According to Section 161 of the German Stock Corporation Act (Aktiengesetz), the management board and the supervisory board of exchange-listed companies are required to declare annually that the company has complied, and will comply, with the recommendations of the Government Commission on the German Corporate Governance Code (the “Code”) published by the German Federal Ministry of Justice in the official Section of the Federal Gazette (Bundesanzeiger) and/or which recommendations the company has not applied and/or will not apply. This declaration has to be made accessible to the public on a permanent basis on the company’s website. Thus, companies may deviate from the recommendations of the Code but, if they do, they are required to disclose such deviations on an annual basis. This allows companies to take account of sector-specific or company-specific needs. Thus, the Code helps to make corporate governance of German companies more flexible and promotes their self-regulation.
For the period as of the issuance of the last Compliance Statement of May 29, 2016, the following statement refers to the version of the Code dated May 5, 2015, as published in the Bundesanzeiger on June 12, 2015.
“In accordance with Section 161 of the German Stock Corporation Act (Aktiengesetz) the Management Board and the Supervisory Board of SFC Energy AG declare that, with the following exceptions, the Company has complied and will comply in full with the “Recommendations of the Government Commission on the German Corporate Governance Code”, as amended:
According to Section 3.8 para. 3 of the Code, a company taking out a D&O (directors’ and officers’ liability insurance) policy for the Supervisory Board must agree upon 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 individual Supervisory Board member. With resolution of May 7, 2015 the general meeting of SFC Energy AG granted the Supervisory Board pre-emptive safeguards against liability risks, in order to ease the recruitment of professional qualified and independent supervisory board members. The recruitment of professional qualified and independent supervisory board members is a key objective of SFC Energy AG, whose fulfillment entails special challenges given the Company’s geographically dispersed business operations, its orientation towards capital markets and its limited financial resources. According to this resolution, Section 16 para. 2 of the Articles of Association of the Company entitles the Supervisory Board Members to receive insurance coverage from the Company under a deductible-free D&O (directors’ and officers’ liability insurance) policy. As a result, the Company deviates from the recommendations set forth in the Code.
According to Section 4.2.3 para. 2 Sentence 6 of the Code, the amount of compensation of the Management Board shall be capped, both overall and for the variable compensation components. With the beginning of the financial year 2014 the Supervisory Board of the Company has implemented a virtual stock option program that applies to any new Management Board member’s employment contract to become effective from 1 January 2014 on and that provides for the distribution of virtual stock options to the members of the Management Board. After the end of a waiting period, the virtual stock options confer the right to cash pay out depending on the price of the share of SFC Energy AG at the date the right is exercised. Whereas the total number of stock options to be distributed is limited from the beginning, there is no limit to the amount in regards of a potentially increased share price during the exercise period. The Supervisory Board holds the opinion that a limitation of the increase potential of a share price-dependent compensation contradicts the principle behind this form of remuneration and would undermine its major incentive which is to work for and contribute to an increased company value. Since there is no complete limitation to the amount of any variable compensation component, no cap to the overall amount of compensation of the Management Board members exists. As a result, the Company deviates from the recommendations set forth in Sections 4.2.3 para. 2 Sentence 6 of the Code.
According to Section 4.2.5. para. 3 of the Code, the compensation report shall present the benefits granted to every member of the Management Board during the last financial year, including the maximum and minimum achievable compensation. For this purpose, the sample table attached as Annex 1 to the Code shall be used. Since, as was previously explained, there is no limit to the amount paid as variable compensation by SFC Energy AG, a maximum achievable compensation cannot be disclosed. For this reason, no illustration of the maximum achievable compensation will be disclosed in the sample table. As a result, the Company deviates from the recommendations set forth in Section 4.2.5. para 3 of the Code.
According to Section 5.3.1 of the Code, the Supervisory Board shall, depending on the specifics of the enterprise and the number of its members, form committees with sufficient expertise. In particular, Section 5.3.2 of the Code recommends that an Audit Committee be set up. The Supervisory Board of SFC Energy AG comprises only three members. The Supervisory Board holds the view – which is consistent with the legal literature on this subject – that the efficiency of the advisory and controlling activities of a Supervisory Board made up of only three members cannot be increased meaningfully by setting up any committees. As a result, the Company deviates from the recommendations set forth in Sections 5.3.1 and 5.3.2 of the Code.
