Siemens 2006 Annual Report Download - page 84

Corporate Governance Report
80
In keeping with its traditions, Siemens places a high priority on corporate governance. Siemens
complies with the recommendations of the German Corporate Governance Code (Code), which
was first issued in 2002 and later expanded in May 2003, in June 2005 and in June 2006, in all but
one respect: no individual disclosure of the annual allocation to accrued pension liabilities or
pension funds for members of the Managing Board in the case of pension plans. Since disclosure
of pension awards to members of the Managing Board is statutorily required only by the next
annual report, the isolated disclosure of the individual allocation to accrued pension liabilities or
pension funds in the case of pension plans does not appear to be appropriate.
The Managing Board and the Supervisory Board of Siemens AG, respectively, discussed com-
pliance with the recommendations of the Code, in particular with regard to the amendments of
June 12, 2006. Based on these deliberations, the Boards approved the Declaration of Conformity
(with the Code) which is set forth below (on page 85 of this Report), posted on our website and
updated as necessary. Siemens voluntarily complies with the Code’s non-obligatory suggestions,
with only minor exceptions.
Our listing on the New York Stock Exchange (NYSE) subjects us to certain U.S. capital market
laws (including the Sarbanes-Oxley Act [SOA]) and regulations of the U.S. Securities and
Exchange Commission (SEC) and rules of the NYSE. To facilitate our compliance with the SOA, we
have, among other things, established a Disclosure Committee (comprised of nine central depart-
ment heads) that is responsible for reviewing certain financial and non-financial information and
advising the Managing Board in its decision-making about disclosure. We have also introduced
procedures that require our Group and subsidiary managements to certify various matters, pro-
viding a basis on which our CEO and CFO certify our financial statements to the SEC. Consistent
with the SOA, Siemens has also implemented procedures for handling accounting complaints and
a Code of Ethics for Financial Matters.
Management and Control Structure
The Supervisory Board
As a German stock corporation, Siemens is subject to German corporate law and has a two-
tier management and oversight structure, consisting of a 10-member Managing Board and a
20-member Supervisory Board. The German Codetermination Act (Mitbestimmungsgesetz)
requires that the Company’s shareholders and its employees each select one-half of the Super-
visory Board’s members.
According to the Bylaws for the Supervisory Board, the shareholder representatives must be
independent. Some Supervisory Board members hold, or held in the past year, high-ranking posi-
tions at other companies; nevertheless, our sales and purchases of products and/or services to or
from such companies are transacted on an arm’s length basis. We believe that these dealings do
not compromise the independence of the associated Supervisory Board members.
The Supervisory Board oversees and advises the Managing Board in its management of Com-
pany business. At regular intervals, it discusses business development, planning, strategy and
implementation. It also discusses Siemens’ quarterly reports and approves the annual, stand-
alone financial statements of Siemens AG, as well as the Consolidated Financial Statements of
Siemens, taking into account both the audit reports provided by the independent auditors and the
results of the review conducted by the Audit Committee. In addition, the Supervisory Board
appoints the members of the Managing Board and allocates members’ individual duties. Impor-
tant Managing Board decisions – such as major acquisitions, divestments and financial measures
– require Supervisory Board approval.
Corporate Governance Report