Corporate Governance forms the basis of all our decision-making and monitoring processes. Our actions are aligned with clear defined ethical principles. Responsible Corporate Governance supports our long-term value creation and strengthens the trust of shareholders, customers, employees, business partners, politics and the public in our company.
Declaration of Conformity with the German Corporate Governance Codex
The German Corporate Governance Code (“Code”) presents essential statutory regulations for the management and supervision (governance) of German listed companies and contains internationally and nationally recognized standards for good and responsible governance. The Code aims at making the German Corporate Governance system transparent and understandable. Its purpose is to promote the trust of international and national investors, customers, employees and the general public in the management and supervision of listed German stock corporations.
Please refer to our report on compliance with the provisions of the German Corporate Governance Code for an overview of the implementation of the Code at Siemens.
Specific details about the implementation of the Code at Siemens may be found in the following:
Shareholders and the General Meeting
Shareholders exercise their rights at the General Meeting and vote there. In principle, each share carries one vote. There are no shares with multiple voting rights, preferential voting rights (golden shares) or maximum voting rights. The Management Board submits to the General Meeting the Annual Financial Statements and the Consolidated Financial Statements. The General Meeting resolves on the appropriation of net income and the discharge of the acts of the Management Board and of the Supervisory Board. It elects the shareholders' representatives to the Supervisory Board and, as a rule, the auditors. Furthermore, the General Meeting resolves on the Articles of Association, the purpose of the company, amendments to the Articles of Association and essential corporate measures such as, in particular, inter-company agreements and transformations, the issuing of new shares and, in particular, of convertible bonds and bonds with warrants, and the authorization to purchase own shares. When new shares are issued, shareholders, in principle, have pre-emptive rights corresponding to their share of the equity capital. Each shareholder is entitled to participate in the General Meeting, to take the floor on matters on the agenda and to submit materially relevant questions and proposals. The chair of the meeting provides for the expedient running of the General Meeting. At least once a year the shareholders' General Meeting is to be convened by the Management Board giving details of the agenda. A quorum of shareholders is entitled to demand the convening of a General Meeting and the extension of the agenda.
Shareholder's rights (Siemens complies)
The company shall facilitate the personal exercising of shareholders' voting rights. The company shall also assist the shareholders in the use of proxies.
For our shareholders, the notice of the Siemens Annual Shareholders' Meeting provides detailed information about registration and attending the Meeting, as well as support on how to exercise voting rights.
Notification (Siemens complies)
The company shall send notification of the convening of the General Meeting together with the convention documents to all domestic and foreign financial services providers, shareholders and shareholders' associations by electronic means if the approval requirements are fulfilled.
The invitation letter to the Annual Shareholders' Meeting also offers shareholders the option of registering to receive the invitation by email.
Proxy voting (Siemens complies)
The Management Board shall arrange for the appointment of a representative to exercise shareholders' voting rights in accordance with instructions.
The invitation letter to the Annual Shareholders' Meeting also offers shareholders the option of being represented in their voting rights according to their instructions by Siemens employees. A proxy may be appointed via the Web site for the Meeting and using the documents distributed prior to the Annual Shareholders’ Meeting.
Publishing (Siemens complies)
The Management Board shall publish the reports and documents, including the Annual Report, required by law for the General Meeting in an easily accessible way on the company's Internet site together with the agenda.
You will find all important financial reports in our Publication Finder. The invitation to the Annual Shareholders' Meeting is published in electronic form on the Web site for the Meeting. [Link Publication Finder
Duration of the General Meeting (Siemens complies)
The chair should be guided by the fact that an ordinary general meeting is completed after 4 to 6 hours at the latest
The period of 4 to 6 hours unfolds model character for ordinary annual shareholders' meetings without substantial changes to the bylaws or other intensive discussions. The chairman is geared to this model.
Internet broadcast (Partial compliance)
The company should make it possible for shareholders to follow the General Meeting using modern communication media (e.g. Internet).
The proceedings of our Annual Shareholders’ Meeting are broadcast via the internet until the beginning of the general debate. In this respect, we depart somewhat from the Code’s suggestion. Given that the Annual Shareholders’ Meeting is a closed and not a public event, and serves the purpose of discussion between shareholders and management, complete coverage seems unwarranted.