According to Section 5.3.3 of the Code, the Supervisory Board shall form a Nominating Committee composed exclusively of shareholder representatives which will propose suitable candidates to the Supervisory Board for recommendation to the General Meeting. The Company’s Supervisory Board has not set up a Nominating Committee. Consistent with the legal literature on this subject, the Supervisory Board supports the position that forming a Nominating Committee is irrelevant if no employees are represented on the Supervisory Board. As a result, the Company deviates from the recommendation set forth in Section 5.3.3 of the Code.
According to Section 5.4.1 paras. 2 and 3 of the Code, the Supervisory Board shall specify concrete objectives regarding its composition which, whilst considering the specifics of the enterprise, take into account the international activities of the enterprise, potential conflicts of interest, the number of independent Supervisory Board members, an age limit to be specified and a regular limit of length of membership to be specified for the members of the Supervisory Board and diversity. Recommendations by the Supervisory Board to the competent election bodies shall take these objectives into account. The concrete objectives of the Supervisory Board and the status of the implementation shall be published in the Corporate Governance Report. The Company deviates from the recommendation to lay down, take account of and publish such concrete objectives. The composition of the Supervisory Board shall ensure that the Management Board is effectively advised and controlled, based on the Company’s best interests. To ensure compliance with these statutory requirements the Supervisory Board will continue to base its proposals of candidates primarily on the knowledge, skills and experience of eligible candidates. In this respect, the Supervisory Board will also appropriately take account of the international activities of the Company, potential conflicts of interest, the number of independent members of the Supervisory Board, an age limit laid down in the Supervisory Board’s Rules of Internal Procedure and diversity. Setting specific targets or quotas in advance that exceed the legally required target quota of women for the Supervisory Board under Section 111 para. 5 AktG, however, is something which the Supervisory Board considers to be neither necessary nor reasonable due to the fact that to do so would be to impose a sweeping restriction on the selection of suitable candidates particularly for SFC Energy AG, as a small, stock-listed German stock corporation (Aktiengesellschaft) with a supervisory board that is composed of only three members. Accordingly, the Corporate Governance Report does not mention any such objectives. As a result, the Company deviates from the recommendation set forth in Section 5.4.1 paras. 2 and 3 of the Code.
SFC Energy AG believes that a corporate governance system and controlling structure rooted in responsible behavior and transparency are the foundation for creating value and instilling confidence in the Company. The structure of the Company’s management and supervisory bodies is as follows:
The shareholders of SFC Energy AG exercise their co-determination and supervisory rights at the Annual General Meeting which occurs at least once a year. SFC Energy AG regularly informs its shareholders, as well as analysts, shareholders’ associations, media representatives and the interested public, through its financial calendar which is published in the Company’s annual and quarterly reports and on its website. As part of its investor relations activities, the Company further regularly meets with analysts and institutional investors. The Company also holds an analysts’ conference each year. The last such conference took place on November 26, 2014.
The Annual General Meeting of SFC Energy AG is held during the first eight months of each financial year. At this meeting, shareholders resolve on all matters reserved for their decision by law, including, inter alia, appropriation of profits, election and approval of the actions of the members of the Supervisory Board, approval of the actions of the Management Board, election of the auditors and amendments to the Company’s Articles of Association.
In advance of the Annual General Meeting, shareholders receive in-depth information about the financial year under review and the pending agenda items through the annual report and the invitation notice, both of which make it easier for them to exercise their rights and prepare for the meeting. All of the documents and information pertaining to the Annual General Meeting, including the annual report, are also published on the Company’s website. To facilitate the exercise of shareholders’ rights, SFC Energy AG offers any shareholder who is unable or chooses not to exercise his or her voting rights at the Annual General Meeting in person the opportunity to have them exercised at the Annual General Meeting through a proxy in accordance with instructions given to such proxy.
