BMW 2011 Annual Report Download - page 165

165 STATEMENT ON CORPORATE GOVERNANCE
Compensation Report
The following section describes the principles relating
to the compensation of the Board of Management and
the stipulations set out in the statutes relating to the
compensation of the Supervisory Board. In addition to
discussing the compensation system, the components
of compensation are also disclosed in absolute figures.
Furthermore, the compensation of each member of
the Board of Management and the Supervisory Board
for the financial year 2011 is disclosed by individual and
analysed into components.
1. Compensation of the Board of Management
Responsibilities; approval by shareholders in 2011
The Supervisory Board is responsible for determining
and regularly reviewing the Board of Management’s
compensation. The Personnel Committee plays a pre-
paratory role in this process.
In conjunction with the introduction of a share-based
remuneration scheme, the compensation system appli-
cable to the Board of Management was presented most
recently for approval by shareholders at the Annual
General Meeting on 12 May 2011 as part of a consulta-
tive process (“Say on Pay”). The compensation system
was approved with a majority vote of 95.83 %.
Principles of compensation
The compensation system for the Board of Management
at BMW AG is designed to encourage a management
approach focused on sustainable development. One im-
portant principle applied when designing remuneration
systems at BMW is that of consistency at different levels.
In other words, compensation systems for the Board of
Management, senior management and employees of
BMW AG should all have a similar structure and contain
similar components. The Supervisory Board carries out
regular checks to ensure that all Board of Management
compensation components are appropriate, both indi-
vidually and in total, and do not encourage the Board of
Management to take inappropriate risks for the BMW
Group. At the same time, the compensation model used
for the Board of Management should be attractive in
the context of the competitive environment for highly
qualified executives.
The compensation of members of the Board of Manage-
ment is determined by the full Supervisory Board on
the basis of performance criteria and after taking into
account any remuneration received from Group com-
panies. The principal performance criteria are the na-
ture of the tasks allocated to each member of the Board
of Management, the economic situation and the per-
formance and future prospects of the BMW Group. The
Supervisory Board sets demanding and relevant pa-
rameters as the basis for variable compensation. It also
takes care to ensure that variable components based on
multi-year assessment criteria take account of both posi-
tive and negative developments and that the package
as whole encourages a long-term approach to business
performance. Targets and other parameters may not be
changed retrospectively.
The Supervisory Board reviews the appropriateness of
the compensation system annually. The Personnel Com-
mittee
also makes use of remuneration studies. The
Supervisory Board reviews the appropriateness of the
compensation system in horizontal terms by comparing
compensation paid by DAX-30 companies and in ver-
tical terms by comparing board compensation with the
salaries of the two top levels of management (below board
level) and with the average salaries of employees. Recom-
mendations made by an independent external remunera-
tion expert and suggestions made by investors and ana-
lysts are also considered in the consultative process.
Compensation system, compensation components
The compensation of the Board of Management com-
prises both fixed and variable remuneration as well
as a share-based component. Retirement and surviving
dependants’ benefit entitlements are also in place.
Fixed remuneration
Fixed remuneration consists of a base salary (paid
monthly) and other remuneration elements. Other
remuneration elements comprise mainly the use of
Company cars as well as the payment of insurance
premiums, contributions towards security systems and
an annual medical check-up.
The basic remuneration of members of the Board of
Management was raised in 2011. For the financial year
2011, the basic remuneration during the first period of
office of a Board of Management member was € 510,000
(2010: € 420,000) and € 590,000 (2010: € 480,000) with
effect from the start of the second period of office. The
basic remuneration of the Chairman of the Board of
Management was € 1,020,000 (2010: € 840,000). For finan-
cial
years commencing after 1 January 2012, the basic
remuneration during the first period of office of a Board
of
Management member was raised to € 750,000 p. a.,
to € 900,000 p. a. with effect from the start of the second
period of office and to € 1,500,000 p. a. for the Chairman
of the Board of Management.
Variable remuneration
The variable remuneration of Board of Management
members comprises variable cash remuneration on the
one hand and share-based remuneration components
on the other.