Siemens 2014 Annual Report Download - page 150

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)

Additionally, compensatory or severance payments cover non-
monetary benefi ts 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 fi rst six months of the remaining
term of the Managing Board member’s contract.
If a member leaves the Managing Board, the variable compen-
sation (bonus) is determined pro rata temporis after the end of
the fi scal year in which the appointment was terminated and is
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 commit-
ments (Bonus Awards) for which the waiting period is still in
progress remain in effect without restriction. If the employ-
ment agreement is terminated because of retirement, disability
or death, a Managing Board member’s Bonus Awards will be
settled in cash as of the date of departure from the Board.
Stock commitments that were made as long-term stock-based
compensation (Stock Awards) and for which the restriction
period is still in progress will be forfeited without replacement
if the employment agreement is not extended after the end of
an appointment 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 are not forfeited if the
employment agreement is terminated by mutual agreement at
the Company’s request, or because of retirement, disability or
death, or in connection with a spinoff, the transfer of an oper-
ation, or a change of activity within the corporate group. In this
case, the Stock Awards will remain in effect upon termination
of the employment agreement and will be honored on expira-
tion of the restriction period.
B... REMUNERATION OF THE MEMBERS
OF THE MANAGING BOARD FOR FISCAL 
On the basis of the fi nancial framework in the context of One
Siemens, at the beginning of the fi scal year the Supervisory
Board set the targets and weighting for the parameters of return
on capital employed (ROCE) and Free cash fl ow, together with
earnings per share (EPS), in each case on the basis of continu-
ing and discontinued operations. The defi nition of these param-
eters and their weighting acknowledges a sustainable enhance-
ment of corporate value. Additionally, in setting the target for
the variable compensation (bonus) for those Managing Board
members with responsibilities for Sector portfolios, the Super-
visory Board set economic value added (EVA) as a Sector-specifi c
target, as well as additional individual targets for all members of
the Managing Board so as to take fuller account of the individ-
ual Board members’ performance. For this purpose, up to fi ve
individual targets were generally defi ned; these take account of
such aspects as business performance in the Regions, imple-
mentation of portfolio measures, and customer satisfaction. An
external review of the appropriateness of the Managing Board’s
compensation for fi scal  confi rmed that the remuneration
of the Managing Board resulting from target attainment for fi s-
cal  is to be considered appropriate. In light of this expert
review, and following a review of the achievement of the targets
set at the beginning of the fi scal year, the Supervisory Board
decided at its meeting on November , , to set the variable
compensation (bonus), the Bonus Awards and Stock Awards to
be granted, and the pension benefi t contributions as follows:
Variable compensation (bonus)
In setting the targets for the variable compensation (bonus) at
the beginning of fi scal , the Supervisory Board took into
account that the Company continues to focus on a sustainable
appreciation of value. This focus is intended to enable the Com-
pany to maintain its fi nancial fl exibility and hold its own
against competitors even in periods of high market volatility:
The emphasis in terms of the sustainable enhancement of
value was on capital effi ciency and capital structure. Target
values slightly higher than the prior-year fi gures were set in the
case of return on capital employed and substantially higher
than the prior-year fi gures in the case of Free cash fl ow. These
were agreed upon uniformly with all members of the Managing
Board. Moreover, the target values for the target parameters
were set on the basis of continuing and discontinued opera-
tions, so as to take full account of the Managing Board’s overall
responsibility for the Company’s economic situation, perfor-
mance and outlook. Additionally, targets were set taking
account of business expectations for fi scal . Here capital
effi ciency improved because of the absence of the expenses for
the Siemens  program in comparison to the prior year, as
well as because of effects outside the Sectors.