Corporate Governance Statement

Corporate Governance Statement pursuant to Section 289a of the German Commercial Code (HGB).

Declaration of the Executive Board and the Supervisory Board of Schaltbau Holding AG pertaining to the recommendations of the “Government Commission on the German Corporate Governance Code” pursuant to Section 161 of the German Stock Corporation Act (AktG) (“Declaration of compliance”).

The Executive Board and the Supervisory Board of Schaltbau Holding AG issued the last Declaration of Compliance with the German Corporate Governance Code pursuant to section 161 of the German Stock Corporation Act (AktG) on 11 December 2015. The following declaration relates to the version of the Code dated 5 May 2015 and published in the electronic Federal Gazette on 12 June 2015.

The Executive Board and the Supervisory Board of Schaltbau Holding AG hereby declare that the recommendations of the “Government Commission on the German Corporate Governance Code” have been and are being observed, with the following exceptions:

Re 3.8:

The D&O insurance policy taken out by Schaltbau Holding AG does not provide for a deductible for the members of the Supervisory Board. Schaltbau Holding AG is of the opinion that the motivation and responsibility with which the members of the Supervisory Board perform their tasks cannot be improved by the introduction of a deductible and has thus decided to refrain therefrom.

Re 4.2.2:

The Personnel Committee set up by the Supervisory Board deals with questions concerning the total compensation of Executive Board members. Specific proposals for the compensation of Executive Board members are prepared either by the Personnel Committee or the full Supervisory Board in each individual case and not exclusively dealt with by the Personnel Committee, to enable maximum flexibility in the handling of questions of compensation for Executive Board members in the course of Supervisory Board work. For this reason, please refer to the explanations for sections 5.2 and 5.3 of the Code.

Re 4.2.3:

There is no plan to introduce share option models as variable compensation components for Executive Board members. Long-term incentive components for the Executive Board should continue to be primarily achieved by means of variable compensation components that relate to the extent of Group profits. Thus the compensation of individual Executive Board members consists solely of fixed and success-oriented components, as the Supervisory Board is of the opinion that stock option models are only limitedly suitable as an incentive for the Executive Board.

The contracts of service for Executive Board members do not include payment arrangements pertaining to the premature termination of their positions in the Executive Board resulting from a change of control. Thus, in case of premature termination of a position in the Executive Board, the necessary flexibility is retained to allow an appropriate agreement to be reached in keeping with the particular situation. Apart from one exception, which relates to the temporary posting of a member of the Supervisory Board to the Executive Board and the resulting short duration of the contract of service, contracts of service for Executive Board members contain payment arrangements pertaining to the premature termination of their positions in the Executive Board.

Re 4.2.4 / 4.2.5:

As a result of the resolution taken at the Annual General Meeting on 14 June 2016, the total compensation of each member of the Executive Board will not be disclosed.

Re 5.1.2:

Due to the function of Schaltbau Holding AG as holding company, the number of staff members it employs is limited. For this reason, a long-term succession plan primarily based on the selection of potential internal successors is not practicable. In view of the current ages of the Executive Board members and the terms of their appointments, there is currently no age limit in place for Executive Board members.

Re 5.2 / 5.3:

The Supervisory Board has formed a Personnel Committee, an Audit Committee and a Strategy Committee. No further committees have been appointed, particularly in view of the fact that a consistent flow of all company and other relevant information to all members of a six-person Supervisory Board is eminently achievable.

Re 5.4.1:

When making proposals for the selection of Supervisory Board members, apart from observing the statutory regulations, the Supervisory Board takes each candidate’s technical and personal suitability into consideration as well as their proper fitness for promoting the function of the Supervisory Board. This includes, for instance, the selecting of members with suitable corporate experience. The company fully complies with the obligations set out in the German law governing the equal participation of men and women in management positions in the private sector and public service dated 24 April 2015. However, the Supervisory Board does not wish to name more specific aims for its composition, as the mere naming of any such aims will not necessarily lead to an improvement in the quality of the work of the Supervisory Board Furthermore, the Supervisory Board’s rules of procedure state that persons who have already reached 70 years of age at the date they are due to take up their duties as Supervisory Board members should not be selected for the post, unless there are exceptional, specific reasons why the person proposed should be selected for membership in the Supervisory Board.

Re 5.4.6:

The compensation of Supervisory Board members will not be individually disclosed as the structure of the compensation is decided by the Annual General Meeting and an individual disclosure would therefore not provide additional transparency for shareholders. The compensation of Supervisory Board members is stipulated in the Articles of Association of the company. Supervisory Board members are not granted benefits for services personally rendered, in particular consulting or agency services, over and above the rules set out in the Articles of Association.