A live video feed of management’s speeches is available on our Web site for the meeting.
Proxy voting (Partial compliance)
The representative should also be reachable during the General Meeting.
Representatives exercising shareholders’ voting rights can be reached over the Internet until the start of the general debate. In this respect, the Code’s suggestion is only partly fulfilled.
The invitation letter to the Annual Shareholders' Meeting also offers shareholders the option of being represented in their voting rights according to their instructions by Siemens employees. A proxy may be appointed via the Web site for the Meeting and using the documents distributed prior to the Annual Shareholders’ Meeting.
Cooperation between Management Board and Supervisory Board
The Management Board and Supervisory Board cooperate closely to the benefit of the enterprise. The Management Board coordinates the enterprise's strategic approach with the Supervisory Board and discusses the current state of strategy implementation with the Supervisory Board in regular intervals. For transactions of fundamental importance, the Articles of Association or the Supervisory Board specify provisions requiring the approval of the Supervisory Board. They include decisions or measures which fundamentally change the asset, financial or earnings situations of the enterprise. Providing sufficient information to the Supervisory Board is the joint responsibility of the Management Board and Supervisory Board. The Management Board informs the Supervisory Board regularly, without delay and comprehensively, of all issues important to the enterprise with regard to planning, business development, risk situation, risk management and compliance. The Management Board points out deviations of the actual business development from previously formulated plans and targets, indicating the reasons therefor. The Management Board's reports to the Supervisory Board are, as a rule, to be submitted in writing (including electronic form). Documents required for decisions, in particular, the Annual Financial Statements, the Consolidated Financial Statements and the Auditors' Report are to be sent to the members of the Supervisory Board, to the extent possible, in due time before the meeting. Good corporate governance requires an open discussion between the Management Board and Supervisory Board as well as among the members within the Management Board and the Supervisory Board. The comprehensive observance of confidentiality is of paramount importance for this. All board members ensure that the staff members they employ observe the confidentiality obligation accordingly. In the event of a takeover offer, the Management Board and Supervisory Board of the target company must submit a statement of their reasoned position so that the shareholders can make an informed decision on the offer. After the announcement of a takeover offer, the Management Board may not take any actions outside the ordinary course of business that could prevent the success of the offer unless the Management Board has been authorized by the General Meeting or the Supervisory Board has given its approval. In making their decisions, the Management and Supervisory Boards are bound to the best interests of the shareholders and of the enterprise. The Management Board and Supervisory Board comply with the rules of proper corporate management. If they violate the due care and diligence of a prudent and conscientious Managing Director or Supervisory Board member, they are liable to the company for damages. In the case of business decisions an infringement of duty is not present if the member of the Management Board or Supervisory Board could reasonably believe, based on appropriate information, that he/she was acting in the best interest of the company (Business Judgment Rule). Extending loans from the enterprise to members of the Management and Supervisory Boards or their relatives requires the approval of the Supervisory Board.
Reporting (Siemens complies)
The Management Board and Supervisory Board shall report each year on the enterprise's Corporate Governance in the Annual Report (Corporate Governance Report). This includes the explanation of possible deviations from the recommendations of this Code. The company shall keep previous declarations of conformity with the Code available for viewing on its website for five years.
Reporting duties (Siemens complies)
The Supervisory Board shall specify the Management Board's information and reporting duties in more detail.
The relationship between the Managing Board and the Supervisory Board is stipulated in the Bylaws of the Managing Board and the Supervisory Board.
D&O insurance policy (Siemens complies)
If the company takes out a D&O (directors and officers' liability insurance) policy for the Management Board and Supervisory Board, a suitable deductible shall be agreed.
The Board Members have, since 01.10.2005, contractually undertaken a self-commitment for a deductible for the directors and officers' liability insurance.
Extraordinary General Meeting (Siemens complies)
In appropriate cases the Management Board should convene an extraordinary General Meeting at which shareholders discuss the takeover offer and may decide on corporate actions.
Supervisory Board Meeting (Siemens complies)
If necessary, the Supervisory Board should meet without the Management Board.
