The Executive Board and the Supervisory Board of RATIONAL AG, Landsberg am Lech, hereby declare in accordance with section 161 of the AktG that, since the last declaration of conformity was submitted in February 2019, the recommendations of the Government Commission for a German Corporate Governance Code (as amended and published in the Federal Gazette on 24 April 2017) have been and are being complied with, with the following exceptions:
Number 4.2.3 (2) sentence 3 of the Code:
Number 4.2.3: “Variable remuneration components generally have a multiple-year assessment basis that shall have essentially forward-looking characteristics.”
The variable components of Executive Board remuneration as agreed in the existing employment contracts with members of the Executive Board comprise various elements of the company’s long-term success, but do not specifically stipulate a multi-year assessment basis. The Supervisory Board of RATIONAL AG regards sustainable company development as a matter of course. In a continuous process, milestones for the annual variable remuneration components of the members of the Executive Board are derived from the corporate strategy.
Numbers 4.2.4 and 4.2.5 of the Code:
Number 4.2.4: “The total compensation of each one of the members of the Management 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 Management Board member or that have been changed during the financial year. Disclosure is dispensed with if the General Meeting has passed a resolution to this effect by three- quarters majority.”
Number 4.2.5: “Disclosure shall be made in the Notes or the Management Report. A compensation report as part of the Management Report outlines the compensation system for Management Board members. The outline shall be presented in a generally understandable way.
The compensation report shall also include information on the nature of the fringe benefits provided by the company.
In addition, the remuneration report shall present the following information for every Management Board member:
The model tables provided in the appendix shall be used to present this information.”
On May 4, 2016, the General Meeting of Shareholders of RATIONAL AG resolved to dispense with the publication of individualised figures for Executive Board remuneration in accordance with section 286 (5) of the Handelsgesetzbuch (HGB, German Commercial Code). This resolution of the General Meeting will be in effect for five years. Disclosure of the variable remuneration broken down by short-term and long-term components will not be made.
Number 5.1.2 (1) sentence 2 of the Code:
Number 5.1.2 (1) sentence 2: “When appointing the Management Board, the Supervisory Board shall also respect diversity.”
Number 5.1.2 (2) sentence 3: “An age limit for members of
the Management Board shall be specified.”
The Supervisory Board and Executive Board expressly welcome all efforts to counter any form of discrimination and to promote diversity in a reasonable manner. When appointing members of the Executive Board, the special skills and qualifications of the candidate are the only decisive criterion for the Supervisory Board. Other attributes such as gender or national identity have not been and will not be of any consequence for this decision.
On 13 November 2020, the Supervisory Board specified an age limit of 65 years for members of the Executive Board.
Number 5.3.3 of the Code (Formation of committees):
“The Supervisory Board shall form a nomination committee composed exclusively of shareholder representatives which recommends suitable Supervisory Board candidates for the proposals of the Supervisory Board to the General Meeting.”
The Supervisory Board formed an Audit Committee in 2015. The Supervisory Board does not believe that the establishment of a nomination committee is necessary. With a seven-member Supervisory Board, efficient discussions and lively exchanges of views on suitable candidates for nomination by the Supervisory Board to the General Meeting of Shareholders can also be held in the plenary session. Moreover, the fact that the Supervisory Board of RATIONAL AG is not subject to co-determination obviates the need to form a nomination committee that consists exclusively of shareholder representatives.
Number 5.4.2 (2) sentence 2 and (4) of the Code:
Number 5.4.1 (2) sentence 2: “Within the company-specific situation the composition of the Supervisory Board shall reflect appropriately the international activities of the company, potential conflicts of interest, the number of independent Supervisory Board members within the meaning of number 5.4.2, an age limit and a regular limit to Supervisory Board members’ term of office, both to be specified, as well as diversity.”
The composition of the Supervisory Board of RATIONAL AG is guided by the company’s interests and guarantees that the Executive Board is effectively monitored and advised. The candidates for election to the Supervisory Board are selected exclusively on the basis of knowledge, skills and experience. Other attributes such as gender or national identity have not been and will not be of any consequence. No age limit has been specified for Supervisory Board members, nor has a regular limit of length of membership of the Supervisory Board.
The recommendations of the Government Commission for a German Corporate Governance Code, as amended on 16 December 2019 and published in the official section of the Federal Gazette on 20 March 2020, have been complied with since this version of the Code entered into force, with the exception of the recommendations itemised below for the reasons and in the periods specified there:
B. Appointments to the Management Board
Recommendation B.1 of the Code: “When appointing Management Board members, the Supervisory Board shall take diversity into account.”