Membership in committees is not taken into account in the compensation of Supervisory Board members.

Re 7.1.2:

A specific review does not take place between the Executive Board and the Supervisory Board prior to the publication of half-yearly or quarterly financial reports. The assets, financial and profitability situation is regularly reviewed within the framework of Supervisory Board meetings and whenever the need arises on the strength of monthly reporting to the Supervisory Board. The Executive Board sees this as the only way to preserve the flexibility required for legal reasons, particularly in the case of subject matter relevant to ad hoc publicity.

Due to the international structure of the Group and the resulting complexity, the Group financial statements have not been made publicly accessible within 90 days after the end of the fiscal year. For the same reasons, there is no guarantee that the interim reports can be published within 45 days after the end of each reporting period.

 

Munich, 21 December 2016

S c h a l t b a u   H o l d i n g   A G
For the Executive Board:
Helmut Meyer
Ralf Klädtke

For the Supervisory Board:
Hans J. Zimmermann

 

 Corporate Governance Report pursuant to section 3.10 of the German Corporate Governance Code

Schaltbau Holding AG is fully committed to a high standard of responsible corporate governance. The German Corporate Governance Code stipulates guidelines for achieving this aim and makes the corporate governance system both transparent and comprehensible. Both the Executive Board and the Supervisory Board of Schaltbau Holding AG have always been aware of their responsibility for a transparent style of corporate governance and control aimed at sustainable growth in company value. For this reason they emphatically endorse the recommendations contained in the German Corporate Governance Code and see them as an additional opportunity to improve the performance of the Company and cement the trust of its shareholders, business partners and staff.

The following Corporate Governance Report serves to summarise the essential principles of corporate governance crucial for the governance of Schaltbau Holding AG. Furthermore, Schaltbau Holding AG has also issued a Corporate Governance Statement in accordance with § 289a of the German Commercial Code (HGB).

In accordance with a resolution passed on 21 September 2015, the Supervisory Board has fulfilled the statutory requirements for determining the quota of women working in Executive Board and Supervisory Board positions.

Dual board system

Schaltbau Holding AG is subject to the regulations enshrined in the German Stock Corporation Act, the One-Third Participation Act and the capital market regulations as well as the provisions laid down in the Articles of Incorporation and the rules of procedure governing the actions of both the Executive Board and the Supervisory Board. Schaltbau Holding AG is governed by a dual management and monitoring structure consisting of two bodies: the Executive Board and the Supervisory Board. The Executive Board and the Supervisory Board are both committed to and aware of their duty to safeguard the best interests of both the shareholders and the Company as a whole. They collaborate closely and in an atmosphere of trust in the best interest of the Schaltbau Group. Please see the Report of the Supervisory Board for supplementary information regarding the main focus of cooperation between the Executive Board and the Supervisory Board.

Executive Board

The Executive Board of Schaltbau Holding AG (currently consisting of three members) is fully responsible for managing the Company and conducting its commercial operations. The Executive Board is responsible for the strategic orientation of the Schaltbau Group, for preparing and determining financial planning and also for monitoring both the company’s participating interests and financing throughout the Group. It performs these duties in close cooperation with the Supervisory Board and reports regularly, promptly and comprehensively to the Supervisory Board in both oral and written reports on business performance, corporate policy and fundamental issues relating to financial, investment and personnel policies as well as on matters concerning the profitability and the risk situation of both Schaltbau Holding AG and the Schaltbau Group.

Furthermore, the Executive Board is responsible for preparing the reports required by law such as company and group financial statements as well as interim reports. It also ensures that appropriate risk management measures are in place, including the internal control system, and reports regularly, promptly and comprehensively to the Supervisory Board on all questions of strategy relevant to the Group, corporate planning, business performance, financing, risk management and compliance. Matters subject to the approval of the Supervisory Board are defined in the Executive Board’s rules of procedure. Responsibilities within the Executive Board are governed by an organisational chart. The activities of the Executive Board are geared towards long-term, sustainable growth in company value.

Supervisory Board

In accordance with § 8 clause 1 of the Articles of Incorporation, the Supervisory Board of Schaltbau Holding AG comprises six members. One third of these are staff representatives and the remaining two thirds represent shareholders. The shareholder representatives are elected at the Annual General Meeting and the staff representatives are elected by the members of the staff. The Supervisory Board has a five-year term of office. The last regular re-election of the Supervisory Board took place at the Annual General Meeting held on 14 June 2016. The term of office of the shareholder representatives therefore ceases at the end of the Annual General Meeting, during which the shareholders will vote on ratifying the actions of the Supervisory Board for the fiscal year 2020. The Supervisory Board elects its chairman from among its members.

