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Corporate Governance
Corporate governance at GILDEMEISTER has long meant managing and controlling the enterprise responsibly and transparently. It is a core component of our corporate management and all corporate areas. For years GILDEMEISTER has been complying with the recommendations of the German Corporate Governance Code and, until the entering into force of the new version on 5 August 2009, complied with all the recommendations. GILDEMEISTER conforms to the Code with one exception. The Executive Board and Supervisory Board issued the following declaration of compliance in December 2009. Our shareholders can view it on our website at any time:
“1. Since the last declaration of conformity of December 2008, GILDEMEISTER Aktiengesellschaft complied with the Recommendations of the Government Commission’s German Corporate Governance Code in the version of 6 June 2008, published in the electronic German Federal Gazette on 8 August 2008, until the entering into force of the latest version on 5 August 2009.
2. GILDEMEISTER Aktiengesellschaft complied with the recommendations of the government commission’s German Corporate Governance Code in the version of 18 June 2009 since its publication in the electronic German Federal Gazette on 5 August 2009 and will continue to comply with it in the future with the following exception:
_ Since November 2009 an acting member of the Supervisory Board due to judicial appointment is the president of a foreign manufacturer of machines for metalcutting. The special expertise of this Supervisory Board member is of particular value for the enterprise and, in particular, for the work of the Supervisory Board. In addition, this Supervisory Board member represents the largest single shareholder in the enterprise known to us.
_ Appropriate measures are taken by the enterprise to counter any conflicts of interest.”
The Executive Board and the Supervisory Board acknowledge excellent corporate governance as an integral component of corporate management, which, in keeping with the interests of the shareholders, concentrates on a sustainable increase in the value of the enterprise. Our internal guidelines are aligned with the rules and principles of responsible corporate management and control.
Remuneration of the Supervisory Board and Executive Board
Pursuant to clause 5.4.7 of the German Corporate Governance Code, we report on the remuneration of the Supervisory Board individually and broken down into components.
Remuneration of the Supervisory Board of GILDEMEISTER Aktiengesellschaft
The remuneration of the Supervisory Board is determined by the Annual General Meeting of shareholders and is regulated under Section 12 of the articles of association of GILDEMEISTER Aktiengesellschaft. The remuneration includes performance-related and nonperformance related components. The remuneration components not dependent upon performance include the fixed remuneration that each member of the Supervisory Board receives and remuneration for committee work. The performance-related component comprises a long term incentive (LTI), which supports sustainable value-based management. Following a resolution passed at the 107th Annual General Meeting of 2009, the short-term performance-related remuneration component (STI) has been cancelled.
In the financial year 2009, the fixed remuneration for each individual member of the Supervisory Board was € 24,000; the chairman received 2.5-times that amount (€ 60,000) and the deputy chairman 1.5-times that amount (€ 36,000). The fixed remuneration therefore totalled € 335,605 (previous year: € 168,000).
Remuneration for committee work amounted to a total of € 221,211 (previous year: € 109,877) and took into account the work carried out by the Finance and Auditing Committee, the Personnel, Nominations and Remuneration Committee, and the Technology and Development Committee. There was no remuneration for work carried out by the Conciliation and Nominations Committee, which is a sub-committee of the Personnel, Nominations and Remuneration Committee. The individual committee members each received € 12,000. The chairperson of a committee also receives an additional fixed remuneration of a further € 12,000 and the deputy chairperson € 6,000.
The performance-related remuneration component LTI is based on index-based target values. Earnings per share (EPS) are used for the performance-related key figure. The EPS is an established key performance indicator, which gives rise to a performance reference taking into account the respective share capital. It is calculated by dividing the annual profit, less the profit share of minority interests, by the weighted average number of shares. The LTI is variable, which means it is not secured remuneration. Again, the Supervisory Board chairman receives 2.5-times, and the deputy chairman 1.5-times, the remuneration of the other members of the Supervisory Board. The LTI is capped at the level of the respective fixed remuneration.
The LTI takes into account not only the reporting year but also the two preceding years. The key performance indicator is the mean average of the EPS values in the corresponding financial years. The LTI is only paid if the average EPS for the relevant three years amounts to at least € 0.15. The LTI calculated performance-based remuneration for the Supervisory Board totalled € 335,605 (previous year: € 168,000).