Pursuant to its Bylaws, the Supervisory Board shall meet at least once in the fiscal year without the Managing Board in attendance.
Reporting (Siemens complies)
Comments can be provided on the Code's suggestions.
Comments on the suggestions included in the Corporate Governance Code can be found here on the investor relations website under the section corporate governance.
Codetermination (Siemens complies)
In Supervisory Boards with codetermination, representatives of the shareholders and of the employees should prepare the Supervisory Board meetings separately, possibly with members of the Management Board.
The Corporate Governance report provides detailed information on the Supervisory Board under the Co-Determination Act and its duties.
The Management Board is responsible for independently managing the enterprise. In doing so, it is obliged to act in the enterprise's best interests and undertakes to increase the sustainable value of the enterprise. The Management Board develops the enterprise's strategy, coordinates it with the Supervisory Board and ensures its implementation. The Management Board ensures that all provisions of law and the enterprise’s internal policies are abided by and works to achieve their compliance by group companies (compliance). The Management Board ensures appropriate risk management and risk controlling in the enterprise. Compensation of the members of the Management Board is determined by the Supervisory Board at an appropriate amount based on a performance assessment in considering any payments by group companies. Criteria for determining the appropriateness of compensation are, in particular, the tasks of the respective member of the Management Board, his personal performance, the performance of the Management Board as well as the economic situation, the performance and outlook of the enterprise taking into account its peer companies. The total compensation of management board members comprises the monetary compensation elements, pension awards, other awards, especially in the event of termination of activity, fringe benefits of all kinds and benefits by third parties which were promised or granted in the financial year with regard to management board work. All compensation components must be appropriate, both individually and in total. In particular, company stocks with a multi-year blocking period, stock options or comparable instruments (e.g. phantom stocks) serve as variable compensation components with long-term incentive effect and risk elements. The total compensation of each member of the Management Board is to be disclosed by name, divided into non-performance-related, performance-related and long-term incentive components, unless decided otherwise by the General Meeting by three-quarters majority. The substantive content of severance awards for Management Board members shall be disclosed if in legal terms the awards differ not insignificantly from the awards granted to employees. During their employment for the enterprise, members of the Management Board are subject to a comprehensive non-competition obligation. Members of the Management Board and employees may not, in connection with their work, demand nor accept from third parties payments or other advantages for themselves or for any other person nor grant third parties unlawful advantages. Members of the Management Board are bound by the enterprise's best interests. No member of the Management Board may pursue personal interests in his decisions or use business opportunities intended for the enterprise for himself. All members of the Management Board shall disclose conflicts of interest to the Supervisory Board without delay and inform the other members of the Management Board thereof. All transactions between the enterprise and the members of the Management Board as well as persons they are close to or companies they have a personal association with must comply with standards customary in the sector.
Suggestions
Stock options (Siemens complies)
Stock options and comparable instruments shall be related to demanding, relevant comparison parameters. Changing such performance targets or the comparison parameters retroactively shall be excluded. For extraordinary, unforeseen developments, a possibility of limitation (Cap) shall be agreed for by the Supervisory Board.
Shareholders approved stock option plans at the Annual Shareholders' Meetings in 1999 and 2001. You can find details about their design in the following key elements for the two stock option plans. The limitation (Cap) required from the Code is not included in the stock option plans but is agreed on separately with the Managing Board.
Conflicts of interest (Siemens complies)
All members of the Management Board shall disclose conflicts of interest to the Supervisory Board immediately and inform the other members of the Management Board thereof. Important transactions shall require the approval of the Supervisory Board. Members of the Management Board shall take on sideline activities, especially Supervisory Board mandates outside the enterprise, only with the approval of the Supervisory Board.
The Bylaws for the Managing Board and the Chairman’s Committee of the Supervisory Board also contain regulations governing possible conflicts of interest.
Structure (Siemens complies)
The Management Board shall be comprised of several persons and have a Chairman or Spokesman. By-Laws shall govern the work of the Management Board, in particular the allocation of duties among individual Management Board members, matters reserved for the Management Board as a whole, and the required majority for Management Board resolutions (unanimity or resolution by majority vote).
The composition of the Managing Board, the assignment of special responsibilities and how the Managing Board works together are regulated in detail in the Bylaws of the Managing Board.