The Supervisory Board consists of the following persons:

Shareholder representatives:

  • Dr Ralph Heck (Deputy Chairman)
  • Helmut Meyer (delegated to the Executive Board with effect from 01.12.2016)
  • Friedrich Smaxwil
  • Hans Jakob Zimmermann (Chairman)

Staff representatives:

  • Thomas Farnschläder and
  • Marianne Reindl

There are no former members of the Executive Board on the Supervisory Board.

The Chairman of the Supervisory Board performs the external duties of the Supervisory Board. The Supervisory Board appoints the members of the Executive Board and both monitors and advises the Executive Board in business matters. The Supervisory Board holds regular discussions with the Executive Board regarding strategy and its implementation, planning, current business performance, the risk situation and topics related to compliance. The Executive Board requires the approval of the Supervisory Board when making major decisions. The Supervisory Board meets at regular intervals four times a year. It also holds unscheduled meetings when necessary, either personally or via telephone conferences. It examines the Company Financial Statements and the Consolidated Financial Statements, paying due consideration to the written and oral reports of the external auditors, and on this basis adopts the Company Financial Statements and approves the Consolidated financial statements.

The Supervisory Board of Schaltbau Holding AG has formed a Personnel Committee, an Audit Committee and a Strategy Committee. The Personnel Committee comprises the members Hans-Jakob Zimmermann, Helmut Meyer and Marianne Reindl. The Audit Committee comprises the members Hans-Jakob Zimmermann, Helmut Meyer and Dr Ralph Heck. The Strategy Committee comprises the members Hans-Jakob Zimmermann, Helmut Meyer, Friedrich Smaxwil and Dr Ralph Heck. No other committees exist within the Supervisory Board. The membership of Helmut Meyer in the above-mentioned committees remains dormant during his delegation to the Executive Board.

No further committees were appointed, particularly in view of the fact that a consistent flow of all corporate and other relevant information to all members of a six-person Supervisory Board is eminently achievable. Further committees can be formed as the need arises.

The Supervisory Board may adopt resolutions provided that a minimum of four members take part in the procedure. Resolutions may be adopted by means of a simple majority. If the number of votes on both sides is equal, the Chairman of the Supervisory Board has the casting vote.

Based on its own assessment, the Supervisory Board has a sufficient number of independent members. The effectiveness of the Supervisory Board is subject to annual review. If there were any indications of conflicts of interest among members of the Supervisory Board, those members either declined to participate in or abstained from voting.

Determining a quota for women and information on target achievement

The German law governing the equal participation of women and men in management positions in the private sector and public service, which was adopted by the German parliament in March 2015, requires Schaltbau Holding AG to stipulate its own target for legally binding compliance with a quota for women. If the current proportion of women working in the enterprise is lower than 30 per cent, the quota for women may not be lower than the status quo. Women currently occupy 16.67 per cent of positions on the Supervisory Board and 0 per cent on the Executive Board, since the resignation of a member of the Executive Board in 2016.

On 21 September 2015, the Supervisory Board decided to adopt the following targets: The proportion of women on the Executive Board of Schaltbau Holding AG shall be 33.33 per cent and 16.67 per cent on the Supervisory Board.

With regard to the percentage of women working in executive positions below Executive Board level, on 21 August 2015 the Executive Board decided upon a target quota of 0 per cent for managing director level (currently 0 per cent). The target quota for middle management was determined at 5.0 per cent (currently 4.1 per cent).

Annual General Meeting

The Annual General Meeting is the third body of the Company. The shareholders exercise their right to vote at the Annual General Meeting. Schaltbau Holding AG has voting stock only. Each share entitles its holder to one vote. The Annual General Meeting takes place once a year within the first eight months of the fiscal year. The Chairman of the Supervisory Board chairs the Annual General Meeting, which then makes all decisions within the scope of its legal responsibilities. The agenda of the Annual General Meeting is published on the Company’s website, including all of the necessary reports and documents pertaining to it.

The Annual General Meeting makes decisions in all matters empowered to it by law, with particular regard to the use of unappropriated profit, the election of the Supervisory Board, the ratification of the actions of the members of both the Executive Board and the Supervisory Board, the appointment of the external auditors, changes to the Articles of Incorporation and corporate activities. Every shareholder has the right to participate in the Annual General Meeting.

