Corporate Governance Report and Declaration of Compliance
for the business year 2008
Basic structural conditions
Rational AG is an Aktiengesellschaft (public limited company) under German law with its registered office in Landsberg am Lech, and since March 2000 has been listed on the stock exchange. The company is administered by the Executive Board and the Supervisory Board.
As at 31.12.2008 the Executive Board of RATIONAL AG consists of Dr Günter Blaschke (Chief Executive Officer), Peter Wiedemann (Chief Technical Officer), Erich Baumgärtner (Chief Financial Officer) and Reinhard Banasch (Chief Sales Officer). Mr Banasch was newly appointed to the Executive Board of RATIONAL AG on 01.04.2008.
As before, the Supervisory Board consists of Mr Siegfried Meister (Chairman of the Supervisory Board), Walter Kurtz (Deputy Chairman of the Supervisory Board) and Roland Poczka (Member of the Supervisory Board). Since the Supervisory Board comprises just three members, no committees are formed.
The Executive Board submits detailed reports to the Supervisory Board each month about the current business situation and the strategic orientation of the business. Six regular meetings of the Supervisory Board were held in 2008 in addition to numerous individual discussions.
Remuneration report
In fiscal 2008 the Executive Board of RATIONAL AG was paid a total of €3,040 thousand (previous year €2,708 thousand) for the performance of its services. Of this, €1,471 thousand was paid as a profit-related, variable component (previous year €1,242 thousand).
Remuneration for the Supervisory Board for its monitoring and advisory work totalled €542 thousand (previous year €552 thousand). Of this, Mr Meister received €216 thousand (previous year €218 thousand), Mr Kurtz €185 thousand (previous year €188 thousand) and Mr Poczka €141 thousand (previous year €146 thousand).
The payments to the Supervisory Board consist of fixed and profit-related components. In fiscal 2008 payments to the members of the Supervisory Board were as follows:
| Fixed (€ th.) | Profit-related (€ th.) | Other (€ th.) | Total (€ th.) | |
| Mr Meister | 150 | 41 | 25 | 216 |
| Mr Kurtz | 125 | 41 | 19 | 185 |
| Mr Poczka | 100 | 41 | 0 | 141 |
| 375 | 123 | 44 | 542 |
Stock option scheme
On 3 February 2000 RATIONAL AG launched a stock option scheme for members of the Executive Board for a maximum of 200,000 individual shares in the company. The stock options are subject to waiting periods and time limits for exercising the rights, which are decided on by the Supervisory Board. The exercise of option rights is linked to a specified increase in the value of the business measured against the SDAX Performance Index. In February 2000 a first tranche of 34,500 option rights was issued, which was drawn on in 2002 in the form of a cash settlement. A second tranche of 34,500 option rights was issued in January 2004 with a waiting period until March 2006. This tranche was likewise drawn on in the form of a cash settlement. As at the balance sheet date 2008 the shareholding of all the board members stands at well below one percent.
Mandatory publications in 2008
In 2008, RATIONAL AG provided Information for shareholders and interested parties pursuant to Section 15 German Securities Trading Act (WpHG) in the form of five detailed, up-to-date ad-hoc communications within the prescribed periods concerning the Company’s position as regards finance, assets and revenue. Share transactions by members of the Supervisory Board and the Executive Board were announced in 27 notifications in accordance with Section 15 German Securities Trading Act (WpHG) as soon as we gained knowledge thereof.
Further information on the business was provided to shareholders in the form of the annual and quarterly reports, press and capital market conferences and individual meetings, as well as on RATIONAL’s Internet site.
Principles of responsible corporate management
The Executive Board and the Supervisory Board of RATIONAL AG have always striven to take all actions and decisions on the basis of corporate management which is responsible and which is geared to long-term, sustained value creation. Openness and transparency in corporate communication and consideration of the interests of shareholders are principles of paramount importance to RATIONAL.
In consequence of this, RATIONAL AG welcomes the German Corporate Governance Code, published by the Government Commission on 26 February 2002 and most recently amended on 6 June 2008, along with the standards and recommendations contained therein.
Shareholding of the Supervisory Board
As founder of the company the Chairman of the Supervisory Board, Siegfried Meister, holds 63.78 percent of the issued RATIONAL shares. The Deputy Chairman of the Supervisory Board, Walter Kurtz, holds 7.81 percent of the shares. Mr Roland Poczka’s shareholding is under one percent.