Compensation (Siemens complies)
At the proposal of the committee dealing with Management Board contracts, the full Supervisory Board shall discuss and regularly review the structure of the Management Board compensation system. The monetary compensation elements shall comprise fixed and variable elements.
Disclosure shall be made in a compensation report, which as part of the Corporate Governance Report describes the compensation system for Management Board members in a generally understandable way. The presentation of the concrete form of a stock option plan or comparable schemes for components with a long-term incentive effect and risk character shall include the value thereof. In the case of pension plans, the allocation to accrued pension liabilities or pension funds shall be stated each year. The compensation report shall also include information on the nature of the fringe benefits provided by the company.
The Chairman of the Supervisory Board shall outline the salient points of the compensation system and any changes thereto to the General Meeting.
The compensation report, which is part of the corporate governance report included in the annual report, outlines the principles used for determining the compensation of the Managing Board of Siemens AG and sets out the level and structure of Managing Board remuneration. In addition, the report describes the policies and levels of compensation paid to Supervisory Board members and gives details of stock ownership by members of the Managing and Supervisory Boards.
Compensation (Siemens complies)
The variable compensation elements should include one-time and annually payable components linked to the business performance as well as long-term incentives containing risk elements. In concluding Management Board contracts, care should be taken to ensure that payments made to a Management Board member on premature termination of his contract without serious cause do not exceed the value of two years’ compensation (severance payment cap) and compensate no more than the remaining term of the contract. The severance payment cap should be calculated based on the total compensation for the past full financial year and if appropriate also the expected total compensation for the current financial year. Payments promised in the event of premature termination of a Management Board member’s contract due to a change of control should not exceed 150% of the severance payment cap.
The compensation report, which is part of the corporate governance report included in the annual report, outlines the principles used for determining the compensation of the Managing Board of Siemens AG and sets out the level and structure of Managing Board remuneration.
The task of the Supervisory Board is to advise regularly and supervise the Management Board in the management of the enterprise. It must be involved in decisions of fundamental importance to the enterprise. The Supervisory Board appoints and dismisses the members of the Management Board. The Chairman of the Supervisory Board coordinates work within the Supervisory Board, chairs its meetings and attends to the affairs of the Supervisory Board externally. The Chairman of the Supervisory Board will be informed by the Chairman or Spokesman of the Management Board without delay of important events which are essential for the assessment of the situation and development as well as for the management of the enterprise. Committees serve to increase the efficiency of the Supervisory Board's work and the handling of complex issues. The respective committee chairmen report regularly to the Supervisory Board on the work of the committees. A Supervisory Board member is considered independent if he/she has no business or personal relations with the company or its Management Board which cause a conflict of interests. Every member of the Supervisory Board must take care that he/she has sufficient time to perform his/her mandate. Compensation of the members of the Supervisory Board is specified by resolution of the General Meeting or in the Articles of Association. It takes into account the responsibilities and scope of tasks of the members of the Supervisory Board as well as the economic situation and performance of the enterprise. All members of the Supervisory Board are bound by the enterprise's best interests. No member of the Supervisory Board may pursue personal interests in his/her decisions or use business opportunities intended for the enterprise for himself/herself. Advisory and other service agreements and contracts for work between a member of the Supervisory Board and the company require the Supervisory Board's approval.
Recommendations
Committees (Siemens complies)
The Chairman of the Supervisory Board shall also chair the committees that handle contracts with members of the Management Board and prepare the Supervisory Board meetings.
Depending on the specifics of the enterprise and the number of its members, the Supervisory Board shall form committees with sufficient expertise.
The Supervisory Board shall set up an Audit Committee, which, in particular, handles issues of accounting, risk management and compliance, the necessary independence required of the auditor, the issuing of the audit mandate to the auditor, the determination of auditing focal points and the fee agreement.
The Chairman of the Audit Committee shall have specialist knowledge and experience in the application of accounting principles and internal control processes.
The Supervisory Board shall form a nomination committee composed exclusively of shareholder representatives, which proposes suitable candidates to the Supervisory Board for recommendation to the General Meeting.
On our website, we provide detailed information on the Siemens management and control structure, including extensive information about the committees.
