BMW 2013 Annual Report Download - page 185

185 STATEMENT ON CORPORATE GOVERNANCE
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 2013 is disclosed by individual and
analysed into components.
1. Board of Management compensation
Responsibilities
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.
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 na-
ture of the tasks allocated to each member of the Board
of Management, the economic situation and the per-
formance 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
positive 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 com-
paring compensation paid by DAX companies and in
vertical terms by comparing board compensation with
the salaries of executive managers and with the average
salaries of employees of BMW AG in Germany, in both
cases in terms of level and changes over time. Recom-
mendations 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 comprises
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 is unchanged from the previous year,
namely € 750,000 p. a. for a board member during the
first period of office, € 900,000 p. a. for a board member
from the second period or fourth year of office onwards
and € 1,500,000 p. a. 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 a share-based remuneration component
on the other.
Variable cash remuneration, in particular bonuses
Variable cash remuneration consists of a cash bonus
and share-based remuneration component equivalent
to 20 % of a board member’s total bonus after taxes,