Declaration on Corporate Management

Corporate governance is an important part of a company’s success and of responsible corporate management and supervision. Wacker Chemie AG attaches great importance to the rules of proper corporate governance. In this Declaration, the Executive Board provides details – also for the Supervisory Board – on corporate governance in accordance with Principle 22 of the German Corporate Governance Code, as amended December 16, 2019 (the “Code”), and Sections 289f and 315d of the German Commercial Code (HGB).

Declaration of Conformity 2020 Issued by the Executive Board and Supervisory Board of Wacker Chemie AG

In 2020, the Executive and Supervisory Boards dealt in detail with the company’s corporate governance and the recommendations of the Code. The Executive and Supervisory Boards resolved in December 2020 to issue the following Declaration of Conformity. It is available to the general public on the company’s website and can be accessed – together with other declarations of conformity that are no longer applicable – for a period of at least five years.

1. General Declaration Pursuant to Section 161 of the German Stock Corporation Act (AktG)

In December 2019, the Executive Board and the Supervisory Board of Wacker Chemie AG issued their most recent 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 (the “Code”) as amended on February 7, 2017, with the exceptions listed below under 2 a), e), f), g), i), j), k) and l), and it will comply with the recommendations of the Code as amended on December 16, 2019, with the exceptions listed below under 2 a), b), c), d), e), f), g) and h).

2. Exceptions

a) Defining Concrete Objectives Regarding the Number of Independent Members of the Supervisory Board (Section 5.4.1, paragraph 2; Recommendation C.1)

The shareholder representatives on the Supervisory Board of Wacker Chemie AG believe that the Supervisory Board, as it is composed at present, includes an adequate number of independent members when the ownership structure is considered. The Supervisory Board will continue to ensure that, in future elections, it recommends to the shareholders what it considers to be an appropriate number of independent candidates. Additionally defining a concrete objective in this regard would not only limit the choice of suitable candidates for the Supervisory Board, but also restrict the shareholders’ right to elect those Supervisory Board members whom they consider to be the most suitable. For these reasons, we do not comply with this recommendation.

b) No Simultaneous Appointment of an Executive Board Member as Supervisory Board Chair of a Non-Group Listed Company (Recommendation C.5)

Our Executive Board member Dr. Tobias Ohler is chairman of the Supervisory Board of Siltronic AG. Prior to its deconsolidation in March 2017, Siltronic AG was a subsidiary and a business division of Wacker Chemie AG, and Dr. Ohler had specific responsibility for it on the Executive Board. The workload resulting from that function was at least as high then as the workload associated with his activity as Supervisory Board chair is now. We therefore have no reason to assume that Dr. Ohler cannot dedicate sufficient time to either of his two offices. Accordingly, we do not consider it reasonable for Dr. Ohler to step down as chair of the Supervisory Board of Siltronic AG prematurely, given that it is appropriate for the largest shareholder of Siltronic AG to appoint the chair of its Supervisory Board.

c) More Than Half of Shareholder Representatives to Be Independent from the Company and Its Executive Board (Recommendation C.7)

Pursuant to the new definition of “independent” in the Code, persons who have been members of the same supervisory board for more than 12 years are no longer considered independent from the company and its executive board. This “excessively long” membership criterion covers more than half of the shareholder representatives on the Supervisory Board of Wacker Chemie AG – with one shareholder representative covered solely by attribution because, even though she herself only recently joined the Supervisory Board, she is a close family member of another person who has been on the Supervisory Board for more than 12 years. We consider the principle behind this recommendation to be flawed. In our opinion, long membership of a supervisory board does not necessarily cause a substantial – and not merely temporary – conflict of interest, which should indeed remain a key criterion for assessing independence, particularly not when such a long membership is merely “attributed” by way of a family relationship. We hold the opposite to be true, namely that it is highly desirable for our Supervisory Board members to stay with us for a long time. When they do, they gain the indispensable in-depth understanding of the company and its business, competitive environment, opportunities and risks, which in turn fosters advisory and control activities aimed at sustainable, long-term objectives. We also do not consider it reasonable to now ask some of the shareholder representatives to step down simply to comply with this Code recommendation. For this reason, we depart from this recommendation. None of the other criteria indicating a lack of independence from the company and its executive board apply to any of the shareholder representatives.

