Siemens 2006 Annual Report Download - page 88

Corporate Governance Report
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“independent” under the SOA) and to certain NYSE notification obligations. In addition, the
NYSE Standards require that foreign private issuers disclose any significant ways in which
their corporate governance practices differ from those required of U.S. domestic companies
under the NYSE Standards.
As a company incorporated in Germany, Siemens AG has to comply with the German law
applicable to stock corporations (primarily the German Stock Corporation Act) and the Co-
determination Act and generally follows the recommendations of the German Corporate Gov-
ernance Code. Furthermore, Siemens complies with applicable rules and regulations of those
markets on which its securities are listed, such as the NYSE, and also voluntarily complies with
many of the NYSE requirements that by their terms apply only to U.S. domestic issuers.
The significant differences between our governance practices and those of U.S. domestic
NYSE issuers are as follows:
Two-tier board
The German 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 Codetermination 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 Chairman 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 independence, Ger-
man law does not require the Supervisory Board to make such affirmative findings on an indi-
vidual basis. At the same time, the Bylaws for Siemens’ Supervisory Board contain several pro-
visions 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. More-
over, Supervisory Board members may not enter into advisory, service or certain other con-
tracts with Siemens, unless approved by the Supervisory Board.
Committees
In contrast to the NYSE Standards, which require the creation of several specified board com-
mittees, 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.