BMW 2011 Annual Report Download - page 166

166
152 STATEMENT ON
CORPORATE GOVERNANCE
(Part of Management Report)
152 Information on the Company’s
Governing Constitution
153 Declaration of the Board of
Management and of the
Supervisory Board pursuant to
§ 161 AktG
154 Members of the Board of
Management
155 Members of the Supervisory Board
158 Work Procedures of the
Board of Management
160 Work Procedures of the
Supervisory Board
165 Compensation Report
173 Information on Corporate
Governance Practices
175 Compliance in the BMW Group
Variable cash remuneration, in particular bonuses
Variable cash remuneration consists of a cash bonus
and a requirement is to invest the equivalent of 20 % of a
member’s total bonus (after tax but including any taxes
and social insurance amounts borne by the Company)
in BMW AG common stock. In substantiated cases, the
Supervisory Board also has the option of paying an ad-
ditional special bonus.
The bonus is made up of two components, each equally
weighted, namely a corporate earnings-related bonus
and a personal performance-related bonus. The target
bonus (100 %) for a Board of Management member (i. e.
covering both components of variable compensation)
totals € 1.5 million p. a. for the first term of office and
€ 1.75 million p. a. with effect from the second. The equiv-
alent
figure for the Chairman of the Board of Manage-
ment is € 3 million p. a. Upper limits for the amount of
the bonus are in place for all Board of Management
members (250 % of the relevant target bonus).
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 € 0.75 million for the relevant
financial year for a member of the Board of Manage-
ment during the first period of office and one of € 0.875
million during the second period of office. The equiva-
lent bonus for the Chairman of the Board of Manage-
ment is € 1.5 million. The earnings factor is 1.00 in the
event of a Group net profit of € 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 com-
mon
stock is between 101 and 110 cents. If the Group
net profit is below € 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 consistency at all levels,
this rule is also applicable in determining the corporate
earnings-related variable compensation components 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
perfor-
mance 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. Performance factor criteria
include innovation (economic and ecological, e. g. reduc-
tion of CO2 emissions), leadership accomplishments,
contributions to the Company’s attractiveness as an em-
ployer, progress in implementing the diversity concept
and activities that foster corporate social responsibility.
The target bonus and the key figures used to determine
the corporate earnings-related bonus are fixed for a
period of three financial years, during which time they
may not be amended retrospectively.
Share-based remuneration programme
For financial years commencing after 1 January 2011,
the compensation system includes a share-based re-
muneration scheme, in which the level of share-based
remuneration is based on the amount of the bonus
paid. The new system is aimed at creating further long-
term incentives to encourage sustainable governance.
The programme includes a requirement for Board of
Management members to invest 20 % of the total bonus
of each member (after tax but including any taxes and
social insurance amounts borne by the Company) in
BMW AG common stock. As a general rule, the shares
must be held for a minimum of four years. As part of
a matching plan, at the end of the holding period, the
Board of Management members will receive from the
Company either one additional share of common stock
or an equivalent cash amount for three shares of com-
mon stock held, to be decided at the discretion of
the Company (share-based remuneration component /
matching component), unless the employment relation-
ship was ended before expiry of the agreed contractual
period (except where caused by death or invalidity).
Special rules apply in the case of death, invalidity and
economic hardship of a Board of Management member
before fulfilment of the holding period.
Retirement and surviving dependants’ benefits
The provision of retirement and surviving dependants’
benefits for existing and future members of the Board of