d) Independence of the Supervisory Board Chair, the Audit Committee Chair and the Executive Committee Chair (Recommendations C.10 and D.4)

The chair of the Supervisory Board, who is also the chair of the Executive Committee, has been on the Supervisory Board for over 12 years and therefore, according to the Code recommendations, is not independent from the company and its Executive Board. The same is true for the chair of the Audit Committee, who has likewise been a Supervisory Board member for more than 12 years. To that extent, we declare a departure from Recommendations C.10 and D.4. We see no indication of impending substantial – and not merely temporary – conflicts of interest for either of the two Supervisory Board members and, accordingly, we consider the assumption of a lack of independence due to long membership of the Supervisory Board to be harmless in these two specific cases. In fact, the Board and the two committees benefit from the many years of experience contributed by their chairs. After weighing up all factors, we believe that changing the chairs is unwarranted. For the sake of completeness, we state that the chair of the Audit Committee complies with all the other requirements provided for by statute and recommended by the Code. He is also independent of the controlling shareholder.

e) CVs of Supervisory Board Members (Section 5.4.1, paragraph 5; Recommendation C.14)

According to this recommendation, proposals for candidates for the supervisory board should be accompanied by a curriculum vitae, while the résumés of existing members should be published on the company’s website. We fulfill the legal requirements regarding the proposals for candidates. Furthermore, the annual report includes the essential information on our Supervisory Board members. We believe that such information is sufficient. We do not see what additional merit a curriculum vitae could have – in particular when taking into account the rights of privacy of our Supervisory Board members.

f) Time Limitation of Applications for Court-Ordered Appointment of a Supervisory Board Member (Section 5.4.3; Recommendation C.15)

Pursuant to this recommendation, applications for the appointment of a supervisory board member by the court should be limited in time up to the next annual shareholders’ meeting. We do not comply with this recommendation. Proposals for candidates to be appointed by the court are in any case agreed with the majority shareholder beforehand. In view of the majority situation, the election of this same candidate at the next Annual Shareholders’ Meeting would merely constitute a confirmation of his/her appointment, which we consider redundant.

g) Formation of a Nomination Committee within the Supervisory Board (Section 5.3.3; Recommendation D.5)

A supervisory board is required to establish a nomination committee that is composed exclusively of shareholder representatives and whose task it is to name suitable candidates to the supervisory board for its proposals 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.

h) Specification of Performance Criteria Governing Variable Remuneration for the Forthcoming Fiscal Year (Recommendation G.7)

We believe it makes sense to determine variable compensation for the forthcoming fiscal year at the same Supervisory Board meeting that decides on variable compensation for the past fiscal year. That meeting is the March meeting of the Supervisory Board. It is also the meeting at which the performance criteria governing variable compensation are specified. This procedure has proven its worth in the past, and we believe it is not efficient to deal with the decision on performance criteria and the decision on target and maximum variable compensation at two separate meetings. For this reason, we do not comply with the recommendation that the performance criteria for all variable compensation components should be specified for the forthcoming fiscal year.

i) D&O Insurance Deductible for Supervisory Board Members (Section 3.8, paragraph 2)

German law and a company’s articles of association set clear limits with regard to a 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 has direct responsibility for managing the corporation. The 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 the implementation of corporate strategy or operations. The same applies to measures taken to avert damage or loss to the company. Furthermore, since our Supervisory Board members receive only a relatively small amount for reimbursement of expenses compared with our Executive Board compensation, we do not consider it reasonable to stipulate a deductible for members of our Supervisory Board.

j) Forward-Looking Assessment Basis for Variable Compensation of Executive Board Members (Section 4.2.3, paragraph 2)

