Siemens to strengthen responsibility and sustainability with new Managing Board compensation system

“The reorientation of our compensation system is another important and logically consistent step in our efforts to sustainably shape Siemens for the next generation. Our new Managing Board compensation system takes into account the interests of all our stakeholders and clearly shows Siemens’ long-term responsibility – not only toward shareholders, but also toward customers, employees and society,” explained Jim Hagemann Snabe, Chairman of the Supervisory Board of Siemens AG.

In the future, the value of the stock awards, which will continue to have a four-year vesting period, will not only be based on the company’s capital market performance – measured in terms of total shareholder return – but also on sustainability targets. These targets will be measured using the new Siemens Environmental, Social & Governance (ESG) / Sustainability Index. This index comprises three equally weighted metrics that are derived from the company’s strategic goals and consider key social and political matters: reduction of CO₂ emissions, the number of training hours per employee – in particular due to the challenges posed by digitalization – and the Net Promoter Score for measuring customer satisfaction. Incorporating the sustainability dimension into its compensation system makes Siemens a pioneer among the companies on Germany’s DAX stock index. As early as 2014, Siemens became one of the world’s first major industrial companies to set itself the goal of becoming carbon neutral by 2030. Since fiscal 2014, Siemens has succeeded in reducing its CO₂ emissions by around 41 percent – from 2.2 million tons to 1.3 million tons in fiscal 2019. By the end of fiscal 2020, Siemens’ CO₂ emissions are to be cut in half.

By implementing its new compensation system, Siemens is also honoring the promise made through the strategic dimension of Vision 2020+: Siemens’ Operating Companies are receiving more entrepreneurial freedom and more leeway for decision-making. These changes are also coupled with greater accountability. The new compensation system mirrors these strategic measures by placing a sharper focus on the responsibilities of the individual Managing Board members: for Managing Board members with business responsibility, the profit margin at their respective businesses will now be the relevant metric determining one-third of their short-term variable compensation. For the other Managing Board members, the Group’s return on capital employed will continue to be the corresponding metric. The target for basic earnings per share and the individual targets will remain unchanged for all Managing Board members. 

For the short-term variable compensation, the former maximum payout amount of 240 percent of the target amount has been reduced to 200 percent. The Supervisory Board’s option of adjusting the payout amount for the annual bonus upward or downward by as much as 20 percent has been discontinued.