35. Remuneration of the members of the Board of Management and the Supervisory Board
Information regarding the remuneration of the members of the Board of Management and of the Supervisory Board is disclosed on an individual basis in the Remuneration Report, which is part of the Management Report.
Board of Management remuneration. The total remuneration granted by Group companies to the members of the Board of Management of Daimler AG is calculated from the total amounts of remuneration paid in cash (base salary and annual bonus), the value of the Group’s personnel expense or income recognized from share-based remuneration, and the total of non-cash benefits in kind that are subject to income tax. Further information on share-based remuneration is provided in Note 20.
In 2009, total remuneration comprised €4.8 million as fixed, i.e. non-performance-related remuneration (2008: €6.2 million; 2007: €7.2 million) and €1.8 million as short-term variable, i.e. short-term performance-related remuneration (2008: €1.5 million; 2007: €17.0 million). In addition, there was expense for the Group of €4.5 million as variable performance-related remuneration with a medium and long-term incentive effect granted in 2009 and previous years (2008: income of €22.5 million; 2007: expense of €30.3 million). In total, this adds up to expense for the Group of €11.1 million for the year 2009 (2008: income of €14.8 million; 2007: expense of €54.5 million). The income from share-based remuneration in the year 2008 resulted from the release of provisions following the negative share-price development. The amounts stated for fixed and short-term performance-related remuneration for the year 2007 also include payments to Board of Management members who resigned from their positions in the context of the Chrysler transaction. For 2007, those Board of Management members also received bonus and severance payments in connection with the Chrysler transaction and their resignation from the Board of Management in a total amount of €19.3 million.
The decline of the fixed remuneration is based on the voluntary waiver by the Board of Management of 15% of their fixed remuneration effective from May 1, 2009 until June 30, 2010 due to the labor costs reduction measures that were agreed Group-wide and the reduced number of Board of Management members in 2009.
The pension agreements of the German Board of Management members which were concluded before 2005, included a commitment to an annual retirement pension, calculated as a proportion of the base salary and depending on the years of service. Those pension rights remain and have been frozen at that level (70% for Dr. Dieter Zetsche, 69% Guenther Fleig, 60% for Dr. Ruediger Grube and Dr. Thomas Weber, 50% for Andreas Renschler and Bodo Uebber, and 35% for Wilfried Porth). The pension payments begin in the form of a retirement pension when a member’s contract of service ends or after his 60th birthday, or in the form of an invalidity pension when a member’s service contract ends before his 60th birthday due to disability. An annual increase of 3.5% is effected (Wilfried Porth: in accordance with applicability law). Similar to the retirement pension of the German workforce, arrangements for widows and orphans are also included.
The pension rights of Mr. Porth were also determined in 2005, however related to his then position and remuneration at the executive level reporting to the Board of Management.
Effective January 1, 2006, those pension agreements were converted into a new pension system. Each Board of Management member is credited with a capital component each year. This capital component comprises an amount equal to 15% of the sum of the Board of Management member’s fixed base salary and the annual bonus that was actually achieved, multiplied by an age factor equivalent to a certain rate of return, at present 6% (Wilfried Porth: 5%). This pension is payable at the age of 60 at the earliest.
In the year 2009, the pension provision was increased by service costs of €1.7 million (2008: €2.5 million; 2007: €2.2 million).
No severance payments are foreseen for Board of Management members in the case of early termination of their service contracts. Solely in the case of early termination of a service contract by mutual consent, the Board of Management service contracts, which are in general concluded for a period of 3 years only, include a commitment to payment of the base salary and to provision of a company car until the end of the original service period. Such persons are only entitled to payment of the performance-related component of remuneration pro rata for the period until they leave the Group. Entitlement to payment of the performance-related component of remuneration with a long-term incentive is defined by the exercise conditions specified in the respective plans. For the period beginning after the end of original service period, Board of Management members can receive pension payments in the amounts of the commitments granted until 2005 as described in the previous section, as well as the use of a company car.
As a result of these provisions and the fact that in accordance with a Supervisory Board resolution of 2006, Daimler AG Board of Management service contracts - both initial contracts and extensions - generally have a term of only three years, Daimler AG is significantly below the limit for severance compensation of two years’ remuneration suggested by the German Corporate Governance Code.
The payments made in 2009 to former members of the Board of Management of Daimler AG and their survivors amounted to €16.1 million (2008: €19.1 million; 2007: €67.9 million). The pension provisions for former members of the Board of Management and their survivors amounted to €192.8 million as of December 31, 2009 (2008: €167.0 million).
No advances or loans were made to members of the Board of Management of Daimler AG.
Supervisory Board remuneration. The remuneration paid in 2009 to the members of the Supervisory Board of Daimler AG for their services to the Group totaled €2.6 million (2008: €2.8 million; 2007: €2.1 million).
In the Supervisory Board meeting on April 30, 2009, the Supervisory Board members decided unanimously to waive 10% of the respective individual Supervisory Board remuneration including meeting fees to support the labor cost reductions, effective from May 1, 2009, until June 30, 2010.
Except for the remuneration paid to the members of the Supervisory Board representing the employees in accordance with their contracts of employment, no remuneration was paid for services provided personally beyond the aforementioned board and committee activities, in particular for advisory or agency services in 2009, 2008 and 2007.
No advances or loans were made to members of the Supervisory Board of Daimler AG.
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