Corporate Governance Report and Declaration on Corporate Management
Corporate governance is an important part of a company’s success, responsible corporate management and supervision. Wacker Chemie AG attaches great importance to the rules of proper corporate governance. In this report, the Executive Board provides details – also for the Supervisory Board – on corporate governance in accordance with Item 3.10 of the German Corporate Governance Code (Code) and Section 289a (1) of the German Commercial Code (HGB).
Declaration of Conformity and Corporate Governance Reporting
In the 2014 fiscal year, the Executive and Supervisory Boards dealt intensively with the company’s corporate governance and the recommendations of the Code published on June 24, 2014. The Executive Board and the Supervisory Board resolved in December 2014 to issue the following Declaration of Conformity as per Section 161 of the German Stock Corporation Act (AktG). The Declaration of Conformity has since been made permanently available to the general public on the company’s website.
The 2014 Declaration of Conformity Issued by Wacker Chemie AG’s Executive and Supervisory Boards
General Declaration Pursuant to Section 161 of the German Stock Corporation Act
In December 2013, the Executive Board and the Supervisory Board of Wacker Chemie AG issued a declaration of conformity pursuant to Section 161 of the German Stock Corporation Act. Since that time, Wacker Chemie AG has complied with the recommendations of the German Corporate Governance Code in the version dated May 13, 2013, with the following exceptions, and will continue to comply with the recommendations of the Code in the version dated June 24, 2014, except as follows:
a) D&O Insurance Deductible for Supervisory Board Members
German law and a company’s Articles of Association set clear limits in regards to the Supervisory Board’s ability to exert influence on the business activities of a stock corporation. Pursuant to Section 76 (1) of the German Stock Corporation Act, the Executive Board is responsible for independently managing the corporation. A Supervisory Board is instrumental in defining the main features of corporate strategy. However, beyond this contribution, the Supervisory Board’s abilities are limited in terms of influencing operations or the implementation of corporate strategy. The same applies to measures taken to avert damage or loss to the company. Since the Supervisory Board members receive a relatively low representation allowance compared with the Executive Board members’ compensation, we do not consider a deductible to be reasonable for members of the Supervisory Board.
b) Appropriate Representation of Women on the Executive Board
The considerable importance that Wacker Chemie AG attaches to diversity extends to Executive Board membership. Nonetheless, expertise – including experience gained abroad – and qualifications are the key criteria here. For this reason, we do not consider it expedient to prioritize “the aim of appropriate representation of women” over expertise and qualifications.
c) Formation of a Nomination Committee within the Supervisory Board
The Supervisory Board is to establish a Nomination Committee that is exclusively composed of shareholder representatives and whose task it is to make recommendations to the Supervisory Board with regard to candidates suitable for proposal to the Annual Shareholders’ Meeting.
We do not comply with this recommendation because, in view of our shareholder structure, we do not believe that the formation of such a committee is appropriate. Due to the majority situation, nominations to the Supervisory Board must be agreed with the majority shareholder in any case, so that an additional nomination committee would not serve to increase efficiency.
d) Announcement to the Shareholders of Proposed Candidates for the Chair of the Supervisory Board
According to this recommendation, shareholders are to be informed of any candidates for the Supervisory Board chair even though, as a rule, the Supervisory Board has not yet been appointed. Under German law, the Supervisory Board chair must be elected by, and from among, the Supervisory Board members. There is no legal requirement to announce the candidates for the chair from among a yet-to-be-appointed group of Supervisory Board members. Furthermore, this would result in a de facto predetermination, which is also not provided for under German law. For these reasons, we do not comply with this recommendation.
e) Naming of a Specific Target Number of Independent Members of the Supervisory Board
In its current composition, Wacker Chemie AG’s Supervisory Board complies with the requirements concerning an adequate number of independent supervisory board members. What is more, in its future recommendations to the shareholders in respect of appointments, the Supervisory Board will make sure it proposes what it considers to be an adequate number of independent candidates. Setting a specific target for the number of independent Supervisory Board members would not only restrict the selection of suitable candidates for that body, but also curb the rights of the shareholders to select those candidates that they consider the most appropriate for the task. For these reasons, we do not comply with this recommendation.
f) Time Limitation on Applications for Judicial Appointment of a Supervisory Board Member
According to this recommendation, applications for the judicial appointment of a Supervisory Board member should be limited in time until the next Annual Shareholders’ Meeting.
