Corporate governance statement
The Management and Supervisory boards of B.R.A.I.N. Biotechnology Research and Information Network AG (hereinafter also referred to as “BRAIN AG” or “the company”) are aware of the importance of the principles of responsible and good corporate governance, and are committed to them. This statement combines the corporate governance statement of BRAIN AG pursuant to Section 289f of the German Commercial Code (HGB) and the Group corporate governance statement for the BRAIN Group pursuant to Section 315d HGB. It comprises of the statement of conformity pursuant to Section 161 of the German Stock Corporation Act (AktG), relevant information about corporate governance practices, the description of Management and Supervisory boards’ working methodology, as well as the composition of their committees.
Statement by the Management and Supervisory boards of the conformity of BRAIN AG with the German Corporate Governance Code (DCGK) pursuant to Section 161 (1) Clause 1 of the German Stock Corporation Act (AktG)
The Management and Supervisory boards of BRAIN AG declare that since the last statement of conformity on 20 December 2018, BRAIN AG has complied with the recommendations of the “Government Commission German Corporate Governance Code” in the version dated 24 April 2017 (with correction dated 17 May 2017), and will continue to comply with them in the future, with the following exceptions.
- Number 3.8 (3): The Code recommends that in a D&O insurance policy (directors & officers liability insurance) for Supervisory Board members a deductible equivalent to at least 10 % of the loss up to a minimum of one and a half times the fixed annual compensation be agreed. BRAIN AG has taken out D&O insurance cover, although it currently includes no deductible for the Supervisory Board members. The company regards a deductible as generally unsuited to enhancing the quality of Supervisory Board activity, while at the same time it diminishes the attractiveness of the Supervisory Board mandate, making it more difficult to compete for suitably qualified candidates.
- Number 4.2.3 (2) Clauses 2 and 3: The Code recommends that variable compensation elements should generally have a multi-year measurement basis relating mainly to the future. To this end, the company has decided that the variable compensation component in Management Board contracts should continue to be calculated applying a one-year measurement basis for the time being. However, the company regularly reviews whether to adjust Management Board compensation by way of mutual agreement. The company has also approved an employee stock ownership plan (ESOP) for the Management Board members, which ensures that they are exposed to a long-term incentive effect.
- Number 4.2.3 (4) Clause 1: The Code recommends that when concluding Management Board employment contracts, care should be exercised to ensure that payments to a Management Board member on early termination of his/her contract, including fringe benefits, do not exceed the value of two years' compensation (severance pay cap), and compensate no more than the remaining term of the employment contract. Management Board contracts concluded before the admission to stock market listing in February 2016 do not include a severance pay cap. The company has taken this into consideration in the case of Management Board contracts concluded after the IPO.
- Number 4.2.3 (4) Clause 3: The Code recommends that the calculation of the aforementioned severance pay cap should be based on the total compensation for the respective financial year elapsed, and, where relevant, also on the basis of the prospective total compensation for the current financial year. Management Board contracts concluded before the admission to stock market listing do not include a severance pay cap. The company has taken this into consideration in the case of Management Board contracts concluded after the IPO.
- Number 5.1.2 (2) Clause 3: The Code recommends setting an age limit for Management Board members. Given the age of the Management Board members in office, BRAIN AG has not set an age limit for the Management Board members to date. The Supervisory Board of BRAIN AG is reviewing whether such an age limit should be set in the future.
- Number 5.3.2 Clause 5: The Code recommends that the Audit Committee chair should be independent, and not be a former member of the company's Management Board whose appointment ended less than two years previously. Dr. Georg Kellinghusen who chaired the Audit Committee until 7 March 2019 was the CFO of BRAIN AG until his (re-)election to the Supervisory Board on 9 March 2017. The recommended two-year waiting period was thereby not complied with. The position of Audit Committee Chairman was conferred on Dr. Kellinghusen thanks to his very good specialist qualifications and the sector knowledge he has acquired. After the AGM on 7 March 2019, Dr. Michael Majerus, who had been newly elected to the Supervisory Board and who had not previously been a member of the Management Board of BRAIN AG, assumed the role of chair of the Audit Committee. Since that date the company has consequently again been in compliance with the recommendation.
