BMW 2014 Annual Report Download - page 189

189 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 2014 is disclosed by individual and
analysed in its component parts.
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 of the
BMW
Group. One further principle applied when de-
signing remuneration systems at BMW is that of consist-
ency at different levels. In other words, compensation
systems for the Board of Management, senior manage-
ment and employees of BMW AG should all have a
simi-
lar structure and contain similar components. The Super-
visory
Board carries out regular checks to ensure that
all Board of Management compensation components are
appropriate, both individually and in total, and do not
encourage the Board of Management to take
inappro-
priate risks on behalf of 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 parame-
ters 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 posi-
tive 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 executive managers and with the average salaries
of employees of BMW AG in Germany, in both cases in
terms of level and of changes over time. Recommenda-
tions made by an independent external remuneration
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 is unchanged from the previous year,
namely € 0.75 million p. a. for a board member during
the first period of office, € 0.9 million p. a. for a board
member from the second term of appointment or fourth
year of office onwards and € 1.5 million 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, which