We do not follow this recommendation. Proposals for a candidate to be appointed by the court are agreed in advance with the majority shareholder in any case. Due to the majority situation, the subsequent election of the same candidate at the next Annual Shareholders’ Meeting would only be confirmation of his/her appointment, which is superfluous from our point of view.
Corporate Governance Reporting
Shareholders and Annual Shareholders’ Meeting
Transparent Information for Shareholders and the Public
WACKER’s aim is to inform all of the company’s target groups – whether shareholders, shareholder representatives, analysts, media, or the interested general public – promptly and without preference. We regularly publicize important dates for the company in a financial calendar published in our Annual Report, in the interim reports and on our website. Capital market participants are in close contact with our Investor Relations team. We inform investors and analysts about the current and future development of business in telephone conferences held whenever a quarterly report is published. We regularly attend roadshows and investors’ conferences and organize a “Capital Markets Day” once a year. Important presentations can be viewed freely on the internet, where all of the press releases and ad-hoc disclosures in both German and English, the online version of the Annual Report, all interim reports and the Sustainability Report can also be found. Further information is provided by our online customer magazine, media library and Podcast Center. www.wacker.com
Annual Shareholders’ Meeting
The Annual Shareholders’ Meeting provides an efficient and inclusive forum for informing shareholders about the company’s situation. Even before the Annual Shareholders’ Meeting begins, shareholders receive important information about the previous fiscal year in the Annual Report. The agenda items are described and the conditions of attendance explained in the invitation to the Annual Shareholders’ Meeting. The notice of the Annual Shareholders’ Meeting – together with all legally prescribed reports and documents, including the Annual Report (of which the consolidated financial statements and the combined management report form part) – as well as the annual financial statements of Wacker Chemie AG are also available on the company’s website. After the Annual Shareholders’ Meeting, we publish the attendance figures and the results of the votes on the internet. All these communication measures contribute to the regular exchange of information with our shareholders. WACKER helps its shareholders exercise their voting rights by giving them the option of casting their vote either in person or by proxy. Proxies are available to exercise shareholders’ voting rights as instructed and can also be contacted during the Annual Shareholders’ Meeting.
Working Methods of the Executive and Supervisory Boards
Wacker Chemie AG has a dual management system as prescribed in the German Stock Corporation Act. It consists of the Executive Board, which manages the company, and the Supervisory Board, which supervises the company. These two bodies are kept strictly separate from one another with regard to both their membership and their spheres of competence. The Executive and Supervisory Boards collaborate closely to ensure WACKER’s sustainable long-term success.
The Executive Board currently consists of four members. The Executive Board bears complete responsibility for managing the company and represents Wacker Chemie AG in all dealings with third parties. The Executive Board’s actions and decisions are driven by the company’s interest and the aim to sustainably increase the Group’s value. With this goal in mind, the Executive Board determines the WACKER Group’s strategic alignment. It then steers and monitors this by allocating funds, resources and capacities, and by supporting and overseeing the operating units. The Executive Board also ensures compliance with legal requirements and establishes an appropriate risk management system.
The members of the Executive Board bear joint responsibility for managing the company, but are fully responsible for managing their respective units. All Executive Board decisions require a simple majority. In the case of a tie of votes, the president & CEO has the deciding vote. However, he/she does not have the right to veto Executive Board resolutions.
Close Collaboration between the Executive and Supervisory Boards
The Executive and Supervisory Boards work together closely to promote the interests of the company. Their common goal is the sustainable growth of the company and the enhancement of its value. The Executive Board reports to the Supervisory Board regularly, promptly and comprehensively about all issues of strategy, planning, business development, risk exposure, risk management and compliance that are relevant to the company. Between meetings, the Supervisory Board chairman maintains contact with the Executive Board, in particular with the president & CEO, consulting with that body on the above-mentioned issues. The Executive Board explains to the Supervisory Board any deviations in the course of business from the approved plans and objectives, and specifies the reasons for them.
Certain transactions defined in the Rules of Procedure of Wacker Chemie AG’s Executive Board require the Supervisory Board’s approval prior to their conclusion. These include approving the annual budget (including financial and investment planning), acquiring and disposing of shares in companies, establishing new production or business units, or suspending existing ones, and concluding sizable long-term loans.
The Supervisory Board appoints, oversees and advises the Executive Board and is directly involved in any decisions of crucial importance to WACKER. Fundamental decisions on the company’s development require Supervisory Board approval.