The Management Board of SFC Energy AG manages the Company with the goal of creating sustainable value on its own responsibility and in the best interests of the Company, i.e., with the interests of the shareholders, employees and other stakeholders in mind. The Management Board acts without being subject to instructions from any third parties and in keeping with the law, the Company’s Articles of Association and the rules of internal procedure laid down by the Supervisory Board for the Management Board and taking account of the resolutions by the Annual General Meeting. When filling management positions within the Company, the Management Board of SFC Energy AG also takes into consideration the principle of diversity and seeks to ensure appropriate representation of women.
Notwithstanding the principle of overall responsibility according to which all members of the Management Board are jointly responsible for managing the Company, each member of the Management Board has sole responsibility for the area assigned to him or her. The Chief Executive Officer has primary responsibility for the overall management and business policy of the Company. He ensures coordination and consistency of business management within the Management Board and represents the Company in public. During the past financial year, the Management Board of SFC Energy AG comprised of three members, Dr. Peter Podesser, who serves as Chief Executive Officer (CEO), Hans Pol, who is responsible for the sales function SFC/PBF, and Gerhard Inninger, who – until his departure on May 16, 2014 – served as Chief Financial Officer (CFO). His position was filled by Steffen Schneider on September 1, 2014.
The Management and Supervisory Boards of SFC Energy AG work closely together for the good of the Company. The Management Board regularly reports to the Supervisory Board providing a timely and comprehensive picture of all relevant issues of planning, the course of business, strategy, risk position and risk management, and all other important events that are of material importance for the management of the Company. The strategic orientation of SFC Energy AG is also regularly coordinated with the Supervisory Board. In accordance with the rules of internal procedure laid down by the Supervisory Board for the Management Board, material decisions by the Management Board are subject to the Supervisory Board’s consent.
During the last financial year, there were no conflicts of interest involving the members of the Management Board of SFC Energy AG that would have required immediate disclosure to the Supervisory Board. In the past fiscal year, Dr. Podesser was member of the supervisory board of COC AG, Burghausen. Besides, no member of the Management Board was a member of the supervisory board of any non-group company.
The Supervisory Board appoints the Management Board and supervises the latter’s management of SFC Energy AG. The Supervisory Board is directly involved in all decisions that are of fundamental importance for the Company. Pursuant to applicable law, the Company’s Articles of Association and the Management Board’s rules of internal procedure or resolutions adopted by the Supervisory Board, certain matters relating to the management of the Company require the Supervisory Board’s consent. The Supervisory Board actively guides the Management Board through advice and discussions, performs the duties incumbent on it by law and the Company’s Articles of Association, and continuously supervises the conduct of the Company’s business on the basis of Management Board reports and joint meetings (see the Supervisory Board report on pages 24 ff).
The Chairman of the Supervisory Board coordinates the Supervisory Board’s work, chairs its meetings and represents its interests externally. He maintains regular contact with the Management Board and in particular discusses with the latter the Company’s strategy, its performance and risk management. The Supervisory Board has established for itself rules of internal procedure which, within the limits set by law and the Company’s Articles of Association, include among other things provisions regarding meetings of the Supervisory Board and the passing of resolutions, the duty of confidentiality and the handling of conflicts of interest.
Pursuant to Article 10 para. 1 of the Company’s Articles of Association, in financial year 2014 the Supervisory Board of SFC Energy AG was made up of three members, which were elected by the shareholders. In financial year 2014, the members of the Supervisory Board were (i) Tim van Delden, (ii) David Morgan and (iii) Dr. Jens Thomas Müller (until the close of the ordinary General Shareholders’ Meeting on May 16, 2014), as well as (iv) Hubertus Krossa (since the close of the General Shareholders Meeting on May 16, 2014). In accordance with the recommendations of the German Corporate Governance Code, Tim van Delden and David Morgan were elected individually at the Annual General Meeting on May 9, 2012. Likewise, Hubertus Krossa was elected individually in the General Shareholders’ Meeting on May 16, 2014.
