APC 2007 Annual Report Download - page 54

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9. Management
interests
and compensation
Management Board and Executive
Committee compensation policy
The general principles underlying the Senior Management
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 principles consist of competitively positioning
Schneider Electric in relation to market compensation rates
for senior executives of comparable industrial 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 median
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 ob-
jectives 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 Committee
members’ variable bonuses are determined as follows:
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 em-
ployed.
20 to 40% is based on the performance of the execu-
tive’s unit, as measured on the basis of business targets
and customer satisfaction rates.
30 to 40% depends on the attainment of measurable
personal performance targets.
The compensation of the Management Board members is
set by the Supervisory Board based on the recommenda-
tions of the Remunerations and Appointments & Corpo-
rate Governance Committee.
The variable bonuses of the Management Board members
are determined as follows:
60% of the bonus is determined by reference to the
Group’s overall performance, as measured in terms of op-
erating margin, organic growth and return on capital em-
ployed.
40% depends on the attainment of measurable personal
performance targets set by the Supervisory Board.
Senior Management may also be granted stock options or
stock grants. US citizens or residents may be granted stock
appreciation rights (SARs) that match option characteris-
tics. The main characteristics of the plans are as follows:
The options have a ten-year life (since 2006).
The options are granted at an exercise price that does
Statutory Auditors’ report,
prepared in accordance with Article L. 225-235 of
French Company Law (Code de commerce), on the re-
port prepared by the President of the Supervisory
Board of Schneider Electric S.A., on the internal con-
trol procedures relating to the preparation and pro-
cessing of financial and accounting information.
This is a free translation into English of the Statutory Au-
ditors’ Report issued in French language and is provided
solely for the convenience of English-speaking readers.
This report should be read in conjunction with, and con-
strued in accordance with French law and professional au-
diting standards applicable in France.
To the Shareholders,
In our capacity as Statutory Auditors of Schneider Electric
S.A., and in accordance with Article L. 225 235 of French
Company Law (Code de commerce), we report to you on
the report prepared by the Chairman of your company in
accordance with Article L. 225-68 of French Company Law
(Code de commerce) for the year ended December 31,
2007.
It is the Chairman's responsibility to describe in his report
the preparation and organization of the Supervisory
Board's work and the internal control procedures imple-
mented by the company.
It is our responsibility to report to you on the information
contained in the Chairman's report in respect of the inter-
nal control procedures relating to the preparation and pro-
cessing of the accounting and financial information.
We conducted our work in accordance with the relevant
French professional standard. This standard requires that
we perform the necessary procedures to assess the fair-
ness of the information provided in the Chairman's report
in respect of the internal control procedures relating to the
preparation and processing of the accounting and finan-
cial information. These procedures consisted mainly in:
obtaining an understanding of the internal control pro-
cedures relating to the preparation and processing of the
accounting and financial information on which the infor-
mation presented in the Chairman's report and existing
documentation are based;
obtaining an understanding of the work involved in the
preparation of this information and existing documentation;
determining if any significant weaknesses in the internal
control procedures relating to the preparation and pro-
cessing of the accounting and financial information that we
would have noted in the course of our engagement are
properly disclosed in the Chairman's report.
On the basis of these procedures, we have no matters to
report in connection with the information given on the in-
ternal control procedures relating to the preparation and
processing of financial and accounting information, con-
tained in the President of the Supervisory Board’s report,
prepared in accordance with Article L. 225-68 of French
Company Law (Code de commerce).
Courbevoie and Neuilly-sur-Seine, February 19, 2008
The Statutory Auditors
French original signed by:
Mazars & Guérard Ernst & Young et Autres
Pierre Sardet Pierre Jouanne