BMW 2011 Annual Report Download - page 167

167 STATEMENT ON CORPORATE GOVERNANCE
Management was changed to a defined contribution
system with a guaranteed minimum return with effect
from 1 January 2010. However, given the fact that board
members had a legal right to receive the benefits already
promised to them, they have been given the option to
choose between the previous system and the new one.
In the event of the termination of mandate, current
members of the Board of Management are entitled to
receive certain defined benefits in accordance with the
pension scheme rules. Pensions are paid to former
members of the Board of Management who have either
reached the age of 65 or, if their mandate was termi-
nated earlier and not extended, to members who have
either reached the age of 60 or who are unable to
work
due to ill-health or accident, or who have entered
into early retirement in accordance with a special ar-
rangement. The amount of the pension is unchanged
from the previous year and comprises a basic monthly
amount of € 10,000 or € 15,000 (Chairman of the Board
of Management) plus a fixed amount. The fixed amount
is made up of approximately € 75 for each year of
ser-
vice in the
Company before becoming a member of the
Board of Management plus between € 400 and € 600 for
each full year of service on the board (up to a maximum
of 15 years). Pension payments are adjusted by analogy
to the rules applicable for the adjustment of civil serv-
ants’ pensions: the pensions of members of the Board
of Management are adjusted when the civil servants re-
muneration level B6 (excluding allowances) is increased
by more than 5 % or in accordance with the Company
Pension Act.
In certain circumstances, Board of Management mem-
bers were entitled under contracts signed before 1 Janu-
ary 2010 to receive so-called “transitional payments”
until their retirement. These rules were cancelled 2011
in agreement with Board of Management members cur-
rently in office.
If a mandate is terminated after 1 January 2010, the new
defined contribution system provides entitlements
which can be paid either (a) in the case of death or inva-
lidity as a one-off amount or over a maximum of ten
years or (b) on retirement – depending on the wish of
the ex-board member concerned – in the form of a life-
long monthly pension, as a one-off amount, in a
maxi-
mum of ten annual instalments, or in a combined form
(e. g. a combination of a one-off payment and a propor-
tionately reduced lifelong monthly pension). Pensions
are paid to former members of the Board of Manage-
ment who have either reached the statutory retirement
age for the state pension scheme in Germany or, if their
mandate had terminated earlier and had not been ex-
tended, to members who have either reached the age of
60 or are permanently unable to work, or who have
entered into early retirement in accordance with a spe-
cial arrangement. In addition, following the death of
a retired board member who has elected to receive a
lifelong pension, 60 % of that amount is paid as a lifelong
widow’s pension.
Pensions are increased annually by
an amount of at
least 1 %.
The amount of the retirement pension to be paid is
determined on the basis of the amount accrued in each
board member’s individual pension savings account.
The amount on this account arises from annual contri-
butions
paid in plus interest earned depending on the
type of investment.
The annual contribution to be paid for each member of
the Board of Management for 2011 amounts to € 270,000
(€ 475,000 for the Chairman of the Board of Manage-
ment) and, from 2012 onwards € 300,000 (€ 525,000 for
the Chairman of the Board of Management). The con-
tributions are credited, along with interest earned,
to the personal savings accounts of board members in
monthly amounts. The guaranteed minimum rate of
return p. a. corresponds to the maximum interest rate
used to calculate insurance reserves for life insurance
policies (guaranteed interest on life insurance policies).
In the case of invalidity or death, a minimum of 60 % of
the potential annual contributions will be paid until the
person concerned would have reached the age of 60.
Contributions falling due under the defined contribution
scheme are paid into an external fund in conjunction
with a trust model that is also used to fund pension ob-
ligations to employees.
Income earned on an employed or a self-employed basis
up to the age of 63 is offset against the pension
entitle-
ment. In addition, certain circumstances have been
specified, in the event of which the Company no longer
has any obligation to pay benefits. In such cases, no
transitional payments will be made either.
Retired board members are entitled to use Company and
lease vehicles in line with the rules applicable for senior
heads of departments.
Apart from the cancellation of transitional pay arrange-
ments, no changes were made during
2011 to entitle-
ments in the event of termination of a member’s activities
on the board.