Efficiency (Siemens complies)
Members of the Management Board of a listed company shall not accept more than five Supervisory Board mandates in non-group listed companies.
If a member of the Supervisory Board took part in less than half of the meetings of the Supervisory Board in a financial year, this shall be noted in the Report of the Supervisory Board. The Supervisory Board shall examine the efficiency of its activities on a regular basis.
The Report of the Supervisory Board includes a separate chapter on the topic of Corporate Governance.
Conflicts of interest (Siemens complies)
Each member of the Supervisory Board shall inform the Supervisory Board of any conflicts of interest which may result from a consultant or directorship function with clients, suppliers, lenders or other business partners. In its report, the Supervisory Board shall inform the General Meeting of any conflicts of interest, which have occurred together with their treatment. Material conflicts of interest and those, which are not merely temporary in respect of the person of a Supervisory Board member, shall result in the termination of his mandate.
§1 of the Bylaws for the Supervisory Board regulates how conflicts of interest are handled. In addition, we publish information about transactions with related parties in our annual report 2007 on page 80.
Responsibilities (Siemens complies)
A re-appointment prior to one year before the end of the appointment period with a simultaneous termination of the current appointment shall only take place under special circumstances. An age limit for members of the Management Board shall be specified. The Supervisory Board shall issue Rules of Procedure.
Structure (Siemens complies)
The Chairman of the Supervisory Board shall regularly maintain contact with the Management Board, in particular, with the Chairman or Spokesman of the Management Board and consult with him on strategy, business development and risk management of the enterprise. He shall inform the Supervisory Board of important events and, if required, convene an extraordinary meeting of the Supervisory Board.
For nominations for the election of members of the Supervisory Board, care shall be taken that the Supervisory Board, at all times, is composed of members who, as a whole, have the required knowledge, abilities and expert experience to properly complete their tasks and are sufficiently independent. Furthermore, the international activities of the enterprise, potential conflicts of interest and an age limit to be specified for the members of the Supervisory Board shall be taken into account.
The Siemens management and control structure is explained in detail on our Web site. Detailed regulations regarding the structure of the Supervisory Board can be found in the Bylaws for the Supervisory Board.
Independence (Siemens complies)
To permit the Supervisory Board’s independent advice and supervision of the Management Board, the Supervisory Board shall include what it considers an adequate number of independent members. Not more than two former members of the Management Board shall be members of the Supervisory Board and Supervisory Board members shall not exercise directorships or similar positions or advisory tasks for important competitors of the enterprise. It shall not be the rule for the former Management Board chairman or a Management Board member to become Supervisory Board chairman or the chairman of a Supervisory Board committee. If this is intended, special reasons shall be presented to the annual general meeting.
The subject of independence is explained in a separate chapter within the Corporate Governance report.
Compensation (Siemens complies)
The exercising of the Chair and Deputy Chair positions in the Supervisory Board as well as the chair and membership in committees shall be considered in the specification of the compensation. Members of the Supervisory Board shall receive fixed as well as performance-related compensation.
The compensation of the members of the Supervisory Board shall be reported individually in the Corporate Governance Report, subdivided according to components. In addition, payments made by the enterprise to the members of the Supervisory Board or advantages extended for services provided individually, in particular, advisory or agency services shall be listed separately in the Corporate Governance Report.
In the Compensation Report as part of the Corporate Governance Report within the Annual Report, we provide comprehensive information on how members of the Supervisory Board are compensated, and list compensation for each member individually. The Compensation Report is integrated in our Web site.
Elections (Siemens complies)
Elections to the Supervisory Board shall be made on an individual basis. An application for the judicial appointment of a Supervisory Board member shall be limited in time up to the next annual general meeting. Proposed candidates for the Supervisory Board chair shall be announced to the shareholders.
Committees (Siemens complies)
The Chairman of the Supervisory Board should not be Chairman of the Audit Committee. The Chairman of the Audit Committee should not be a former member of the Management Board of the company.
The Supervisory Board can delegate other subjects to be handled by one or several committees. These subjects include the strategy of the enterprise, the compensation of the members of the Management Board, investments and financing. The Supervisory Board can arrange for committees to prepare Supervisory Board meetings and to take decisions in place of the Supervisory Board.
