LEKKERLAND CORPORATE GOVERNANCE CODEX

4 Board of Management

4.1 Functions and responsibilities

4.1.1 The Board of Management is responsible for independently managing the enterprise in the interests of the enterprise, i.e. taking into account the requirements of the shareholders, the employees and the other groups associated with the enterprise (stakeholders), with the aims of creating sustainable value added.

4.1.2 The Board of Management develops the strategic direction of the enterprise, coordinates it with the Supervisory Board and ensures that the strategy is implemented.

4.1.3 The Board of Management is responsible for compliance with the statutory regulations and the internal corporate guidelines, and for ensuring that they are observed by the Group companies (compliance).

4.1.4 The Board of Management makes adequate provision for appropriate risk management and risk controlling in the enterprise.

4.1.5 When making appointments to management positions in the enterprise, the Board of Management should take diversity into consideration and in particular aim to take appropriate consideration of women.

4.2 Composition and compensation

4.2.1 The Board of Management should be comprised of several persons and should have a chairperson or spokesperson. Rules of procedure should govern the work of the Board of Management, in particular the portfolio responsibilities of individual members of the Board of Management, matters reserved for the entire Board of Management, and the rules of procedure should determine the majority necessary for resolutions passed by the Board of Management (unanimity or majority decision on a resolution).

4.2.2 The plenary Supervisory Board determines the overall compensation for the individual members of the Board of Management. If there is a committee that deals with the contracts for the Board of Management, this committee should submit proposals to the plenary Supervisory Board. The plenary Supervisory Board will then pass a resolution on the system of compensation for the Board of Management and will regularly review it.

The total compensation package for the individual members of the Board of Management is defined by the plenary Supervisory Board on the basis of performance assessment and taking into account any Group emoluments. The criteria for the reasonableness of the compensation are formed in particular by the functions of the members of the Board of Management, their personal performance, the business situation, the success and the future prospects of the enterprise taking into account the comparative economic environment and the remuneration structure otherwise applicable within the Company. During the course of its deliberations, the Supervisory Board should take into account the overall relationship of the compensation paid to the Board of Management and the compensation of the senior management and the workforce as a whole, as well as the time scale for development of remuneration. For purposes of comparison, the Supervisory Board should also define how the senior management should be distinguished from the relevant workforce.

If the Supervisory Board calls on an external compensation expert to evaluate the appropriateness of the compensation, the Supervisory Board needs to ensure that any external expert is completely independent from the Board of Management and / or the enterprise.

4.2.3 The total compensation for the members of the Board of Management comprises the fixed and variable monetary elements, the pension awards, other awards, especially in the event of termination of the activity, fringe benefits of all kinds and benefits paid by third parties which were promised or granted in the course of a business year.

The compensation structure should be oriented towards sustainable development of the enterprise. The monetary compensation elements shall comprise fixed and variable elements. The Supervisory Board must make sure that the variable compensation elements are fundamentally based on an assessment over a period of several years. Positive and negative developments should be taken into account when determining variable compensation components. All compensation elements must be appropriate individually and in total and in particularly must not encourage executives to take unreasonable risks. The total compensation and the variable compensation elements should have maximum limits fixed for amounts. The variable compensation elements should be related to demanding, relevant comparison parameters. Changing such performance targets or the comparison parameters retroactively shall be excluded

In the case of pension commitments, the Supervisory Board shall in each case define the targeted level of benefits – also according to the length of service on the Board of Management – and shall also take account of the derived annual and long-term expenditure for the Company.

When concluding contracts for members of the Board of Management, care must be taken to ensure that payments made to a member of the Board of Management on premature termination of his/her contract, including fringe benefits, do not exceed the value of two years’ compensation (severance payment cap) and do not compensate more than the remaining term of the employment contract. If the employment contract is terminated for good cause that is the responsibility of the member of the Board of Management, no payments shall be made to the member of the Board of Management. The severance payment cap shall be calculated on the basis of the total compensation for the past full business year and if appropriate also the expected total compensation for the current business year.

Payments promised in the event of premature termination of the contract of a member of the Management Board due to a change of control shall not exceed 150% of the severance payment cap.

On a single occasion, the Chairman of the Supervisory Board shall outline to the Shareholders’ Meeting the salient points of the compensation system and any changes to the system.

4.2.4 The Shareholders’ Meeting can pass a resolution to the effect that the total compensation of each one of the members of the Board of Management is to be disclosed by name, divided into fixed and variable compensation components. The same applies to promises relating to benefits that are granted to a member of the Board of Management in the case of premature or statutory termination of the function of a member of the Board of Management or that have been changed during the course of the business year. Disclosure may be dispensed with in individual cases if the Shareholders’ Meeting has passed a resolution to this effect with a three-quarters majority.

4.2.5 Disclosure shall be made as appropriate in the notes to the consolidated financial statements or in the Group management report. The principles of the compensation system for the members of the Board of Management shall be disclosed in a compensation report as part of the Group management report. The disclosure shall be made in a fully transparent form.

In this case, the compensation report shall also include information on the nature of the fringe benefits provided by the company.

Furthermore, the following disclosure should be provided for each member of the Board of Management as appropriate in the compensation report for the business years commencing after 31 December 2013:

– the awards granted for the year under review including fringe benefits, supplemented in the case of variable compensation elements by the attainable maximum and minimum compensation,

– the payments received for the year under review from fixed compensation, short-term variable compensation and long-term variable compensation with differentiation in accordance with the individual reference years,

– in the case of pension benefits and other post-employment benefits the cost of benefits in or for the year under review.

4.3 Conflicts of interest

4.3.1 The members of the Board of Management have a duty to act in the interests of the enterprise. They must not act in their own personal interests when they take decisions, they are subject to a comprehensive prohibition on competition during the course of their activity for the enterprise and they must not take advantage of business opportunities which are available to the company for their own purposes.

4.3.2 Members of the Board of Management and employees may not, in connection with their work, demand or accept from third parties unjustified advantages for themselves or for other persons, nor grant third parties unlawful advantages.

4.3.3 Each member of the Board of Management will immediately disclose any conflicts of interest to the Supervisory Board of the Company and will inform the other members of the Board of Management about such conflicts of interest. All transactions between the enterprise on the one hand and the members of the Board of Management and related parties or enterprises affiliated with them personally on the other hand must be concluded at standard arm’s length commercial conditions. In the case of transactions with members of the Board of Management, the Supervisory Board represents the company. Material transactions with a member of the Board of Management, related persons or enterprises should only be carried out with the consent of the Supervisory Board

4.3.4 Members of Board of Management should only take up a secondary occupation, in particular memberships of other supervisory boards outside the enterprise, with the consent of the Supervisory Board of the Company.

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