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3 | Management Report | Overall Assessment of the Economic Situation | Events after the End of the 2012 Financial Year | Remuneration Report
The Remuneration Report summarizes the principles that
are applied to determine the remuneration of the Board
of Management 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 Remuneration 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 sustained 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 vertical 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, that is,
the relationship between the fixed base salary and the
short-term and long-term variable components,
– the ratio of an average employee’s income to that
of a member of the Board of Management
and the resulting target remuneration consisting of base
salary, annual bonus and long-term remuneration, also
with consideration of entitlement to a retirement 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 com-
mon in the market. If the review results in a need for changes to
the remuneration system for the Board of Management, the
Presidential 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 on the success parameters rele-
vant for the variable components of remuneration in the coming
year. Furthermore, once a year, individual goals are agreed
for the respective areas of responsibility for the coming year
between the Chairman of the Supervisory Board, the Chairman
of the Board of Management and each member of the Board
of Management; 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.
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 Super-
visory 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 2012. The remuneration system comprises a fixed base
salary (approximately 29% of the target remuneration),
an annual bonus (approximately 29% of the target remuneration),
and a variable component of remuneration with a long-term
incentive effect (approximately 42% of the target remuneration).
The spectrum of target achievement and the reference
parameters remained unchanged. Only 50% of the annual bonus
is paid out in the March of the following year. The other 50%
is paid out a year later with the application of a bonus-malus rule,
depending on the development of the Daimler share price com-
pared with an automotive index (Dow Jones STOXX Auto Index
E see pages 26 f), which Daimler AG uses as a benchmark
for the relative share-price development. Both the delayed pay-
out of the annual bonus (with the use of the bonus-malus rule)
and the variable component of remuneration with a long-term
incentive effect with its link to additional, ambitious compar-
ative parameters and the share price reflect the recommenda-
tions of the German Corporate Governance Code and give
due consideration to both positive and negative developments.
The details of the system are as follows:
Remuneration Report