Siemens 2008 Annual Report Download - page 128

32 Corporate Governance Report: Compensation Report
This section outlines the principles used for determining the compensation of the
Managing Board of Siemens AG and sets out the level and structure of Managing
Board remuneration. In addition, this section describes the policies and levels of
compensation paid to Supervisory Board members.
This section is based on the recommendations and suggestions of the German Corporate Governance Code and
comprises data that, in accordance with the requirements of the German Commercial Code (HGB) and Interna-
tional Financial Reporting Standards (IFRS), are part of the Notes to Consolidated Financial Statements and of
Management’s discussion and analysis. It is thus part of the audited consolidated nancial statements.
1. Managing Board remuneration
The Managing Board compensation system, including fundamental contractual elements, is adopted and regu-
larly reviewed at the Supervisory Board’s plenary meetings. The Chairman’s Committee of the Supervisory
Board, which is responsible for the execution, amendment, extension and cancellation of employment contracts
and pension agreements with Managing Board members, prepares the relevant proposals for adoption by the
Supervisory Board. The Chairman’s Committee of the Supervisory Board consists of the Chairman of the Super-
visory Board, Dr. Gerhard Cromme, and the two Deputy Chairmen of the Supervisory Board, Dr. Josef Ackermann
and Ralf Heckmann, as well as Berthold Huber as another member appointed by the Supervisory Board.
The remuneration of the members of the Managing Board of Siemens is based on the Company’s size and global
presence, its economic and nancial position, and the level and structure of managing board compensation paid
by peer companies. In addition, the compensation reects each Managing Board member’s responsibilities and
performance. The level of Board compensation is designed to be competitive in the market for highly qualied
executives and to provide incentives for successful work.
In scal year 2008, the Managing Board remuneration had four components: (i) a xed annual salary, (ii) a
variable bonus which the Chairman’s Committee may adjust upward or downward by up to 20 percent of the
amount of target attainment, (iii) stock-based compensation, and (iv) a pension benet contribution. With
regard to xed salary and bonus, a target annual compensation is determined, consisting of 50% xed and 50%
variable components. The target compensation is reviewed every two to three years on the basis of an analysis of
the compensation paid by peer companies to their top managers. The last review was conducted as of April 1, 2006.
In scal year 2008, the remuneration of the Managing Board members is composed as follows:
The xed compensation is paid as a monthly salary.
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The variable bonus is based on the level of the Company’s attainment of certain targets relating to “return on 
capital employed” (ROCE), “economic value added” (EVA) and free cash ow as well as other nancial goals, if
any, that are set at the start of the scal year by the Chairman’s Committee of the Supervisory Board. One half
of the bonus is paid as an annual bonus and is contingent upon achieving the Company-wide ROCE and/or EVA
targets and free cash ow targets established for the scal year. The other half is granted as a long-term
bonus, the amount of which depends on the average attainment of ROCE and/or EVA targets or free cash ow
Compensation Report