Siemens 2011 Annual Report Download - page 138

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)

The foundation for the performance-based component of
long-term stock-based compensation is the One Siemens tar-
get system, which applies throughout the Company. It focus-
es on sustainably increasing Siemens’ corporate value. The al-
location rules for long-term stock-based compensation take
this focus into account as follows:
> On the one hand, the annual grant of Stock Awards de-
pends on the sustainability of business performance. For
this purpose, half of the annual target amount of the Stock
Awards is linked to the average of the published earnings
per share (EPS) for the past three fiscal years (continuing
and discontinued operations undiluted). At the end of each
fiscal year, the Supervisory Board decides on a figure that
represents the relevant fiscal year’s target attainment,
which may lie between % and % (cap). This target at-
tainment will then determine the actual fair value of the
award, and the resulting number of Stock Awards.
> On the other hand, the performance of Siemens’ stock rela-
tive to its competitors is to have a direct effect on compen-
sation. For this purpose, with respect to the other half of
the annual target amount for the Stock Awards, the Super-
visory Board will first grant a number of Stock Awards
equivalent to the fair value of half the target amount on the
date of the award. The Supervisory Board will also decide
on a target system (target value for % and target curve)
for the performance of Siemens stock relative to the stock
of (at present) five competitors (ABB, General Electric,
Philips, Rockwell, Schneider). The reference period for mea-
suring the target will be the same as the four-year restric-
tion period for the Stock Awards. After this restriction peri-
od expires, the Supervisory Board will determine how much
better or worse Siemens stock has performed relative to the
stock of its competitors. This determination will yield a
target attainment of between % and % (cap). If target
attainment is above %, an additional cash payment cor-
responding to the outperformance is effected. If target
attainment is less than %, a number of Stock Awards
equivalent to the shortfall from the target will expire with-
out replacement.
With regard to the further terms of the Stock Awards, the
same general principles apply for the Managing Board and se-
nior executives; these principles are discussed in more detail
in
Note 34 of the Notes to Consolidated Financial State-
ments. That note also includes further information about the
stock-based employee investment plans.
Share Ownership Guidelines
Since , the remuneration system at Siemens has been
significantly shaped by the Siemens Share Ownership Guide-
lines, which apply to the Managing Board and senior manage-
ment throughout the Company. These guidelines require the
members of the Managing Board to hold Siemens stock worth
a multiple of their base compensation (% for the President
and CEO, % for the other members of the Managing Board)
for the duration of their term of office on the Managing Board.
The determining figure in this context is the average base
compensation that the relevant member of the Managing
Board has drawn over the past four years. Accordingly, chang-
es that have been made to base compensation in the mean-
time are included. Moreover, non-forfeitable stock awards
(Bonus Awards) will be taken into account in determining
compliance with the Share Ownership Guidelines.
Evidence that the required amounts of Siemens shares are
held must first be provided after a buildup phase of slightly
more than four years – and therefore not until March  at
the earliest for certain members of the Managing Board. The
evidence must be updated annually thereafter. If the value of
the accrued holdings declines below the minimum to be evi-
denced from time to time because the market price of Siemens
stock decreases, the member of the Managing Board must ac-
quire additional shares. At the end of the calendar year, the
Company determines the value of Siemens shares to be evi-
denced, together with the number of Siemens shares to be ev-
idenced, and notifies each member of the Managing Board ac-
cordingly. Each Managing Board member then has until the
second Friday in March of the following year to make up for
any shortfalls. Accordingly, the Managing Board members are
required to permanently invest a significant portion of their
assets in Siemens shares during their term of office on the
Board.
Pension benefit commitments
Since fiscal , members of the Managing Board have been
included in the Siemens Defined Contribution Benefit Plan
(BSAV), the general conditions of which are uniformly appli-
cable to all employees of Siemens AG in Germany. The former
retirement benefit system was integrated into the BSAV in Oc-
tober . Under the BSAV, members of the Managing Board
receive contributions that are credited to their personal pen-
sion account. The amount of the annual contributions is
based on a predetermined percentage which refers to the
base compensation and the target amount for the bonus. This
percentage was set by the Chairman’s Committee of the Su-