Declaration of Compliance with the German Corporate Governance Code
The Supervisory Board and the Management Board of Koenig & Bauer AG declare pursuant to section 161 of the German Stock Corporation Act as follows:
Koenig & Bauer AG will comply with all recommendations of the German Corporate Governance Code in the version dated 16 December 2019 in the future. However, the Supervisory Board reserves the right to deviate from recommendation G.9 of the Code once in 2021, as explained in greater detail in section 1. Koenig & Bauer AG has complied with the Code recommendations since the last Declaration of Conformity dated 20 March 2020, subject to the exceptions listed in sections 2 to 5. The Company will no longer be applying the exceptions described in sections 2 to 5.
All exceptions relate to the change of the remuneration system for the members of the Management Board. In 2020, the Supervisory Board dealt in detail with the revision of the remuneration system for the members of the Management Board to incorporate recent legal developments and the new version of the Code. The material recommendations contained in the new Code concerning the remuneration of the Management Board were fully implemented in 2020. The deviations from the Code recommendations relate, on the one hand, to the fact that the remuneration of the Management Board was converted in steps (see section 1) and, on the other hand, to the fact that the internal procedures have not yet been fully adapted to reflect the Code recommendations. In the interests of the greatest possible transparency, the deviations are disclosed and explained solely as a precautionary measure.
1. Recommendation G.9: After the end of every financial year, the Supervisory Board shall establish the amount of individual variable remuneration to be granted, depending on target achievement.
Under the new remuneration system for the members of the Management Board, 50 percent of the annual bonus is tied to the Group’s performance and 50 percent to the achievement of individual targets defined for the individual member of the Management Board in the performance of their responsibilities (including any additional tasks assumed).
Following the conversion of the remuneration programme, individual targets aligned with the preparation and implementation of the “Performance 24x” efficiency programme have been defined for three members of the Management Board. The service contracts of two members of the Management Board were not converted until the beginning of 2021. Although it is the shared understanding of the Management Board and the Supervisory Board that the successes in implementing the “Performance 24x” efficiency programme are equally attributable to all members of the Management Board, the individual targets for the two members have not been formally adjusted. The Supervisory Board reserves the right to compensate for the affects arising from this unequal treatment as there is no justification for any differences in the treatment of the members of the Management Board and it is based solely on the timing of the implementation of the new remuneration system for members of the Management Board.
2. Recommendation G.2: The Supervisory Board shall set the specific target total remuneration for each Management Board member on the basis of the remuneration system.
The remuneration system to be submitted to the Annual General Meeting on 11 May 2021 for approval will not be formally adopted by the Supervisory Board until its meeting on 22 March 2021. When it revised the service contracts of the members of the Management Board, the Supervisory Board implemented the new remuneration system in the same way for all members of the Management Board. The agreements on the remuneration of the Management Board, including their specific target total remuneration, are therefore not formally based on the new Management Board remuneration system, but do incorporate elements of the new system, on which the Supervisory Board will be formally passing a resolution at its meeting on 22 March 2021.
3. Recommendation G.3 (horizontal comparison): In order to assess whether the specific total remuneration of Management Board members is in line with usual levels compared to other enterprises, the Supervisory Board shall determine an appropriate peer group of other third-party entities, and shall disclose the composition of that group.
The Supervisory Board considers the MDAX and SDAX companies to be the peer group. In this connection, the Supervisory Board used published remuneration studies to gain an understanding of the development of the Management Board remuneration at companies listed in the M-DAX and S-DAX indices. However, it has not adopted a formalised procedure for a horizontal comparison. The Supervisory Board believes that the Management Board remuneration systems of listed companies are generally only comparable to a limited extent due to their individual structure and the differences in the development of the potential peer group.
In the future, the Supervisory Board will continue to define companies listed in the MDAX and SDAX as a peer group for the assessment of horizontal appropriateness, as described in the remuneration system for the members of the Management Board to be submitted to the Annual General Meeting for approval. In doing so, the Supervisory Board will either be guided by remuneration studies published by renowned institutions or a peer group composed of the MDAX or SDAX companies identified by the Supervisory Board, or ask an independent remuneration consultant to assess the remuneration system by reference to a peer group assembled in consultation with the Supervisory Board. In selecting the peer group, the Supervisory Board will consider Koenig & Bauer AG’s market position and key figures such as revenue, employee numbers and market capitalisation as part of a plausibility check. The Supervisory Board is currently considering whether to formalise the horizontal comparison to a greater extent in the future. To this end, it also wants to observe how other MDAX or SDAX companies perform a horizontal comparison.
4. Recommendation G.4 (Vertical comparison): To ascertain whether remuneration is in line with usual levels within the enterprise itself, the Supervisory Board shall take into account the relationship between Management Board remuneration and the remuneration of senior managers and the workforce as a whole, and how remuneration has developed over time.
To achieve a vertical comparison, the Supervisory Board will assess the development of the Management Board remuneration in relation to the remuneration of senior management and the workforce in Germany in the future. Senior management includes all executives who report directly to members of Koenig & Bauer AG’s Management Board. The workforce is made up of employees subject to collective bargaining agreements as well as non-tariff employees of Koenig & Bauer AG. The Supervisory Board reserves the right to apply a Group-wide comparative view instead of one based on Koenig & Bauer AG. In the past, the Supervisory Board followed the same considerations in principle without, however, having specified a formalised procedure for this. In view of the new statutory reporting requirements under section 162 of the German Stock Corporation Act, the Supervisory Board will be providing a comparative presentation of annual changes in remuneration, the Company’s earnings performance and the average remuneration of employees considered over the last five years on a full-time equivalent basis, including an explanation of which group of employees was included.
5. Recommendation G.7: Referring to the forthcoming financial year, the Supervisory Board shall establish performance criteria for each Management Board member covering all variable remuneration components.
The Supervisory Board will be proceeding in the same manner for 2021. The target agreements with the members of the Management Board will be finalised by mid-April 2021. From 2022 onwards, the target agreements will be set before the beginning of the year in accordance with Code recommendation G.7.
Würzburg, 19 March 2021
Koenig & Bauer AG
For the Supervisory Board: Prof. Dr.-Ing. Raimund Klinkner, Chairman of the Supervisory Board
For the Management Board: Dr. Andreas Pleßke, Chief Executive Officer