BMW 2012 Annual Report Download - page 170

170
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 Information on Corporate
Governance Practices
166 Compliance in the BMW Group
170 Compensation Report
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
compensation of the Supervisory Board. In addition to
discussing the compensation system, the components
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 2012 is disclosed by individual
and analysed into components.
1. Management Board compensation
Responsibilities; approval by shareholders in 2012
The Supervisory Board is responsible for determining
and regularly reviewing the Board of Management’s
compensation. The Personnel Committee plays a pre-
paratory role in this process.
The compensation system applicable to the Board of
Management was presented most recently for approval
by shareholders at the Annual General Meeting on
16 May 2012 as part of a voluntary consultative process
(“Say on Pay”). The compensation system was approved
with a majority vote of 95.45 %.
Principles of compensation
The compensation system for the Board of Management
at BMW AG is designed to encourage a management
approach focused on sustainable development. One im-
portant principle applied when designing remuneration
systems at BMW is that of consistency at different levels.
In other words, compensation systems for the Board
of Management, senior management and employees of
BMW AG should all have a similar structure and contain
similar components. The Supervisory Board carries out
regular checks to ensure that all Board of Management
compensation components are appropriate, both indi-
vidually and in total, and do not encourage the Board of
Management to take inappropriate risks for the BMW
Group. At the same time, the compensation model used
for the Board of Management should be attractive in
the
context of the competitive environment for highly
qualified executives.
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
account any remuneration received from Group com-
panies. The principal performance criteria are the nature
of the tasks allocated to each member of the Board of
Management, the economic situation and the perfor-
mance
and future prospects of the BMW Group. The
Supervisory Board sets demanding and relevant pa-
rameters as the basis for variable compensation. It also
takes care to ensure that variable components based on
multi-year assessment criteria take account of both pos-
itive and negative developments and that the package
as a whole encourages a long-term approach to business
performance. Targets and other parameters may not be
changed retrospectively.
The Supervisory Board reviews the appropriateness of
the compensation system annually. The Personnel
Committee also makes use of remuneration studies. The
Supervisory Board reviews the appropriateness of the
compensation system in horizontal terms by comparing
compensation paid by DAX companies and in vertical
terms by comparing board compensation with the sala-
ries of the two top levels of management below board
level and with the average salaries of employees. Rec-
ommendations made by an independent external remu-
neration expert and suggestions made by investors and
analysts are also considered in the consultative process.
Compensation system, compensation components
The compensation of the Board of Management com-
prises both fixed and variable remuneration as well
as a
share-based component. Retirement and surviving
dependants’ benefit entitlements are also in place.
Fixed compensation
Fixed remuneration consists of a base salary (paid
monthly)
and other remuneration elements. Other re-
muneration elements comprise mainly the use of com-
pany and lease cars as well as the payment of insurance
premiums, contributions towards security systems and
an annual medical check-up. Members of the Board of
Management are also entitled to purchase vehicles and
other services of the BMW Group at conditions that also
apply in each relevant case for employees.
The basic remuneration of members of the Board of
Management were set in 2011 for financial years
beginning after 1 January 2012 at € 750,000 p. a. (2011:
€ 510,000) for a board member during the first period
of office, at € 900,000 p. a. (2011: € 590,000) for a board
member during the second period of office and at
€ 1,500,000 p. a. (2011: € 1,020,000) for the Chairman of
the Board of Management.
Variable remuneration
The variable remuneration of Board of Management
members comprises variable cash remuneration on the
one hand and share-based remuneration components
on the other.
Variable cash remuneration, in particular bonuses
Variable cash remuneration consists of a cash bonus
and a share-based remuneration component equivalent