Forum Report: Siemens AG
Survey of Siemens AG Shareholders:
Information Needed for Voting on
Settlement and Compensation Issues
To determine shareholder information requirements for voting decisions at
the annual meeting of Siemens AG on January 26, 2010, the Shareholder
Forum and its independently managed German affiliate,
Aktionaersforum AG, conducted a survey of the company’s investors.
The survey questionnaire
addressed current voting inclinations and criteria relating to two
subjects of apparent interest to investors:
·
Proposed settlements of corruption claims
against former directors, which can be rejected by 10% shareholder
opposition
·
Compensation issues, including the new German
requirement for shareholder "Say on Pay" and an employee group’s proposal
to revise supervisory board compensation
Summary of Results
Survey responses clearly show that Siemens shareholders need more
information to understand why they should vote in support of management’s
positions:
►
A very high proportion of investors is undecided.
Over 40% of the total number of respondents reported being undecided about
both the settlement and compensation votes, with more than another 25%
only “probably” inclined to vote one way or the other.
►
Investors want information beyond what is presented in
traditional reports. The information that investors considered most
important included management explanations and answers to questions,
independent opinions, and other responses that are not usually in the
standard reports distributed to shareholders for annual meetings.
►
Current inclinations do not support management positions.
In the absence of information addressing investor decision-making
criteria, current ratios of "for" and "against" inclinations suggest that
shareholders could reject the proposed settlements and approve the
shareholder counter-proposal to revise board compensation.
Aktionaersforum will be presenting its own analysis of the survey results
summarized below, and will be inviting Siemens management to respond to
the reported interests of the company’s shareholders.
Approval of Claim Settlements
![](20100106_report_files/image002.gif)
Of the survey participants who stated their voting inclinations in
relation to the proposed settlement of corruption claims, 42.6% reported
being undecided. Excluding the 20.1% who planned to follow management
recommendations, presumed to be primarily individual holders without
fiduciary duties to exercise independent judgment, the proportion of
undecided voters was 53.2%.
Of the participants reporting an inclination to vote one way or another
based on their current knowledge, 84.7% said they would probably or
definitely vote in support of the settlements and 15.3% against. If that
is the proportion of undecided votes that ultimately supports or opposes
the settlements, the final proportion of shareholders against the
settlement would be 12.2%, enough to defeat the proposal.
Addressing the types of information shareholders considered relevant to
their consideration of the proposed settlements, the most important was
independent opinions, followed by management responses to questions and
summaries of the conditions. Recommendations of either proxy advisors or
management were clearly not as important as the detailed explanations.
Regarding the issues that need to be explained, participants reported
considering all the suggested criteria to be important. The company’s
reputation and a sense of fairness received the highest rankings, with
almost 75% considering them “important,” but the amount of money to be
paid and the elimination of distractions were also considered “important”
by well over half.
These priorities are explained in the following examples of comments:
“I would like to know two things: 1) are the accused individuals being
punished appropriate to their personal gain from all transactions with
which they were associated? and 2) are the accused individuals also being
punished in a means that sends an effective message to all other
executives who are expected to provide honourable and legally compliant
corporate behaviour in conduct of business? Clearly, these individuals
have damaged the economic health of the company and its investors so the
punishment for any carelessness or selfishness on their part, should be
damaging to them as individuals.”
“Must send a very strong message that unethical and inappropriate behavior
will not be tolerated and will be prosecuted vigorously.”
“Former management failed the stockholders with their naive actions and a
clear message must be sent to current employees and managers that such
action will severely impact their future careers and quality of life.”
“investigators findings”
“With the greatest respect to a fine company's management, on issues which
have passed -- or passed through -- the hands of directors and management,
I'd like a thoroughly independent analysis.”
Compensation Issues
![](20100106_report_files/image008.gif)
![](20100106_report_files/image010.gif)
Of the survey participants stating their voting inclinations in relation
to the compensation proposals, 44.8% were undecided about the approval of
executive compensation and 41.1% were undecided about a shareholder
proposal to revise the compensation for members of the company’s
supervisory board. The proportions of undecided votes after excluding the
21.0% who said they would follow management recommendations were 56.7% for
executive compensation approval and 54.2% for the shareholder proposal.
The proportions of participants who reported being definitely or probably
for rather than against the compensation proposals were 64.7% in relation
to approval of executive compensation and 86.8% in favor of the
shareholder proposal for revised board compensation. Projecting these
proportions to the undecided voters would result in a 72.1% vote approving
executive compensation and a 68.0% vote in favor of the shareholder
proposal to revise supervisory board compensation.
The issues that were considered most important by participants were the
amounts and the details of compensation,
and approximately half the participants considered responses to questions
by both management and shareholder proponents to be important.
These are examples of participant comments explaining what they consider
relevant to their voting on compensation issues:
“[E]specially interested in compensation linkage to long-term
profitability and gain of market share.”
“Compensation should be based on the performance overall and not what any
government office deems fair.
“I want all involved with Siemens to benefit from growth and profit.”
“How does executive compensation compare with that of the rank and file,
the men and women who actually promote, design, and produce the product
and thus make the money for the company.”
“Need information, details. While jobs well done deserve recognition and
good compensation, they should be reasonable and not burden the company or
adversely affect the bottom line.”
Shareholder Questions and Management Responses
Survey participants were invited to submit questions for Siemens
management, to be presented by Aktionaersforum without identifying the
source other than as an anonymous participant in the survey.
Aktionaersforum will also be providing Siemens with its own suggestions of
information that shareholders may consider important in their voting
decisions, based on the survey. These presentations and all Siemens
responses will be posted on the freely accessible Aktionaersforum web
site:
www.aktionaersforum-siemens.de
♦♦♦
Comments and questions about the survey will be welcomed.
Thanks are due to all the Siemens investors who participated in the survey
and, especially, to the managers of Aktionaersforum who supported this
project to serve Siemens shareholders.
– January 6, 2009
Gary Lutin, Forum chairman
c/o Lutin & Company
575 Madison Avenue, 10th Floor
New York, New York 10022
Tel: 212-605-0335
Email:
gl@shareholderforum.com
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