In the past, we did not comply with this recommendation, which is now no longer contained in the Code. Under the current compensation system, the variable components of the Executive Board members’ compensation are calculated on a three-year (= multi-year) assessment basis. Furthermore, 15 percent of the variable compensation is paid in the form of shares that are subject to a holding period of two years. Even if the assessment basis is not essentially forward-looking, we consider our compensation system to be balanced and suitable for setting the right incentives for a sustainable corporate policy. Our compensation system ensures that our Executive Board members participate in positive and negative developments at the company over a longer period – by means of the share component on the one hand and the average assessment over a three-year period on the other.

k) Limit to Supervisory Board Members’ Term of Office (Section 5.4.1, paragraph 2)

Pursuant to this former recommendation, the supervisory board was supposed to determine a general limit to its members’ term of office. A generally applicable term limit of this sort is not required in our opinion, as we consider an individual analysis of our Supervisory Board members to be more effective. This applies in particular since the Code in any case provides for self-assessment of the supervisory board and its members, as part of its regular examination of efficiency. Furthermore, a general term limit would restrict the majority shareholder’s freedom to choose representatives on the Supervisory Board at its own discretion in fulfillment of its corporate responsibility.

l) Announcement of Proposed Candidates for the Chair of the Supervisory Board to Shareholders (Section 5.4.3)

Pursuant to this former recommendation, shareholders were to be informed of the candidates for the supervisory board chair even though, as a rule, the supervisory board members were yet to be chosen. 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 that is also not provided for under German law. For these reasons, we did not comply with this recommendation.

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 – shareholders, shareholder representatives, analysts and the media – as well as the interested general public promptly and without preference. We regularly publish important company dates 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 conferences and roadshows, and actively maintain contact with institutional investors. In the reporting year, nearly all these events were held online. We also regularly organize Capital Market Days and held two online in 2020. Important presentations are freely available on the internet, where interested parties can also access press releases and ad-hoc disclosures in both German and English, the online version of our Annual Report, every interim report, the Sustainability Report, Wacker Chemie AG’s Articles of Association and the Supervisory Board’s Rules of Procedure. Further information is provided via our online customer magazine, media library and Podcast Center.

Annual Shareholders’ Meeting

The Annual Shareholders’ Meeting is an efficient forum for providing shareholders with comprehensive information on the company’s situation. Even before the Annual Shareholders’ Meeting begins, shareholders receive key 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, the combined management report and the non-financial 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 online. All these communication activities are part and parcel of 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 by the German Stock Corporation Act. It consists of the Executive Board, which manages the company, and the Supervisory Board, which monitors and advises the Executive Board in its management of the company. These two bodies are kept strictly separate from one another with regard both to their membership and to their spheres of competence. The Executive and Supervisory Boards collaborate closely, however, to ensure WACKER’s sustainable long-term success. Their common goal is to ensure the company’s sustainable growth and to enhance its value. The Executive Board reports to the Supervisory Board and the latter’s Audit Committee regularly, promptly and comprehensively on all relevant issues of strategy, planning, business development, risk exposure, risk management and compliance. Also in the periods between meetings, the Supervisory Board chairman maintains contact with the Executive Board, in particular with the president and CEO, consulting with that body on the above-mentioned issues. The Executive Board explains any deviations from approved business plans and objectives to the Supervisory Board and gives reasons for these deviations.

The Rules of Procedure for Wacker Chemie AG’s Executive Board stipulate that certain measures require the consent of the Supervisory Board before their implementation. These include approving the annual budget (including financial and investment planning), acquiring and disposing of shares in companies, establishing new production/business units or suspending existing ones, and concluding sizable long-term loans.

Executive Board

The Executive Board bears direct responsibility for managing the company and represents Wacker Chemie AG in all dealings with third parties. Its actions and decisions are driven by the company’s interest and the aim of achieving a lasting increase in the company’s value. With this in mind, the Executive Board determines the WACKER Group’s strategic direction. 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 an appropriate system of risk management and control.

