Siemens 2012 Annual Report Download - page 122

1 A. To our Shareholders 21 B. Corporate Governance
22 B. Corporate Governance Report
28 B. Corporate Governance statement pursuant to
Section a of the German Commercial Code
(part of the Combined Management Report)
29 B. Compliance Report
31 B. Compensation Report
(part of the Combined Management Report)
44 B. Takeover-relevant information (pursuant to
Sections  para.  and  para.  of the
German Commercial Code) and explanatory report
(part of the Combined Management Report)

In fiscal 2012, the remuneration system for the Managing Board
had
the following components:
Non-performance-based components
Base compensation
Base compensation is paid as a monthly salary. It is reviewed
regularly, and revised if appropriate. The base compensation
of President and CEO Peter Löscher was set at the time of his
appointment on July , , and has remained essentially
unchanged since then. It is €,, per year. The base
compensation of the other members of the Managing Board
has been €, per year since October , .
Other compensation
Other compensation includes costs, or the cash equivalent, of
non-monetary benefits and perquisites, such as provision of
a Company car, contributions toward the cost of insurance,
reimbursement of fees for legal advice, tax advice and accom-
modation and moving expenses, including a gross-up for any
taxes that have to be borne in this regard, as well as costs
relating to preventive medical examinations.
Performance-based components
Variable compensation component (bonus)
The variable compensation component (bonus) is based on
the Company ’s business performance in the past fiscal year.
The targets for the variable compensation component are de-
rived from One Siemens, our target system for sustainably en-
hancing corporate value. On the basis of this target system,
the Supervisory Board at the beginning of each fiscal year
defines specific targets for several parameters. These target
parameters – in addition to other factors – also apply to senior
executives, with a view to establishing a consistent target sys-
tem throughout the Company.
For a % target attainment (target amount) the amount of
the bonus equals the amount of base compensation. The
bonus is subject to a ceiling (cap) of %. If targets are sub-
stantially missed, the variable component may potentially not
be paid at all.
The Supervisory Board is entitled to revise the amount result-
ing from attaining targets, by as much as % upward or down-
ward, at its duty-bound discretion (pflichtgemäßes Ermessen);
the adjusted amount of the bonus paid can be as much as
% of the target amount. In choosing the factors to be con-
sidered in deciding on possible revisions of the bonus payouts
(± %), the Supervisory Board takes account of incentives for
sustainable corporate management. The revision option may
also be exercised in recognition of Managing Board members’
individual achievements.
The bonus is paid half in cash, and half in the form of non-for-
feitable stock commitments (Bonus Awards). After a four-year
waiting period, the beneficiary will receive one share of
Siemens stock for each Bonus Award. Instead of the transfer of
Siemens stock, an equivalent cash settlement may be effected.
Long-term stock-based compensation
Long-term stock-based compensation consists of a grant of
forfeitable stock commitments (Stock Awards). The beneficiar-
ies will receive one free share of Siemens stock for each Stock
Award after a restriction period. Beginning with fiscal , the
restriction period for Stock Awards ends at the close of the sec-
ond day after publication of the operating results for the fourth
calendar year after the date of the award.
In the event of extraordinary unforeseen developments that
have an impact on the stock price, the Supervisory Board may
decide to reduce the number of promised Stock Awards retro-
actively, or it may decide that in lieu of a transfer of Siemens
Stock only a cash settlement in a defined and limited amount
will be paid, or it may decide to postpone transfers of Siemens
Stock for payable Stock Awards until the developments have
ceased to have an impact on the stock price.
In the event of a % target attainment, the annual target
amount for the monetary value of the Stock Awards commit-
ment will be €. million for the President and CEO, and € mil-
lion for each of the other members of the Managing Board. Be-
ginning with fiscal , the Supervisory Board has the option
of increasing, on an individual basis, the target amount for a
member of the Managing Board who has been reappointed by
as much as % above the amount of € million, for one fiscal
year at a time. This option enables the Supervisory Board to
take account of the Managing Board member’s individual ac-
complishments and experience as well as the scope and de-
mands of his or her function. This rule does not apply to the
President and CEO.
The foundation for the performance-based component of long-
term stock-based compensation is One Siemens, our target
system for sustainably enhancing corporate value. The allo-
cation rules for long-term stock-based compensation take this
focus into account as follows:
> On the one hand, half of the annual target amount for the
annual Stock Awards is linked to the average basic earnings
per share (EPS) for the last three completed fiscal years (from
continuing and discontinued operations). In principle, the
target value is the average basic earnings per share (from
continuing and discontinued operations) from the past three
fiscal years completed prior to the year of compensation. At
the end of each fiscal year, the Supervisory Board decides on