Mercedes 2006 Annual Report Download - page 136

120
Compensation Report
The Compensation Report summarizes the principles that are
applied to determine the compensation of the Board of Manage-
ment of DaimlerChrysler AG and explains the level and structure
of its members’ compensation. It also describes the principles and
level of compensation of the Supervisory Board.
Compensation of the Board of Management
Responsibility. The Supervisory Board has transferred respon-
sibility for determining the structure and level of compensation
for the Board of Management of DaimlerChrysler AG to the
Presidential Committee, which regularly informs the Supervisory
Board about its decisions and obtains the approval of the entire
Supervisory Board if needed (see page 113). The principles to be
applied have been laid down by the Supervisory Board in the
Rules of Procedure for the Presidential Committee. The Super-
visory Board also holds discussions on the structure of the
compensation system for the Board of Management and regularly
reviews this structure.
Goals. The compensation system for the Board of Management
aims to compensate its members commensurately with their
areas of activity and responsibility when compared internation-
ally. The system should also clearly and directly reflect in the
variability of compensation the joint and individual performance
of the Board of Management members and the success of the
Group.
For this purpose, the compensation system comprises an element
of fixed basic compensation, an annual bonus and an element of
variable compensation with medium-term and long-term incentive
effects and a risk component.
In order to ensure the competitiveness and appropriateness of
Board of Management compensation, its structure, individual
components and the total compensation are reviewed each year
in relation to a benchmark group of companies in the United
States, Germany and other European countries. For this purpose,
the Presidential Committee is regularly assisted by external
consultants.
Structure of Board of Management compensation. Board of
Management compensation for 2006 comprised three compo-
nents, as set out below:
The element of fixed base salary, paid in twelve monthly install-
ments, is related to the area of responsibility of each Board of
Management member.
The annual bonus is variable cash compensation, the level of
which is related to the fixed basic compensation and depends to
an equal extent on the degree to which DaimlerChrysler Group’s
planned operating profit is actually achieved and a comparison of
the operating profit in the current year and the prior year. Additional
targets may also be taken into consideration, such as the
development of total shareholder return in relation to comparable
automotive companies. When setting the annual bonus, the
Presidential Committee of the Supervisory Board also has the
possibility to reward the Board of Management members’
individual performance, which is not directly reflected in the
performance of the Group, with a supplementary payment or
deduction of up to 25%. The operating-profit target is determined
annually in advance on the basis of the planning approved by
the Supervisory Board.