While the members of the Executive Board bear joint responsibility for managing the company, each individual member is directly responsible for managing his/her respective Board department. All Executive Board decisions require a simple majority. In the case of a tie of votes, the president and CEO has the deciding vote. However, he/she does not have the right to veto Executive Board resolutions.

Appointments to the Executive Board

The Executive Board currently consists of four members. Together with the Executive Board, the Supervisory Board ensures that a system of sustainable, long-term succession planning for the Executive Board is in place in order to guarantee competent leadership at all times and enable appropriate responses to sudden absences or departures. The Supervisory Board’s Executive Committee, which is tasked with preparing the Supervisory Board’s personnel decisions, regularly discusses the topic of long-term succession planning for the Executive Board and, in doing so, takes account of the company’s executive planning in dialogue with the Executive Board members. The Committee also complies with the provisions of the German Stock Corporation Act and this Code, and with those aspects of the diversity strategy adopted by the Supervisory Board that are relevant to the Executive Board’s composition. The Executive Committee prepares a requirements profile, taking account of the criteria mentioned, entrepreneurial needs and specific qualifications. On this basis, the Executive Committee discusses and names a number of potential successors for each Executive Board position. The Executive Board participates in identifying and appointing such candidates. To enable appropriate succession planning, the Supervisory Board and Executive Board also have recourse to the results of assessments made of the company’s other management levels so that they can identify suitable persons on an ongoing basis. When a position is to be filled, the Executive Committee prepares a shortlist of available candidates as soon as possible, holds talks with them, and then submits a well-grounded proposal and a recommendation to the Supervisory Board for adoption. The key aspect here is always the company’s interest, with the circumstances of each specific case also being factored in. Depending on the situation, personnel consultants participate in this work, helping to validate the individual views of Supervisory Board members and to achieve a complete picture of the pool of eligible candidates.

Diversity Strategy for the Executive Board

The Executive Board of Wacker Chemie AG must be composed in such a way that all its members have the knowledge, skills and experience required to manage a chemical company active in international markets. We are convinced that only a diverse group of individuals can do justice to this task. The decisive factor is achieving a balanced composition that reflects a cross-section of the duties involved.

Proceeding on this basis, the Supervisory Board takes the following main aspects of diversity into account when proposing new members for the Executive Board:

• High priority is accorded to different educational backgrounds and professional careers. The executive board of a chemical company must have members with scientific expertise and/or experience in the chemical industry. At the same time, knowledge and experience of accounting, financial management, corporate decision-making, planning and strategy are required, as is a profound understanding of the workings and requirements of the capital markets.
• What is more, in a global company like Wacker Chemie AG, different cultural backgrounds – or at least pronounced international and intercultural experience – are essential.
• A balanced age structure across the entire Executive Board is also important. The Supervisory Board’s Rules of Procedure provide for a standard retirement age of 67, which must be taken into account when Executive Board members are appointed.
• We are convinced that mixed teams achieve better results – and that also means having women on the Executive Board. In this context, a whole range of measures has already been put in place across the company to raise the proportion of women in management positions.

The goal of the diversity strategy described above is to give the Executive Board an optimal composition to ensure the company is managed in both a successful and sustainable manner. A diverse composition guarantees that the Executive Board can assess all relevant issues with the appropriate expertise, view all material aspects from different standpoints and set the right priorities. The standard retirement age for Executive Board members ensures that the company can profit from the longstanding professional and life experience of individual members. At the same time, it enables younger managers to advance to the Executive Board and contribute new ideas and impetus.

The diversity strategy for the Executive Board is taken into account when Executive Board positions are filled.

The Executive Board’s current composition corresponds to the diversity strategy adopted by the Supervisory Board.

Supervisory Board

The Supervisory Board appoints, monitors 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.

Composition of the Supervisory Board

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. Shareholder representatives are elected by the Annual Shareholders’ Meeting and employee representatives by the employees, as stipulated by the German Co-Determination Act. As a rule, the term of office is roughly five years.

