Wacker Chemie AG attaches great importance to the rules of proper corporate governance. It is an important part of good and responsible corporate management and a significant foundation of a company’s success. In this Declaration, the Executive Board reports – also for the Supervisory Board – on corporate management in accordance with Item 3.10 of the German Corporate Governance Code (Code) and Section 289 a of the German Commercial Code (HGB).
Declaration of Conformity and Corporate Governance Reporting
The Executive and Supervisory Boards dealt intensively with the company’s corporate governance in the 2009 fiscal year. A prominent part in these deliberations was played by the alterations to the Code implemented by the Government Commission on the German Corporate Governance Code as of June 18, 2009. The Executive Board and the Supervisory Board have resolved to issue the following annual Declaration of Conformity with Section 161 of the German Stock Corporation Act (AktG). The Declaration of Conformity was made permanently available to the general public on the company’s website.
Wording of the 2009 Declaration of Conformity
General Declaration Pursuant to Section 161 of the German Stock Corporation Act
In December 2008, the Executive Board and the Supervisory Board of Wacker Chemie AG issued their last declaration of conformity pursuant to Section 161 of the German Stock Corporation Act (AktG). Since that time, Wacker Chemie AG has complied with the recommendations of the German Corporate Governance Code (Code) in the version dated June 6, 2008, with the following exceptions, and will comply with the recommendations of the Code in the version dated June 18, 2009, except as follows:
Exceptions
a) D&O Insurance – Deductible
The law and the 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. The Supervisory Board is instrumental in defining the main features of the corporate strategy. However, beyond this contribution, the Supervisory Board’s abilities are limited in terms of influencing the implementation of corporate strategy or operative business. 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 when compared to the Executive Board members’ compensation, we do not deem the agreement of a deductible reasonable for members of the Supervisory Board.
In the future, D&O insurance taken out for the Group will include the deductible mandatory by law for members of the Executive Board. For practical reasons, the change will be effective as of July 1, 2010.
b) Corporate Governance Report
In 2008, the Executive Board and the Supervisory Board submitted a report on the company’s corporate governance in accordance with the provisions of Section 161 of the German Stock Corporation Act. Since the recommendation of the Code regulated a report on corporate governance which partially varied in terms of content, the Executive Board and the Supervisory Board decided to issue a declaration solely in accordance with the legal provisions and to avoid duplications/repetitions, since these do not offer any additional value.
The Executive Board and the Supervisory Board have decided that, in the future, they will provide a report on corporate governance as an integral part of the declaration on corporate management which is required by Section 289 (lit. a) of the German Commercial Code (HGB). This report shall contain comprehensive information on the company’s corporate governance in accordance with the legal provisions. The Executive Board and the Supervisory Board do not recognize any additional value in the duplication/repetition of statements on corporate governance beyond the legal provisions.
c) Review and Resolution Concerning the Structure of the Compensation System by the Full Supervisory Board
Since the last declaration of conformity was made, the Executive Committee has regularly discussed and decided on the structure of the compensation system, including the contractual components, because the Supervisory Board considered this procedure efficient. A report detailing the activities of the Supervisory Board committees, including the activities of the Executive Committee, was given regularly in the full meeting of the Supervisory Board. In the future, the compensation system for the Executive Board will be resolved and reviewed by the full Supervisory Board in accordance with the recommendation. This procedure shall take into account that the full Supervisory Board will be charged by mandatory law with setting the Executive Board members’ compensation.
d) Severance Pay Cap
We will comply with this recommendation of the Code on new appointments to the Executive Board as well as the re-appointment of Executive Board members.
e) Information Regarding the Main Features of the Executive Board’s Compensation System Structure at the Annual Shareholders’ Meeting
Our annual report provides extensive information, including facts about the Executive Board’s compensation system, for our shareholders. Any additional reporting by the Chairman of the Supervisory Board to the Annual Shareholders’ Meeting would not provide any further information. Therefore, providing such additional information to the Annual Shareholders’ Meeting by the Chairman of the Supervisory Board is considered unnecessary. Our shareholders’ right of access shall of course not be affected thereby.
f) Formation of a Nomination Committee within the Supervisory Board
The Supervisory Board is to establish a Nomination Committee which is exclusively composed of shareholder representatives and whose task it is to make recommendations to the Supervisory Board with regard to suitable candidates for proposal to the Annual Shareholders’ Meeting.