In order to facilitate the exercising of their individual rights, Schaltbau Holding AG gives shareholders the option to vote via a company proxy who is bound to vote in accordance with their instructions at the Annual General Meeting. The invitation to the Annual General Meeting includes an explanation as to how voting instructions can be given prior to the meeting. Shareholders can, however, also be represented by a proxy of their choice. Shareholders may designate an authorised proxy for the Annual General Meeting, who is obliged to vote in accordance with the shareholder’s instructions. The corresponding proxy voting forms are contained in the entry tickets, which are issued to the shareholders.

The registration and legitimation procedure complies with the legal and customary international “record date” procedure. Shareholders must legitimate their participation at the Annual General Meeting at least 21 days in advance.

Financial reporting and risk management, external audit

The Consolidated Financial Statements of Schaltbau Holding AG are prepared in accordance with International Financial Reporting Standards (IFRS). The Company Financial Statements of Schaltbau Holding AG are prepared in accordance with the German Commercial Code (HGB). Both the Consolidated and Company financial statements were audited by PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, Munich, as elected at the Annual General Meeting in accordance with a proposal made by the Supervisory Board and adopted and approved by the Supervisory Board. The Consolidated and Company Financial Statements are made publicly available.

The Chairman of the Supervisory Board issued the audit engagement letter after assuring himself of the impartiality of the external auditors prior to putting forward the proposal at the Annual General Meeting. The external auditor promptly reports to the Chairman of the Supervisory Board on any significant findings and events resulting from the external audit that could be of relevance for the work of the Supervisory Board. The Chairman is informed if the external auditor detects facts that point to an inaccuracy with respect to the Declaration of Compliance submitted by the Executive Board and the Supervisory Board in accordance with Section 161 of the German Stock Corporation Act (AktG).

The risk management system implemented in the Schaltbau Group is designed with the dual purpose of detecting or anticipating risks at an early stage in order to avoid losses to the company on the one hand and of making conscious use of any business opportunities that present themselves on the other. The risk management system, including the account-related internal control system, and the specific risks to the Group are described in detail in the opportunities and risks report, which is part of the Group Management Report.

Transparency

Schaltbau Holding AG utilises the company website in order to provide shareholders and investors with prompt information: www.schaltbau.de. In addition to the annual report and various interim reports, shareholders and third parties are additionally kept informed of the latest developments by means of ad hoc announcements and press releases. Schaltbau Holding AG publishes a financial calendar displaying all important dates and company publications well in advance.

Directors’ dealings, major participations and shareholdings subject to notification in accordance with number 6.3 of the German Corporate Governance Code

In accordance with the stipulations contained in the Market Abuse Regulation (MAR) and to the extent that they replace those contained in the German Securities Trading Act (WpHG), Schaltbau Holding AG promptly discloses any notification of directors’ dealings in accordance with Section 19 MAR. This includes notifications about securities transactions involving Schaltbau Holding stock made by members of the Executive Board, members of the Supervisory Board or any individuals who perform management functions in the legal sense of Section 19 MAR, as well as notifications made by persons or legal entities closely related to any of the above mentioned. These reports are also published on the Company’s website at: www.schaltbau.de.

Major participations

The Company promptly publishes any notifications received regarding the purchase or sale of major participations in accordance with § 21 of the Securities Trading Act (WpHG) or pertaining to the holding of respective financial instruments in accordance with § 25 WpHG.

Shareholdings of Executive Board and Supervisory Board members

Members of the Executive Board and the Supervisory Board held at 31 December 2016 the following Schaltbau Holding AG stock (WKN 717030) either directly or indirectly through related individuals (spouses and first-degree relatives) or companies:

Person subject to report

Position

Shareholding at 31 Dec. 2016

Hans Jakob Zimmermann

spouse and first-degree relatives

Chairman of the Supervisory Board

436,880

216,396

Friedrich Smaxwil

Member of the Supervisory Board

1,190

 

Stock option programmes and similar securities-related incentive systems

Schaltbau Holding AG does not currently have a stock option programme or any such similar securities-related incentive system in place.

Further fundamental corporate governance practices

In order to promote the confidence and trust of investors, employees, business partners and the general public, the Schaltbau Group has drawn up a Code of Conduct to supplement the principles of Corporate Governance. The Code of Conduct defines minimum standards of conduct, which are valid for every Schaltbau employee worldwide. The complete Code of Conduct is published on the Schaltbau Holding AG website under the following link: http:// schaltbau.com/investor-relations/corporate-governance/code-of-conduct.

 

Munich, in April 2017

S c h a l t b a u   H o l d i n g   A G
For the Executive Board:

Dr Bertram Stausberg                   Helmut Meyer                 Thomas Dippold              Ralf Klädtke
(Spokesman)

For the Supervisory Board
Hans J. Zimmermann