Entsprechenserklärung der Softing AG

zum Deutschen Corporate Governance Kodex gemäß § 161 AktG

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

A.Softing AG (hereinafter: the Company) will comply with the recommendations and suggestions of the German Corporate Governance Code, as amended on December 16, 2019, and published by the Federal Ministry of Justice in the official section of the Federal Gazette on March 20, 2020 (hereinafter: the Code), with the following exceptions:
 1)

Diversity on the Executive Board (Code recommendation B.1)

Diversity on the Executive Board (Code recommendation B.1)
According to recommendation B.1 of the Code, the Supervisory Board shall take diversity into account when appointing Executive Board members. When appointing the members of the Executive Board, the Supervisory Board cannot also take into account 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 remain 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.

 2)

Independence of shareholder representatives (Code recommendation C.7)

According to recommendation C. 7 of the Code, more than half of the shareholder representatives shall be independent from the Company and its Executive Board. Supervisory Board members are to be considered independent from the Company and its Executive Board if they have no personal or business relationship with the Company or its Executive Board that may cause a substantial – and not merely temporary – conflict of interest.

When assessing the independence of Supervisory Board members from the Company and its Executive Board, shareholder representatives shall particularly take into consideration the following aspects; whether the respective Supervisory Board member – or a close family member:

  • was a member of the Company's Executive Board in the two years prior to appointment;
  • currently is maintaining (or has maintained) a material business relationship with the Company or one of the entities dependent upon the Company (e.g. as customer, supplier, lender or advisor) in the year up to their appointment, directly or as a shareholder, or in a leading position of a non-group entity;
  • is a close family member of an Executive Board member; or
  • has been a member of the Supervisory Board for more than 12 years.

Dr. Horst Schiessl has been a member of the Supervisory Board of Softing AG for more than 12 years. In addition, Supervisory Board member Dr. Klaus Fuchs has a business relationship with the Company.

 3)

Explanation on independence (Code recommendation C.8)

According to recommendation C.8 of the Code, if one or more of the indicators set out in recommendation C.7 are met and the Supervisory Board member concerned is still considered independent, the reasons for this shall be given in the Corporate Governance Statement.

The Supervisory Board considers it acceptable that Dr. Horst Schiessl has been a member of the Supervisory Board of Softing AG for more than 12 years since, in the opinion of the Supervisory Board, no conclusion can be drawn from the length of membership on the Supervisory Board as to the respective member’s independence and, moreover, there has been no indication to date that Dr. Horst Schiessl lacks independence. Contrary to recommendation C.7, the Supervisory Board itself does not consider business relationships to be a suitable criterion for defining independence. With regard to Supervisory Board member Dr. Klaus Fuchs, there has also been no indication to date that he lacks independence.

 4)

Independence of the Chairman of the Supervisory Board, the Chairman of the Audit Committee and the Chairman of the committee that addresses Executive Board remuneration (Code recommendation C.10)

According to recommendation C.10 of the Code, the Chairman of the Supervisory Board, the Chairman of the Audit Committee and the Chairman of the committee that addresses Executive Board remuneration, shall be independent from the Company and its Executive Board. The Chairman of the Audit Committee shall also be independent from the controlling shareholder.

The Chairman of the Supervisory Board, Dr. Horst Schiessl, has been a member of the Supervisory Board of Softing AG for more than 12 years, but is considered independent from the Company in reference to recommendation C.8 of the Code.

 5)

Remuneration system (Code recommendation G.1)

The remuneration system shall define in particular:

  • how the target remuneration and total remuneration is determined for each Executive Board member;
  • the proportion of (i) fixed remuneration and (ii) short-term and long-term variable remuneration in the target total remuneration;
  • the financial and non-financial performance criteria relevant for the granting of variable remuneration components;
  • what kind of relationship exists between achieving previously agreed performance criteria and variable remuneration; and
  • when and in what form Executive Board members have access to variable remuneration components they have been granted.

A remuneration system implementing this recommendation has not yet been adopted. The Supervisory Board will adopt such a remuneration system in good time before sending out the notice to the 2021 General Shareholders’ Meeting and submit it to the shareholders for approval at the General Shareholders’ Meeting following December 31, 2020, in accordance with the transitional provision of Section 26j of the Introductory Act to the Stock Corporation Act.