Of the Supervisory Board members currently in office, David Morgan especially qualifies as an independent financial expert within the meaning of Section 100 Subsection 5 AktG. He served many years as a UK auditor and for several years, he has held various prominent positions in the field of corporate finance. Until its dissolution in financial year 2011, David Morgan also served as Chairman of the Company’s Audit Committee.
The Supervisory Board has not specified any concrete objectives regarding its composition. To ensure compliance with the legal requirements the Supervisory Board will continue to base its proposals of candidates to the shareholders primarily on the knowledge, skills and experience of eligible male and female candidates. In this respect, the Supervisory Board will also appropriately take account of the international activities of the Company, potential conflicts of interest, the number of independent members of the Supervisory Board, an age limit laid down in the Supervisory Board’s Rules of Internal Procedure and diversity. However, the Supervisory Board holds the view that it is neither necessary nor appropriate to set concrete objectives or gender-specific quotas as this would restrict in a blanket fashion the election of suitable candidates especially at SFC Energy AG as a smaller exchange-listed company.
Except for Dr. Jens Thomas Müller, who was elected to the Company’s Supervisory Board at the proposal of the Company’s shareholder HPE PRO Institutional Fund B.V., Amsterdam, The Netherlands, which at the time held more than 25 percent of the voting rights in SFC Energy AG, no other former members of the Management Board of SFC Energy AG have sat or sit on the Company’s Supervisory Board. The Company’s Management and Supervisory Boards believe that the Supervisory Board consists of an adequate number of independent members.
In financial year 2014, as in previous years, the Supervisory Board thoroughly examined potential conflicts of interest affecting its members and discussed and agreed upon its procedure for handling such conflicts, should they arise. In the year under review, the Supervisory Board did not identify any conflict of interest regarding the members of the Supervisory Board. At its meeting on March 22, 2013, the Supervisory Board decided, as a matter of precaution and for purposes of clarification, that the member of the Supervisory Board David Morgan, who is the Chairman of the Advisory Board of Conduit Ventures Ltd. (Conduit), should abstain from voting on any potential resolution regarding the acquisition of companies or the entering into close business relations with companies in which Conduit holds an equity interest. By way of this voting rights preclusion, conflicts of interest shall be avoided. However, no such resolutions were adapted in the year 2014.
The Supervisory Board’s term of office generally amounts to five years. The current term of office ends at the close of the Annual General Meeting 2017. In order to allow for a synchronisation of the electoral periods of the members of the supervisory board, Hubertus Krossa was, as an exception, only elected as a member until the close of the General Shareholders’ Meeting in 2017.
In financial year 2014, the Supervisory Board had (as in previous years) not formed any committees since it is – consistent with the legal literature on this subject – of the opinion that the setting up of committees within a supervisory board made up of only three members does not seem adequate and will not lead to any efficiency improvements in terms of the exercise of the advisory and controlling functions. The setting-up of a nominating committee is – according to the view of the Supervisory Board – further irrelevant since there are no employee representatives on the Company’s Supervisory Board.
There are no relevant corporate governance practices at SFC Energy AG over and above the legal obligations.
One of the tasks of any system of good corporate governance is to deal with risks responsibly. The Management Board of SFC Energy AG ensures that the Company’s risk management and risk controlling are adequate. Doing so guarantees that risks are identified in time and potential risks are minimized. More detailed information about the Company’s risk management can be found in the Report on Risks and Opportunities of the Group Management Report, on page 73 ff.
SFC Energy AG aims to secure the highest possible degree of transparency and to provide all target groups with the same information at the same time. All target groups can keep abreast of the latest developments at the Company via the internet. SFC Energy AG publishes ad hoc announcements as well as press releases and other corporate news on its website. The latest statement regarding the Company’s compliance with the German Corporate Governance Code and all previous declarations of conformity are also accessible via the Company’s website.