In 2009 the Supervisory Board remuneration was made up as follows:
| Fixed
remuneration in € | Committee remuneration Finance & Auditing (F&A) in € | Committee remuneration Personnel Nomination & Remuneration (PNR) in € | Committee remuneration Technology & Development (T&D) in € | LTI in € | Total in € | |
|---|---|---|---|---|---|---|
| Hans Henning Offen Chairman SB, Chairman PNR | 60,000 | 12,000 | 24,000 | 0 | 60,000 | 156,000 |
| Prof. Dr.-Ing. Uwe Loos Chairman T&D | 24,000 | 0 | 0 | 24,000 | 24,000 | 72,000 |
| Günther Berger Chairman F&A | 24,000 | 24,000 | 0 | 0 | 24,000 | 72,000 |
| Dr.-Ing. Jürgen Harnisch Deputy Chairman T&D | 24,000 | 0 | 0 | 18,000 | 24,000 | 66,000 |
| Dr. jur. Klaus Kessler Member SB until 31 Oct. 2009 Member F&A until 31 Oct. 2009 | 19,989 | 9,995 | 0 | 0 | 19,989 | 49,973 |
| Dr.-Eng. Masahiko Mori Member SB as of 6 Nov. 2009 Member F&A as of 24 Nov. 2009 | 3,616 | 1,216 | 0 | 0 | 3,616 | 8,448 |
| Prof. Dr.-Ing. Walter Kunerth | 24,000 | 0 | 12,000 | 0 | 24,000 | 60,000 |
| Norbert Zweng | 24,000 | 12,000 | 0 | 0 | 24,000 | 60,000 |
| Gerhard Dirr Deputy Chairman SB, Deputy Chairman PNR | 36,000 | 12,000 | 18,000 | 0 | 36,000 | 102,000 |
| Wulf Bantelmann | 24,000 | 0 | 0 | 12,000 | 24,000 | 60,000 |
| Matthias Pfuhl | 24,000 | 0 | 0 | 12,000 | 24,000 | 60,000 |
| Harry Domnik Deputy Chairman F&A | 24,000 | 18,000 | 12,000 | 0 | 24,000 | 78,000 |
| Günther Johann Schachner | 24,000 | 0 | 0 | 0 | 24,000 | 48,000 |
| Total | 335,605 | 89,211 | 66,000 | 66,000 | 335,605 | 892,421 |
In the financial year 2009 the total remuneration of the Supervisory Board amounted to € 892,421 (previous year: € 613,877).
Pursuant to Section 15a of the German Securities Act (WpHG), the members of the Supervisory Board, or other persons subject to reporting requirements, must disclose any acquisition or disposal of shares or related rights of purchase or disposal, such as options or rights that are directly dependent on the company’s stock exchange price. We did not receive any director’s dealings notifications in the year under report.
One company, which is monitored by a member of the Supervisory Board, holds a shareholding of 5% of total shares. The remaining members of the Supervisory Board together hold less than 1% of the total number of shares; no member of the Executive Board owns any GILDEMEISTER shares.
Insurance for Supervisory and Executive Board members of the GILDEMEISTER group
GILDEMEISTER has D&O insurance (manager liability insurance) and legal costs insurance for all members of the Supervisory and Executive Boards, as well as for managing directors and executive staff. The D&O insurance provides for an appropriate deductible within the context of the Act on the Appropriateness of Management Board Remuneration (VorstAG).
Remuneration of the Executive Board of GILDEMEISTER Aktiengesellschaft
Through the changes in legislation (VorstAG), and thus the associated amendment of the rules of procedure of the Supervisory Board, as of September 2009, the full Supervisory Board is advised on and decides the remuneration of the Executive Board. Even before this amendment entered into force, the chairman of the Supervisory Board had informed the Supervisory Board in detail of consultations held with the Personnel, Nominations and Remuneration Committee; he will also report on this to the Annual General Meeting.
Members of the Executive Board receive direct and indirect remuneration components, whereby the indirect components primarily consist of pension plan expenses. The direct remuneration of the Executive Board members of GILDEMEISTER Aktiengesellschaft contains fixed and variable components. The variable components comprise a short-term incentive (STI) and a long-term incentive (LTI). Both variable components are fixed in such a way that they represent a clear incentive for the Executive Board members to achieve the targets. In this way they support a sustainable and value-based management. The criteria for the appropriateness of the remuneration include in particular the tasks rendered by each Executive Board member, his personal performance and the performance of the Executive Board, as well as the company’s economic situation, success and future prospects within the scope of its comparative environment.