- Number 5.4.1 (2) Clauses 1 and 2: The Code recommends that supervisory boards set specific targets for their composition and develop a competency profile for the overall board. While considering the specifics of the enterprise, the composition of the supervisory board should take into appropriate account the company's international activities, potential conflicts of interest, the number of independent Supervisory Board members in the meaning of Number 5.4.2, setting an age limit for Supervisory Board members, and determining a standard limit to Supervisory Board membership, as well as diversity. The Supervisory Board's current composition is based on the competency profile that was prepared. To date, no regulations have been set for an age limit and a limit for a regular duration of membership of the Supervisory Board. For the time, the Supervisory Board has decided being not to set any age limit and no normal limit for the duration of Supervisory Board membership. However, it engages with both of these issues in the case proposed elections to the Supervisory Board, taking the respective individual into consideration.
- Number 7.1.2 Clause 3, semi-clause 1: The Code recommends publishing consolidated financial statements and the group management report within 90 days after the financial year-end. Due to the additional financial accounting requirements as a listed company, the auditing of the financial statements lasted, and lasts, longer than 90 days, so that the audited figures cannot be published with the annual report within 90 days after the financial year-end, but instead not until after the expiry of 90 days. Prospectively, this will also remain the case with future annual consolidated financial statements.
- Number 7.1.2 Clause 3, semi-clause 2: The Code recommends publishing mandatory interim financial information within 45 days after the end of the reporting period. In relation to the publication of interim reports, BRAIN AG complies with statutory regulations as well as the Prime Standard stock exchange regulations of the Frankfurt Stock Exchange. The Management and Supervisory boards regard these as appropriate. Furthermore, in light of various unlisted subsidiaries and participating interests held abroad, publication within shorter periods would necessitate the deployment of considerable financial and personnel resources that would not be appropriately related to the information that shareholders require for a company the size of BRAIN AG. As a consequence, the 45 days required in the Corporate Governance Code are not complied with. Publication nevertheless occurs within the 2-months or 3-months periods valid pursuant to Prime Standard regulations.
Relevant information about corporate governance practices
The purpose of BRAIN AG and of the BRAIN Group is to identify, research, develop, produce and market biological, biochemical and biotechnology processes and products, especially enzymes, biocatalysts, microorganisms and other bioactive natural compounds for industrial applications at chemical companies, for the production of foodstuffs and animal feed, cosmetics and medical products, for the disposal of waste and hazardous materials, as well as to produce energy and raw materials, including the development, production and marketing of such processes and products that contain bioactive components, are based on biotechnical mechanisms, exhibit bioactive effects, or enable biotechnology applications. Within the BRAIN Group, services are also rendered for the pharmaceuticals industry.
The company complies with all statutory corporate governance regulations as well as the recommendations of the German Corporate Governance Code (DCGK) – apart from the exceptions specified and justified in the statement of conformity.
The BRAIN Group parent company, BRAIN AG, is a public stock corporation listed on the Regulated Market of the Frankfurt Stock Exchange, and is consequently subject to certain transparency and insider regulations. In particular, all senior staff of BRAIN AG as well as staff in the areas of finance, legal and communications are informed about insider law issues, and the company has prepared a corresponding information sheet for this purpose.
Description of the Management and Supervisory boards’ working methodology as well as composition and working methodology of the Supervisory Board’s committees
BRAIN AG is a public stock corporation under German law and the parent company of the BRAIN Group with subsidiaries in Germany, France, England and the USA. It is especially subject to the regulations of the German Stock Corporation Act (AktG), and also operates the normal dual executive and supervisory structure consisting of a management board and a supervisory board. The company’s Management and Supervisory boards work together closely in the company’s interest.