Committees Increase the Supervisory Board’s Efficiency

The Supervisory Board has constituted three professionally qualified committees to help it perform its duties optimally. The committees regularly report on their work 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 and CEO. In addition, it negotiates contracts with Executive Board members and develops a compensation system that the full Supervisory Board then uses as a basis for determining the compensation for Executive Board members. In 2020, the Executive Committee comprised the Chairman of the Supervisory Board, Dr. Peter-Alexander Wacker, and Supervisory Board members Manfred Köppl and Franz-Josef Kortüm.

The Audit Committee does the groundwork for the Supervisory Board’s decision on the adoption of the annual financial statements and the approval of the consolidated financial statements. To this end, the committee is obligated to pre-audit the annual financial statements, the consolidated financial statements, the combined management report and the proposal on appropriation of profits. It is also tasked with pre-auditing the separate non-financial report (pursuant to Sections 289b and 315b of the German Commercial Code). In addition, it discusses and examines the half-yearly financial reports and the quarterly figures. The Audit Committee gives the Supervisory Board a well-grounded recommendation as to which auditors it should propose to the Annual Shareholders’ Meeting. In accordance with the resolution of the Annual Shareholders’ Meeting, it awards the auditing contract to the auditors and determines the focus of auditing. It then monitors the audit, in particular the auditors’ independence and the services they deliver. Above and beyond that, the Audit Committee reviews the accounting process and the effectiveness of the internal control, risk management and auditing systems, as well as compliance-related issues. The members of this committee in 2020 were Franz-Josef Kortüm (as chairman), Dr. Peter-Alexander Wacker and Manfred Köppl.

In addition, there is the Mediation Committee (mandated by Section 27 (3) of the German Co-Determination Act (MitbestG)). Its duties are to prepare proposals for the Supervisory Board concerning the appointment, and revocation of appointments, of Executive Board members in cases where they fail to achieve the required two-thirds majority of the votes of the Supervisory Board members in the first ballot. In 2020, the committee comprised Dr. Peter-Alexander Wacker (as chairman), Manfred Köppl, Franz-Josef Kortüm and Eduard-Harald Klein.

Targets for the Composition and Skills Profile of the Supervisory Board of Wacker Chemie AG

WACKER has always attached importance to having highly qualified individuals sit on its Supervisory Board. In line with Recommendation c.1 of the Code, WACKER’s Supervisory Board adopted the following objectives for its composition (including a skills profile for the entire Supervisory Board), taking into account the recommendations of the Code:

The Supervisory Board shall be composed in such a way that all its members have the knowledge, skills and professional experience required to properly perform their duties.

(I) Targets for Composition

1. International Expertise

In view of the international nature of the company’s business activities, the Supervisory Board must have an appropriate number of members – but at least one – with international experience.

2. Prevention and Handling of Conflicts of Interest

The Supervisory Board’s Rules of Procedure already contain extensive provisions on members’ conflicts of interest. In addition, the Supervisory Board actively strives to prevent conflicts of interest that are substantial and not merely of a temporary nature, and takes this goal into consideration when making recommendations to the Annual Shareholders’ Meeting.

3. Age Limit for Supervisory Board Members

The Supervisory Board’s Rules of Procedure provide for a standard retirement age of 80 for its members.

4. Diversity

As regards the diversity of its composition, the Supervisory Board strives to take account of different professional experience, professional expertise and educational backgrounds and, in particular, to ensure appropriate representation of women and men. In accordance with Section 96 (2) of the German Stock Corporation Act (AktG), at least 30 percent of the members of a supervisory board must be women and at least 30 percent men.

(II) Skills Profile

When filling the positions on our Supervisory Board, we strive to achieve a mix of young and old, industry insiders and those from other sectors, and different professional backgrounds. We expect all members to be willing and able to make the necessary commitment to their Supervisory Board duties. Beyond that, the Supervisory Board as a whole must have the skills, knowledge and experience that are important to the WACKER Group’s business activities and that enable it to properly oversee the company and provide professional advice to the Executive Board. This includes the following:

• The Supervisory Board should have sufficient members with the necessary expertise in corporate management, accounting, financial controlling, risk management, corporate governance and compliance.
• The Supervisory Board in its entirety must be familiar with the chemical industry (Section 100 (5) AktG).
• At least one member of the Supervisory Board must have expertise in the field of accounting or auditing (Section 100 (5) AktG).