The Supervisory Board comprises 16 members. In compliance with the German Co-Determination Act (MitbestG), it has an equal number of shareholder and employee representatives. The Supervisory Board appoints the members of the Executive Board and oversees and advises them on the management of the company.
As members of the Supervisory Board cannot simultaneously sit on the Executive Board, this structure ensures a high degree of independence in monitoring the Executive Board.
Where necessary, in particular when forming resolutions in respect of personnel, the Supervisory Board convenes without the Executive Board.
Committees Increase the Supervisory Board’s Efficiency
The Supervisory Board has constituted three professionally qualified committees to help it perform its duties optimally. The work of those committees is reported on regularly at Supervisory Board meetings.
The Executive Committee prepares the Supervisory Board’s personnel decisions, especially the appointment and dismissal of Executive Board members and the nomination of the president & CEO. In addition, it deals with contracts with Executive Board members and develops the system for Executive Board compensation, on the basis of which the meeting of the full Supervisory Board determines the compensation payable to Executive Board members. The Executive Committee consists of the Chairman of the Supervisory Board, Dr. Peter-Alexander Wacker, and Supervisory Board members Anton Eisenacker and Franz-Josef Kortüm.
The Audit Committee does the groundwork for the Supervisory Board’s decisions on the adoption of the annual financial statements and the approval of the consolidated financial statements. Its work also includes an audit of the consolidated interim financial statements for the first half-year, discussion of the quarterly reports, and issues involving risk management. In connection with this, the committee is obliged to pre-audit the annual financial statements, the consolidated financial statements, the combined management report and the proposal for the appropriation of profits. In particular, this committee monitors the accounting processes, the company’s compliance with laws and regulations, and the effectiveness of the internal control, risk management and auditing systems. It performs these tasks in close cooperation with the external auditors. The Audit Committee also prepares the agreement with the external auditors and takes suitable steps to monitor the auditors’ independence and the services they deliver. On this basis, it gives the Supervisory Board a recommendation as to which auditors it should propose to the Annual Shareholders’ Meeting. The members of this committee are Dr. Bernd W. Voss, Dr. Peter-Alexander Wacker and Anton Eisenacker. The chairman of the Audit Committee is Dr. Bernd W. Voss, who was unable to perform this task in 2014 due to personal reasons. Therefore, the Supervisory Board elected Franz-Josef Kortüm, an independent Supervisory Board member, to stand in for Dr. Voss on the Audit Committee and to act as that committee’s chairman. With a degree in management and due to his many years of professional experience, most recently as CEO of Webasto SE, Mr. Kortüm has special expertise and experience in the fields of accounting and auditing.
The Group also has a statutory Mediation Committee, the tasks of which are stipulated by German law. Chaired by Dr. Peter-Alexander Wacker, this committee also consists of Anton Eisenacker, Franz-Josef Kortüm and Manfred Köppl. The committee is chaired by Dr. Peter-Alexander Wacker.
Key Corporate Management Practices
Compliance as a Key Managerial Duty of the Executive Board
At WACKER, managerial and monitoring duties include ensuring that the company complies with legal requirements and that employees observe internal company regulations. The Group’s compliance policy is regularly reviewed and adapted.
WACKER’s compliance organization is responsible in this regard. The company has appointed and trained compliance officers in Germany, Norway, the USA, China, Japan, India, South Korea, Brazil, Mexico, Singapore, Dubai (UAE) and Taiwan, who hold regular training courses to inform employees of key legal provisions and internal regulations. They also serve as contacts whenever employees have questions or need advice about compliance. One focus of compliance management in 2014 continued to be in improving communication with the company’s international sites within the compliance organization and on training the local employees at those sites.
Responsible Care® and the Global Compact – Integral Parts of Corporate Management
Two voluntary global initiatives form the basis for sustainable corporate management: the chemical industry’s Responsible Care® initiative and the UN’s Global Compact. WACKER has been an active member of the Responsible Care® initiative since 1991. Program participants undertake to continually improve health, safety and environmental performance on a voluntary basis – even in the absence of statutory requirements. WACKER is equally committed to the UN’s Global Compact initiative. We observe the Global Compact’s ten principles, which address social and environmental standards, anticorruption and the protection of human rights. We also expect our suppliers to respect the principles of the Global Compact, and we evaluate them on this point in our risk assessments.
In 2011, WACKER created an internal Corporate Sustainability department that implements its voluntary commitments under Responsible Care® and the Global Compact, and coordinates WACKER’s sustainability activities worldwide.
