Mercedes 2013 Annual Report Download - page 116

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annual bonus (with the use of the bonus-malus rule) and
the variable component of remuneration with a long-term
incentive effect with its link to additional, ambitious com-
parative para meters and to the share price reflect the recom-
mendations of the German Corporate Governance Code
and give due consideration to both positive and negative
developments. The details of the system are as follows:
The base salary is fixed remuneration relating to the entire
year, oriented towards the area of responsibility of each
Board of Management member and paid out in twelve monthly
installments.
The annual bonus is variable remuneration, the level of which
is primarily linked to the operating profit of the Daimler Group
(EBIT). For the past financial year, the annual bonus was also
linked to the target for the respective financial year determined
by the Supervisory Board (derived from the level of return
targeted for the medium term and the growth targets), the actual
result compared with the prior year, the individual performance
of the Board of Management members and the achievement
of compliance targets. Optionally, additional key figures/assess-
ment bases and targets can be included.
Primary reference parameters:
– 50% relates to a comparison of actual EBIT in 2013
with EBIT targeted for 2013.
– 50% relates to a comparison of actual EBIT in 2013
with actual EBIT in 2012.
Amount with 100% target achievement
(target annual bonus):
In the year 2013, 100% of the base salary.
Range of possible target achievement:
0 to 200%, that is, the annual bonus due to EBIT achievement
has an upper limit of double the base salary and may also
be zero (see below). Both primary reference parameters, each
of which relates to half of the bonus, can vary between 0%
and 200%. The limits of this bandwidth are defined by a deviation
of plus or minus 2% of the prior-year revenue.
On the basis of the resulting degree of target achievement,
an amount of up to 10% can be added or deducted, depending
on the aforementioned predefined key figures/assessment
basis. Since 2012, non-financial targets have been used
as a basis for assessment; for the past financial year, those
targets were employee and customer satisfaction, diversity
as well as the further development and permanent establishment
of the corporate value of integrity. Furthermore, the Super-
visory Board has the possibility, based for example on the agreed
targets that have been set, to take account of the personal
performance of the individual Board of Management members
with an addition or deduction of up to 25%.
Once again in 2013, further individual targets were agreed upon
with the Board of Management with regard to the development
and sustained function of the compliance management system.
The complete or partial non-achievement of individual com-
pliance targets can be reflected by a deduction of up to 25% from
the individual target achievement. However, the compliance
targets cannot result in any increase in individual target achieve-
ment, even in the case of full accomplishment.
The Performance Phantom Share Plan (PPSP) is a variable
element of remuneration with long-term incentive effects.
At the beginning of the plan, the Supervisory Board specifies
an absolute amount in euros in the context of setting the
individual annual target remuneration. This amount is divided
by the relevant average price of Daimler shares calculated
over a long period of time, which results in the preliminary number
of phantom shares allocated. Also at the beginning of the
plan, performance targets are set for a period of three years.
Depending on the achievement of these performance targets
with a possible range of 0% to 200%, after three years, the
phantom shares allocated at the beginning of the plan are con-
verted into the final number of phantom shares allocated.
After another plan year has elapsed, the amount to be paid
out is calculated from this number of phantom shares and
the applicable share price at that time. The share price relevant
for the payout under this plan is also relevant for allocating
the preliminary number of phantom shares for the plan newly
issued in this year.
Reference parameters for Plan 2013:
– 50% relates to the Group’s return on sales compared with
a group of competitors (BMW, Fiat, Ford, Honda, Paccar,
Renault, Toyota, Volvo and Volkswagen). For the measurement
of this success criterion, the competitors’ average return
on sales is calculated over a period of three years, whereby
the best and worst values are not taken into consideration.
The extent that Daimler’s return on sales deviates by up to +/-2
percentage points from the average thus calculated is
deemed to be the range of target achievement. This means
that target achievement is 200% if Daimler’s return on
sales is 2 percentage points or more above the competitors’
average. Target achievement is 0% if Daimler’s return on
sales is 2 percentage points or more below the competitors’
average.
– 50% relates to the Group’s return on net assets in relation
to the cost of capital. This criterion stands for the value
created by the Group. In a defined range between 6% and 8%
and between 8% and 16% (since the 2013 plan), appropriate
performance factors are allocated to the individual figures
for return on net assets in a linear relationship. This means
that target achievement is 200% if Daimler’s return on net
assets is 16% or more. Target achievement is 0% if Daimler’s
return on net assets is 6% or less.
Value upon allocation:
Determined annually in relation to a market comparison;
for 2013, approximately 1.3 to 1.6 times the base salary.
Range of possible target achievement:
0 to 200%, that is, the plan has an upper limit.
It may also be zero.