The Supervisory Board will take into account the objectives it has set as well as its skills profile when making its nomination proposals to the Annual Shareholders’ Meeting. The current composition of the Supervisory Board complies with the objectives set and with the skills profile.

Diversity Strategy for the Supervisory Board

The diversity that the Supervisory Board wishes to see in its own composition is reflected in the goals and the skills profile it adopted.

Accordingly, the diversity criteria of international and intercultural experience, a balanced age structure, and different professional experience, expertise and educational backgrounds are considered when positions on the Supervisory Board are filled. In addition, the Supervisory Board’s Rules of Procedure provide for a standard retirement age of 80 for its members. In accordance with the statutory requirements, the Supervisory Board must also comprise at least 30 percent female members and 30 percent male members, and must have an equal number of shareholder and employee representatives.

The goal of the diversity strategy is to ensure that the Supervisory Board as a whole is able to effectively monitor and advise the Executive Board. A Supervisory Board whose members are diverse in line with above-mentioned criteria is better placed to assess topics from different standpoints, and to scrutinize the Executive Board’s management of the company, its decisions and its strategy in a constructive and comprehensive manner. The retirement-age provision enables members to contribute their longstanding professional and life experience for the good of the company. At the same time, it ensures that younger individuals can advance to the Supervisory Board at regular intervals.

The Supervisory Board gives due consideration to this diversity strategy when presenting its recommendations for candidates to the Annual Shareholders’ Meeting – most recently at the Meeting held in 2018. What is more, during its regular examinations of efficiency, the Supervisory Board conducts a self-assessment that also includes aspects such as its own composition and diversity.

The Supervisory Board fulfills the targets as regards its composition and complies with both the skills profile and the diversity strategy. Following Konrad Kammergruber’s departure from the Supervisory Board and the subsequent appointment of Dr. Birgit Schwab to replace him in October 2020, there are currently six women on the Supervisory Board, two as shareholder representatives and four as employee representatives; this surpasses statutory requirements.

Independence

Given the shareholder structure, the group of shareholder representatives considers that it has an adequate number of independent members on the Supervisory Board. The Code, as amended December 16, 2019, contains specific criteria for judging whether supervisory board members are independent. Accordingly, members who have been on a supervisory board for more than 12 years are no longer considered to be independent from the company and its management board. Two shareholder representatives – Prof. Andreas Biagosch and Dr. Gregor Biebl – meet this criterion of independence from the company and its Executive Board.

We also consider Ms. Ann-Sophie Wacker to be independent from the company and its Executive Board. According to the definition given in the Code, it is presumed that she is not independent because a close family member of hers (Dr. Peter-Alexander Wacker) has been on the Supervisory Board for more than 12 years. However, after due consideration of all the circumstances, the Supervisory Board’s shareholder representatives believe that this situation does not mean Ms. Wacker lacks independence. It cannot be assumed that she will be influenced by her father in exercising her duties as a member of the Supervisory Board – especially given that Dr. Wacker’s own lack of independence from the company and its Executive Board stems solely from his long membership of the Supervisory Board and he otherwise has no particular personal or business relations with the company or the Executive Board that could constitute a conflict of interest that is substantial and not merely of a temporary nature. Especially in regard to the criterion of length of service, we deem the general assumption that a lack of independence could rub off on a close relative to be misguided.

The following four shareholder representatives are independent from the controlling shareholder: Franz-Josef Kortüm, Prof. Ernst-Ludwig Winnacker, Prof. Biagosch and Dr. Gregor Biebl.

