Corporate Governance Report and Declaration of Compliance for the business year 2009
Corporate Governance Report
In fiscal year 2009 RATIONAL AG continued the development of its own corporate governance system, and wherever possible follows the recommendations and suggestions in the German Corporate Governance Code (the “Code”) included for the first time in the new edition of the Code dated June 18, 2009.
Divergences are set out and justified in the joint declaration of compliance by the Supervisory Board and the Executive Board.
The rules of procedure for the Executive Board and Supervisory Board were unchanged in 2009. One point in the company’s articles of association was amended by a resolution of the General Meeting of Shareholders and part of the section on election of Supervisory Board members was redrafted.
Shareholders and General Meeting of Shareholders
A total of 700 shareholders, representatives of the press and guests attended the General Meeting of Shareholders in Augsburg on May 6, 2009. An imputed 87.43% of the share capital was represented. All six resolutions on the agenda were approved by the General Meeting of Shareholders with a large majority.
Cooperation between Executive Board and Supervisory Board
Full details of the cooperation between the Executive Board and the Supervisory Board are given in the Supervisory Board’s report.
As in previous years, the Executive Board and Supervisory Board report on Corporate Governance in the company in the 2009 Annual Report. The Corporate Governance Report including the declaration of compliance also forms part of the newly introduced corporate governance statement. RATIONAL AG displays this statement on its corporate website and refers to it in the consolidated management report. RATIONAL AG comments on the Code suggestions as part of the Corporate Governance Report.
Executive Board
No conflicts of interest occurred in the past fiscal year. The members of the Executive Board, Dr. Günter Blaschke (CEO), Peter Wiedemann (Chief Technical Officer), Erich Baumgärtner (Chief Financial Officer) and Reinhard Banasch (Chief Sales Officer) do not perform any supervisory board duties in other listed companies.
Supervisory Board
The General Meeting of Shareholders on May 6, 2009 elected Mr Siegfried Meister, Mr Walter Kurtz and Mr Roland Poczka as Supervisory Board members and thereby confirmed them in office.
The Supervisory Board of RATIONAL AG comprises three members, hence no committees are formed. Details of the focus of the Supervisory Board’s activities and advice in fiscal year 2009 are given in the Report of the Supervisory Board. The Supervisory Board considers that it contains a sufficient number of independent members. No conflicts of interest occurred in the fiscal year.
Remuneration of management bodies
In fiscal year 2009 the members of the Executive Board received total remuneration of 3,642 thousand euros, of which 2,082 thousand euros was paid out as a variable, earnings-related component. The variable components of the remuneration are geared to Group earnings. Thus both positive and any negative developments are taken into account.Remuneration for the Supervisory Board for its monitoring and advisory work amounts to 555 thousand euros for 2009. The remuneration for the members of the Supervisory Board consists of fixed and earnings-related components. Payments to the individual members of the Supervisory Board were as follows:
| Thousands of euros | Fixed | Earnings-related | Other | Total |
| Siegfried Meister | 150 | 45 | 27 | 222 |
| Walter Kurtz | 125 | 45 | 18 | 188 |
| Roland Poczka | 100 | 45 | - | 145 |
| Gesamt | 375 | 135 | 45 | 555 |
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 set and 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 SMAX Performance Index (replaced by the SDAX Performance Index as of January 1, 2004). In 2000 and 2004 tranches totalling 69,000 option rights were issued, which on expiry of the relevant waiting periods and time limits for exercising the rights were likewise drawn on in the form of a cash settlement.
Transparency
In fiscal year 2009 RATIONAL AG published a total of four ad-hoc communications pursuant to Section 15 German Securities Trading Act (WpHG), in order to keep all shareholders directly informed of current business performance.
| Date | Contents |
| 26.03.2009 | Fiscal 2008 – Global credit crunch puts the brakes on growth |
| 06.05.2009 | Decrease in sales held at moderate level |
| 11.08.2009 | 12 percent drop in sales in first six months |
| 10.11.2009 | Sales in third quarter back at previous year’s level |
The following voting rights threshold announcements were sent to RATIONAL AG by its shareholders and were immediately published:
| Voting rights threshold announcements under Section 26 para. 1 WpHG | |
| Contents | Date |
| Royce & Associates, LLC., New York, USA, exceeds 3% of the voting rights (March 27, 2009) | April 2, 2009 |
| Legg Mason, Inc., Baltimore, USA, exceeds 3% of the voting rights (March 27, 2009) | April 2, 2009 |
In fiscal year 2009 RATIONAL AG did not receive any Directors’ Dealings announcements.