The Siemens management and control structure is explained in detail on our Web site, including extensive information about the committees.
Appointment of members of Management Board (Partial compliance)
Together with the Management Board the Supervisory Board shall ensure that there is a long-term succession planning. The Supervisory Board can delegate preparations for the appointment of members of the Management Board to a committee, which also determines the conditions of the employment contracts including compensation. For first time appointments, the maximum possible appointment period of five years should not be the rule.
Although we have not followed the latter suggestion in the past, we do not rule out the possibility of compliance at some future date.
The Siemens management and control structure is explained in detail on our Web site, including extensive information about the committees.
Compensation (Siemens complies)
Performance-related compensation of Supervisory Board members should also contain components based on the long-term performance of the enterprise.
In the Compensation Report, which is part of the Corporate Governance Report within the Annual Report, we provide individualized information regarding the composition of the compensation of the Supervisory Board. The Compensation Report is integrated in our Web site.
Elections (Siemens does not comply)
The election or re-election of members of the Supervisory Board at different dates and for different periods of office enables changing requirements to be taken into account.
We consider the suggestion to be inappropriate for a supervisory board established under the German Codetermination Act. Since employee representatives on the Supervisory Board are elected for five-year terms, the suggestion would only apply to shareholder representatives. Following the suggestion would, accordingly, result in disparate treatment of Supervisory Board members.
Extensive information regarding the composition of our Supervisory Board is provided in the notes to Annual Report 2007.
The Management Board must disclose insider information directly relating to the company without delay unless it is exempted from the disclosure requirement in an individual case. As soon as the company becomes aware of the fact that an individual acquires, exceeds or falls short of 3, 5, 10, 15, 20, 25, 30, 50 or 75% of the voting rights in the company by means of a purchase, sale or any other manner, the Management Board will disclose this fact without delay.
Suggestions
Directors' Holdings (Siemens complies)
Beyond the statutory obligation to report and disclose dealings in shares of the company without delay, the ownership of shares in the company or related financial instruments by Management Board and Supervisory Board members shall be reported if these directly or indirectly exceed 1% of the shares issued by the company. If the entire holdings of all members of the Management Board and Supervisory Board exceed 1% of the shares issued by the company, these shall be reported separately according to Management Board and Supervisory Board. The previously mentioned disclosures shall be included in the Corporate Governance Report.
Information on stock ownership by members of the Managing and Supervisory Boards is provided on page 84 of the Annual Report 2007.
All purchases or sales of shares since the financial year 2005 subject to disclosure pursuant to § 15a of the German Securities Trading Act (WpHG) are published on our Web site.
Fair Disclosure (Siemens complies)
All new facts made known to financial analysts and similar addressees shall also be disclosed to the shareholders by the company immediately. The company shall use suitable communication media, such as the Internet, to inform shareholders and investors in a prompt and uniform manner. Any information, which the company discloses abroad in line with corresponding capital market law provisions, shall also be disclosed domestically immediately. Information on the enterprise, which the company discloses, shall also be accessible via the company's Internet site. The Internet site shall be clearly structured.
Embracing transparency and open communications with the capital market is a Siemens hallmark. Our Investor Relations site gives you the comprehensive and timely information you need to form an opinion about our stock. In addition to news on the stock’s performance, Siemens current financial figures and publications as well as past figures and publications are available for your review. We also offer you fascinating reports on a variety of topics related to Siemens’ stock as well as the capital market in general.
Financial Calendar (Siemens complies)
As part of regular information policy, the dates of essential regular publications (including the Annual Report, interim financial reports) and the date of the General Meeting shall be published sufficiently in advance in a "financial calendar."
The Siemens Financial Calendar lists all important investor relations events and their dates. Here you can get information about upcoming events or get details on events that have already taken place.
Publications (Siemens complies)
Publications should also be in English.