We do not comply with this recommendation because, in view of our shareholder structure, it is our opinion that the formation of such committee is not 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 contribute to an increase in efficiency.
g) Announcement of Proposed Candidates for the Chair of the Supervisory Board to the Shareholders
According to this recommendation, shareholders shall 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 group of not yet appointed Supervisory Board members. Furthermore, this would, above all, 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. The Declaration of Conformity is available online at: www.wacker.com/corporate-governance
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 with equality of access. We publicize important dates for the company regularly in a financial calendar which is published in our Annual Report, in the interim reports, and on our website. The 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. We organize a “Capital Market Day” once a year. Important presentations can be viewed freely on the internet. 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 there. Further information is provided by the online customer magazine, the media library, and the Podcast Center.www.wacker.com
Annual Shareholders’ Meeting
The Annual Shareholders’ Meeting provides an efficient and extensive venue for informing shareholders about the company’s situation. Even before the Annual Shareholders’ Meeting begins, shareholders receive important information about the last 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. All of the documents are posted on the 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 to exercise their rights either in person or by proxy. Proxies are available to exercise shareholders’ voting rights as instructed. These proxies can also be contacted during the Annual Shareholders’ Meeting.
Working Methods of the Executive Board and the Supervisory Board
Wacker Chemie AG has a dual management system as prescribed in the German Stock Corporation Act (AktG). 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 areas of expertise.
Executive Board
The Executive Board currently consists of four members. More information on Executive Board
The Executive Board holds 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. In addition to this, each individual member of the Executive Board is fully responsible for managing their own units. All Executive Board decisions generally require a simple majority. In the case of a tie of votes, the President & CEO has the deciding vote. However, he does not have the right to veto Executive Board resolutions.
Close Cooperation Between the Executive and Supervisory Boards
The Executive Board and the Supervisory Board cooperate closely with one another in the interests of the company. Their common goal is the sustainable development of the company and its value. The Executive Board reports to the Supervisory Board regularly, promptly, and comprehensively about all issues of planning, business development, the risk situation and risk management which are relevant for the company. It explains to the Supervisory Board any deviations from the approved plans and objectives shown by the course of business, and specifies the reasons for them.
Certain transactions defined in Wacker Chemie AG’s constitution require the Supervisory Board’s approval prior to their conclusion. These include, among others, 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 sizeable long-term loans.
Supervisory Board
The Supervisory Board is comprised of 16 members. In compliance with the German Co-Determination Act (MitbestG), it has an equal number of representatives from the employees’ and the employer’s side, respectively. The Supervisory Board appoints the members of the Executive Board and oversees and advises it on the management of the company. More information on Supervisory Board
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.
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 the 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 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 management report, the Group management report, and the proposal for the distribution of profits. In particular, the Committee monitors the accounting processes 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 establish and monitor the auditing company’s independence. On this basis, it gives the Supervisory Board a recommendation as to whom it should propose as auditor to the Annual Shareholders’ Meeting. The members of this committee are Dr. Bernd W. Voss, Dr. Peter-Alexander Wacker and Anton Eisenacker. The committee is chaired by Dr. Bernd W. Voss, who has special knowledge and experience in the fields of accounting and auditing.
The Group also has a statutory Mediation Committee, of which the tasks are stipulated by law. This committee consists of Dr. Peter-Alexander Wacker, Anton Eisenacker, Franz-Josef Kortüm and Uwe Fritz. The committee is chaired by Dr. Peter-Alexander Wacker.
Compliance with the Provisions of Section 15 of the German Securities Trading Act (WpHG)
We comply with the statutory provisions in Section 15 of the German Securities Trading Act (WpHG). 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 whose functions necessitate access to insider information are listed in an insider directory.
Share Dealings by the Executive Board and the Supervisory Board
Section 15a of the German Securities Trading Act (WpHG) also stipulates that members of the Executive and Supervisory Boards and certain 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 further rights related to such shares if the amount of €5,000 is exceeded within one calendar year.
In 2009, members of the Executive and Supervisory Boards and their dependents subject to reporting requirements gave notification of four purchasing transactions involving between 60 to 100 WACKER shares. The volumes of the individual transactions ranged from €5,040 to €8,535.
Blue Elephant Holding GmbH, which is majority-owned by Dr. Peter-Alexander Wacker (Supervisory Board Chairman of Wacker Chemie AG), holds over 10% of the voting shares in Wacker Chemie AG.
Dealing Responsibly with Opportunities and Risks
Dealing responsibly with risks is an important part of good corporate governance. WACKER uses systematic opportunity and risk management for the regular identification and monitoring of the material risks and opportunities. Its objective is to recognize risks at an early stage and minimize them with consistent risk management. The Executive Board informs the Supervisory Board regularly about existing risks and their development. The Audit Committee concerns itself regularly with 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 changed general conditions. More information on Risk Management
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. Should the auditors, during the course of their audit activities, establish facts which reveal incorrectness in the Declaration of Conformity with the German Corporate Governance Code submitted by the Executive and Supervisory Boards in accordance with Section 161 of the German Stock Corporation Act (AktG), the Supervisory Board shall be notified accordingly and/or a note included in the audit report.
D&O Insurance
WACKER has concluded a pecuniary damage liability insurance policy which additionally covers the activities of the Executive Board and Supervisory Board members (i.e. D&O insurance). As from July 1, 2010, this insurance will provide for the statutory deductible for the members of the Executive Board.