Siemens 2015 Annual Report Download - page 41

Combined Management Report 
In fiscal , the Managing Board’s remuneration system had
the following components:
Non-performance-based components
Base compensation
Base compensation is paid as a monthly salary. Since October ,
, the base compensation of President and CEO Joe Kaeser
has amounted to € ,, per year. The base compensation
of the CFO and of those members of the Managing Board who
are responsible for Divisions (including Healthcare) has been
€ ,, per year. For the other members of the Managing
Board, it has been € , per year.
Fringe benefits
Fringe benefits include the costs, or the cash equivalent, of non-
monetary benefits and other perquisites, such as the provision
of a company car, contributions toward the cost of insurance,
the reimbursement of expenses for legal advice and tax advice,
accommodation and moving expenses, including a gross-up for
any taxes due in this regard, currency adjustment payments
and costs relating to preventive medical examinations.
Performance-based components
Variable compensation (Bonus)
Variable compensation (Bonus) is based on the Company’s busi-
ness performance in the past fiscal year. The Bonus depends on
an equal one-third weighting of target achievement of the tar-
get parameters return on capital employed, earnings per share
and individual targets. To achieve a consistent target system
Company- wide, corresponding targets – in addition to other fac-
tors – also apply to senior managers.
For  % target achievement (target amount), the amount of
the Bonus equals the amount of base compensation. The Bonus
is subject to a ceiling (cap) of  %. If targets are substantially
missed, variable compensation may not be paid at all ( %).
At its duty-bound discretion, the Supervisory Board may revise
the amount resulting from target achievement upward or down-
ward by as much as  %; the adjusted amount of the bonus paid
can thus be as much as  % of the target amount. In choosing
the factors to be considered in deciding on possible revisions of
the bonus payouts (± %), the Supervisory Board takes account
of incentives for sustainable corporate management. Decisions
to make discretionary adjustments may take factors such as the
results of an employee survey or a customer satisfaction survey
into account as well as the Company’s economic situation. The
revision option may also be exercised in recognition of Manag-
ing Board members’ individual achievements. The Bonus is paid
entirely in cash.
Long-term stock-based compensation
Long-term stock-based compensation consists of a grant of for-
feitable stock commitments (Stock Awards) at the beginning of
the fiscal year. Beneficiaries receive one free share of Siemens
stock per Stock Award after an approximately four-year restric-
tion period. In the event of extraordinary unforeseen develop-
ments that impact the share price, the Supervisory Board may
decide to reduce the number of promised Stock Awards retro-
actively, or it may decide that in lieu of a transfer of Siemens
stock only a cash settlement in a defined and limited amount
will be paid, or it may decide to postpone transfers of Siemens
stock for payable Stock Awards until the developments have
ceased to impact the share price.
In the event of  % target achievement, the annual target
amount for the monetary value of the Stock Awards commit-
ment is € ,, for the President and CEO (effective Octo-
ber , ) and € ,, for each of the other members of
the Managing Board. Since fiscal , the Supervisory Board
has had the option of increasing the target amount for each
member of the Managing Board, on an individual basis, by as
much as  % for one fiscal year at a time. This option enables
the Supervisory Board to take account of each Managing Board
member’s individual accomplishments and experience as well
as the scope and demands of his or her position.
Long-term stock-based compensation is linked to the perfor-
mance of Siemens stock compared to its competitors. The Super-
visory Board will decide on a target system (target value for
 % and target line) for the performance of Siemens stock
relative to the stock of – at present – five competitors (ABB,
General Electric, Rockwell, Schneider Electric and Toshiba). If
significant changes occur among these competitors during the
period under consideration, the Supervisory Board may take
these changes into account, as appropriate, in determining the
values for comparison and / or calculating the relevant stock
prices of those competitors.
Changes in the share price are measured on the basis of a
twelve-month reference period (compensation year) over three
years (performance period), while Stock Awards are restricted
for a period of four years. When this restriction period expires,
the Supervisory Board determines how much better or worse
Siemens stock has performed relative to the stock of its com-
petitors. This determination yields a target achievement of be-
tween  % and  % (cap). If target attainment is above  %,
an additional cash payment corresponding to the outperfor-
mance will be made. If target attainment is less than  %, a
number of stock commitments equivalent to the shortfall from
the target will expire without replacement.