BMW 2012 Annual Report Download - page 171

171 STATEMENT ON CORPORATE GOVERNANCE
to 20 % of the board member’s total bonus after taxes,
which the board member is required to invest in
BMW AG common stock. Taxes and social insurance
relating to the share-based remuneration component
are also borne by the Company.
In substantiated cases,
the
Super visory Board also has the option of paying
an additional 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 %) of a Board of Management member, for
both components of the variable compensation, totals
€ 1.5 million p. a. and € 1.75 million p. a. with effect from
the second term of appointment. The equivalent figure
for the Chairman of the Board of Management is € 3 mil-
lion 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 a
corporate earnings-based bonus of € 0.75 million for
the relevant financial year for a member of the Board of
Management during the first period of office and one of
€ 0.875 million during the second period of office. The
equivalent bonus for the Chairman of the Board of
Management
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 common stock is between 101 and 110 cents. If the
Group net profit is below € 1 billion or if the post-tax re-
turn 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 consist-
ency at all levels, this rule is also applicable in determin-
ing the corporate earnings-related variable compensa-
tion 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), customer focus, ability to adapt,
leadership accomplishments, contributions to the Com-
pany’s attractiveness as an employer, progress in imple-
menting the diversity concept and activities that foster
corporate social responsibility. The target bonus and
the key figures used to determine the corporate
earn-
ings-related bonus have been fixed for a period of three
financial years, during which time they may not be
amended retrospectively.
Share-based remuneration programme
The compensation system includes a share-based remu-
neration programme, in which the level of share-based
remuneration is based on the amount of the bonus
paid. The system is aimed at creating further long-term
incentives to encourage sustainable governance.
This programme envisages a share-based remuneration
component equivalent to 20 % of the board member´s
total bonus after taxes, which the board member is re-
quired to invest in BMW AG common stock. Taxes and
social insurance relating to the share-based remunera-
tion component are also borne by the Company. As a
general rule, the shares must be held for a minimum of
four years. 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 (share-based remuneration
component / matching component), unless the
employ-
ment relationship was ended before expiry of the agreed
contractual period (except where caused by death or
invalidity). Special rules apply in the case of death or
invalidity 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 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