Siemens 2014 Annual Report Download - page 148

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 performance-based component of long-term stock-based
compensation is likewise founded on One Siemens. 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) from continuing and discontinued operations
for the last three completed fi scal years. In principle, the tar-
get value is the average basic EPS from the past three fi scal
years completed prior to the year of compensation. At the
end of each fi scal year, the Supervisory Board decides on a
fi gure that represents that year’s target attainment, which
may lie between  % and  % (cap). This target attainment
will then determine the actual monetary value of the award
and the resulting number of Stock Awards.
>
On the other hand, the development of the performance of
Siemens’ stock relative to competitors is to have a direct ef-
fect on compensation. For this purpose, with respect to the
other half of the annual target amount for the Stock Awards,
the Supervisory Board will fi rst grant a number of Stock
Awards equivalent to the monetary value of half the target
amount on the date of the award. The Supervisory Board will
also decide on a target system (target value for  % and tar-
get curve) for the performance of Siemens stock relative to
the stock of competitors (for fi scal , these are ABB,
Alstom, General Electric, Rockwell and Schneider). The refer-
ence period for measuring the target will be the same as the
four-year restriction period for the Stock Awards. After this
restriction period expires, the Supervisory Board will deter-
mine how much better or worse Siemens stock has per-
formed rela tive to the stock of its competitors. This determi-
nation will yield a target attainment of between  % and
 % (cap). If target attainment is above  %, an additional
cash payment corresponding to the outperformance is
effected. If target attainment is less than  %, a number of
Stock Awards equivalent to the shortfall from the target will
expire without replacement.
The value of Siemens stock to be transferred for Stock Awards
after the end of the restriction period is subject to a ceiling of
 % of the respective target amount. If this maximum amount
of compensation is exceeded, the corresponding entitlement to
stock commitments will be forfeited without replacement.
With regard to the further terms of the Stock Awards, the same
principles apply in general for the Managing Board and for
senior managers; these principles are discussed in more detail
in NOTE  SHARE-BASED PAYMENT in D. NOTES TO CONSOLI-
DATED FINANCIAL STATEMENTS. That note also includes further
information about the stock-based employee investment plans.
Maximum amount for compensation overall
In addition to the forfeiture rules to maintain the maximum
amounts of compensation for variable compensation (bonus)
and long-term stock-based compensation, a maximum amount
for the compensation overall has also been agreed upon.
Beginning with fi scal , this amount cannot be more than
. times greater than target compensation. Target compensa-
tion comprises base compensation, the target amount for vari-
able compensation (bonus), and the target amount for long-
term stock-based compensation, excluding fringe benefi ts and
pension benefi t commitments. Including fringe benefi ts and
pension benefi t commitments of the relevant fi scal year, the
maximum amount of compensation for the overall compensa-
tion increases by corresponding amounts.
Share Ownership Guidelines
The Siemens Share Ownership Guidelines are an integral part
of the remuneration system for the Managing Board and senior
executives. These guidelines require the members of the
Managing Board – after a certain buildup phase – to hold
Siemens stock worth a multiple of their base compensation –
 % for the President and CEO,  % for the other members
of the Managing Board – during their term of offi ce on the
Managing Board. The determining fi gure in this context is the
average base compensation that each member of the Managing
Board has drawn over the four years before the applicable date
of proof of compliance. Accordingly, changes that have been
made to base compensation in the meantime are included.
Non-forfeitable stock commitments (Bonus Awards) are taken
into account in determining compliance with the Share Owner-
ship Guidelines.
Evidence that this obligation has been met must fi rst be pro-
vided after a four-year buildup phase, and updated annually
thereafter. If the value of the accrued holdings declines below
the minimum to be evidenced from time to time because the
market price of Siemens stock has fl uctuated, the member of
the Managing Board must acquire additional shares.
Pension benefit commitments
The members of the Managing Board, like all Siemens AG
employees, are included in the Siemens Defi ned Contribution
Benefi t Plan (BSAV). Under the BSAV, members of the Managing
Board receive contributions that are credited to their personal
pension account. The amount of the annual contributions is
based on a predetermined percentage which refers to the base
compensation and the target amount for the bonus. This per-
centage is decided upon annually by the Supervisory Board;
most recently it was set at  %. In making its decision, the
Super visory Board takes account of the intended level of provi-
sion for each individual, also considering the length of time for