Siemens 2013 Annual Report Download - page 125

155 C. Combined Management Report 253 D. Consolidated Financial Statements 357 E. Additional Information
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B... TWO-TIER BOARD STRUCTURE
The German Stock Corporation Act requires Siemens AG to
have a two-tier board structure, consisting of a Managing
Board and a Supervisory Board. This two-tier structure is char-
acterized by a strict separation of management and super-
vision. The roles and responsibilities of each of the two
boards are clearly defined by law. The composition of the
Supervisory Board is determined in accordance with the
German Codetermination Act, which stipulates that one-half
of the required 20 Supervisory Board members are to be
elected by our employees in Germany. The Chairman of the
Super
visory Board is entitled to cast a deciding vote when
the Supervisory
Board is unable to reach a decision in two
separate rounds of voting.
B... INDEPENDENCE
In contrast to the NYSE Standards, which require a board of
directors to affirmatively determine the independence of the
individual directors with reference to specific tests of indepen-
dence, German law does not require the Supervisory Board to
make such affirmative findings on an individual basis. German
law requires an audit committee to include at least one
independent supervisory board member with knowledge and
experience in the application of accounting principles or the
auditing of financial statements. In addition, the Bylaws for
Siemens’ Supervisory Board contain several provisions to help
ensure the independence of our Supervisory Board’s advice
and supervision. Furthermore, the members of our Super-
visory and Managing Boards are strictly independent of one
another: a member of one board is legally prohibited from
being concurrently active on the other. Our Supervisory Board
members have independent decision-making authority and
are legally prohibited from following any direction or instruc-
tion. Moreover, they may not enter into consulting, service or
certain other contracts with Siemens, unless approved by the
Supervisory Board. We also use the independence criteria of
the Code as guiding principles.
B... COMMITTEES
In contrast to the NYSE Standards, which require the creation
of several specific board committees, composed of indepen-
dent directors and operating pursuant to written charters that
define their tasks and responsibilities, the Supervisory Board
of Siemens AG has assigned many of the functions of a nomi-
nating and corporate governance committee to its Chairman’s
Committee and has delegated part of the remaining functions
to its Nominating Committee. The Supervisory Board has also
established a Compensation Committee. Nevertheless, certain
responsibilities – for example, the determination of the com-
pensation of the members of the Managing Board – have not
been delegated to a committee because German law requires
that these functions be performed by the full Supervisory
Board. The Audit Committee, the Chairman’s Committee and
the Compliance Committee have written bylaws – adopted by
the Supervisory Board – that define their respective tasks and
responsibilities. The NYSE Standards were taken into consider-
ation in drawing up these bylaws.
The Audit Committee of Siemens AG is subject to the require-
ments of the SOA and the Securities Exchange Act, as these
apply to a foreign private issuer, and performs – in cooperation
with the Compliance Committee – functions similar to those
assigned to an audit committee under the NYSE Standards.
Nevertheless, German law prohibits delegating certain respon-
sibilities – such as the selection of independent auditors (who,
under German law, must be elected at the shareholders’ meet-
ing) – to a committee.
The Supervisory Board of Siemens AG also has a Finance and
Investment Committee and a Mediation Committee, the latter
of which is required under German law. Neither of these com-
mittees is required by the NYSE Standards.
B... SHAREHOLDER APPROVAL OF EQUITY
COMPENSATION PLANS; STOCK REPURCHASES
The NYSE Standards generally require that the U.S. domestic
companies, i.e. U.S. companies listed on the NYSE, obtain
shareholder approval of all equity compensation plans (in-
cluding stock option plans) and of any material revisions to
such plans. Under German law, the creation of authorized or
contingent capital in order to issue shares requires share-
holder approval. Shareholders must also approve the key
points of a stock option plan as part of a decision regarding
the creation of contingent capital or the authorization for a
company to repurchase and use its own shares for servicing
a stock option plan.
Under German law, share buybacks generally require prior
shareholder authorization. Such authorization was last given
at our Annual Shareholders’ Meeting on January 25, 2011, and
this matter will, as a general rule, be voted upon at the expira-
tion of each authorization.