Pursuant to Section 15a of the German Securities Trading Act ("Wertpapierhandelsgesetz"), the members of SFC Energy AG’s Management and Supervisory Boards and certain senior executives, as well as individuals and entities closely related to and affiliated with them, are required to report purchases and sales of shares in the Company and of any related financial instruments. Management Board Member Steffen Schneider notified SFC Energy AG, that he acquired 1,000 no-par value shares of the company on December 18, 2014. Former Supervisory Board Member Dr. Jens Müller notified SFC Energy AG that he sold (i) 25,000 no-par value shares of the company on March 5, 2014, (ii) 17,835 no-par value shares of the company on March 6, 2014 and (iii) 2,165 no-par value shares of the company on March 7, 2014. At the time of the transactions, Dr. Müller was still a member of the Supervisory Board.
All directors’ dealings pursuant to Section 15a of the German Securities Trading Act are published on the Company’s website at www.sfc.com. In financial year 2014 no other dealings have been carried out either by the members of the Management Board and/or by the Supervisory Board for which a disclosure was required.
The total number of shares in SFC Energy AG held by Management Board members as of December 31, 2014 was 2,60%, of which 1,35% were held by Management Board Member Hans Pol and 1,24 % by the chairman Dr. Peter Podesser. As of this date, the members of the Supervisory Board held 0,05% of the shares issued by the Company.
The consolidated financial statements of SFC Energy AG as well as the Company’s interim reports are prepared in accordance with the International Financial Reporting Standards (IFRS) pursuant to the guidelines of the International Accounting Standards Board. Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft, Munich, was appointed by the Ordinary Annual General Meeting to audit the Company’s financial statements for financial year 2014 and engaged for the audit by the Supervisory Board. The auditors participated in the Supervisory Board’s discussions concerning the consolidated financial statements and reported on the material results of their audit. Shareholders and other interested parties can access the consolidated financial statements and interim reports on the Company’s website.
The compensation report summarizes the principles used to determine the compensation of the Management Board of SFC Energy AG and explains the amounts and the structure of the compensation. The compensation report also describes the underlying principles and the amounts of compensation paid to the Supervisory Board.
Pursuant to the German Stock Corporation Act, as amended by the Act on the Appropriateness of Management Board Compensation, the determination of the Management Board’s compensation is a matter reserved for the full Supervisory Board. The compensation of the members of the Management Board consists of the following elements:
The members of the Management Board receive fixed annual compensation which is paid in twelve equal monthly installments.
In addition, the members of the Management Board receive variable com-pensation if pre-defined performance targets are met (performance-based bonus). In financial year 2014, the targets were for the Company to reach the amounts budgeted for Group sales (based on the budgeted exchange rate of the Canadian dollar to the Euro), gross margin and adjusted EBITDA, and each target was tied to 1/3 of the bonus.
Under a long-term incentive program (LTIP) of the Group, the members of the Management Board could – until the fiscal year 2014 – additionally receive bonus payments for the period of the term of their service agreements, under certain circumstances and if certain performance targets are met. Dr. Peter Podesser participates in the LTIP since 2009, Gerhard Inninger participates in the program as of 2012. The LTIP is based on a so called phantom stock model and is divided into different performance periods of three years each: financial years 2009 to 2011, 2010 to 2012 and 2011 to 2013 (Dr. Peter Podesser) and financial years 2012 to 2014 and 2013 to 2015 (Dr. Podesser and Gerhard Inninger). The cash compensation awarded at the end of each of the three-year periods predominantly depends on the Company’s share price and the attainment of a defined EVA (Economic Value Added) target for the respective period. More detailed information about the LTIP can be found in the Notes to the financial statement on page 137 ff.
With the beginning of the financial year 2014 the Supervisory Board of the Company has implemented a virtual stock option program (SAR-Program 2014-2016) that applies to any new Management Board member’s employment contract to become effective from January 1, 2014, on and that provides for the issuance of virtual stock options to the members of the Management Board. More detailed information about the SAR-Program 2014-2016 can be found under the heading “Stock Option Plans” on page 41 ff of the Annual Report.
