Siemens 2014 Annual Report Download - page 161

171 C. Combined Management Report 247 D. Consolidated Financial Statements 337 E. Additional Information

B... REMUNERATION SYSTEM FOR THE
MANAGING BOARD FROM FISCAL  ONWARD
At its meeting on September , , the Supervisory Board
decided to introduce a new, simplifi ed remuneration system for
the Managing Board as of October , . In past years, the
remuneration system for the Managing Board was modifi ed a
number of times on the basis of new regulatory and statutory
requirements. The system grew more complex as a result.
Establishing transparency about the remuneration of the Man-
aging Board is an important element of good corporate gover-
nance. For that reason, in its revision of the remuneration
system, the Supervisory Board has reduced the system’s com-
plexity to the necessary minimum. At the same time, the Super-
visory Board retained incentives for successful corporate man-
agement with an emphasis on sustainability and ensured that
the system would remain consistent with other remuneration
offered in the market. The Supervisory Board has maintained
the time-tested division of compensation into non-perfor-
mance-based and performance-based components, but in the
future the individual components of compensation – base com-
pensation, variable compensation (bonus) and long-term,
stock-based compensation – will be weighted equally. This
equal weighting will also be applied in setting the target cate-
gories for variable compensation (bonus).
The complexity of the former system also resulted from the
way in which variable compensation (bonus) was granted
partly in Stock commitments, Bonus Awards, and from the di-
vided measurement of performance for long-term stock-based
compensation (Stock Awards). Beginning with fi scal , the
bonus will be paid in cash only. The Stock Awards will now be
measured only on the basis of one performance component.
Principal features of the new remuneration system for the Managing Board
Sustainability
The multi-year bases of measurement and long-
term goals for variable components ensure and
encourage sustainable Company development.
Individual performance
Individual performance is rewarded by agreeing
on individual targets and by the possibility for
the Supervisory Board to adjust the bonus as well
as by individualizable target amounts for stock-
based compensation.
Transparency
Dividing compensation into three equally
weighted components, and the equal weighting
of three bases of measurement for the bonus,
permit transparent, understandable communica-
tion of Managing Board remuneration.
Ownership culture
Granting a substantial portion of compensation
as stock, together with the share ownership
obligation, puts an emphasis on the ownership
culture within the Company.
Performance orientation
Variable compensation is linked
to the Company’s success and
to comparisons with competitors.
Appropriateness
Annual remuneration reviews – together with
contractually defi ned maximum amounts for
variable compensation and for stock-based
components of compensation and compensation
overall – ensure that compensation is appropriate.
Specifi cally, the following changes were adopted effective
October , :
Compensation structure. Base compensation, variable com-
pensation (bonus) and long-term stock-based compensation
will each constitute approximately one-third of the target com-
pensation for all Managing Board members. The maximum
amounts for stock commitments (Stock Awards), for bonus and
for compensation overall that were introduced in fi scal 
will remain fully in effect.
Variable compensation (bonus). In the future, the bonus
will depend on an equal one-third weighting of target attain-
ment in the target categories of capital effi ciency, earnings and
individual targets. This weighting will give greater importance
to the Managing Board members’ individual performance.
In deciding the individual targets, account will be taken of both
business-related targets like market coverage and business
performance as well as targets like customer and employee
satisfaction, innovation and sustainability. For fi scal , the
target values for the earnings component will be set on a multi-
year basis. Target attainment for the bonus can still vary
between  % and a ceiling (cap) of  %.
After the end of the fi scal year, the Supervisory Board can still
decide, exercising its duty-bound discretion (pfl ichtgemäßes
Ermessen), to adjust bonus payout amounts by ±  % for all or
some of the members of the Managing Board. Thus the maxi-
mum amount of  % of the target amount applies for the
bonus. In deciding on a discretionary adjustment, the Super-
visory Board will take account not only of the Company’s eco-
nomic situation and the individual performance of the various
Managing Board members, but also of such factors as the
results of an employee survey (Global Engagement Survey) and
a customer satisfaction survey (Net Promoter Score). Variable
compensation (bonus) will be granted entirely in cash.