Dr. Susanne Weiss, Dr. Peter-Alexander Wacker and Matthias Biebl belong to the controlling shareholder’s management team and, in accordance with Recommendation C.9 of the Code, are irrefutably not independent. The same applies to Ms. Ann-Sophie Wacker, whose lack of independence under the Code results solely from the fact that she is Dr. Wacker’s daughter. In our opinion, the Code goes too far in this respect because it does not take into account the special circumstances of family businesses. In our specific case, the controlling shareholder is a family holding company whose sole purpose consists in holding the shares in Wacker Chemie AG. Thus, above and beyond holding the equity investment in Wacker Chemie AG, the controlling shareholder does not engage in any other entrepreneurial activities and thus has no further interest linking it to the company. In the case at hand, there is thus no danger of a typical conflict of interest arising under the laws governing corporate groups.

For the reasons given in the Declaration of Conformity of December 2020, we do not comply with Recommendation C.1 of the Code to name a specific target number of independent members.

Self-Assessment of the Supervisory Board

Once a year, the Supervisory Board assesses how efficiently it has performed its duties, in both its plenary sessions and in its committees. At its December 2020 meeting, the Supervisory Board assessed the efficiency of its activities by means of a general discussion of the topic. The discussion and assessment were based on defined criteria, such as the frequency and length of (committee) meetings, preparation and conduct of the Supervisory Board and committee meetings, the quality and promptness of the information provided to the Supervisory Board members, the composition of the Supervisory Board and its committees, the handling of conflicts of interest and other conflicts within the body, and the Supervisory Board’s general ability to monitor the company’s Executive Board and advise it appropriately. The self-assessment confirmed the professional and constructive nature of the collaboration within the Supervisory Board and its committees as well as with the Executive Board. The Supervisory Board members came to the conclusion that, in particular, the material provided in advance of the meetings was comprehensive, of high quality and very easy to understand, thus making for comprehensive and efficient meeting preparation and for candid discussions during the meetings. The Supervisory Board members also found the separate preparatory meetings of employee and shareholder representatives in advance of the meetings of the full Supervisory Board to be particularly expedient and conducive to candid discussions. They did not identify any need to make fundamental changes. Any suggestions made in the course of the year will be addressed and implemented accordingly.

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 its legal requirements and that employees also observe company regulations. WACKER’s compliance management system is regularly reviewed and adapted.

These tasks are the responsibility of the Compliance Management department. For a detailed description of compliance management, please refer to the Risk Management Report. The company has appointed and trained compliance officers in Germany, the USA, China, Japan, India, South Korea, Brazil, Mexico, Norway, Singapore, Russia and the United Arab Emirates. These officers hold regular training courses to inform employees of key legal provisions and internal regulations. They are also the contact persons for employees who have questions or need advice, information or training in compliance matters.

Principles of Corporate Ethics

• Beside our vision and goals, our ethical principles form the third pillar of WACKER’s corporate policy guidelines. These principles – embedded in five separate codes – govern how the company’s goals should be achieved. These codes are supplemented by a set of company regulations and directives.
• Code of Conduct: contains our principles for dealing with business partners and third parties. It also governs the handling of information, confidentiality and data security, the prevention of money laundering, and the separation of personal and business interests.
• Code of Innovation: specifies our principles concerning research and development, partnerships, patents and innovation management.
• Code of Teamwork & Leadership: outlines our understanding of teamwork and leadership. Key aspects here include trust and esteem, motivation and success, recognition and development, teamwork and equal opportunity, work-life balance and the positive example set by managerial employees.
• Code of Safety: defines our safety culture and sets safety guidelines for workplaces, facilities, products and transportation.
• Code of Sustainability: lists the sustainability principles that are central to R&D, Procurement, Logistics, production and products as well as our commitment to society.

Responsible Care^® and the UN Global Compact – Integral Parts of Corporate Management

Two voluntary global initiatives form the basis for sustainable corporate management at WACKER: the chemical industry’s Responsible Care^® initiative and the UN 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. The same is true of the UN Global Compact initiative. We observe the UN Global Compact’s ten principles, which address social and environmental standards, combat corruption and protect human rights. We also expect our suppliers to respect the principles of the UN Global Compact and we evaluate them on this point in our risk assessments.