Companies can be commercially successful only if they have society’s trust. Consequently, WACKER takes its social responsibilities seriously toward communities near its sites and wherever people are in need around the world. We regularly promote and support a wide variety of charitable projects, organizations and initiatives. Our commitment covers activities relating to science, education, sport and various charities.
Further Information on Corporate Governance at WACKER
Compliance with the Provisions of Section 15 of the German Securities Trading Act (WpHG)
We comply with the statutory provisions of Section 15 of the German Securities Trading Act. For a number of years, we have maintained an “ad-hoc publicity” coordination unit in which representatives of various specialist areas examine issues for their ad-hoc relevance. In this way, we guarantee that potential insider information is handled in accordance with the law. Employees required to access insider information as part of their job are listed in an insider directory.
Share Dealings by the Executive and Supervisory Boards
Section 15a of the German Securities Trading Act stipulates that members of the Executive and Supervisory Boards and certain of their dependents are obliged to notify the German Federal Financial Supervisory Authority (BaFin) and the company of any purchase or sale of WACKER shares or any other rights related to such shares if an amount of € 5,000 is exceeded within one calendar year.
In 2014, members of the Supervisory Board and their dependents subject to reporting requirements gave no notification of sales or acquisitions of WACKER shares.
Blue Elephant Holding GmbH, which is majority-owned by Dr. Peter-Alexander Wacker (Supervisory Board Chairman of Wacker Chemie AG), holds over 10 percent of the shares in Wacker Chemie AG.
Dealing Responsibly with Opportunities and Risks
Dealing responsibly with risks is an important part of good corporate governance. WACKER has in place an opportunity and risk management system to regularly identify and monitor material risks and opportunities. Its objective is to recognize risks at an early stage and minimize them through systematic risk management. The Executive Board informs the Supervisory Board regularly about existing risks and their development. The Audit Committee regularly reviews the accounting process and the effectiveness of the internal control, risk management and auditing systems. It is also involved in auditing the financial statements. The opportunity and risk management system is continuously being enhanced and adapted to meet changing conditions.
Accounting and Auditing
As stipulated by the Corporate Governance Code, we have agreed with the auditors, KPMG AG Wirtschaftsprüfungsgesellschaft, Munich, that the Chairman of the Supervisory Board shall be informed without delay during the audit about any grounds for disqualification and/or bias. In addition, the auditors shall immediately report all significant discoveries and events which concern the Supervisory Board’s duties. If, in the course of their audit activities, the auditors establish facts that reveal errors in the Declaration of Conformity pursuant to Section 161 of the German Stock Corporation Act, the Supervisory Board shall be notified accordingly and/or a note included in the audit report.
WACKER has concluded a financial liability insurance policy that also covers the activities of the Executive and Supervisory Board members (i.e. D&O insurance). This insurance provides for the statutory deductible for the members of the Executive Board.
Targets for Supervisory Board Composition
WACKER has always placed importance on having highly qualified individuals sit on its Supervisory Board. Pursuant to Item 5.4.1 of the German Corporate Governance Code in the version of May 26, 2010, WACKER’s Supervisory Board resolved at its meeting of December 9, 2010 to set itself the following specific targets in respect of its composition, which also include the qualifications, international experience and gender of Supervisory Board members:
- An appropriate number of Supervisory Board members – at least one – should have international experience.
- The Supervisory Board’s Rules of Procedure already deal extensively with members’ conflicts of interest. In addition, the Supervisory Board actively strives to prevent such conflicts of interest and will also take this goal into account when making recommendations to the Annual Shareholders’ Meeting.
- In the interests of even greater diversity, the Supervisory Board will strive to increase the number of female Supervisory Board members to at least two over the next two terms. In its bid to meet this goal, the Supervisory Board plans to appoint at least one female employee representative and at least one female shareholder representative.
The Supervisory Board’s Rules of Procedure already define an age limit.
As the Supervisory Board believes that an adequate number of its members are independent, it does not comply with the additional recommendation made in Section 5.4.1 of the German Corporate Governance Code in the version dated June 24, 2014 to name a specific target number of independent members. The reasons for this decision are given in the Declaration of Conformity of December 11, 2014.
The Supervisory Board took account of its adopted composition-related targets in its recommendations to shareholders as part of the scheduled Supervisory Board elections held in 2013. During those elections, two female Supervisory Board members – one each from the shareholder representative and employee representative sides – were nominated and elected, and the same applies to the election of an appropriate number of members with international experience. The Supervisory Board’s composition-related targets were thus met in full.