BMW 2014 Annual Report Download - page 190

190
170 STATEMENT ON
CORPORATE GOVERNANCE
(Part of Management Report)
170 Information on the Company’s
Governing Constitution
171 Declaration of the Board of
Management and of the
Supervisory Board pursuant to
§ 161 AktG
172 Members of the Board of
Management
173
Members of the Supervisory
Board
176 Work Procedures of the
Board of Management
178 Work Procedures of the
Supervisory Board
183 Information on Corporate
Governance Practices
184 Compliance in the BMW Group
189 Compensation Report
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. from the
second term of appointment or fourth year of office on-
wards. 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.
With effect from financial years beginning on or after
1 January 2014, the upper limits are 200 % of the relevant
target bonus (2013: 250 %).
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 tar-
get
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
Super visory 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 finan-
cial
year 2014 for a member of the Board of Management
during the first period of office and one of € 0.875 mil-
lion during the second term of appointment or from the
fourth year in office. The equivalent bonus for the Chair-
man 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 earn-
ings factor for the financial year 2014 would be zero. In
this case, no corporate earnings-related bonus would be
paid. Based on the principle of consistency at all levels,
this rule is also applicable in determining the corporate
earnings-related variable compensation 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 pe-
riods, 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. re-
duction of carbon emissions), customer focus, ability to
adapt, leadership accomplishments, contributions to
the Company’s attractiveness as an employer, progress
in implementing the diversity concept and activities that
foster corporate social responsibility. The target bonus
and the key figures used to determine the corporate
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 em-
ployment relationship was ended before expiry of the
agreed contractual period (except if caused by death or
invalidity). Special rules apply in the case of death or
invalidity of a Board of Management member before ful-
filment of the holding period.