The Supervisory Board and Executive Board expressly welcome all efforts to counter any form of discrimination and to promote diversity in a reasonable manner. When appointing members of the Executive Board, the special skills and qualifications of the candidate are the only decisive criterion for the Supervisory Board. Other attributes such as gender or national identity have not been and will not be of any consequence for this decision.
Recommendation B.5 of the Code: “An age limit shall be specified for members of the Management Board and disclosed in the Corporate Governance Statement.”
On 13 November 2020, the Supervisory Board specified an age limit of 65 years for members of the Executive Board.
C. Composition of the Supervisory Board
I. General requirements
Recommendation C.1 second half of sentence 1 of the Code: “... while taking the principle of diversity into account.”
Recommendation C.2 of the Code: “An age limit shall be specified for members of the Supervisory Board and disclosed in the Corporate Governance Statement.”
The composition of the Supervisory Board of RATIONAL AG is guided by the company’s interests and guarantees that the Executive Board is effectively monitored and advised. The candidates for election to the Supervisory Board are selected exclusively on the basis of knowledge, skills and experience. Other attributes such as gender or national identity have not been and will not be of any consequence. No age limit has been specified for Supervisory Board members, nor has a regular limit of length of membership of the Supervisory Board. In compliance with the profile of skills and expertise, nominations to the General Meeting of Shareholders are based exclusively on the knowledge, skills and experience of the candidates in question. The intention is to continue to abide by this policy in future in order to retain experience and skills for the benefit of the company.
II. Independence of Supervisory Board members
Recommendation C.10 of the Code: “The Chair of the Supervisory Board, the Chair of the Audit Committee, as well as the Chair of the committee that addresses Management Board remuneration, shall be independent from the company and the Management Board.”
Walter Kurtz has been a member of the Supervisory Board since 1998 and is therefore not considered independent of the company. Mr Kurtz has been Chairman of the Supervisory Board since 11 August 2017. Due to his many years of service in the company, which he managed with the company’s founder Siegfried Meister for many years, Mr Walter Kurtz not only has invaluable experience, but also upholds the continued management of the company as its founder had intended.
D. Supervisory Board Procedures
I. Rules of procedure
Recommendation D.1 of the Code: “The Supervisory Board shall adopt its own rules of procedure and shall publish these on the company’s website.”
For its work, the Supervisory Board has set itself rules of procedure. However, the Supervisory Board opts not to publish the rules of procedure on the company’s website. The main rules of conduct for the Supervisory Board are laid down in law and in the Articles of Association and publicly accessible. We do not believe that the additional publication of the rules of procedure would add any value.
II. Cooperation within the Supervisory Board and with the Management Board
2. Supervisory Board committees
Recommendation D.5 of the Code: “The Supervisory Board shall form a Nomination Committee, composed exclusively of shareholder representatives, which names suitable candidates to the Supervisory Board for its proposals to the General Meeting.”
The Supervisory Board does not believe that the establishment of a nomination committee is necessary. With a seven-member Supervisory Board, efficient discussions and lively exchanges of views on suitable candidates for nomination by the Supervisory Board to the General Meeting of Shareholders can also be held in the plenary session. Moreover, the fact that the Supervisory Board of RATIONAL AG is not subject to co-determination obviates the need to form a nomination committee that consists exclusively of share- holder representatives.
G. Remuneration of Management Board and Supervisory Board
Recommendation G.1 to G.4, G.6, G.8, G.10 to G.12, G.13, sentence 1 of the Code
Unlike the previous version, the Code, as in force since 20 March 2020, contains a number of recommendations on the remuneration of members of the Executive Board. The remuneration of the members of the Executive Board of RATIONAL AG is based on the remuneration system approved by the ordinary General Meeting of Shareholders held on 21 April 2010.
Due to the impact of the coronavirus crisis, which could not have been foreseen at the beginning of 2020, and the exceptional performance of the Executive Board in achieving a very good result of the company in the face of the particular challenges, a portion of the variable, performance-related remuneration for fiscal year 2020 will be paid to the members of the Executive Board, even though the targets set at the beginning of 2020 were not met. The Supervisory Board believes that this is in the interest of the company’s longterm prosperity.
As part of the implementation of the German Act Implementing the Second Shareholder Rights Directive (Gesetz zur Umsetzung der zweiten Aktionärsrechterichtlinie, ARUG II), the Supervisory Board will meet its obligation and submit for approval a new revised remuneration system to the General Meeting of Shareholders to be held on 12 May 2021; the new system incorporates most of the recommendations of the Code.
Landsberg am Lech, 28 January 2021
RATIONAL Aktiengesellschaft
Corporate governance.