Siemens 2012 Annual Report Download - page 124

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)

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 pre-
maturely 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. The compen-
satory payment is payable in the month when the member
leaves the Managing Board. In addition, a one-time exception-
al contribution is made to the BSAV. The amount of this contri-
bution is based on the BSAV contribution that the Board mem-
ber received for the previous year, together 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 Manag-
ing Board is agreed upon at the member’s request, or if there is
serious cause for the Company to terminate the employment
relationship.
In the event of a change of control that results in a substantial
change in the position of the Managing Board member (e.g.,
due to a change in corporate strategy or a change in the Man-
aging Board member’s duties and responsibilities), the mem-
ber of the Managing Board has the right to terminate his or her
contract with the Company for good cause. A change of con-
trol exists if one or more shareholders acting jointly or in con-
cert acquire a majority of the voting rights in Siemens AG and
exercise a controlling influence, or if Siemens AG becomes a
dependent enterprise as a result of entering into an intercom-
pany agreement within the meaning of Section  of the Ger-
man Stock Corporation Act, or if Siemens AG is to be merged
into an existing corporation or other entity. If this right of ter-
mination 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 compensa-
tion includes not only the base compensation and the target
amount for the bonus, but also the target amount for the Stock
Awards, in each case based on the most recent completed fis-
cal year prior to termination of the contract. The stock-based
components for which a firm commitment already exists will
remain unaffected. There is no entitlement to a severance pay-
ment if the Managing Board member receives benefits from
third parties in connection with a change of control. Moreover,
there is no right to terminate 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 total
compensation or severance amount. Compensatory or sever-
ance payments will be reduced by % as a lump-sum allow-
ance for discounted values and for income earned elsewhere.
However, this reduction will apply only to the portion of the
compensatory or severance payment that was calculated with-
out taking account of the first six months of the remaining
term of the Managing Board member’s contract.
If a member leaves the Managing Board, the variable compo-
nent (bonus) is determined pro rata temporis after the end of
the fiscal year in which the appointment was terminated 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
will remain in effect without restriction. If the employment
agreement is terminated because of retirement, disability or
death, a Managing Board member’s Bonus Awards will be set-
tled in cash as of the date of departure from the Board.
By contrast, stock commitments that were made as long-term
variable compensation (Stock Awards) and for which the re-
striction period is still in progress will expire without replace-
ment if the employment agreement is terminated in the course
of an appointment period. The same applies if the employ-
ment agreement is not extended after the end of an appoint-
ment period, either at the Board member’s request or because
there is serious cause that would have entitled the Company to
revoke the appointment or terminate the contract. However,
once granted, Stock Awards do not expire if the employment
agreement is terminated because of retirement, disability, or
death, or in connection with a spin-off, the transfer of an op-
eration, or a change of activity within the corporate group. In
this case, the Stock Awards will remain in effect upon termina-
tion of the employment agreement and will be honored on ex-
piration of the restriction period.