The Supervisory Board consults regularly with the Management Board concerning the management of BRAIN AG, and supervises the Management Board’s activities. The Management Board involves the Supervisory Board in good time in all decisions of fundamental significance for the company. It coordinates the company’s strategic orientation with the Supervisory Board, and discusses with it the status of strategy implementation at regular intervals. The Management and Supervisory boards’ joint goal is to successfully implement the growth strategy that has been approved.
Management Board working methodology
The Management Board manages the company’s business according to statutory regulations, the company’s bylaws and the rules of business procedure for the Management and Supervisory boards. It is subject in this context to the restrictions that the company’s bylaws or the Management and Supervisory boards’ rules of business procedure have established in relation to the power to manage the business, or which the Supervisory Board or the AGM determine within the scope of their powers. It informs the Supervisory Board regularly, promptly and comprehensively in the form of detailed written and verbal reports on all questions of relevance to the company relating to strategy, planning, business development, the risk position, risk management and compliance. The Management Board prepares the separate and consolidated annual financial statements.
Pursuant to Section 7 (1) of the company’s bylaws, the Management Board consists of one or several individuals. The Supervisory Board determines the number of Management Board members. The Supervisory Board appoints the Management Board members, recalls them from office, and determines the allocation of their responsibilities. It can also appoint a Management Board Chair (CEO) and a Deputy Management Board Chair, as well as deputy Management Board members.
Composition of the Management Board
The Management Board of BRAIN AG consisted of three members as of 30 September 2019.
|Name||Function||Management Board member since||Contract end|
|Dr. Jürgen Eck||Chief Executive Officer||21 June 2000||30 June 2020|
|Manfred Bender||Chief Financial Officer||1 December 2018||30 November 2021|
|Ludger Roedder||Chief Business Officer||1 January 2019||31 December 2021|
All Management Board members are individually responsible for managing the business division with which they are entrusted; the company’s overall interest has to be taken into consideration at all times in this context. The allocation of business areas to the individual Management Board members is derived from the business allocation plan that is prepared with the Supervisory Board’s approval, and can be modified at any time with its approval.
The business allocation plan includes the following allocations during the 2018/19 financial year:
Dr. Jürgen Eck (Chief Executive Officer – CEO):
- Business development of the BioScience segment
- Technology management, research and development, technological process optimization
- Grants and academic cooperations
Manfred Bender (Chief Financial Officer – CFO):
- Coordinating the individual Management Board areas and contacts with the company’s boards
- Corporate strategy
- Press and public relations work (corporate communications)
- Financial communications (IR)
- Accounting and controlling
- Compliance and quality assurance
- Risk management
- Legal, administration and organization, Group audit
- IT, digitalization
- Management of equity interests, M&A (corporate finance)
- Business process optimization
Ludger Roedder (Chief Business Officer – CBO):
- Business development of the BioIndustrial segment
- Product development
- Formulation and application technology
- Production, scale-up
- Registration and approvals, commercialization strategy
- Innovation management
- Patent strategy
- Press and public relations work (market and customer communications)
The Management Board has a set of rules of business procedure. The rules of business procedure for the Management Board were approved by the Supervisory Board and last updated on 27 February 2019. These particularly include regulations about the working methodology of the Management Board and the allocation of responsibilities between the Management Board members, as well as relating to collaboration with the Supervisory Board. They include a catalog of actions and legal transactions requiring Supervisory Board assent.
Management Board meetings
Management Board meetings are held as required, which is generally bi-weekly. They must be convened if the company’s interests so require. Management Board resolutions are passed with a simple majority of the votes cast, unless statutory provisions prescribe another majority. If the Management Board consists of at least three members, the vote of the Management Board Chair (CEO) is decisive given an equal number of votes.
Collaboration with subsidiaries
At least once a quarter, the Management Board of BRAIN AG and the management of the subsidiaries meet in person or hold telephone conferences on the course of business and forthcoming developments at the subsidiaries. The subsidiaries report monthly to BRAIN AG and consult with the Management Board at short notice in the event of deviations from the planning or forecast. The Management Board reports to the Supervisory Board on reporting and coordination with the subsidiaries and, if requisite, consults with it separately on individual topics.
