Mercedes 2006 Annual Report Download - page 137

Variable compensation, in the form of a Performance Phantom
Share Plan, is linked to the long-term development of enterprise
value and is based on the principles of performance orientation,
benchmark comparison and share ownership. This component
of compensation takes into consideration all of the key criteria
recommended in connection with good corporate governance.
With a term of four years, the plan is oriented towards medium-
term performance targets, while also having a long-term effect
through the obligation to acquire shares and hold them perma-
nently. With this model, target achievement is measured in
terms of the return on net assets that is actually achieved by the
Group, i.e. value creation, and its return on sales; the latter
compared with the relevant competitors, which are BMW, Ford,
General Motors, Honda, Toyota, AB Volvo and Volkswagen. Due
to the allocation of phantom shares at the beginning of the
4-year period, the development of DaimlerChrysler’s share price
is taken into consideration; these phantom shares are also
entitled to a dividend during the 4-year period. After three years,
the final number of phantom shares is calculated depending on
the degree of target achievement. These phantom shares must
then be held for one more year. After four years, the amount to
be paid out is calculated by multiplying the number of phantom
shares by the share price relevant at that time. The members
of the Board of Management have to use a quarter of this gross
amount paid out to purchase “real” DaimlerChrysler shares, so
that the stipulations arising from the guidelines for share owner-
ship are fulfilled.
No retroactive change in the defined performance targets or the
competitive parameters is possible in connection with allocating
the stock-based compensation.
Guidelines for share ownership. As a supplement to these
three components of Board of Management compensation, the
Presidential Committee of the Supervisory Board of Daimler-
Chrysler has approved Stock Ownership Guidelines for the Board
of Management, under which the members of the Board of Man-
agement are required to invest a portion of their private assets in
DaimlerChrysler shares over a period of several years and to
hold these shares until the end of their Board of Management
membership. The real shares acquired in the context of the new
stock-based compensation are generally to be used to fulfill the
provisions of these guidelines, but the required shares can also
be acquired in different ways.
Total Board of Management compensation in 2006. The total
compensation paid by Group companies to the members of the
Board of Management of DaimlerChrysler AG is calculated from
the amount of compensation paid in cash and from the non-cash
benefits in kind. The latter primarily comprise the provision of
company cars and the reimbursement of expenses for security
precautions.
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