Siemens 2010 Annual Report Download - page 110

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)

. REVISIONS TO THE REMUNERATION SYSTEM
FOR THE MANAGING BOARD FOR FISCAL 
In fiscal , the Supervisory Board decided to make further
adjustments to the remuneration system for the Managing
Board and to focus even more sharply on sustainable corporate
management. The changes center around strengthening long-
term components of compensation, with an associated expan-
sion of deferred payouts. For a % target attainment, more
than half of total remuneration will be awarded as stock-based
compensation with a four-year vesting period. Additionally,
over % of the variable component of compensation will be
determined on the basis of multi-year target parameters. Fur-
thermore, the remuneration of the members of the Managing
Board will be more strongly aligned with the shareholders’ in-
terest in a stable and long-term remunerative investment. In
particular, this purpose is achieved by relating half of the long-
term variable compensation to the multi-year performance of
Siemens stock relative to five important competitors. Finally,
for this purpose, adjustments in connection with the measure-
ment of the target attainment for variable compensation
components will be tightly limited to extraordinary develop-
ments which cannot be anticipated.
Specifically, the following changes were adopted effective Oc-
tober , :
Base compensation. The base compensation of the President
and CEO will remain substantially unchanged. The base com-
pensation of the other Managing Board members, which has
hitherto remained at approximately the same level as in ,
will be increased from €, to €, per year.
Variable compensation component (bonus). The bonus will
continue to be calculated on the basis of annual targets which
are determined by the Supervisory Board at the beginning of
the fiscal year. The starting point for the target setting is One
Siemens, our target system for sustainably enhancing the
Company value. Growth, return on capital employed (ROCE
adjusted) and Free cash flow will continue to serve as target
parameters under this target system. The Supervisory Board
will take into consideration the position of Siemens in the
market and relative to its competitors when setting the targets
and defining the relative weighting of the target parameters
each year. The target system for the members of the Managing
Board thus provides an incentive for sustainably increasing the
value of the Company.
In choosing the targets to be considered in deciding on possi-
ble adjustments to the bonus payouts (± %), the Supervisory
Board will take account of incentives for sustainable corporate
management. In addition, the adjustment option may be used
to give special recognition for Managing Board members’ indi-
vidual achievements.
Going forward, the bonus which had been paid out up to now
entirely in cash, will be paid out half in cash, and half in the
form of non-forfeitable commitments for Siemens stock (Bo-
nus Awards). After a four-year vesting period, the beneficiary
will receive one free share of Siemens stock for each Bonus
Award. Instead of the transfer of Siemens stock, an equivalent
cash settlement may be paid. This new arrangement will sig-
nificantly increase the proportion of total compensation paid
out as stock-based and deferred compensation.
Remuneration System for Managing Board members
Base compensation (fixed component)
Variable compensation component (bonus, variable from 0 to 200%)
Long-term stock-based compensation component (variable from 0 to 200%)
Base compensation
Long-term compensation component (target
parameter: price compared to 5 competitors)
Long-term compensation component
(target parameter: average EPS)
Bonus based on annual goals
(target parameters: FCF, ROCE adjusted,
revenue growth)
Stock-based
compensation
Compensation Timing
Cash
compensation
component
  2015
Reference period:
4 years before value date
Reference period: 3 years, in -
cluding year of compensation
Reference period: 1 year (remuneration
year); subsequent vesting period: 4 years