Siemens 2005 Annual Report Download - page 76

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The significant differences between our governance practices and those of U.S. domestic NYSE
issuers are as follows:
Two-tier board – The Stock Corporation Act requires Siemens AG to have a two-tier board
structure consisting of a Managing Board and a Supervisory Board. The two-tier system provides
a strict separation of management and supervision. Roles and responsibilities of each of the two
boards are clearly defined by law.
The composition of the Supervisory Board is determined in accordance with the Codetermina-
tion Act, which requires that one-half of the required 20 Supervisory Board members must be
elected by our domestic employees. In the event of a tie vote at the Supervisory Board, the Chair-
man of the Supervisory Board is entitled to cast a deciding vote.
Independence – In contrast to the NYSE Standards, which require the board to affirmatively
determine the independence of the individual directors with reference to specific tests of inde-
pendence, German law does not require the Supervisory Board to make such affirmative findings
on an individual basis. At the same time, the Bylaws of Siemens’ Supervisory Board contain sever-
al provisions to help ensure the independence of the Supervisory Board’s advice and supervision.
Furthermore, the members of the Supervisory and Managing Boards are strictly independent
from one another; a member of one board is legally prohibited from being concurrently active on
the other. Supervisory Board members have independent decision making authority and are
legally prohibited from following the direction or instruction of any affiliated party. Moreover,
Supervisory Board members may not enter into advisory, service or certain other contracts with
Siemens, unless approved by the Supervisory Board.
Committees – In contrast to the NYSE Standards, which require the creation of several speci-
fied board committees, composed of independent directors and operating pursuant to written
charters that set forth their tasks and responsibilities, the Supervisory Board of Siemens AG has
combined the functions of a nominating, compensation and corporate governance committee in
the Chairman’s Committee. Both the Audit Committee and the Chairman’s Committee have writ-
ten bylaws – adopted by the Supervisory Board based on the NYSE Standards – addressing their
respective purposes and responsibilities.
Our Audit Committee is subject to the standards of the SOA and the Securities Exchange Act
of 1934, as applicable to a foreign private issuer, and it performs functions similar to those of an
audit committee subject to the full NYSE Standards. Yet, German law precludes certain responsi-
bilities from being delegated to a committee, such as the selection of the independent auditors,
who are required by German law to be elected at the shareholders’ meeting.
Siemens AG also has an Ownership Rights Committee and a Mediation Committee, the latter
of which is required by German law. Neither is required under the NYSE Standards.
Fit4MoreLetter to our Shareholders Managing Board