Siemens 2009 Annual Report Download - page 116

2
 Reports Supervisory Board /
Managing Board  Corporate Governance  Management’s discussion and analysis  Consolidated Financial Statements
 Corporate Governance report  Compliance report  Compensation report (part of Notes
to Consolidated Financial Statements)
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 re-
muneration. In addition, this section describes the policies
and levels of compensation paid to Supervisory Board
members.
This section is based on the recommendations of the German
Corporate Governance Code and comprises data in accordance
with the requirements of the German Commercial Code (HGB)
and the International Financial Reporting Standards (IFRS).
The Compensation Report is an integral part of the Notes to
Consolidated Financial Statements and thus part of the au-
dited consolidated financial statements.
. Managing Board remuneration
The German Act on the Appropriateness of Managing Board
Remuneration (VorstAG) that came into effect on August ,
, established new requirements with regard to the deter-
mination of the amount of compensation to be paid to Manag-
ing Board members. The legislators’ aim is to implement incen-
tives through Managing Board remuneration that promote
sustainable and long-term oriented business development.
This aim is in line with the principles which underlie the sys-
tem of Managing Board compensation at Siemens. When de-
termining the remuneration, the provisions of the German
Stock Corporation Act (AktG) and the German Corporate Gov-
ernance Code are given due attention.
Siemens reviews the remuneration system for its Managing
Board annually on the basis of external market comparisons.
At the same time, an assessment is made to determine
whether the system is consistent with market practice. Based
on these comparisons, the stock-based compensation was
gradually raised to market level in fiscal years  through
 (: €,; : €,; : €,,).
In , the Managing Board remuneration system was funda-
mentally redesigned and aligned with the aim of ensuring
long-term sustainability. The introduction of Share Owner-
ship Guidelines applicable worldwide within the Siemens
group is an important element of the new system. The mem-
bers of the Managing Board have undertaken voluntarily to
comply with these Guidelines. Under the Guidelines, the
members of the Managing Board are required to hold an inter-
est in the Company over the entire period of their membership
on the Managing Board equal to a multiple of their base salary
( percent in the case of the President and CEO,  percent
in the case of Managing Board members) as an incentive for
long-term service. Evidence of required amounts held in
Siemens shares must first be provided in March  and
thereafter be renewed annually. For Managing Board members
who were appointed after October , , this deadline period
is extended by one year. In the event that the Siemens stock
price decreases, Managing Board members have an obligation
to acquire additional shares in order to reach the required
equivalent amount. As a consequence, over the long term, the
Managing Board members will participate in stock market
gains as well as in stock market losses of Siemens stock.
Furthermore, since fiscal year , members of the Manag-
ing Board may participate in the new Share Matching Plan,
which gives them yet another incentive for long-term invest-
ment in Siemens shares (for further details of the Plan see be-
low “Other”).
At its meetings on July  and September , , the Super-
visory Board discussed the new legal framework, in particular
the alignment of Managing Board remuneration with sustain-
able management policies. The Bylaws for the Supervisory
Board and for the Chairman’s Committee of the Supervisory
Board were amended to reflect the distribution of responsibili-
ties between these bodies arising from the new legal regula-
tions. As a result, the total remuneration of each individual
member of the Managing Board is determined by the Supervi-
sory Board. In the same way, the Managing Board compensa-
tion system is adopted and regularly reviewed by the Supervi-
sory Board. The Chairman’s Committee of the Supervisory
Board prepares the relevant resolutions of the Supervisory
Board.
In the opinion of experts, the present system of Managing
Board compensation already takes account to a large extent of
the objectives of the new legal framework. Nevertheless, the
Compensation report