Direct remuneration of the members of the Executive Board amounted to € 2,988 K (previous year: € 7,441 K). Of this amount, € 1,673 K were attributed to fixed remuneration (previous year: € 1,328 K), € 400 K to the STI (previous year: € 6,000 K), € 0 K to the LTI, as the EBIT margin fixed for the tranche was not reached in allocation year 2009. € 800 K was acknowledged as a performance remuneration for 2009. Payments in kind accounted for € 115 K (previous year: € 113 K). In 2009 the direct remuneration of the Executive Board breaks down as follows:
| Fixed € K | STI € K | LTI € K | Remu- neration € K | Payment in kind € K | Total € K | |
|---|---|---|---|---|---|---|
| Dr. Rüdiger Kapitza, Chairman | 800 | 400 | 0 | 200 | 37 | 1,437 |
| Michael Welt | 345 | 0 | 0 | 200 | 23 | 568 |
| Günter Bachmann | 252 | 0 | 0 | 200 | 30 | 482 |
| Dr. Thorsten Schmidt | 276 | 0 | 0 | 200 | 25 | 501 |
| Total | 1,673 | 400 | 0 | 800 | 115 | 2,988 |
The fixed remuneration is the contractually defined basic remuneration, which is paid in equal monthly amounts.
The STI is based on index-based target values. In the reporting year the earnings after taxes (EAT) provided the reference value used. The scale of the target values is re-defined annually. In addition, this is capped at € 1,000 K, respectively, for 2009. The cap is also fixed anew each year.
As a remuneration component with long-term incentive effect, the LTI combines the achievement of fixed targets in relation to the EBIT of the company with the performance of the GILDEMEISTER share. A cap has been set at 2-times the annual fixed salary of each Executive Board member per tranche for the year in which the award takes place. Should the EBIT of the allocation year not reach a minimum EBIT figure that is set anew upon every new awarding of a tranche, the LTI payment is not applicable.
The LTI involves a performance units plan, which is not associated with any dividend payments or voting rights. In addition, the units may not be traded nor sold to third parties. The performance units awarded at the beginning of each year have a term of three years. The first performance units awarded following this model for the year 2007 will thus be allocated on 31 December 2009. No payment was made from the allocation, as the fixed EBIT margins were not reached. The performance units awarded for the financial year 2008 will be allocated on 31 December 2010 and, following the Annual General Meeting of Shareholders in 2011, will be paid out taking into account the EBIT target achieved in 2010 and the respective share price. The performance units awarded for the financial year 2009 will be allocated on 31 December 2011 and, following the Annual General Meeting of Shareholders in 2012, will be paid out taking into account the EBIT target achieved in 2011 and the respective share price. The following table shows the number of performance units awarded in 2007, 2008 and 2009, and the fair value of the LTI at the time of granting for each member of the board.
On the basis of the new legal provisions (VorstAG), the Supervisory Board passed a resolution to prolong the term of the tranches from three to four years. In order not to stop the incentive effect of the LTI, an additional tranche was awarded in 2009 to each Executive Board member. As a result of the new four-year term, the payment of this tranche will take place in 2013, and thus will facilitate the seamless continuation from the tranches awarded until now.
Both the STI and the LTI are variable, which means neither is a secure remuneration. The performance remuneration arises from projects that were concluded particularly successfully, and which is not covered by the other remuneration components.
Remuneration in kind arises mainly from amounts for the use of company cars, which will be assessed in accordance with applicable tax regulations, and individual insurance contributions. Every member of the Executive Board is contractually entitled to remuneration in kind, which may vary depending on the personal situation and is subject to tax payable by each Executive Board member.
