Siemens 2014 Annual Report Download - page 146

108 A. To our Shareholders 131 B. Corporate Governance
132 B. Corporate Governance Report
136 B. Corporate Governance statement pursuant to
Section a of the German Commercial Code
(part of the Combined Management Report)
138 B. Compliance Report
(part of the Combined Management Report)
144 B. Compensation Report
(part of the Combined Management Report)
165 B. Takeover-relevant information (pursuant to
Sections  para.  and  para.  of the
German Commercial Code) and explanatory report
(part of the Combined Management Report)

The Compensation Report outlines the principles underlying
the determination of the total compensation of the members of
the Managing Board of Siemens AG, and sets out the structure
and level of the remuneration of the Managing Board mem-
bers. It also describes the policies governing, and levels of, the
compensation paid to Supervisory Board members.
This section is based on the recommendations of the German
Corporate Governance Code (Code) and the requirements of
the German Commercial Code (Handelsgesetzbuch), German
Accounting Standards (Deutsche Rechnungslegungs Standards),
and International Financial Reporting Standards (IFRS). The
Compensation Report is an integral part of the Combined
Management Report.
B.. Remuneration of members
of the Managing Board
B... REMUNERATION SYSTEM
The remuneration system for the Managing Board at Siemens is
intended to provide an incentive for successful corporate man-
agement with an emphasis on sustainability. Members of the
Managing Board are expected to make a long-term commitment
to and on behalf of the Company, and may benefi t from any sus-
tained increase in the Company’s value. In the interest of that
aim, a substantial portion of their total remuneration is linked to
the long-term performance of Siemens stock. A further aim is
for their remuneration to be commensurate with the Company’s
size and economic position. Exceptional achievements are to be
rewarded adequately, while falling short of goals is intended to
result in an appreciable reduction in remuneration. The
Managing Board’s compensation is also structured so as to be
attractive in comparison to that of competitors, with a view to
attracting outstanding managers to our Company and keeping
them with us for the long term.
The system and levels for the remuneration of the Managing
Board are determined and reviewed regularly by the full Super-
visory Board, based on proposals from the Compensation Com-
mittee. The Supervisory Board reviews remuneration levels
annually to ensure that they are appropriate. In that process,
the Company’s economic situation, performance and outlook,
as well as the tasks and performance of the individual Manag-
ing Board members, are taken into account. In addition, the
Supervisory Board considers the common level of remunera-
tion in comparison with peer companies and with the compen-
sation structure in place in other areas of the Company. Here it
also takes due account of the relationship between the Manag-
ing Board’s remuneration and that of senior management and
staff, both overall and with regard to its development over
time, and for this purpose the Supervisory Board has also
determined how senior management and the relevant staff
are to be differentiated. The remuneration system that was in
place for the Managing Board members for fi scal  was
approved by .% at the Annual Shareholders’ Meeting on
B. Compensation Report
Remuneration system for Managing Board members for fiscal 2014
Base
compen -
sation
Stock-
based
compen-
sation
Cash
compen-
sation
Compensation
overall
max. .-times
of target
compensation
Stock-based
components
(Bonus Awards
and Stock
Awards):
max. % of
the respective
target amount
Base
compen -
sation
Bonus (cash):
 – %
add. + %
adjustment
Performance-based component
Obligation to hold shares during term of office on the Managing Board
Performance-based components with deferred payout
Non-performance-based component
Long-term stock-based compensation
> target parameter: stock price
compared to  competitors
> target parameter: Ø earnings per share
> variability:  – % respectively
Variable compensation (bonus)
> target parameter: Return on
capital employed, Free cash flow,
individual targets
> variability:  – %
add. ± % adjustment
> % granted in cash and
% in Bonus Awards
Target compensation Maximum amounts of compensation Share Ownership Guidelines
President
and CEO:
-times
of Base
compen-
sation
Base
compen -
sation
Managing
Board
member:
-times
of Base
compen-
sation