In 2011, WACKER created an internal Corporate Sustainability department, which implements the company’s voluntary commitments under Responsible Care^® and the UN Global Compact, and coordinates its sustainability activities worldwide.

Engagement with Society

Companies can be commercially successful only if they have society’s trust. Consequently, WACKER is serious about its social responsibilities 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, sports and various charities.

Further Information on Corporate Governance at WACKER

Compliance with the Provisions of Art. 17 of MAR

We comply with the provisions of Art. 17 of MAR (EU regulation No. 596/2014 – Market Abuse Regulation). For a number of years, we have maintained a unit for ad-hoc publicity coordination, where 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 who have access to insider information as part of their jobs are included in insider lists.

Share Dealings by the Executive and Supervisory Boards

Persons discharging managerial responsibilities – at Wacker Chemie AG, these are members of the Executive and Supervisory Boards – as well as persons closely associated with them are obligated under Art. 19 of MAR to notify the German Financial Supervisory Authority (BaFin) and the company within three business days of transactions conducted on their own account relating to the shares or debt instruments of that company or to derivatives or other financial instruments linked to them. A reporting obligation exists, however, only where the total volume of the transactions made by the person concerned reaches or exceeds €20,000 within a calendar year.

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 how they are developing. The Audit Committee regularly reviews the accounting process and the effectiveness of the internal control, risk management and auditing systems, while the full Supervisory Board is also regularly informed about the compliance management system and the Group’s internal control systems. Both bodies are 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 Code, we have agreed with the auditors, KPMG AG Wirtschaftsprüfungsgesellschaft, Munich, that the Chairman of the Supervisory Board is to be informed without delay during the audit about any grounds for disqualification and/or bias. In addition, the auditors must immediately report all material findings and events that concern the Supervisory Board’s duties. If, in the course of their audit activities, the auditors establish facts that reveal errors in the Executive and Supervisory Boards’ Declaration of Conformity to the Code pursuant to Section 161 of the German Stock Corporation Act (AktG), the Supervisory Board is notified accordingly and/or a note included in the audit report.

D&O Insurance

WACKER has concluded a financial liability insurance policy that also covers the activities of its Executive and Supervisory Board members (D&O insurance). This insurance provides for a statutory deductible for the members of the Executive Board.

Supporting the Participation of Women in Executive Positions

Effective May 1, 2015, the German Act on Equal Participation of Women and Men in Executive Positions in the Private and the Public Sector calls for supervisory boards – such as that of Wacker Chemie AG – to be composed of at least 30 percent female members and at least 30 percent male members. A supervisory board as a whole must comply with this gender ratio unless the representatives of either the shareholders or the employees object thereto pursuant to Section 96 (2) sentence 3 of the German Stock Corporation Act (AktG). Both the shareholder and employee representatives on Wacker Chemie AG’s Supervisory Board objected to enforcement of the statutory gender ratio for the Supervisory Board as a whole. As a result, there must be at least two women and two men represented on both the shareholder representative and employee representative sides of the Supervisory Board.

Wacker Chemie AG exceeds the statutory requirements by having two women as shareholder representatives and four as employee representatives.

The act also requires Wacker Chemie AG to specify target values for the proportion of women on the Executive Board and in the two management levels below the Executive Board. The target values for the Executive Board are set by the Supervisory Board and those for the two management levels below the Executive Board are set by the Executive Board.

The target value for the Executive Board (zero; deadline for implementation: June 30, 2022) has been achieved. In December 2020, the Supervisory Board appointed Ms. Angela Wörl to the Executive Board with effect from the end of the Annual Shareholders’ Meeting of 2021. As a result, the Executive Board will comprise three men and one woman as of that date. The company is also well on the way to meeting its targets for the two management levels below the Executive Board – first management level: 21 percent; second management level: 20 percent – by the deadline of December 31, 2022. Based on the current situation, we expect to reach these two targets before the deadline.