Mercedes 2009 Annual Report Download - page 160

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The Remuneration Report summarizes the principles that are
applied to determine the remuneration of the Board of Manage-
ment of Daimler AG and explains both the level and the structure
of its members’ remuneration. It also describes the principles
and level of remuneration of the Supervisory Board. The Remu-
neration Report is part of the Management Report for Daimler AG
and for the Group.
Principles of Board of Management remuneration
Goals. The remuneration system for the Board of Management
aims to remunerate its members commensurately with their
areas of activity and responsibility and in compliance with applic-
able law, so that Daimler is an attractive employer also for
first-class executives. By means of adequate variability, the system
should also clearly and directly reflect the joint and individual
performance of the Board of Management members and the long-
term sustainable performance of the Group.
Practical implementation. For each upcoming financial year,
the Presidential Committee at first prepares a review by the
Supervisory Board of the system and level of remuneration on
the basis of a comparison with competitors. The main focus is
on the question of appropriateness. In this respect, the following
aspects are given particular attention in relation to a group of
comparable companies, mainly in Germany, but also in other Euro-
pean countries and the United States:
– the effects of the individual fixed and variable components,
that is, the methods behind them and their reference parame-
ters,
– the relative weighting of the components, i.e. the relationship
between the fixed base salary and the short-term and long-
term variable components, and
– the resulting target remuneration consisting of base salary
(approximately 20% of the target remuneration), annual bonus
(approximately 30% of the target remuneration) and long-term
remuneration (approximately 50% of the target remuneration)
with an assumed 100% target achievement.
In carrying out this review, the Presidential Committee and the
Supervisory Board consult independent external experts. If the
review results in a need for changes to the remuneration system
for the Board of Management, the Presidential Committee sub-
mits proposals for such changes to the entire Supervisory Board
for its approval.
On the basis of the approved remuneration system, the Supervi-
sory Board decides at the beginning of the year on the base
and target remuneration for the individual members of the Board
of Management and decides upon the success parameters rele-
vant for the variable components of remuneration for the coming
year. Furthermore, once a year, goals are jointly set between the
Chairman of the Supervisory Board, the Chairman of the Board of
Management and the members of the Board of Management for
the coming financial year; these goals are then taken into consid-
eration after the end of the financial year when the annual bonus
is decided upon by the Supervisory Board.
In this way, the individual base and target remuneration and the
relevant performance parameters are set by the beginning of
each year. These details require the approval of the Supervisory
Board.
On this basis, after the end of each year, target achievement is
measured and the actual remuneration is calculated by the Presi-
dential Committee and submitted to the Supervisory Board for
its approval.
The system of Board of Management remuneration in 2009.
The remuneration system continues to comprise a fixed base
salary, an annual bonus, and a variable component of remunera-
tion with a medium-term and long-term incentive effect. The
latter reflects the recommendations of the German Corporate
Government Code through its link to the share price and to
additional challenging comparative parameters, and takes account
of both positive and negative developments. The details of the
system are as follows:
The base salary is fixed cash remuneration relating to the entire
year, oriented towards the area of responsibility of each Board
of Management member, and paid out in twelve monthly install-
ments.
The annual bonus is variable cash remuneration, the level of
which is primarily linked to the operating profit of the Daimler
Group (EBIT), and optionally to other key figures and the individ-
ual performance of the Board of Management members in the
past financial year. In the year 2009, particular importance was
additionally placed on the free cash flow of the industrial
business.
Remuneration Report