German Corporate Governance Code

Declaration of compliance of Softing AG regarding the German Corporate Governance Code in accordance with Section 161 German Stock Corporation Act.

The latest version of the Code
Website of the Government Commission German Corporate Governance Code

The Executive Board and the Supervisory Board of Softing AG hereby issue the following declaration of compliance regarding the recommendations of the Government Commission of the German Corporate Governance Code in accordance with Section 161 of the German Stock Corporation Act:

1.Softing AG (hereinafter: the Company) will comply with the recommendations of the German Corporate Governance Code, as amended on February 7, 2017, with the following exceptions:
 a.

The Executive Board’s duties to inform and report to the Supervisory Board are not specified in greater detail (Section 3.4 para 1 sentence 3 of the Code).
The Supervisory Board has not specified the Executive Board’s duties to inform and report in greater detail because the Executive Board is already legally obligated to regularly inform the Supervisory Board about all material business transactions without delay. In addition, the Supervisory Board has not had any reason to find fault with the Executive Board’s information policy to date.

 b.

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 believe that such a deductible could enhance the motivation and responsibility of the members of the Company’s Supervisory Board in carrying out their duties.

 c.

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).
It does not believe that it is necessary to store non-current Declarations of Compliance with the German Corporate Governance Code on its website for five years. Such postings do not offer new information relevant to the capital market.

 d.

No consideration was given to the relationship between the remuneration of senior management and the staff overall, when determining the remuneration for the Executive Board (Section 4.2.2 para 2 sent. 3 of the Code)
Section 4.2.2 para 2 sentence 3 of the Code recommends that the Supervisory Board consider the relationship between the remuneration of the Executive Board and that of senior management and the relevant staff overall, particularly in terms of its development over time. When the current director’s contracts of the Executive Board members were concluded, the Supervisory Board ensured – in compliance with the requirements of the German Stock Corporation Act – that the overall remuneration appropriately reflects the tasks and performance of the respective Executive Board member and does not exceed what is a customary level of remuneration. Using the customary calculation method, the determination of the Executive Board’s remuneration was oriented on the Company’s scope of business, its economic and financial position and the structure of the Executive Board remuneration in place at comparable companies. Furthermore, consideration was given to the individual tasks and scope of responsibilities of the respective Executive Board member. To the extent that the Code, as amended, specifies reviewing the vertical appropriateness of Executive Board remuneration, which is required by the German Stock Corporation Act, and provides a more detailed definition of both the peer groups relevant for comparison and the time period to which such a comparison applies, the Company as a precaution declares that it deviates from the Code. When reviewing vertical appropriateness, the Supervisory Board did not distinguish between the peer groups of the Code recommendation and did not collect any data regarding the development over time of the wage and salary structure, either.

 e.

Variable remuneration components with a multiple-year, forward-looking assessment basis (Section 4.2.3 para 2 sent. 3 of the Code)
Executive Board remuneration already includes a multiple-year assessment basis. However, this multiple-year assessment basis does not have essentially forward-looking characteristics. The Company believes that additional, essentially forward-looking characteristics do not currently represent additional incentives for the Executive Board. The Supervisory Board and the Executive Board will, however, discuss a change in the assessment basis for variable remuneration during the next year.

 f.

Diversity in the Executive Board (Section 5.1.2 para 1 sent. 2 of the Code)
When appointing the members of the Executive Board, the Supervisory Board cannot also respect diversity because the Company currently has only two Executive Board members. Given that the Executive Board comprises just two members – a number the Company believes to be adequate and whose positions will be filled for the foreseeable future – the recommendations in the Code to aim for diversity do not appear feasible for the time being. Furthermore, the Supervisory Board does not consider it appropriate to select Executive Board members based on criteria such as orientation or race, but instead to rely on personality and expertise only.

 g.

The Supervisory Board has not set up any committees (Sections 5.3.1, 5.3.2, 5.3.3 of the Code).
Given the size of the Supervisory Board (three members), setting up committees is not considered necessary.

 h.

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).
A specific age limit could be an undesired criterion to exclude qualified members of the Executive Board or the Supervisory Board.

 i.

Specification of concrete objectives regarding the composition of the Supervisory Board and preparation of a profile of skills and expertise (Section 5.4.1 para 2, 3 and 4 of the Code).
The Company’s Supervisory Board will not specify any concrete objectives regarding its composition, nor has it prepared a profile of skills and expertise for the entire Supervisory Board. Up to now, the Supervisory Board has exclusively based its proposals for the nomination of Supervisory Board members on the suitability of the male and female candidates with the aim of creating a Supervisory Board whose members as a group possess the knowledge, skills and professional experience required to properly complete its tasks. The Supervisory Board firmly believes that this approach works, which is why it does not see any need to change this practice. In particular, the Company does not intend to implement the recommendation to set a regular limit of length of membership because as a rule, the Company wishes to have access to the expertise of experienced Supervisory Board members as well. The Supervisory Board does not consider a predetermined limit for the maximum period of service appropriate, since the term of office for Supervisory Board members stipulated in the law and Articles of Incorporation provide for a reasonable period for Supervisory Board mandates.

Since the Supervisory Board accordingly does not set specific targets regarding its composition and does not prepare a profile of skills and expertise, either, the recommendations in Section 5.4.1 para 3 can not be followed. For this reason, the Company also cannot follow the recommendations in Section 5.4.1 para 4, according to which proposals by the Supervisory Board to the General Meeting shall take these targets into account, while simultaneously aiming at fulfilling the overall profile of required skills and expertise of the Supervisory Board. The implementation status can therefore not be published in the Corporate Governance Report, either.

 j.

Performance-related remuneration shall be linked to sustainable growth of the company (Section 5.4.6 para 2 sent. 2 of the Code)
In addition to fixed remuneration, the members of the Supervisory Board also receive performance-related remuneration based on consolidated EBIT before taking into account the Supervisory Board’s variable remuneration. The Company’s Articles of Incorporation thus do not expressly require a link to sustainable growth of the Company. The Company continues to believe that basing performance-related remuneration on consolidated EBIT of the respective financial year is a sensible approach, because due to the nature of its business, deliberate deferrals of expenses and income are hardly possible. Consolidated EBIT is a key performance indicator. Furthermore, no generally accepted model for basing the remuneration of Supervisory Board members on a company’s sustainable development has established itself in the capital markets to date. For the time being, the Company will continue to monitor the situation.

 k.

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).
The Company believes that a separate discussion of the reports is not necessary because the Supervisory Board is informed regularly of the business transactions.

2.

Since the publication of its most recent 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 February 7, 2017. 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 4.1.3 sentence 2; Section 4.2.2 para 2 sentence 3; Section 4.2.3 para 2 sentence 3; 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, 3 and 4; 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.


Haar, Germany, December 2018

The Executive Board and the Supervisory Board of Softing AG

x

Softing

Phone:  +49 89 4 56 56-0

Fax:  +49 89 4 56 56-399
Email:  info[at]softing[dot]com

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