BMW 2015 Annual Report Download - page 189

189 STATEMENT ON CORPORATE GOVERNANCE
The bonus comprises two components, each equally
weighted, namely a corporate earnings-related bonus
and a personal performance-related bonus. The tar-
get
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 bonus
figure is capped for all Board of Management members
at 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 corpo-
rate
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 divi-
dend
factor. In exceptional circumstances, for instance
when there have been major acquisitions or disposals,
the Supervisory Board may adjust the level of the corpo-
rate
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 2015 for a member of the Board of Manage-
ment
during the first period of office and € 0.875 million
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 were below € 1 billion,
or if the post-tax return on sales were less than 2 %, the
earnings factor for the financial year 2015 would be
zero. In this case, no corporate earnings-related bonus
would be paid.
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, equal consideration is given to personal perfor-
mance, decisions taken in previous forecasting periods,
key decisions affecting the future development of the
business and the effectiveness of measures taken in
re-
sponse 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. reduction of
carbon emissions), customer focus, ability to adapt,
leadership accomplishments, contributions to the Com-
pany’s attractiveness as an employer, progress in imple-
menting 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 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 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, at the end of the
holding period the Board of Management members will
normally receive from the Company either one addi-
tional 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
remuneration component / matching component). Spe-
cial
rules apply in the case of death or invalidity of a
Board of Management member or early termination of
the contractual relationship before fulfilment of the
holding period.
Retirement and surviving dependants’ benefits
The provision of retirement and surviving dependants’
benefits for Board of Management members was changed
to a defined contribution system with a guaranteed
minimum return with effect from 1 January 2010. How-
ever, given the fact that board members appointed for
the first time prior to 1 January 2010 for the most part
had a legal right to receive the benefits already prom-
ised to them, these board members were given the
option to choose between the previous system and the
new one.
In the event of the termination of mandate, Board of
Management members appointed for the first time prior
to 1 January 2010 are entitled to receive certain defined