The Executive Board of Softing AG reports on issues of corporate governance in this statement – also on behalf of the Supervisory Board – pursuant to both Section 3.10 of the German Corporate Governance Code and Section 289a para. 1 of the German Commercial Code (HGB).
The Executive Board and the Supervisory Board of Softing AG support many suggestions and rules of the German Corporate Governance Code and declare that they were and will be in compliance in the future with the recommendations regarding conduct contained in the Code's current and applicable version in the 2016 financial year, taking into account the exceptions and comments listed below. The Executive Board and Supervisory Board issued the Declaration of Compliance in December 2016. Below, the Executive Board and the Supervisory Board disclose and explain any deviations from the Code. You can download the full text of the Code from the Investor Relations section of our website at www.softing.com.
Softing AG (hereinafter: the Company) will comply with the recommendations of the German Corporate Governance Code, as amended on May 5, 2015, with the following exceptions:
The obligations for the Executive Board towards the Supervisory Board on information and reporting are not further defined (Section 3.4 para 1 sentence 3 of the Code)
The Company currently has not agreed a deductible for the D&O insurance taken out on behalf of the members of its Supervisory Board (Section 3.8 para 3 of the Code).
The Company does not maintain Declarations of Compliance with the German Corporate Governance Code at its website for five years (Section 3.10 sentence 3 of the Code).
No consideration was given to the relationship between the compensation of senior management and the staff overall, when determining the compensation for the Executive Board (Section 4.2.2 para 2 sent. 3 of the Code)
Severance payment cap (Section 4.2.3 para 4 and para 5 of the Code)
Diversity on the Executive Board (Section 5.1.2 para 1 sent. 2 of the Code)
The Supervisory Board has not set up any committees (Sections 5.3.1, 5.3.2, 5.3.3 of the Code).
No age limit has been specified for members of the Executive Board and the Supervisory Board (section 5.1.2 para 2 sent. 3 and section 5.4.1 para 2 of the Code).
Specification of concrete objectives regarding the composition of the Supervisory Board (section 5.4.1 para 2 and 3 of the Code).
Since the Supervisory Board is not specifying any concrete objectives regarding its composition, consequently, the recommendations in Section 5.4.1 para 3 based on this can also not be followed.
Independence of Supervisory Board members (Section 5.4.2 of the Code)
Elections to the Supervisory Board are not carried out on an individual basis. The court appointment of Supervisory Board members is not limited in time until the next General Shareholders' Meeting (Section 5.4.3 of the Code).
Performance-related compensation shall be oriented toward sustainable growth of the enterprise (Section 5.4.6 para 2 sent. 2 of the Code)
The Supervisory Board does not discuss quarterly or half-yearly financial reports with the Executive Board prior to publication (Section 7.1.2. sent. 2 of the Code).
Since the publication of its previous Declaration of Compliance in December 2015, Softing AG has generally been in compliance with the recommendations contained in the German Corporate Governance Code as amended on May 5, 2015. The Company has not observed the following recommendations: Section 3.4 para 1 sentence 3; Section 3.8 para 3; Section 3.10 sentence 3; Section 4.2.2 para 2 sentence 3; Section 4.2.3 paras 4 and 5; Section 5.1.2 para 1 sentence 2; Section 5.3.1; Section 5.3.2; Section 5.3.3; Section 5.1.2 para 2 sentence 3; Section 5.4.1 paras 2 and 3; Section 5.4.2; Section 5.4.3; Section 5.4.6 para 2 sentence 2; and Section 7.1.2 sentence 2.
Please see the explanations under no. 1 for the reasons for not observing the recommendations of the Code stated under no. 2.
Compensation for the active members of the Supervisory Board in the 2016 financial year is presented in the 2016 annual report.
Disclosures regarding directors’ dealings pursuant to Section 15a German Securities Trading Act (Wertpapierhandelsgesetz - WpHG): Directors' Dealings
Softing AG is a stock corporation under German law. The dual management system comprising the Executive Board and the Supervisory Board as corporate bodies, both of which have distinct responsibilities, is a fundamental element of German corporate law. The collaboration between the Executive Board and the Supervisory Board of Softing AG in running and supervising the Company is very close and trusting.
Softing AG's Executive Board may comprise one or several persons. The Executive Board currently comprises two members: Dr.-Ing. Dr. rer. oec. Wolfgang Trier and Ernst Homolka. Dr. Trier is currently responsible for the operating segments Industrial Automation and Automotive Electronics as well as for Investor Relations, Mr. Homolka is responsible for Finance and Human Resources as of 1st May 2015.
The members of the Executive Board are jointly responsible for managing the Company in its entirety. They work together in a spirit of cooperation and keep each other informed of important activities and events in their areas of responsibility on an ongoing basis. Each individual member of the Executive Board is responsible for managing the area of responsibility assigned to them subject to the Executive Board's resolutions. The Executive Board generally adopts its resolutions in meetings that shall take place on a weekly basis. Every member of the Executive Board may ask that a meeting be convened, subject to notification of the issue to be deliberated. Likewise, every Executive Board member may ask that a topic be included in the agenda of a particular meeting. The Executive Board adopts its resolutions by the simple majority of all votes cast. The subsidiaries' managing directors receive regular information from the members of the Executive Board on important measures and matters concerning the respective functions.
