Siemens 2010 Annual Report Download - page 100

6 To our shareholders 21 Corporate Governance
23 Corporate Governance report
29 Corporate Governance statement pursuant to §a
of the German commercial code (HGB) (part of the
Combined management’s discussion and analysis)
30 Compliance report
34 Compensation report (part of Notes to
Consolidated Financial Statements)

In fiscal , the remuneration system for the Managing
Board had the following components:
Base compensation. Base compensation is paid as a monthly
salary. The base compensation of President and CEO Peter
Löscher was set at the time of his appointment on July , ,
and has remained unchanged since then. The base compensa-
tion of the other members of the Managing Board was at ap-
proximately the same level in fiscal  as in .
Variable cash compensation component (bonus). The vari-
able cash compensation component (bonus) is based on the
Company’s business performance in the past fiscal year. For a
% target attainment (target amount) the amount of the
bonus equals the amount of the base compensation. Taking
into consideration the Company’s long-term strategic orienta-
tion and using the target parameters of return on capital em-
ployed (ROCE), Free cash flow, and organic revenue growth at
the group level, the Supervisory Board defines unique targets
at the beginning of the fiscal year. The target parameters – in
addition to other factors – also apply to senior executives with
a view to establishing a uniform and consistent target system
throughout the Company. The Supervisory Board redefines the
relative weighting of the target parameters each year.
The bonus is subject to a ceiling (cap), which amounted to
% of the target amount for fiscal . If targets are not
met, the variable component is potentially not paid at all.
The Supervisory Board is entitled to revise the amount result-
ing from attaining targets by up to % upward or downward,
at its duty-bound discretion (pflichtgemäßes Ermessen). In
deciding on such a revision, the Supervisory Board may take
into account the achievement of other goals that it has set at
the beginning of the fiscal year.
Long-term stock-based compensation. Since fiscal , the
long-term stock-based compensation has consisted of a grant
of forfeitable stock commitments (Stock Awards). The benefi-
ciary of a Stock Award will receive one free share of Siemens
stock after a vesting period. The vesting period for Stock
Awards ends at the close of the second day after publication of
the results of operation in the third calendar year after the date
of the award.
For fiscal , the Supervisory Board has decided to base its
discretionary decision to grant Stock Awards on the average
earnings per share (basic EPS) for the past three fiscal years.
On the basis of prior years, the fair value of the awards for a
This section outlines the principles underlying the determina-
tion of the total compensation of the members of the Manag-
ing Board of Siemens AG, and sets out the structure and level
of the remuneration of the Managing Board members. It also
describes the policies governing and levels of compensation
paid to Supervisory Board members.
This section is based on the recommendations of the German
Corporate Governance Code and includes disclosures in ac-
cordance with the requirements of the German Commercial
Code (HGB) and International Financial Reporting Standards
(IFRS). The Compensation report is an integral part of the
“Notes to Consolidated Financial Statements.”
. REMUNERATION SYSTEM FOR THE MEMBERS
OF THE MANAGING BOARD IN FISCAL 
The remuneration system for the Managing Board at Siemens
is intended to provide an incentive for long-term corporate
management with an emphasis on sustainability. Members of
the Managing Board are expected to make a long-term commit-
ment to and on behalf of the Company, and may benefit from
any sustained increase in the Company’s value. A further aim
is for their remuneration to be commensurate with the com-
pensation paid by companies of comparable size and eco-
nomic position. Exceptional achievements are to be rewarded
adequately, while falling short of goals is intended to result in
an appreciable reduction in remuneration. Finally, the Manag-
ing Board’s compensation also is structured so as to be attrac-
tive in comparison to that of competitors, with a view to that
of attracting outstanding managers to our Company and keep-
ing them with us for the long term.
The system and levels for the remuneration of the Managing
Board are determined and regularly reviewed by the full Super-
visory Board, based on proposals of the Chairman’s Committee.
Additionally, in the fall of  the Managing Board and Super-
visory Board decided to submit the remuneration system for
the Managing Board to the Shareholders’ Meeting for a vote.
The remuneration system then in effect was approved by a
large majority at the Annual Shareholders’ Meeting on January
, .
The revised remuneration system for the members of the Man-
aging Board, the details of which are set forth under Item 
(page ) of this report, became effective as of October , 
and will be presented for the approval of the Annual Share-
holders’ Meeting in January .
Compensation report