 6)

Target and maximum total remuneration (Code recommendation G.2)

According to recommendation G.2 of the Code, the Supervisory Board shall set the specific target and maximum total remuneration for each Executive Board member on the basis of the remuneration system. This shall be appropriate to the Executive Board member’s own tasks and performance as well as to the enterprises’ overall situation and performance, and it shall not exceed the usual level of remuneration without specific reasons.
The remuneration system specifically recommended in Section G.1 of the Code has not yet been adopted. The current directors’ contracts do not expire until March 31, 2021 (Dr. Wolfgang Trier) and April 30, 2023 (Mr. Ernst Homolka) and are binding until that date. Before the beginning of each financial year, the Supervisory Board sets the targets, the achievement of which is then relevant. Following the resolution on the new remuneration system adopted by the General Shareholders’ Meeting, the Supervisory Board intends to implement the determination of the specific target total remuneration recommended by the Code in advance of each forthcoming financial year when entering into new directors’ contracts.

 7)

Peer group (Code recommendation G.3)

In order to assess whether the specific total remuneration of Executive Board members is in line with usual levels compared to other enterprises, the Supervisory Board shall determine an appropriate peer group of other third-party entities, and shall disclose the composition of that group. The peer-group comparison shall be applied with a sense of perspective in order to prevent an automatic upward trend. Recommendation G.3 of the Code was introduced in the context of the Executive Board’s specific total remuneration, which is why the composition of the peer group has not been disclosed to date. The Supervisory Board intends to implement recommendation G.3 of the Code when entering into new directors’ contracts, which will then also take into account the specific total remuneration in accordance with recommendation G.2 of the Code.

 8)

No consideration was given to the relationship between the remuneration of senior managers and the workforce as a whole when determining the remuneration for the Executive Board (Code recommendation G.4)

Recommendation G.4 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 workforce as a whole, particularly in terms of its development over time. When the current directors’ 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 respective Executive Board member’s individual tasks and scope of responsibilities. 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 recommendation and did not collect any data regarding the development over time of the wage and salary structure, either, because no comparison parameters exist due to the absence of a senior management group.

 9)

Determining the total amount of variable remuneration components (Code recommendations G.6 to G.11)

Recommendations G.6 to G.11 of the Code were introduced when the Code was amended. The Supervisory Board intends to implement recommendations G.6 to G.11 when entering into new directors’ contracts.

 10)

Benefits granted at contract termination (Code recommendation G.12)

According to recommendation G.12 of the Code, if an Executive Board member’s contract is terminated, the disbursement of any remaining variable remuneration components attributable to the period up until contract termination shall be based on the originally agreed targets and comparison parameters, and on the due dates or holding periods stipulated in the contract. Recommendation G.12 of the Code was introduced when the Code was amended. In the event of termination of the contract, the current directors’ service agreements provide for early payment of the outstanding variable remuneration components (in Dr. Wolfgang Trier’s director’s service agreement) and a compensation payment as part of the variable remuneration (in Mr. Ernst Homolka’s director’s service agreement). The Supervisory Board intends to implement recommendation G.12 when entering into new directors’ service agreements.

 11)

Termination of employment contracts due to a change of control (Code recommendation G.14)

Change of control clauses that commit to benefits in the case of early termination of an Executive Board member’s contract due to a change of control should not be agreed upon. Recommendation G.14 of the Code was introduced when the Code was amended. Dr. Wolfgang Trier’s director’s service agreement provides for a compensation payment if the Executive Board member terminates his employment contract prematurely due to a change of control.

 12)

Performance-related remuneration shall be geared to the long-term development of the Company (Code recommendation G.18).

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 do not expressly require a link to the Company’s long-term development. 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 long-term development has established itself in the capital markets to date. For the time being, the Company will continue to monitor the situation.

B.

Since the publication of its most recent Declaration of Compliance in December 2019, Softing AG has generally been in compliance with the recommendations contained in the German Corporate Governance Code as amended on December 16, 2019. The recommendations and suggestions contained in sections B.1, C.7, C.8, C.10, G.1, G.2, G.3, G.4, G.6, G.7, G.8, G.9, G.10, G.11, G.12, G.14 and G.18 were not applied.

Please see the explanations in section A. for the reasons for not observing the Code’s recommendations and suggestions stated here in section B.

Haar, Germany, December 18, 2020

The Executive Board and the Supervisory Board of Softing AG

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