Declaration of Compliance by RATIONAL AG
Pursuant to Article 161 of the Stock Corporation Act (AktG) the Executive Board and the Supervisory Board of RATIONAL AG submitted the first declaration of compliance with the German Corporate Governance Code on 18 February 2003. The present version has been amended in accordance with the current edition of 6 June 2008.
RATIONAL Aktiengesellschaft therefore complies with the recommendations of the Government Commission on the German Corporate Governance Code, with the exception of:
Re 3.8
“If the company takes out a D&O (directors’ and officers' liability insurance) policy for the Management Board and Supervisory Board, a suitable deductible shall be agreed.”
A Directors' & Officers' policy has been taken out for the members of the Executive Board and Supervisory Board. No specific deduction for the insured parties has been agreed.
Re 4.2.4
“The total compensation of each member of the Management Board is to be disclosed by name, divided into non-performance-related, performance-related and long-term incentive components, unless decided otherwise by the General Meeting by three-quarters majority.”
By resolution of the General Meeting of Shareholders of 17 May 2006 RATIONAL AG has dispensed with the publication of individualized figures for Executive Board compensation. The other provisions are complied with in full.
Re 5.3
"Formation of committees”
Forming committees of the Supervisory Board to handle complex issues, such as an Audit Com-mittee, is not appropriate for RATIONAL AG because the Supervisory Board consists of only three members.
Re 5.4.1
“For nominations for the election of members of the Supervisory Board, care shall be taken that the Supervisory Board, at all times, is composed of members who, as a whole, have the required knowledge, abilities and expert experience to properly complete their tasks and are sufficiently independent. The international activities of the enterprise, potential conflicts of interest and an age limit to be specified for the members of the Supervisory Board shall be taken into account.“
No age limit has been set for members of the Supervisory Board.
Landsberg, February 2009
RATIONAL Aktiengesellschaft
The Supervisory Board
The Executive Board
Corporate Governance Report and Declaration of Compliance
for the business year 2007
Basic structural conditions
Rational AG is an Aktiengesellschaft (public limited company) under German law with its registered headquarter in Landsberg am Lech, and since March 2000 has been listed on the stock exchange. The company is administered by the Executive Board and the Supervisory Board.
On 31 December 2007 the Executive Board of RATIONAL AG consisted of Dr. Günter Blaschke (Chief Executive Officer), Mr Peter Wiedemann (Chief Technology Officer) and Mr Erich Baumgärtner (Chief Financial Officer). Mr Thomas Polonyi (Director of Sales and Marketing) left the company by mutual agreement on 30 April 2007.
As before, the Supervisory Board consists of Mr Siegfried Meister (Chairman of the Supervisory Board), Walter Kurtz (Deputy Chairman of the Supervisory Board) and Roland Poczka (Member of the Supervisory Board). Since the Supervisory Board comprises just three members, no committees are formed.
The Executive Board submits detailed reports to the Supervisory Board each month about the current business situation and the strategic orientation of the business. Eight regular meetings of the Supervisory Board were held in 2007 in addition to numerous individual discussions.
Remuneration report
For the performance of their tasks the Executive Board of RATIONAL AG received remuneration totalling €2,708 thousand in 2007 (previous year €5,177 thousand), of which €1,242 thousand was paid out as a profit-related, variable component (previous year €1,230 thousand). Included in total payments in the previous year are the claims of the Executive Board arising from the second tranche of the stock option scheme of 3 February 2000, which were paid by a cash settlement amounting to €2,623 thousand. This second tranche was issued by the Supervisory Board on 28 January 2004 and included options on 34,500 shares in RATIONAL AG. The option rights were linked to the achievement of specific performance targets by RATIONAL shares measured against the SDAX. The waiting period was two years and ended in the first quarter of 2006.
The expenses of the Supervisory Board for its control and consultancy activities were reimbursed by payments totalling €552 thousand (previous year €543 thousand). Of this, Mr Meister received €218 thousand (previous year €216 thousand), Mr Kurtz €188 thousand (previous year €184 thousand) and Mr Poczka €146 thousand (previous year €143 thousand).
