BMW 2013 Annual Report Download - page 186

186
166 STATEMENT ON
CORPORATE GOVERNANCE
(Part of Management Report)
166 Information on the Company’s
Governing Constitution
167 Declaration of the Board of
Management and of the
Supervisory
Board pursuant to
§ 161 AktG
168 Members of the Board of
Management
169
Members of the Supervisory
Board
172 Work Procedures of the
Board of Management
174 Work Procedures of the
Supervisory Board
179 Information on Corporate
Governance Practices
180 Compliance in the BMW Group
185 Compensation Report
which the board member is required to invest in BMW AG
common stock. Taxes and social insurance relating
to the share-based remuneration are also borne by the
Company. In substantiated cases, the Supervisory
Board also has the option of paying an additional spe-
cial 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, for
both components of variable compensation, totals
€ 1.5
million p. a., rising to € 1.75 million p. a. with effect
from the second term of appointment or the fourth year
in office. The equivalent figure for the Chairman of the
Board of Management is € 3 million p. a. The amount of
bonus is capped for all Board of Management members.
For the financial year 2013, the upper limits were 250 %
of the relevant target bonus. For financial years com-
mencing after 1 January 2014, the upper limits are 200 %
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 would give
rise to an earnings-based bonus of € 0.75 million for
the financial year 2013 for a member of the Board of
Management during the first period of office and one
of € 0.875 million during the second term of appoint-
ment or from the fourth year in 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 return on sales is less
than 2 %, the earnings factor for the financial year 2013
would be zero. In this case, no corporate earnings- re-
lated bonus would be paid. Based on the principle of
consistency at all levels, this rule is also applicable in de-
termining the corporate earnings-related variable com-
pensation 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 rele-
vant Board of Management member to sustainable and
long-term oriented business development. In setting
the factor, consideration is given equally to personal
performance and decisions taken in previous forecast-
ing periods, key decisions affecting the future develop-
ment 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 di-
rectly in the basis of measurement. Performance factor
criteria include innovation (economic and ecological,
e. g. reduction of carbon emissions), customer focus,
ability to adapt, leadership accomplishments, contribu-
tions to the Company’s attractiveness as an employer,
progress in implementing the diversity concept and ac-
tivities that foster corporate social responsibility. The
target bonus and the key figures used to determine the
cor porate earnings-related bonus are fixed in advance
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 incen-
tives 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
remunera-
tion component / matching component), unless the