In addition, the members of the Management Board receive certain fringe benefits. For example, the Company provides the members of its Management Board with a company car. It pays the premiums for their accident, pension and life insurance up to a maximum of EUR 10,000.00 per year and has taken out directors’ and officers’ liability insurance on the Management Board members, which provides for a retention of 10% of the damage or one and a half times the fixed annual compensation.
Compensation of the members of the Management Board totaled EUR 1,014,197 in financial year 2014. Compensation in financial year 2014 included the fixed compensation, non-cash perquisites, variable profit and performance-based compensation, expenditure for the SAR program and premiums for accident, pension, and life insurance. The above total includes all amounts that were laid out in 2014 or set aside as provisions in the consolidated financial statements for 2014, less the amounts that had been set aside as of December 31, 2013.
The individual disclosure of the compensation of each member of the Management Board is published according to sample tables provided in the German Corporate Governance Code, which was published in its current version on September 30, 2014. Chart 1 illustrates the benefits granted in the financial year 2014. Chart 2 shows the amount disbursed. Since no cap to the amount paid as variable compensation has been established (with regard to the SARP), no maximum achievable compensation is being disclosed. This is a deviation from the German Corporate Governance Code.
The members of the Supervisory Board receive a fixed-only annual compensation in the amount of EUR 25,000.00 per member, with the Chairman of the Supervisory Board and his deputy respectively receiving twice and one and a half times this amount.
Moreover, the members of the Supervisory Board are entitled to reimbursement of the out-of-pocket expenses they incur in exercising their duties as Supervisory Board members, including any value-added tax attributable to those expenses, and inclusion in the directors’ and officers’ liability insurance policy the Company has taken out for its governing bodies.
The compensation (including non-cash perquisites) of the individual members of the Supervisory Board in 2014 breaks down as follows:
|Tim van Delden Chairman||Total: 50.000€|
|David Morgan Deputy Chairman||Total: 37.500€|
|Dr. Jens Müller (until May 16 2014)||Total: 9.315€|
|Hubertus Krossa (since May 16 2014)||Total: 15.685€|
With the beginning of the financial year 2014 the Supervisory Board of the Company has implemented a virtual stock option program (SAR-Program 2014-2016) to align the interests of the shareholders with those of the members of the Management Board. The SAR-Program 2014-2016, which provides for the issuance of virtual stock options to the members of the Management Board, applies to any new Management Board member’s employment contract to become effective from January 1, 2014, on and replaces the existing LTIP. After the end of a fixed waiting period the virtual stock options confer the right to cash pay out depending on the stock exchange price of the shares of SFC Energy AG at the date the right is exercised. The total number of virtual stock options to be issued to the members of the Management Board is limited and will be reduced retrospectively if the stock exchange price of the shares of SFC Energy AG at previous agreed cut-off dates falls below certain thresholds. The SAR-Program 2014-2016 has a term of seven years. However, only after a waiting period of four years has expired, a part of the virtual stock options may be exercised subject to the achievement of certain pre-agreed performance targets. The exercise price payable is EUR 1.00 per virtual stock option.
The terms of the SAR-Program 2014-2016 are as follows:
|Date Of Issuance||January 1, 2014 (Hans Pol); April 1, 2014 (Dr. Peter Podesser); September 1, 2014 (Steffen Schneider)|
|Waiting period||4 years (Hans Pol); 4 to 6 years (Dr. Peter Podesser); 4 to 6 years (Steffen Schneider)|
|Cut-off dates||January 1, 2015 (Hans Pol); April 1, 2015, April 1, 2016, and April 1, 2017 (Dr. Peter Podesser); September 1, 2015, September 1, 2016 and September 1, 2017 (Steffen Schneider)|
|Exercise price||EUR 1.00|
|Performance targets (stock market price targets)||Stock exchange price increase in respect of stock exchange price at day of issuance and better development than benchmark (ÖkoDAX)|
All of SFC Energy AG’s commercial transactions eligible for reporting at a glance: Purchase and sale transactions involving SFC shares and securities.
All voting rights registrations as per Section 26 of the German Securities Trading Act since 2008 at a glance.
All German Securities Trading Act notifications of SFC Energy AG regarding the issue of new shares.