The payments to the Supervisory Board consist of fixed and profit-related components. In fiscal 2007 payments to the members of the Supervisory Board were as follows:
| Fixed (€ th.) | Profit-related (€ th.) | Other (€ th.) | Total (€ th.) | |
| Mr Meister | 150 | 46 | 22 | 218 |
| Mr Kurtz | 125 | 46 | 17 | 188 |
| Mr Poczka | 100 | 46 | 0 | 146 |
| 375 | 138 | 39 | 552 |
Stock option scheme
On 3 February 2000 RATIONAL AG launched a stock option scheme for members of the Executive Board for a maximum of 200,000 individual shares in the company. The stock options are subject to waiting periods and time limits for exercising the rights, which are decided on by the Supervisory Board. The exercise of option rights is linked to a specified increase in the value of the business measured against the SDAX Performance Index. In February 2000 a first tranche of 34,500 option rights was issued, which was drawn on in 2002 in the form of a cash settlement. A second tranche of 34,500 option rights was issued in January 2004 (the waiting period ended in March 2006) and was likewise drawn on in the form of a cash settlement. As at the balance sheet date 2007 the shareholding of all the board members stands at well below one percent.
Mandatory publications in 2007
In 2007 RATIONAL AG provided information for shareholders and interested parties pursuant to § 15 German Securities Trading Act (WpHG) in the form of five detailed, up-to-date ad-hoc communications within the prescribed periods concerning the company’s position as regards finance, assets and revenue as well as on the settlement of the patent disputes with Technology Licensing Corporation and Food Automation Service Techniques, Inc. (FAST). Stock transactions by Supervisory Board and Executive Board members were announced immediately we became aware of them, in the form of five notices pursuant to §15a WpHG.
Further information on the business was provided to shareholders in the form of the annual and quarterly reports, press and capital market conferences and individual meetings, as well as on RATIONAL’s Internet site.
Principles of responsible corporate management
The Executive Board and the Supervisory Board of RATIONAL AG have always striven to take all actions and decisions on the basis of corporate management which is responsible and which is geared to long-term, sustained value creation. Openness and transparency in corporate communication and consideration of the interests of shareholders are principles of paramount importance to RATIONAL.
In consequence of this, RATIONAL AG welcomes the German Corporate Governance Code, published by the Government Commission on 26 February 2002 and most recently amended on 14 June 2007, along with the standards and recommendations contained therein.
Shareholding of the Supervisory Board
As founder of the company the Chairman of the Supervisory Board, Siegfried Meister, holds 63.0 percent of the issued RATIONAL shares. The Deputy Chairman of the Supervisory Board, Walter Kurtz, holds 7.8 percent of the shares. Mr Roland Poczka’s shareholding is well under one percent.
Declaration of Compliance by RATIONAL AG
Pursuant to Article 161 of the Stock Corporation Act (AktG) the Executive Board and the Supervisory Board of RATIONAL AG submitted the first declaration of compliance with the German Corporate Governance Code on 18 February 2003. The present version has been amended in accordance with the current edition of 14 June 2007.
RATIONAL Aktiengesellschaft therefore complies with the recommendations of the Government Commission on the German Corporate Governance Code, with the exception of:
Re 3.8
“If the company takes out a D&O (directors’ and officers’ liability insurance) policy for the Management Board and Supervisory Board, a suitable deduction should be agreed.”
A Directors' & Officers' policy has been taken out for the members of the Executive Board and Supervisory Board. No specific deduction for the insured parties has been agreed.
Re 4.2.4
“The total compensation of each member of the Management Board is to be disclosed by name, divided into non-performance-related, performance-related and long-term incentive components, unless decided otherwise by the General Meeting by three-quarters majority.”
By resolution of the General Meeting of Shareholders of 17 May 2006 RATIONAL AG has dispensed with the publication of individualized figures for Executive Board compensation. The other provisions are complied with in full.
Re 5.3
"Formation of committees”
Forming committees of the Supervisory Board to handle complex issues, such as an Audit Committee, is not appropriate for RATIONAL AG because the Supervisory Board consists of only three members.
Landsberg, January 2008
RATIONAL Aktiengesellschaft
The Supervisory Board
The Executive Board
Corporate Governance Report and Declaration of Compliance
for the business year 2006
Remuneration report
For the performance of their tasks, the Executive Board of RATIONAL AG received remuneration totalling 5,177 thousand euros (previous year: 2,244 thousand euros), of which 1,230 thousand euros were paid out as a performance-related, variable component (previous year: 1,228 thousand euros). The total remuneration also includes the entitlement of the Executive Board from the second tranche under the stock option scheme dated February 3, 2000, which was drawn on in the form of a cash settlement amounting to 2,623 thousand euros. This second tranche was issued by the Supervisory Board on January 28, 2004, comprising options on 34,500 shares in RATIONAL AG. Option rights were linked to RATIONAL shares meeting specific performance targets measured against the SDAX Performance Index. The waiting period was for two years, ending in the first quarter of 2006.