The Supervisory Board advises and monitors the Executive Board with regard to its management of the Company. The Supervisory Board is integrated in corporate strategy and planning, as well as all aspects of fundamental importance to the Company. Under the rules of procedure for the Executive Board, significant transactions — for example, determining the Company's annual planning or major investments — require the approval of the Supervisory Board. The Chairman of the Supervisory Board coordinates the work of the Supervisory Board, chairs its meetings and represents the Supervisory Board externally.
The Executive Board informs the Supervisory Board in a timely and comprehensive manner — both in writing and at regularly scheduled meetings — of the Group's planning, performance, financial condition and risk management. Extraordinary Supervisory Board meetings are convened as necessary in connection with material events. The Supervisory Board adopted rules of procedure for its own work.
Pursuant to the Company's Articles of Incorporation, the Supervisory Board of Softing AG comprises three members, who are elected by the shareholders. These three members have identical terms of office. The Supervisory Board includes an adequate number of independent individuals, who, except in their capacity as shareholders, do not maintain any professional or personal ties to the Company or its Executive Board. The Supervisory Board's term of office is four years. Its current term of office ends with the General Shareholders' Meeting in 2017. The Supervisory Board did not establish any committees, given its size. Instead, the full Supervisory Board is responsible for all tasks and decisions. The current members of the Supervisory Board are: Dr. Horst Schiessl (Chairman), Dr. Klaus Fuchs (Deputy Chairman) and Mr. Andreas Kratzer.
On May 1, 2015 the German Act to Promote the Equal Participation of Women and Men in Management Positions in the Private and Public Sector (Gesetz für die gleichberechtigte Teilhabe von Frauen und Männern an Führungspositionen in der Privatwirtschaft und im öffentlichen Dienst) entered into force. For exchange-traded companies, Section 111 (5) of the German Stock Corporation Act (Aktiengesetz - AktG) now stipulates that the Supervisory Board must set targets for the proportion of women in the Supervisory Board and the Executive Board along with deadlines for their achievement. The first targets must be set by September 30, 2015 at the latest, though the time periods to be initially defined may not extend beyond June 30, 2017.
The Supervisory Board of Softing AG has discussed this matter at length. Currently, the proportion of women in the Executive Board and Supervisory Board is 0% in each case. Up to now, the Supervisory Board of Softing AG has exclusively based its proposals for the nomination of Supervisory Board members and executives to fill Executive Board positions on the suitability of the male and female candidates with the aim of creating a Supervisory Board and an Executive Board whose members as a group possess the knowledge, skills and professional experience required to properly complete its tasks. Since the Supervisory Board comprises only three members, the Supervisory Board is of the opinion that taking other criteria into consideration would impose a disproportionate limitation in the selection of candidates. What is more, the term of office of the acting Supervisory Board members still runs until the end of the Annual General Meeting that formally approves their actions for financial year 2017. This Annual General Meeting will probably be held in May 2018, which means that changes in the composition of the Supervisory Board prior to June 30, 2017 would require one of the acting members to step down or the Supervisory Board to be expanded to six members. However, this is not even envisaged for the statutory minimum quota applicable to exchange-traded and codetermined companies. The company's Executive Board currently comprises two members, a number the Supervisory Board considers adequate at the present time. In respect of the term of office of the Executive Board members, no changes in the composition of the Executive Board are planned in the medium term, i.e., up to April 2018 at least. It would therefore not be possible to implement a quota of women in the Executive Board before June 30, 2017 without expanding the Executive Board.
Both the Executive Board and the Supervisory Board are committed to safeguarding and furthering the corporate interests of Softing AG. There were no conflicts of interest in the financial year just ended that would have had to be disclosed to the Supervisory Board without delay. The members of the Executive Board did not hold any positions on supervisory boards of listed stock corporations outside of the Group.
For the Report of the Supervisory Board, please see the 2016 annual report.
Corporate Governance Practices
Acting responsibly with a view toward the long term and in a spirit of social awareness has always been fundamental to Softing AG's corporate culture. Among other things, this includes integrity in the Company's relationships with customers, employees, business partners, shareholders and the public at large.
Softing defines "Compliance" as abiding by requirements under the law and the Company's Articles of Incorporation as well as internal rules and regulations. The Company has not committed itself voluntarily to any external codes or rules and regulations. Instead, it has given itself a comprehensive corporate vision and a set of written management principles. The Company's vision expresses the way the Company, its corporate bodies and its employees perceive themselves. It has also adopted recommendations regarding proper dealings with customers, business partners and co-workers.
Please see the Company's web page for more information on quality assurance at Softing AG, as certified under DIN ISO 9001.
Haar, December 2016
The Executive Board of Softing AG