APC 2006 Annual Report Download - page 52

9. Management interests
and compensation
Management Board and Executive
Committee compensation policy
The general principles underlying the senior manage-
ment compensation policy and the situation of each
executive are reviewed by the Remunerations and
Appointments & Corporate Governance Committee
and presented to the Supervisory Board.
The policy’s aims are to:
Retain and motivate the best talents.
Reward individual and collective performance.
Align overall compensation with the Group’s results.
The basic principle consists of competitively position-
ing Schneider Electric in relation to market compensa-
tion rates for senior executives of comparable industri-
al groups in each country concerned, as follows:
Cash compensation, comprising a fixed salary and a
variable bonus, is set at level close to the market medi-
an with the salary portion below the market median.
 Total compensation (cash compensation, stock options
or stock grants) is set above the market median.
The variable bonus depends on the degree to which
objectives set at the beginning of the year are met and
can range from 0 to 200% of salary, establishing a
close link between performance and compensation.
Depending on their responsibilities, Executive Commit-
tee members’ variable bonuses are determined as fol-
lows:
30 to 40% of the bonus is determined by reference
to the Group’s overall performance, as measured in
terms of operating margin, organic growth and return
on capital employed.
20 to 40% is based on the performance of the exec-
utive’s unit, as measured on the basis of business tar-
gets and customer satisfaction rates.
30 to 40% depends on the attainment of measurable
personal performance targets.
The compensation of the Chairman and Chief Execu-
tive Officer was set by the Board of Directors and that
of the Management Board members by the Superviso-
ry Board based on the recommendations of the Remu-
nerations and Appointments & Corporate Governance
Committee.
The variable bonuses of the Management Board mem-
bers (and the Chairman and Chief Executive Officer
before the change in the Company’s management sys-
tem) are determined as follows:
60% of the bonus is determined by reference to the
Group’s overall performance, as measured in terms of
operating margin, organic growth and return on capital
employed.
40% depends on the attainment of measurable per-
sonal performance targets set by the Supervisory
Board (previously the Board of Directors).
Senior management may also be granted stock
options. The main characteristics of the plans are as
follows:
Report of the statutory auditors
on the internal control procedure
This a free translation into English of the statutory
auditors’ report issued in the French language and is
provided solely for the convenience of English speak-
ing readers.
This statutory auditors’ report addressing financial and
accounting information in the Chairman’s report on
internal control should be read in conjunction with, and
is construed in accordance with French law and pro-
fessional auditing standards applicable in France.
To the Shareholders,
In our capacity as statutory auditors of Schneider Elec-
tric SA Company, and in accordance with article L.225
235 of the French Commercial Code (Code de Com-
merce), we report to you on the report prepared by the
Chairman of your company in accordance with article
or L.225-68 of the French Commercial Code (Code de
Commerce) for the year ended December 31, 2006.
The Chairman is responsible for giving an account, in
his report, of the conditions in which the duties of the
supervisory board are prepared and organized and of
the internal control procedures in place within the com-
pany.
It is our responsibility to report to you our observations
on the information set out in the Chairman’s report on
the internal control procedures relating to the prepara-
tion and processing of financial and accounting infor-
mation.
We performed our procedures in accordance with pro-
fessional guidelines applicable in France. These
require us to perform procedures to assess the fair-
ness of the information set out in the Chairman’s report
on the internal control procedures relating to the
preparation and processing of financial and accounting
information. In particular, this entailed:
Obtaining an understanding of the objectives and
general organization of internal control, as well as the
internal control procedures relating to the preparation
and processing of financial and accounting informa-
tion, as set out in the Chairman’s report.
Obtaining an understanding of the work performed to
support the information given in the report.
On the basis of these procedures, we have no matters
to report in connection with the information given on
the internal control procedures relating to the prepara-
tion and processing of financial and accounting infor-
mation, contained in the Chairman of the supervisory
board’s report, prepared in accordance with article
L.225-68 of the French Commercial Code (Code de
Commerce).
Courbevoie and Neuilly-sur-Seine, February 20, 2007
The Statutory Auditors
Mazars & Guérard Ernst & Young et Autres
Pierre Sardet Christian Chochon
Jean-Louis Simon Pierre Jouanne
Corporate governance
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