All ad-hoc communications and mandatory publications were put on the corporate website in 2009 and were published in both German and English.
The shareholding of the Executive Board stands at well below one percent of the capital stock. The total direct and indirect shareholding of the Supervisory Board stands at 72.22% according to the current voting rights announcements.
Accounting and auditing
On May 6, 2009 the General Meeting of Shareholders appointed Rölfs WP Partner AG Wirtschaftsprüfungsgesellschaft, Munich, as auditor and group auditor for fiscal year 2009. The audit mandate was issued by the Supervisory Board. Prior to the proposal being submitted to the General Meeting of Shareholders the Supervisory Board obtained a declaration from the auditor on the personal and business relationships to the company. This gave rise to no objections. The Supervisory Board agreed with the auditor – as in previous years – that the chairman of the Supervisory Board would be notified immediately about disqualification and reasons for lack of impartiality during the audit.
Subordinate Status Report
The Executive Board issued a Subordinate Status Report pursuant to Section 312 Stock Corporation Act (AktG). The auditor did not raise any objections to the Subordinate Status Report following his audit. Likewise the Supervisory Board stated after examining the Subordinate Status Report that there are no objections to the declaration by the Executive Board at the end of the Subordinate Status Report.The auditor is additionally required, with immediate effect, to report any major weaknesses found during the audit which may occur in the accounting-related internal monitoring and risk management system.
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 declare as follows:RATIONAL AG has complied with the recommendations of the June 18, 2009 edition of the German Corporate Governance Code (the “Code”) since the last declaration of compliance was issued in February, 2009, with the defined exceptions, and intends to comply with the recommendations of the Code in future with the exceptions set out below:
Point 3.8 of the Code:
“If the company takes out a D&O (directors’ and officers’ liability insurance) policy for the Executive Board, a deductible of at least 10% of the loss up to at least the amount of one and a half times the fixed annual compensation of the Executive Board member must be agreed upon.”
A D&O insurance policy has been taken out for the Executive Board of RATIONAL AG. No deductible has hitherto been agreed. The company will bring this into line with the legal provisions in 2010.
“A similar deductible must be agreed upon in any D&O policy for the Supervisory Board.”
A Directors' & Officers' policy has been taken out for the members of the Supervisory Board. No specific deductible for the insured parties has been agreed. The Executive Board and Supervisory Board are of the opinion that responsible actions are a self-evident obligation for members of all management bodies; a deductible is therefore not required, particularly since major shareholders are represented on the Supervisory Board. Hence it is not intended in future to agree a deductible for the members of the Supervisory Board in their Directors' and Officers' policies.
Point 4.2.4 of the Code:
“The total compensation of each one of the members of the Executive Board is to be disclosed by name, divided into fixed and variable compensation components. The same applies to promises of benefits that are granted to a Management Board member in case of premature or statutory termination of the function of a Executive Board member or that have been changed during the financial year. Disclosure may be dispensed with if the General Meeting has passed a resolution to this effect by three-quarters majority.”
By resolution of the General Meeting of Shareholders of May 17, 2006 RATIONAL AG has dispensed with the publication of individualized figures for Executive Board compensation. The other provisions are complied with in full. The Executive Board and Supervisory Board intend to continue to abide by this in fiscal 2010.
Point 5.3 of the Code:
“Formation of committees”
The Supervisory Board of RATIONAL AG has not formed any committees. Forming committees of the Supervisory Board, such as an Audit Committee, is not appropriate for RATIONAL AG because the Supervisory Board consists of only three members. For this reason it is not intended to form any Supervisory Board committees in future.
Point 5.4.1 of the Code:
"Age limit for members of the Supervisory Board"
No age limit has been set for members of the Supervisory Board. Nominations to the General Meeting of Shareholders are geared exclusively to knowledge, skills and technical experience of the candidates in question. It is also intended to abide by this policy in future, in order to safeguard experience and skills for the benefit of the company.
Point 5.4.3 of the Code:
“Elections to the Supervisory Board shall be made on an individual basis”
In the 2009 General Meeting of Shareholders the Supervisory Board was confirmed in office using the list system of election. The company chose this procedure with the agreement of all shareholders present in order to save time.
Landsberg, February 2010
RATIONAL Aktiengesellschaft
The Supervisory Board
The Executive Board
Declarations of Previous Years
