BMW 2015 Annual Report Download - page 188

188
Compensation Report
The following section describes the principles govern-
ing 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
explaining 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 2015 is disclosed by individual mem-
ber and analysed in its component parts.
1. Board of Management compensation
Responsibility
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 the sustainable development of
the BMW Group. One further principle applied when
designing remuneration systems at BMW is that of
con-
sistency 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
similar structure and contain similar components. The
Supervisory Board carries out regular checks to ensure
that all Board of Management compensation compo-
nents are appropriate, both individually and in total,
and do not encourage the Board of Management to take
inappropriate risks on behalf of the BMW Group. At the
same time, the compensation model used for the Board
of Management needs to be sufficiently attractive for
highly qualified executives in a competitive environment.
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 ambitious and relevant para-
meters as the basis for variable compensation. It also
ensures 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 perfor-
mance. Targets and other parameters may not be changed
retrospectively. The Supervisory Board reviews the ap-
propriateness of the compensation system annually.
In
preparation, the Personnel Committee also consults
remuneration studies. The Supervisory Board reviews
the appropriateness of the compensation system in hori-
zontal terms by comparing compensation paid by
other DAX companies and in vertical terms by compar-
ing board compensation with the salaries of executive
managers and with the average salaries of employees of
BMW AG based in Germany, in both cases with regard
to their various levels and to changes over time.
Recom-
mendations made by an independent external remuner-
ation
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 remuneration
Fixed remuneration consists of a base salary (paid
monthly) and other remuneration elements, which
comprise mainly the use of Company and leased cars as
well as the payment of insurance premiums, contribu-
tions
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
the board member is required to invest in BMW AG com-
mon
stock. Taxes and social insurance relating to the
share-based remuneration are also borne by the Com-
pany. In substantiated cases, the Supervisory Board also
has the option of paying an additional special bonus.
168 STATEMENT ON
CORPORATE GOVERNANCE
(Part of Management Report)
168 Information on the Company’s
Governing Constitution
169 Declaration of the Board of
Management and of the
Supervisory Board pursuant to
§ 161 AktG
170 Members of the Board of
Management
171
Members of the Supervisory
Board
174 Work Procedures of the
Board of Management
176 Work Procedures of the
Supervisory Board
181 Disclosures pursuant to the Act
on Equal Gender Participation
182 Information on Corporate
Governance Practices
184 Compliance in the BMW Group
188 Compensation Report