Siemens 2011 Annual Report Download - page 139

51 C. Combined management’s discussion and analysis 273 E. Additional information 153 D. Consolidated Financial Statements
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pervisory Board at % when the system was introduced in
October , and has been reconfirmed at that figure each
year since. Furthermore, special contributions may be grant-
ed to Managing Board members on the basis of individual de-
cisions of the Supervisory Board. If a member of the Manag-
ing Board had earned a pension benefit entitlement from the
Company before the BSAV was introduced, a portion of his
contributions went toward financing this prior commitment.
Commitments in connection with termination
of Managing Board membership
Managing Board contracts provide for a compensatory pay-
ment if membership on the Managing Board is terminated
prematurely by mutual agreement, without serious cause.
The amount of this payment must not exceed the value of two
years‘ compensation (cap). The amount of the compensatory
payment is calculated on the basis of the base compensation
and the variable components of compensation actually re-
ceived for the last fiscal year before termination. In addition, a
one-time exceptional contribution is made to the BSAV. The
amount of this contribution is based on the BSAV contribu-
tion that the Board member received for the previous year, to-
gether with the remaining term of the appointment, but is
limited to not more than two years’ contributions (cap). The
above benefits are not paid if an amicable termination of the
member’s activity on the Managing Board is agreed upon at
the member‘s request, or if there is serious cause for the Com-
pany to terminate the employment relationship.
In the event of a change of control – i.e., if one or more share-
holders acting jointly or in concert acquire a majority of the
voting rights in Siemens AG and exercise a controlling influ-
ence, or if Siemens AG becomes a dependent enterprise as a
result of entering into an intercompany agreement within the
meaning of § of the German Stock Corporation Act, or if
Siemens AG is to be merged into an existing corporation or
other entity – any member of the Managing Board has the
right to terminate his or her contract with the Company if
such a change of control results in a substantial change in po-
sition (e.g., due to a change in corporate strategy or a change
in the Managing Board member‘s duties and responsibilities).
If this right of termination is exercised, the Managing Board
member is entitled to a severance payment in the amount of
not more than two years’ compensation. The calculation of
the annual compensation includes not only the base compen-
sation and the target amount for the bonus, but also the tar-
get amount for the Stock Awards, in each case based on the
most recent completed fiscal year prior to termination of the
contract. The stock-based components for which a firm com-
mitment already exists will remain unaffected. There is no en-
titlement to a severance payment if the Managing Board
member receives benefits from third parties in connection
with a change of control. Moreover, there is no right to termi-
nate if the change of control occurs within a period of twelve
months prior to a Managing Board member‘s retirement.
Additionally, compensatory or severance payments cover
non-monetary benefits by including an amount of % of the
com pensation
or severance total. Furthermore, compensatory
or severance payments will be reduced by % as a lump-sum
allowance for discounted values and for income earned else-
where. However, this reduction will apply only to the portion
of compensatory or severance payment that was calculated
without taking account of the first six months of the remain-
ing term of the Managing Board member’s contract.
If a member leaves the Managing Board, the variable compo-
nent (bonus) is determined after the end of the fiscal year in
which the appointment was terminated pro rata temporis and
settled in cash at the usual payout or transfer date, as the case
may be. If the employment contract is terminated in the
course of an appointment period, the non-forfeitable stock
awards (Bonus Awards) for which the waiting period is still in
progress remain in effect without restriction. If the employ-
ment agreement is terminated because of retirement, disabil-
ity or death, a Managing Board member’s Bonus Awards are
settled in cash as of the date of departure from the Board.
By contrast, stock commitments made as long-term variable
compensation (Stock Awards) for which the restriction period
is still in progress will expire without replacement if the em-
ployment agreement is terminated in the course of an ap-
pointment period. The same applies if the employment agree-
ment is not extended after the end of an appointment period,
either at the Board member’s request or because there is seri-
ous cause that would have entitled the Company to revoke
the appointment or terminate the contract. However, once
granted, Stock Awards do not lapse if the employment agree-
ment is terminated because of retirement, disability, or death,
or in connection with a spinoff, the transfer of an operation,
or a change of activity within the corporate group. In this
case, the Stock Awards will remain in effect upon termination
of the employment agreement, and will be honored on expira-
tion of the restriction period.