Der Kodex in der aktuellen Fassung
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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 April 28, 2022, and published by the Federal Ministry of Justice in the official section of the Federal Gazette on June 27, 2022 (hereinafter: the “Code”), with the following exceptions:|
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.
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:
Supervisory Board member Dr. Klaus Fuchs has a business relationship with the Company. Nevertheless, Dr. Fuchs is regarded as independent. The reasons for this are given in the Statement on Corporate Governance in accordance with Code recommendation C.8. Aside from this, two shareholders – Mr. Matthias Weber and Mr. Andreas Kratzer – that have no personal or business relationship with the Company or its Executive Board have been represented on the Supervisory Board since May 6, 2022. This means more than half of the shareholder representatives have been independent from the Company and its Executive Board since May 6, 2022, taking into account the indicators set out in recommendation C.7.
Formation of a Nomination Committee (Code recommendation D.4)
According to Code recommendation D.4, the Supervisory Board shall form a Nomination Committee, composed exclusively of shareholder representatives, which names suitable candidates to the Supervisory Board for its proposals to the General Shareholders’ Meeting.
To date, the Company has not established a Nomination Committee. Given that the Supervisory Board comprises only three members, all of whom are elected by the General Shareholders’ Meeting, it is not considered necessary to form a Nomination Committee.
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.
Benefits granted at contract termination (Code recommendations G.12 and G.13)
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.
Softing deviates from this recommendation. In the event that an Executive Board member is dismissed for cause without good reason for terminating their director’s service agreement, the Executive Board member receives a severance payment for their contractually agreed remuneration claims in the form of the basic remuneration, short-term incentive and long-term incentive that would still have accrued for the remainder of their director’s service agreement. The amount of the variable remuneration components is then calculated based on the claims realized from this in the previous year, provided that the calculation of the short-term incentive program is based on a notional update of the relevant earnings performance indicator from the previous year (e.g. EBITDA) in future months for the remainder of the agreement.
In accordance with recommendation G.13 of the Code, any payments made to an Executive Board member due to early termination of their Executive Board activity shall not exceed twice the annual remuneration (severance cap) and shall not constitute remuneration for more than the remaining term of the employment contract.
Softing deviates from this recommendation. If the contract period is less than one year, the remuneration will be paid for a full year. In the opinion of the Company, this is appropriate compensation.
Committee work not taken into account in the remuneration (Code recommendation G.17)
Recommendation G.17 sets out that the remuneration of Supervisory Board members shall take into account, in an appropriate manner, the higher time commitment of the Chairman and the members of committees. This is not currently envisaged for the Audit Committee formed at the Company and is not considered necessary because the members of the Audit Committee are the same as the Supervisory Board members.
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 March 2022, 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, D.5 (old version, now: D.4), G.4, G.12, G.13, G.17 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, March 2023
The Executive Board and the Supervisory Board of Softing AG