BMW 2010 Annual Report Download - page 157

155 STATEMENT ON CORPORATE GOVERNANCE
bonus (100%) for a Board of Management member (i.e.
covering both components of variable compensation)
totals euro 1.5 million p. a. for the first term of appoint-
ment and euro 1.75 million p. a. with effect from the
sec-
ond. The equivalent figure for the Chairman of the Board
of Management is euro 3 million p. a. Upper limits for
the amount of the bonus are in place for all Board of
Management members (150% of the relevant target
bonus). The total target compensation for a Board of
Management member (i.e. salary and target bonus) is
therefore euro 1.92 million p. a. for the first term of ap-
pointment and euro 2.23 million p. a. with effect from
thesecond. The equivalent figure for the Chairman of
the Board of Management is euro 3.84 million p. a.
If the target bonus is fully achieved, the ratio of salary
and variable compensation (bonus) is approximately
20: 80%.
The corporate earnings-related bonus is based on the
BMW Group’s net profit and post-tax return on sales
(which are combined in a single earnings factor) and the
level of the dividend (common stock). The corporate
earnings-related bonus is derived by multiplying the
target amount fixed for each member of the Board of
Management by the earnings factor and by the dividend
factor. In exceptional circumstances, for instance when
there have been major acquisitions or disposals, the
Supervisory Board may adjust the level of the corporate
earnings-related bonus.
An earnings and dividend factor of 1.00 gives rise to an
earnings-based bonus of euro 0.75 million for a member
of the Board of Management during the first period of
appointment and one of euro 0.875 million during the
second period of appointment. The equivalent bonus
forthe Chairman of the Board of Management is euro
1.5
million. The earnings factor is 1.00 in the event of a
Group net profit of euro 3.1 billion and a post-tax return
on sales of 5.6%. The dividend factor is 1.00 in the event
that the dividend paid on the shares of common stock is
between 100 and 110 cents.
If the Group net profit is below euro 1 billion or if the
post-tax return on sales is less than 2%, the earnings
factor will be zero. In these cases, no corporate earnings-
related bonus will be paid. Based on the principle of con-
sistency, this rule is also applicable in determining the
corporate earnings-related variable compensation com-
ponents of all managers and staff of BMW AG.
The personal performance-related bonus is derived by
multiplying the target amount set for each member of
the Board of Management by a performance factor. The
Supervisory Board sets the performance factor on the
basis of its assessment of the contribution of the relevant
Board of Management member to sustainable and long-
term oriented business development. In setting the
factor, consideration is given equally to personal per-
formance
and decisions taken in previous forecasting
periods, key decisions affecting the future development
of the business and the effectiveness of measures taken
in response to changing external conditions as well as
other activities aimed at safeguarding the future viability
of the business to the extent not included directly in the
basis of measurement.
The target bonus and the key figures used to determine
the corporate earnings-related bonus, have been fixed
for
a period of three financial years, during which time
target bonus and the key figures may not be amended
retrospectively.
As in previous years, the compensation system for 2010
does not include any stock options, value appreciation
rights or other share-based components incorporating
other long-term incentives. The Supervisory Board did,
however, decide in December 2010 to add a further com-
ponent to the compensation system for financial years
from 1 January 2011 onwards, requiring Board of Manage-
ment
members to invest the equivalent of 20% of their
total bonuses (after tax) for financial years from 2011 on-
wards in BMW common stock and to hold these shares
for a minimum of four years. One half of the amount
required to finance this investment will be provided by
theCompany. As part of a matching plan, the Board of
Management members will, at the end of the holding
period, receive from the Company either one additional
share of common stock or an equivalent cash amount
forthree shares of common stock held, to be decided at
the discretion of the Company. The new requirement
isaimed
at creating further long-term incentives to en-
courage sustainable
governance.
The Supervisory Board carries out an annual review of
the appropriateness of the total compensation of the
Board of Management. In horizontal terms, this is done
by comparing compensation paid by DAX-30 companies
and, in vertical terms, by comparing board compensa-
tion
with the salaries of senior management (below
board level) and with the average salaries of employees.
With effect from financial years beginning on or after
1January 2010, the provision of retirement and surviving
dependants’ benefits for existing and future members
ofthe Board of Management was changed to a defined
contribution system with a guaranteed minimum return
(similar to the switch to a defined contribution system
for middle and senior management in 2009). Given the
fact that board members already have a legal right to