The expenses of the Supervisory Board for its control and consultancy activities were reimbursed by payments totalling 543 thousand euros (previous year: 504 thousand euros). Of this, Mr Meister received 216 thousand euros (previous year: 201 thousand euros), Mr Kurtz 184 thousand euros (previous year: 170 thousand euros) and Mr Poczka 143 thousand euros (previous year: 133 thousand euros).
Stock option scheme
On February 3, 2000, RATIONAL AG launched a stock option scheme for members of the Executive Board for a maximum of 200,000 individual shares in the company. The stock options are subject to waiting periods and time limits for exercising the rights, which are decided on by the Supervisory Board. The exercise of option rights is linked to a specified increase in the value of the enterprise measured against the SDAX Performance Index. In February 2000, a first tranche of 34,500 option rights was issued, which was drawn on in 2002 in the form of a cash settlement. A second tranche of 34,500 option rights was issued in January 2004 with a waiting period until March 2006. This tranche was likewise drawn on in the form of a cash settlement. As at balance sheet date 2006, the shareholding of the board members stands at well below 1 percent.
Declaration of compliance by RATIONAL AG
Pursuant to Article 161 of the Stock Corporation Act (AktG), the Executive Board and the Supervisory Board of RATIONAL AG submitted the first declaration of compliance with the German Corporate Governance Code on February 18, 2003. The present version has been amended in accordance with the current edition of June 12, 2006.
RATIONAL AG therefore complies with the recommendations of the Government Commission on the German Corporate Governance Code, with the exception of:
Re 3.8
“If the company takes out a D&O (directors’ and officers’ liability insurance) for Management Board and Supervisory Board, a suitable deduction should be agreed.”
A Directors’ & Officers’ policy has been taken out for the members of the Executive Board and Supervisory Board. No specific deduction for the insured parties has been agreed.
Re 4.2.4
“Compensation of the members of the Management Board shall be reported, specifying names and subdivided according to fixed, performance-related and long-term incentive components, unless decided otherwise by a majority of three-quarters at the general meeting of shareholders.”
In the resolution taken by the general meeting of shareholders on May 17, 2006, RATIONAL AG decided against publishing the individualised figures for Executive Board compensation. The remaining provisions are complied with in full.
Re 5.3.1
“Formation of committees”
Forming committees of the Supervisory Board to handle complex issues, such as an Audit Committee, is not appropriate for RATIONAL AG because the Supervisory Board consists of only three members.
Re 5.4.2
“The Supervisory Board shall include what it considers an adequate number of independent members.”
As founder of the company, the Chairman of the Supervisory Board, Siegfried Meister, holds 63.0 percent of the issued RATIONAL shares. The Deputy Chairman of the Supervisory Board, Walter Kurtz, holds 7.8 percent of the shares. Mr Roland Poczka’s shareholding is well under 1 percent.
Landsberg am Lech, January 2007
RATIONAL AG
The Supervisory Board
The Executive Board
Declaration of Compliance for the business year 2005
Principles of responsible corporate management
Declaration of compliance by RATIONAL AG
Re 5.3.1
"Formation of committees"
Mandatory publications in 2005
Landsberg, January 2006
RATIONAL Aktiengesellschaft
The Supervisory Board
The Executive Board
Declaration of Compliance for the business year 2004
Landsberg, January 2005
RATIONAL Aktiengesellschaft
The Supervisory Board
The Managing Board
Declaration of Compliance for the business year 2003
Background
The term Corporate Governance stands for responsible management and control of businesses, geared to long-term value creation. Efficient cooperation between Managing Board and Supervisory Board, consideration of shareholders' interests, openness and transparency in corporate communication are essential aspects of good Corporate Governance.
RATIONAL AG has always striven for corporate openness and transparency, and hence welcomes the German Corporate Governance Codex, published by the Government Commission on 26 February 2002 and most recently amended on 21 May 2003.
Rational AG is an Aktiengesellschaft (public limited company) under German law, and hence is administered by a Managing Board and a Supervisory Board. On 18 February 2003 the Managing Board and Supervisory Board submitted the first declaration of compliance with the recommendations of the Government Commission on the German Corporate Governance Code pursuant to Section 161 of the Stock Corporation Act (AktG).
Further to the amendments to the code decided by the Government Commission on the German Corporate Governance Code on 21 May 2003 we have updated the declaration of compliance.
Declaration of Compliance by RATIONAL AG
Managing Board and Supervisory Board of RATIONAL Aktiengesellschaft declare pursuant to Section 161 AktG:
RATIONAL Aktiengesellschaft complies with the recommendations of the Government Commission on the German Corporate Governance Code, with the exception of the divergences listed below:
Re 3.8
"If the company takes out a D&O (directors' and officers' liability insurance) policy for the Management Board and Supervisory Board, a suitable deduction should be agreed."
