Mercedes 2015 Annual Report Download - page 115

122 B | COMBINED MANAGEMENT REPORT | REMUNERATION REPORT
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.
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 applicable
law. The adequate combination of non-performance-related
and performance-related components of remuneration is
designed to create an incentive to secure the Group’s long-term
success. The fixed component of remuneration is paid as a
base salary; the variable components are intended to reflect,
clearly and directly, the joint and individual performance of
the members of the Board of Management as well as the long-
term performance of the Group. The interests of all stake-
holders, in particular those of the shareholders as the owners
of the Company and those of the employees, are harmonized
through the focus on the Group’s long-term success.
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 checking for appro-
priateness, based on a horizontal and a vertical comparison.
In the horizontal comparison, the following aspects are
given particular attention in relation to a group of comparable
companies in Germany:
– the effects of the individual fixed and variable components,
that is, the methods behind them and their reference
parameters;
– the relative weighting of the components, that is,
the relationship between the fixed base salary and the
short-term and long-term variable components; and
– the target remuneration consisting of base salary, annual
bonus and long-term variable remuneration, also with
consideration of entitlement to a retirement pension and
fringe benefits.
The vertical comparison focuses on the ratio of Board of
Management remuneration to the remuneration of the senior
executives and the entire workforce of Daimler AG in Germany,
also with regard to development over time. The Supervisory
Board has defined the group of senior executives for this purpose.
In carrying out this review, the Presidential Committee and the
Supervisory Board consult independent external advisors,
above all to facilitate a comparison with remuneration systems
common in the market. If the review results in a need for
changes to the remuneration system for the Board of Manage-
ment, the Presidential Committee submits the relevant
proposals to the entire Supervisory Board for its approval.
On the basis of the approved remuneration system, the
Supervisory 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 on the success
parameters relevant to the annual bonus in the coming year.
Furthermore, individual goals are decided upon for each
member of the Board of Management for the respective areas
of personal responsibility; those goals are then taken into
consideration after the end of the financial year when the annual
bonus is decided upon by the Supervisory Board.
For the long-term variable component of remuneration,
the so-called Performance Phantom Share Plan (PPSP), the
Supervisory Board sets an amount to be granted for the
upcoming financial year in the form of an absolute amount
in euros and sets the related performance targets.
In this way, the individual base and target remuneration and
the relevant performance parameters are set by the beginning
of each year.
After the end of each year, target achievement is measured
and the actual remuneration is then calculated by the
Presidential Committee and submitted to the Supervisory
Board for its approval.
Remuneration Report