Mercedes 2012 Annual Report Download - page 115

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The base salary is fixed remuneration relating to the entire
year, oriented towards the area of responsibility of each
Board of Management member and paid out in twelve monthly
installments.
The annual bonus is variable remuneration, the level of which
is primarily linked to the operating profit of the Daimler Group
(EBIT). For the past financial year, the annual bonus was also
linked to the target for the respective financial year determined
by the Supervisory Board (derived from the level of return
targeted for the medium term and the growth targets), the actual
result compared with the prior year, the individual performance
of the Board of Management members and the achievement
of compliance targets. Optionally, additional key figures/assess-
ment bases can be included; for 2012, these were key non-
financial metrics and indicators oriented towards the UN Global
Compact and its ten principles.
Primary reference parameters:
– 50% relates to a comparison of actual EBIT in 2012
with EBIT targeted for 2012.
– 50% relates to a comparison of actual EBIT in 2012
with actual EBIT in 2011.
Amount with 100% target achievement:
In the year 2012, 100% of the base salary.
Range of target achievement:
0 to 200%, that is, the annual bonus due to EBIT achievement
has an upper limit of double the base salary and may also
be zero (see below). Both primary reference parameters, each
of which relates to half of the bonus, can vary between 0%
and 200%. The limits of this bandwidth are defined by a deviation
of plus or minus two percent of the prior-year revenue.
On the basis of the resulting degree of target achievement,
an amount of up to 10% can be added or deducted, depending
on the aforementioned predefined key figures/assessment
basis. Since 2012, non-financial targets have been used as a basis
for assessment; for the past financial year, those targets were
the deepened establishment in the Daimler Group of the princi-
ples of the UN Global Compact. Furthermore, the Supervisory
Board has the possibility, based for example on the aforemen-
tioned agreed targets, to take account of the personal per-
formance of the individual Board of Management members
with an addition or deduction of up to 25%.
Once again in 2012, additional individual targets were agreed
upon with the Board of Management with regard to the
development and sustained function of a compliance system.
The complete or partial non-achievement of individual com-
pliance targets can be reflected by a deduction of up to 25% from
the individual target achievement. However, the compliance
targets cannot result in any increase in individual target achieve-
ment, even in the case of full accomplishment.
The Performance Phantom Share Plan (PPSP) is an element
of remuneration with long-term incentive effects. At the
beginning of the plan, a number of phantom shares are granted
and medium-term performance targets are set for a period
of three years. On the basis of the degree of target achievement
determined at the end of the three-year period, the final
number of phantom shares is determined that are then paid
out at the end of the fourth plan year. This final number can
be between 0% and 200% of the phantom shares granted at the
beginning of the plan. Payouts under the 2012 plan occur
after four years at the price of Daimler shares that is then valid.
Due to the granting of phantom shares and their payout
at the end of the plan on the basis of the share price then valid,
an opportunity and risk potential exists relating to the devel-
opment of the share price. Half of the net amount paid out must
be used to buy ordinary Daimler shares, which must then
be held until the applicable guidelines for share ownership
are fulfilled. E see page 125
For the granting of phantom shares, the Supervisory Board
specifies an absolute amount in euros in the context of setting
the annual target remuneration. The number of phantom
shares granted is calculated by dividing that amount by the rele-
vant average share price over a period of several weeks. This
average price is definitive not only for granting phantom shares
under the new plan, but also for payment under the plan
granted four years previously.
Reference parameters for Plan 2012:
– 50% relates to the Group’s return on sales compared with
a group of competitors (BMW, Fiat, Ford, Honda, Paccar,
Renault, Toyota, Volvo and Volkswagen). For the measurement
of this success criterion, the competitors’ average return
on sales is calculated over a period of three years, whereby
the best and worst values are not taken into consideration.
The extent that Daimler’s return on sales deviates by up to plus
or minus two percentage points from the average thus
cal culated is deemed to be the range of target achievement.
This means that target achievement is 200% if Daimler’s
return on sales is two percentage points or more above the
cal culated average. Target achievement is 0% if Daimler’s
return on sales is two percentage points or more below the
calculated average.
– 50% relates to the Group’s return on net assets in relation
to the cost of capital. This criterion stands for the value
created by the Group. The extent that Daimler’s return on
net assets deviates over a period of three years by plus
or minus two percentage points from a target of 8% is deemed
to be the range of target achievement. This means that
target achievement is 200% if Daimler’s return on net assets
is 10% or more. Target achievement is 0% if Daimler’s
return on net assets is 6% or less.
As of PPSP 2013, the Supervisory Board has decided
that target achievement of 200% will only be achieved
with a return on net assets of 16% or more.
Value upon allocation:
Determined annually in relation to a market comparison;
for 2012, approximately 1.3 to 1.6 times the base salary.
Range of target achievement:
0 to 200%, that is, the plan has an upper limit. It may also be zero.
Value of the phantom shares on payout:
In line with the calculated share price and the number
of shares achieved according to the aforementioned criteria.
The share price used as a basis for payout is limited to
2.5 times the share price at the beginning of the plan and
the amount paid out is limited to 2.5 times the grant value
used to calculate the preliminary number of phantom shares.