LEKKERLAND CORPORATE GOVERNANCE CODEX

5 Supervisory Board

5.1 Functions and responsibilities

5.1.1 The Supervisory Board has the function of regularly advising and monitoring the Board of Management in the management of the enterprise. It should be integrated in any decisions of fundamental importance for the enterprise.

5.1.2 The Supervisory Board appoints and dismisses the members of the Board of Management. The Supervisory Board should take diversity into account when making decisions relating to the composition of the Board of Management and in particular aim to take appropriate consideration of women. It should cooperate with the Board of Management to ensure long-term planning for succession. The Supervisory Board can delegate the preparations for the appointment of members of the Board of Management, as well as for the handling of the conditions of the employment contract including compensation, to committees.

When initially making appointments, the maximum possible period of appointment of five years should not be the rule. A reappointment before the end of the year prior to the end of the appointment period if the current appointment is simultaneously being discontinued should only be made under special circumstances. An age limit for members of the Board of Management should be defined.

5.1.3 The Supervisory Board should draw up rules of procedure.

5.2 Functions and powers of the Chairman of the Supervisory Board

One of the members of the Supervisory Board is appointed by the board as the Chairman of the Supervisory Board. He / she coordinates the work of the Supervisory Board, chairs its meetings and represents the Supervisory Board on any issues in the public domain.

The Chairman of the Supervisory Board should not hold the chair of the Audit Committee.

The Chairman of the Supervisory Board should maintain regular contact with the Board of Management between the meetings, in particular with the Chairman or Spokesperson of the Board of Management and should discuss with him / her issues relating to the strategy, the planning, the business development, the risk position, the risk management and the compliance of the Company. The Chairman of the Supervisory Board must be informed immediately by the Chairman or Spokesperson of the Board of Management about any important events, which are of material significance for assessing the position and development of the enterprise and for the management of the enterprise. The Chairman of the Supervisory Board must then inform the Supervisory Board and should convene an extraordinary meeting of the Supervisory Board as appropriate.

5.3 Formation of committees

5.3.1 The Supervisory Board should form committees made up of appropriately qualified members, depending on the specific circumstances of the enterprise and the number of members. The relevant committee chairpersons must submit regular reports to the Supervisory Board detailing the work of the committees.

5.3.2 The Supervisory Board should form an Audit Committee – if no other committee has been tasked with this issue – which addresses in particular issues relating to the monitoring of the accounting process, the effectiveness of the internal controlling system, the risk management system and the internal audit system, the audit of the annual financial statements, here in particular the necessary independence of the auditor, the additional services provided by the auditor, the engagement of the auditor by granting an audit mandate, the definition of the focuses of the audit and the agreement of the level of the audit fee, as well as compliance. The Chairman of the Audit Committee should have special knowledge and experience in the application of accounting principles and internal controlling procedures. The Chairman should be independent and should not be a former member of the Board of Management whose appointment ended less than two years previously.

5.3.3 The Supervisory Board should form a nomination committee composed exclusively of shareholder representatives which makes recommendations of suitable candidates for the election of members of the Supervisory Board to the Shareholders’ Meeting.

5.4 Composition and compensation

5.4.1 The Supervisory Board should be composed in such a way as to ensure that its members as a group possess the knowledge, skills and expertise required to carry out its functions in a fit and proper manner.

The Supervisory Board should define concrete objectives for its composition which, while considering the specific situation of the enterprise, take account of the international activities of the enterprise, potential conflicts of interest, the number of independent members of the Supervisory Board pursuant to section 5.4.2., an age limit to be specified for the members of the Supervisory Board, and diversity.

The Supervisory Board should disclose the personal and the business relationships of each candidate to the enterprise, the governance bodies of the Company and to a shareholder with a significant shareholding in the Company.

Before electing new members of the Supervisory Board, the shareholders should ensure from each individual candidate that he / she can devote the amount of time that is expected for carrying out the duties associated with the office.

5.4.2 The Supervisory Board should include an adequate number of independent members according to its assessment. A member of the Supervisory Board pursuant to this recommendation should in particular not be regarded as independent if the person has a personal or business relationship with the Company, its governance bodies or a controlling shareholder, or if he/she is associated with an affiliated company which might constitute a reason for a material and not only temporary conflict of interest. Not more than two former members of the Board of Management should be members of the Supervisory Board. Members of the Supervisory Board should not exercise any governance function or carry out advisory functions for important competitors of the enterprise.

5.4.3 Proposed candidates for the Chair of the Supervisory Board should be announced to the shareholders.

5.4.4 Members of the Board of Management may not become members of the Supervisory Board of the Company within two years after the end of their appointment unless they are appointed on the basis of a proposal by shareholders holding more than 25 % of the voting rights in the Company. In the latter case, appointment to the chairmanship of the Supervisory Board shall be an exception to be justified at the Shareholders’ Meeting.

5.4.5 Every member of the Supervisory Board must ensure that he/she has sufficient time available to exercise his/her mandate. Members of the management board of a company listed on the stock exchange should not accept more than a total of three Supervisory Board mandates in listed companies outside the Group or in supervisory bodies of companies with similar requirements.

The members of the Supervisory Board shall independently take responsibility for ensuring they undertake the necessary basic and advanced training measures necessary to carry out their functions. They should receive appropriate support from the Company for such training.

5.4.6 The compensation for the members of the Supervisory Board is defined by resolution of the Shareholders’ Meeting or in the Articles of Association. It should take into account the positions of chairman and deputy chairman on the Supervisory Board and the chair and membership of committees.

The members of the Supervisory Board shall receive compensation which is commensurate with their functions and the position of the Company. If the members of the Supervisory Board are awarded performance-related compensation, this should be geared to the long-term development of the enterprise.

The Shareholders’ Meeting can pass a resolution such that the compensation paid to each of the members of the Supervisory Board shall be reported individually in the notes to the consolidated financial statements or in the Group management report and shall be shown subdivided into its constituent components. It can also pass a resolution such that compensation payments paid by the enterprise to the members of the Supervisory Board or advantages extended for the individual provision of services, in particular advisory or mediation services, shall be listed separately on an individual basis.

5.4.7 If a member of the Supervisory Board has only attended half or less than half of the meetings of the Supervisory Board and the committees of which he / she is a member in a business year, this shall be noted in the report of the Supervisory Board. Participation is also deemed to be taking part in telephone or video conferences; however, this should not be the rule.

5.5 Conflicts of interest

Each member of the Supervisory Board has a duty to act in the interests of the enterprise. When members of the Supervisory Board make decisions, they must not pursue personal interests or make use of business opportunities available to the enterprise for the benefit of themselves.

5.5.1 Each member of the Supervisory Board must disclose to the Supervisory Board any conflicts of interest, especially such conflicts of interest that may arise as a result of holding a consultancy or a function as an executive officer with customers, suppliers, lenders or other third parties.

5.5.2 The Supervisory Board will provide information in its report to the Shareholders’ Meeting about any conflicts of interest that arise and will indicate how they are dealt with. If a member of the Supervisory Board is subject to substantial conflicts of interest which are not simply of a temporary nature, it will be necessary for that member to resign from his / her office as a member of the Supervisory Board.

5.5.3 Consultancy contracts and other contracts for work and services to be held by a member of the Supervisory Board with the Company require the consent of the Supervisory Board.

5.5.4 Consultancy contracts and other contracts for work and services to be held by a member of the Supervisory Board with the Company require the consent of the Supervisory Board.

5.6 Efficiency audit

The Supervisory Board should review the efficiency of its activities on a regular basis.

Company

Company more