Reporting and Audit of the Annual Financial Statements
Shareholders and third parties are mainly informed by the Consolidated Financial Statements. During the financial year they are additionally informed by means of a half-year financial report and, in the first and second halves, by interim reports or quarterly financial reports. The Consolidated Financial Statements and the Condensed Consolidated Financial Statements in the half-year financial report and the quarterly financial report are prepared under observance of internationally recognised accounting principles. The Consolidated Financial Statements must be prepared by the Management Board and examined by the auditor and Supervisory Board. In addition, the Financial Reporting Enforcement Panel and the Federal Financial Supervisory Authority are authorized to check that the Consolidated Financial Statements comply with the applicable accounting regulations (enforcement). The Supervisory Board commissions the auditor to carry out the audit and concludes an agreement on the latter's fee. The auditor takes part in the Supervisory Board's deliberations on the Annual Financial Statements and Consolidated Financial Statements and reports on the essential results of its audit.
Stock-based compensation (Siemens complies)
The Corporate Governance Report shall contain information on stock option programs and similar securities-based incentive systems of the company.
The Compensation Report, which is part of the Corporate Governance Report, contains information with regard to stock-based compensation.
Investments (Siemens complies)
The company shall publish a list of third party companies in which it has a shareholding that is not of minor importance for the enterprise. The following shall be provided: name and headquarters of the company, the amount of the shareholding, the amount of equity and the operating result of the past financial year.
Publication term (Siemens complies)
The Consolidated Financial Statements shall be publicly accessible within 90 days of the end of the financial year; interim reports shall be publicly accessible within 45 days of the end of the reporting period.
The financial calendar provides you with an up-to-date list of both future and past publication dates.
Auditor (Siemens complies)
Prior to submitting a proposal for election, the Supervisory Board or, respectively, the Audit Committee shall obtain a statement from the proposed auditor stating whether, and where applicable, which business, financial, personal and other relationships exist between the auditor and its executive bodies and head auditors on the one hand, and the enterprise and the members of its executive bodies on the other hand, that could call its independence into question. This statement shall include the extent to which other services were performed for the enterprise in the past year, especially in the field of consultancy, or which are contracted for the following year.
The Supervisory Board shall agree with the auditor that the Chairman of the Supervisory Board will be informed immediately of any grounds for disqualification or impartiality occurring during the audit, unless such grounds are eliminated immediately. The Supervisory Board shall arrange for the auditor to report immediately on all facts and events of importance for the tasks of the Supervisory Board, which arise during the performance of the audit.
The Supervisory Board shall arrange for the auditor to inform it and/or note in the Auditor's Report if, during the performance of the audit, the auditor comes across facts which show a misstatement by the Management Board and Supervisory Board on the Code.
Our Web site contains extensive information on the duties of the Audit Committee.
The aforementioned recommendations of the Code with respect to the auditor are implemented in §§ 6 and 7 of the Bylaws for the Audit Committee.
Independence (Siemens complies)
Notes on the relationships with shareholders considered to be "related parties" pursuant to the applicable accounting regulations shall be provided in the Consolidated Financial Statements.
Related party transactions are explained on page 80 of the Annual Report 2007.
Due to our listing on the New York Stock Exchange (NYSE), we are subject to certain U.S. capital markets laws and regulations of the U.S. Securities and Exchange Commission (SEC) and rules of the NYSE.
Companies listed on the NYSE are subject to the Corporate Governance Standards of Section 303A (the NYSE Standards) of the NYSE Listed Company Manual. Under the NYSE Standards, Siemens AG, as a foreign private issuer, is permitted to follow its home-country corporate governance practices in lieu of the NYSE Standards, except that it is required to comply with the NYSE Standards relating to the having of an audit committee (comprised of members who are “independent” under the SOA) and to certain NYSE notification obligations. In addition, the NYSE Standards require that foreign private issuers disclose any significant ways in which their corporate governance practices differ from those required of U.S. domestic companies under the NYSE Standards.
As a company incorporated in Germany, Siemens AG has to comply with the German law applicable to stock corporations (primarily the German Stock Corporation Act) and the German Codetermination Act and follows the recommendations of the German Corporate Governance Code. Furthermore, Siemens complies with applicable rules and regulations of the markets on which its securities are listed, such as the NYSE, and also voluntarily complies with many of the NYSE requirements that by their terms apply only to U.S. domestic issuers. For additional information on our corporate governance, please refer to Item 6: “Directors, Senior Management and Employees” and to the other subsections of this Item 10.
