two components, each equally
weighted, namely a corporate earnings-related bonus
and a personal performance-related bonus. The Super-
visory Board may also, in justified cases, decide to pay an
additional special bonus on a voluntary basis. The target