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46 Corporate Governance
Compensation Report
In our Compensation Report, which is based on the recom-
mendations of the German Corporate Governance Code,
we summarize the principles relevant for determining
the compensation of our Executive Board and outline
the structure and level of Executive Board compensation
as well as the compensation of our Supervisory Board.
The individualized compensation of our Executive Board
members broken down by the different components is
given in the notes to the consolidated fi nancial statements
as required by the German Corporate Governance Code
(see Notes – Additional Information/note 34).
Executive Board Compensation in 2005
Responsibility Assigned to General Committee
In accordance with its new Rules of Procedure, our Super-
visory Board has again assigned matters relating to the
structure and level of Executive Board compensation to its
co-determined General Committee as this system has proven
successful.
Compensation Consists of Three Components
The structure of our Executive Board’s compensation is based
on our Group’s size and global orientation as well as fi nan-
cial and economic position. In addition, the compensation is
determined by criteria including the responsibilities and the
contribution of the respective Executive Board member, his
individual performance as well as the performance of the
entire Executive Board. Performance-related components,
which comprise the greatest share in the compensation, are
designed in such a way as to present a clear incentive for our
Executive Board members to achieve the defi ned targets and
to support a sustainable value- oriented management.
The compensation of our Executive Board comprises the fol-
lowing components:
…
…
… A non-performance-related component consisting of base
salary and benefi ts in kind.
…
…
… A performance-related component consisting of:
…
…
… a Performance Bonus, which is linked to the base salary
and depends on the individual performance of the respective
Executive Board member as well as on the Group’s results
and is paid out following the end of the respective fi scal year;
and
…
…
… a Long-Term Incentive Plan Bonus (LTIP Bonus) to be
paid out in 2006, the amount of which is determined by the
attainment of predefi ned earnings improvements during the
three-year period from 2003 to 2005.1)
…
…
… A share-based component in the form of compensation
through the Management Share Option Plan (MSOP), which is
calculated on the basis of a performance discount consisting
of an absolute and a relative performance component. The
option rights, which were issued in several tranches under
the share option plan adopted by the 1999 Annual General
Meeting, are exercisable over a period of fi ve years following
a two-year vesting period, provided that at least one of the two
performance targets, i.e. absolute performance and relative
performance, has been attained (see Notes – Additional Infor-
mation/note 32). Executive Board members were last granted
options under the Management Share Option Plan (MSOP) in
August 2002. No new share option plan has been adopted by
the Annual General Meeting.
1) The General Committee has decided to implement a subsequent plan for the three-year
period from 2006 to 2008 (LTIP 2006–2008).