The significant differences between our governance practices and those of U.S. domestic NYSE issuers are as follows:
Two-Tier Board
The German Stock Corporation Act requires Siemens AG to have a two-tier board structure consisting of a Managing Board and a Supervisory Board. The two-tier system provides a strict separation of management and supervision. Roles and responsibilities of each of the two boards are clearly defined by law. The composition of the Supervisory Board is determined in accordance with the Codetermination Act, which requires that one-half of the required 20 Supervisory Board members must be elected by our domestic employees. In the event of a tie vote at the Supervisory Board, the Chairman of the Supervisory Board is entitled to cast a deciding vote.
Independence
In contrast to the NYSE Standards, which require the board to affirmatively determine the independence of the individual directors with reference to specific tests of independence, German law does not require the Supervisory Board to make such affirmative findings on an individual basis. At the same time, the Bylaws for Siemens’ Supervisory Board contain several provisions to help ensure the independence of the Supervisory Board’s advice and supervision. Furthermore, the members of the Supervisory and Managing Boards are strictly independent from one another; a member of one board is legally prohibited from being concurrently active on the other. Supervisory Board members have independent decision-making authority and are legally prohibited from following the direction or instruction of any affiliated party. Moreover, Supervisory Board members may not enter into advisory, service or certain other contracts with Siemens, unless approved by the Supervisory Board.
Committees
In contrast to the NYSE Standards, which require the creation of several specified board committees, composed of independent directors and operating pursuant to written charters that set forth their tasks and responsibilities, the Supervisory Board of Siemens AG has combined the functions of a nominating, compensation and corporate governance committee substantially in the Chairman’s Committee and has delegated the remaining functions to the Nominating Committee. Both the Audit Committee and the Chairman’s Committee have written bylaws—adopted by the Supervisory Board based on the NYSE Standards—addressing their respective purposes and responsibilities.
The Audit Committee of Siemens AG is subject to the standards of the SOA and the Securities Exchange Act of 1934, as applicable to a foreign private issuer, and performs—in cooperation with the Compliance Committee—functions similar to those of an audit committee subject to the full NYSE Standards. Nevertheless, German law precludes certain responsibilities from being delegated to a committee, such as the selection of the independent auditors, who are required by German law to be elected at the shareholders’ meeting.
In addition, the Supervisory Board of Siemens AG has a Finance and Investment Committee and a Mediation Committee, the latter of which is required by German law. Neither of these two committees is required under the NYSE Standards.
Shareholder Approval of Equity Compensation Plans; Stock Repurchases
The NYSE Standards generally require U.S. domestic companies listed on the NYSE to obtain shareholder approval of all equity compensation plans (including stock option plans) and any material revisions to them. Similarly, our adoption of stock option plans and any material revisions thereto require the approval by our shareholders insofar as any issuance of shares and/or stock options under authorized or contingent capital authorizations requires shareholder approval (which approval requires consideration of the key elements of the applicable option plan or relevant modifications). The 2001 Siemens Stock Option Plan, for example, under which no further options can be issued after December 2006, was approved in 2001 by our shareholders. Similarly, under German law, share buybacks generally require the prior authorization by shareholders. Such approval was provided at our January 25, 2007 Annual Shareholders’ Meeting and this matter will generally be voted upon annually.
In addition to the previously mentioned Corporate Governance Standards, in October 2004 the European Union has established a European Corporate Governance Forum. The Forum comprises fifteen senior experts from various professional backgrounds (issuers, investors, academics, regulators, auditors, etc.) whose experience and knowledge of corporate governance are widely recognized at European level.
In its Action Plan on modernizing company law and enhancing corporate governance in the European Union the Commission considered as a priority to encourage the co-ordination and convergence of national codes through regular high-level meetings of the European Corporate Governance Forum. The Commission specified that the Forum, to be chaired by the Commission, could meet two or three times a year and that it would comprise representatives from Member States, European regulators (including the Committees of European Securities Regulators, CESR), issuers and investors, other market participants and academics.
The Forum has undertaken several initiatives to enhance Corporate Governance in the European Union. We attentively follow the progress the forum is making.
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