Pension commitments for members of the Executive Board are primarily implemented through a contribution-based pension plan. A defined-benefit pension commitment exists for the chairman of the Executive Board.
| € K | |
|---|---|
| Dr. Rüdiger Kapitza, Chairman | 108 |
| Michael Welt | 143 |
| Günter Bachmann | 60 |
| Dr. Thorsten Schmidt | 50 |
| Total | 361 |
In accordance with the International Accounting Standards (IAS), provision expenses of € 108 K arose for the defined-benefit contribution commitment in 2009 (previous year: € 114 K) as well as one-off past service costs pursuant to IAS of € 204 K for an adjustment of the pension commitments. The payments restricted to the contribution-based pension plan amount in total to € 253 K (previous year: € 253 K). The total provisions expenses without the adjustment amount totalled € 361 K (previous year: € 367 K). Advances and loans to Executive Board members or Supervisory Board members were not granted, nor were any declarations of liability in favour of any of the aforementioned members entered into. There was no share option programme or similar securities based incentive system.
The companies of the GILDEMEISTER group did not pay any remuneration to officers for services personally rendered, in particular consulting and introduction services. Former members of the Executive Board and their surviving dependants received € 604 K (previous year: € 597 K). The amount of the pension commitments (cash value of future pension commitments or defined benefit obligations) for former members of the Executive Board and their surviving dependants amounted to € 7,063 K (previous year: € 6,646 K).
Responsible management of opportunities and risks
The Executive Board is regularly informed of risks and their development with the aid of the opportunities and risk management system. For GILDEMEISTER the responsible handling of risks by the company is part of good corporate governance. GILDEMEISTER identifies and monitors significant opportunities and risks regularly with the aid of the systematic opportunity and risk management system. The early risk warning system, introduced by the Executive Board according to section 91, paragraph 2 AktG, is checked by the annual auditors, is continuously enhanced by GILDEMEISTER and adapted to changing conditions. More information on the opportunities and risk management system can be found in the chapter “Opportunities and risk report”.
Cooperation between the Executive Board and Supervisory Board
To achieve the joint goal of increasing enterprise value sustainably, the Executive Board and the Supervisory Board work closely together. The Executive Board informs the Supervisory Board regularly, timely and comprehensively on current development, business strategy, corporate planning, the risk situation, risk management and compliance. The Executive Board passes the quarterly and six months’ reports to the Supervisory Board, so that the latter can discuss them before publication. The Articles of Association provide for any transactions of fundamental significance to be subject to the agreement of the Supervisory Board.
Avoidance of conflicts of interest
The Executive Board and Supervisory Board are bound by the enterprise’s best interests. Potential conflicts of interest of members of the Executive or Supervisory Board are disclosed to the Supervisory Board immediately and have to be approved by the latter. In making decisions and in connection with their functions, the members of the Executive Board and of the Supervisory Board may not pursue any personal interests or business opportunities that the company is entitled to, nor may they grant any unjustified benefits to any other person. The Supervisory Board reports any conflicts of interest and the handling of these to the Annual General Meeting. In the reporting year there were neither conflicts of interest with respect to the members of the Executive Board nor with respect to members of the Supervisory Board.
To topSafeguarding the interests of the shareholders
Corporate communication from GILDEMEISTER has the aim of ensuring both the best possible transparency and timely communication to all target groups. Shareholders and potential investors can obtain information in the Internet at any time on the current situation of the company. On our website, www.gildemeister.com, we publish, both in German and English, press releases, business and quarterly reports as well as a detailed financial calendar, which is regularly updated. Through candour and transparency, the Executive Board and Supervisory Board aim to strengthen the confidence of our shareholders and investors, business partners and employees, as well as of the general public, in our company.
Shareholders may either exercise their voting rights themselves at the Annual General Meeting, through an authorised person of their choice or through a proxy bound by their directives. For shareholders who are not able to attend the Annual General Meeting of Shareholders personally, we offer them the possibility of following the events of the Annual General Meeting in real time via Internet.
Reporting and auditing of annual accounts
Pursuant to the regulations of the Corporate Governance Code, we have agreed with the annual auditor, KMPG AG Wirtschaftsprüfungsgesellschaft, Berlin, for the year under report that they shall inform the chairman of the Supervisory Board promptly of any grounds of exclusion or bias that may arise during the audit. It has been further agreed that the auditor shall report promptly on all findings and events arising during the audit that are of significance for the duties of the Supervisory Board. Moreover, the auditor will inform the Supervisory Board of, or include in the auditing report, any facts found during the audit process that are inconsistent with the Declaration of Compliance with the German Corporate Governance Code given by the Executive Board and Supervisory Board.
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