Mercedes 2010 Annual Report Download - page 156

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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. The Remu-
neration Report is part of the Management Report for Daimler AG
and for the Group.
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 appli-
cable law, so that Daimler is an attractive employer also for
first-class executives. By means of adequate variability, the
system should also clearly and directly reflect the joint and
individual performance of the Board of Management members
and the long-term sustainable performance of the Group.
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 appropriateness, based on a horizontal and verti-
cal comparison. In this context, 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, i.e. the relationship
between the fixed base salary and the short-term and long-
term variable components,
– the ratio of an average employee’s salary to that of a member
of the Board of Management, and the resulting target remuner-
ation consisting of base salary, annual bonus and long-term
remuneration, also with consideration of entitlement to retire-
ment pension and fringe benefits.
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 Management, the Presiden-
tial Committee submits proposals for such changes to the entire
Supervisory Board for its approval.
On the basis of the approved remuneration system, the Super-
visory 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 upon the success parameters relevant
for the variable components of remuneration in the coming year.
Furthermore, once a year, individual goals are agreed for the com-
ing year between the Chairman of the Supervisory Board, the
Chairman of the Board of Management and each member of the
Board of Management for his specific area of responsibility;
these goals are then taken into consideration after the end of the
financial year when the annual bonus is decided upon by the
Supervisory Board.
In this way, the individual base and target remuneration and the
relevant performance parameters are set by the beginning of
each year. These details require the approval of the Supervisory
Board.
On this basis, after the end of each year, target achievement
is measured and the actual remuneration is calculated by the
Presidential Committee and submitted to the Supervisory Board
for its approval.
The system of Board of Management remuneration in 2010.
The remuneration system continues to comprise a fixed base
salary (approximately 20% of the target remuneration), an annual
bonus (approximately 30% of the remuneration), and a variable
component of remuneration with a medium-term and long-term
incentive effect (approximately 50% of the target remuneration).
The latter reflects the recommendations of the German Corporate
Government Code through its link to the share price and to addi-
tional challenging comparative parameters, and takes account of
both positive and negative developments. The details of the
system are as follows:
The base salary is fixed cash remuneration relating to the entire
year, oriented towards the area of responsibility of each Board
of Management member, and paid out in twelve monthly install-
ments. In the first six months of 2010, this was reduced due
to a voluntary waiver in the context of the economic crisis by the
members of the Board of Management of 15% of their base
salaries, effective as of May 1, 2009.