A Directors' & Officers' policy has been taken out for the members of the Managing Board and Supervisory Board under the general property insurance and liability insurance. No specific deduction for the insured parties has been agreed.
Re 4.2.4
"Compensation of the members of the Management Board shall be reported in the Notes of the Consolidated Financial Statements subdivided according to fixed, performance-related and long-term incentive components. The figures shall be individualized."
With the exception of the individualized figures for Management Board compensation, this provision is complied with in full.
Re 5.3.1
"Formation of committees"
Forming committees of the Supervisory Board to handle complex issues, such as an Audit Committee, is not appropriate for RATIONAL Aktiengesellschaft because the Supervisory Board of RATIONAL Aktiengesellschaft consists of only three members. Forming committees comprising fewer than three members of the Supervisory Board would not result in any further increase in the efficiency of the Supervisory Board.
Re 5.4.5 Abs. 2
"Members of the Supervisory Board shall receive fixed as well as performance-related compensation"
The members of the Supervisory Board of RATIONAL Aktiengesellschaft do not currently receive performance-related compensation, though there are plans to introduce this in future.
Landsberg, January 2004
RATIONAL Aktiengesellschaft
The Supervisory Board
The Managing Board
Declaration of Compliance for the business year 2002
Background
It has become all too apparent over the last two years that businesses around the world have grossly neglected their obligations to comply with basic regulations and to disclose corporate information. The damage caused goes well beyond simply the loss of shareholders' and business associates' assets. Mistrust as regards attainment of ambitious corporate goals and thus positive share price movements in the financial markets is at an all-time high.
In response to this, the Government Commission on the German Corporate Governance Code produced a code of conduct for Management Boards and Supervisory Boards of listed companies on February 16, 2002. The aim is to make the German corporate governance system transparent and comprehensible, and to promote investors' trust in the supervision of German listed companies.
The Transparency and Publicity Act (TransPuG), from which the German Corporate Governance Code derives it legal basis, came into force on July 26, 2002. The TransPuG inserted a new Paragraph 161 into the Stock Corporation Act (AktG), obligating the Management Board and Supervisory Board of a listed company to declare on an annual basis whether the Code has been complied with or which recommendations in the Code have not been applied. Under the transitional regulations, the first such declaration had to be submitted in 2002.
RATIONAL AG has always striven for corporate openness and transparency, and hence welcomes the German Corporate Governance Code. It is in the interests of Germany and of business, and will help to strengthen German and international investors' confidence in the German economy.
Declaration of Compliance by RATIONAL AG
Managing Board and Supervisory Board of RATIONAL Aktiengesellschaft declare pursuant to Section 161 AktG, 15 EG AktG (first declaration of compliance):
RATIONAL Aktiengesellschaft complies with the recommendations of the Government Commission on the German Corporate Governance Code, with the exception of the divergences listed below:
Re 3.8
"If the company takes out a D&O (directors' and officers' liability insurance) policy for the Management Board and Supervisory Board, a suitable deduction should be agreed."
A Directors' & Officers' policy has been taken out for the members of the Management Board and Supervisory Board. RATIONAL insures the Directors' & Officers' risk in its general property insurance and liability insurance without specific deduction with the overall premium payable. A substantial deduction, which because of the principle of equality to be observed would have to be uniform, would affect the members of the Management Board and Supervisory Board very differently depending on their private circumstances as regards income and assets, which given their equal obligations cannot be regarded as justified. The D&O policy does not therefore provide for deductions.
Re 5.3.1
"Formation of committees"
Forming committees of the Supervisory Board to handle complex issues, such as an Audit Committee, is not appropriate for RATIONAL Aktiengesellschaft because the Supervisory Board of RATIONAL Aktiengesellschaft consists of three members. Forming committees comprising fewer than three members of the Supervisory Board would not result in any further increase in the efficiency of the Supervisory Board.
Re 5.4.5 Abs. 2
"Members of the Supervisory Board shall receive fixed as well as performance-related compensation"
The members of the Supervisory Board of RATIONAL Aktiengesellschaft do not currently receive performance-related compensation. Two of the three members of the Supervisory Board have a significant stake as shareholders of RATIONAL Aktiengesellschaft, which in itself results in a high degree of orientation to success on the part of the Supervisory Board.
Landsberg,18.02.2003
RATIONAL Aktiengesellschaft
The Supervisory Board
The Managing Board
