“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.
Sustainability index as new criterion
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.
Greater focus on individual responsibility
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
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.