Siemens 2011 Annual Report Download - page 136

6 A. To our shareholders 23 B. Corporate Governance
25 B. Corporate Governance report
31 B. Corporate Governance statement pursuant to
Section a of the German Commercial Code
(HGB) (part of the combined management’s
discussion and analysis)
33 B. Compliance report
36 B. Compensation report
(part of Notes to
Consolidated Financial Statements)

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 accor-
dance 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.
B.. Remuneration of members
of the Managing Board
B... REMUNERATION SYSTEM
The remuneration system for the Managing Board at Siemens
is intended to provide an incentive for successful corporate
management with an emphasis on sustainability. Members of
the Managing Board are expected to make a long-term com-
mitment to and on behalf of the Company, and may benefit
from any sustained increase in the Company ’s value. A fur-
ther aim is for their remuneration to be commensurate with
the compensation paid by companies of comparable size and
economic position. Exceptional achievements are to be re-
warded adequately, while falling short of goals is intended to
result in an appreciable reduction in remuneration. Finally,
the Managing Board’s compensation is also structured so as to
be attractive in comparison to that of competitors, with a view
to 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 from the Chairman’s Com-
mittee. Additionally, in the fall of  the Managing Board
and Supervisory Board decided to submit the remuneration
system for the Managing Board, revised as of fiscal , to
the Shareholders’ Meeting for a vote. The remuneration sys-
tem was approved by a large majority at the Annual Share-
holders’ Meeting on January , . The remuneration sys-
tem in effect until the end of fiscal  was explained in de-
tail in the Annual Report for fiscal .
In order to focus compensation for the members of the Man-
aging Board on the goal of sustainable value enhancement,
the bulk of remuneration is paid only after a certain delay: for
a % target attainment, more than half of total remunera-
tion is provided in the form of stock-based compensation with
a four-year restriction period, and over % of the variable
component of compensation is determined on the basis of
multi-year target parameters. Managing Board members’ com-
pensation is furthermore strongly aligned with shareholders’
interest in a long-term remunerative investment, since one-
half of long-term stock-based compensation relates to the
multi-year performance of Siemens stock relative to the stock
of (at present) five important competitors. In determining
how successfully targets have been met for the variable com-
ponents of compensation, adjustments are narrowly limited
to exceptional, unforeseen matters.
B. Compensation report
Remuneration system for Managing Board members
Base compensation (fixed component)
Variable compensation component (bonus, variable from  to %)
Long-term stock-based compensation component (variable from  to %)
Base compensation
Long-term compensation component (target
parameter: price compared to 5 competitors)
Long-term compensation component
(target parameter: average earnings per share)
Bonus based on annual goals
(target parameters: free cash flow,
ROCE adjusted, revenue growth)
Stock-based
compensation
Compensation Timing
Cash
compensation
component
  
Reference period:
4 years before value date
Reference period: 1 year (remuneration
year); subsequent waiting period: 4 years
Reference period: 3 years, in-
cluding year of compensation Subsequent restriction period:
4 years