Supervisory Board working methodology
The Supervisory Board has all responsibilities and rights transferred or allocated to it by law, the company’s bylaws, or in another manner. This especially includes supervising the executive management of the company, the appointment and dismissal of Management Board members, as well as the amendment, cancellation and termination of employment contracts with the Management Board members. The Supervisory Board consults regularly with the Management Board concerning the management of the company. The Supervisory Board is involved in good time in all decisions of fundamental significance for the company. The Supervisory Board has established a set of rules for its own business procedures. These include, among other matters, the working methodology and type of passing of resolutions on the Supervisory Board, as well as the tasks of the Supervisory Board committees that are formed (the Audit Committee, the Personnel Committee, the M&A Committee and the Nomination Committee). Separate sets of rules are also approved through the committees to regulate their working methodologies. All rules of business procedure are adapted regularly to reflect any modifications to the German Corporate Governance Code (DCGK).
The Supervisory Board met for a total of six face-to-face meetings in the 2018/19 financial year. Otherwise the committees held twenty-two face-to-face meetings, and the Supervisory Board and its committees held four telephone conferences. The Audit Committee held four face-to-face meetings in the 2018/19 financial year. The Personnel Committee held ten face-to-face meetings and one telephone conference in the 2018/19 financial year. The Nomination Committee held one face-to-face meeting in the 2018/19 financial year. The M&A Committee held five face-to-face meetings in the 2018/19 financial year. The Innovation Committee held two face-to-face meetings in the 2018/19 financial year.
At the request of the Supervisory Board Chair, the Management Board participates in all ordinary Supervisory Board meetings, reports both in writing and verbally on all agenda items and proposed resolutions, and responds to questions from individual Supervisory Board members. The Supervisory Board Chair has the Management Board report regularly on current business, forwarding such information in an appropriate form to the entire Supervisory Board.
Supervisory Board resolutions are generally passed at face-to-face meetings of the Supervisory Board members. Absent Supervisory Board members can submit a written vote through another Supervisory Board member. This also applies for the submission of the second vote of the Supervisory Board Chair. Outside the scope of attended meetings, the passing of resolutions is permissible through votes conveyed by written, telegram, telephone, telex or modern telecommunications means (by telephone conference or video conference or by email, for example), if so arranged for special reasons by the Supervisory Board Chair, or, if the Supervisory Board Chair is prevented from so doing, the Deputy Supervisory Board Chair. The Supervisory Board is considered quorate if all members are convened in good time via their last provided address, and at least half of the members of which it is to consist in total participate in the passing of the resolution. Supervisory Board members also participate in the passing of a resolution if they abstain from voting. Supervisory Board resolutions are passed with a simple majority of votes submitted, unless other majorities are required by law. This is also applicable in the case of elections. Abstentions are not counted when determining the results of voting. Given an equal number of votes, the Supervisory Board Chair – or if the Supervisory Board Chair is prevented from so doing, the Deputy Supervisory Board Chair – decides whether a further vote is to be held at the same meeting. Given a further vote on the same matter, the Supervisory Board Chair has two votes; the Deputy Supervisory Board Chair does not have this right to a second vote.
All Supervisory Board members must disclose conflicts of interest to the Supervisory Board, including potential conflicts of interest based on advising, or being a director of, a customer, supplier, lender or other third party, whereby this list is not conclusive. In the case of conflicts of interest that are significant or not just of a temporary nature, the respective Supervisory Board members must step down from office. The Supervisory Board provides information in its report to the AGM on conflicts of interest that arise and how they are handled. No conflicts of interest arose in the reporting period.
The Supervisory Board completed its last efficiency audit in December 2017. In order to conduct the efficiency audit, the current situation was appraised based on questionnaires, and the results of the questionnaires were discussed by the Supervisory Board. After evaluating the results, the Supervisory Board notes that it performs its activities efficiently overall. Potential improvements identified as part of the audit are taken into consideration for the future. The Supervisory Board plans to conduct the next efficiency audit in the first half of 2020.
Composition of the Supervisory Board
Pursuant to Section 9 (1) of the company’s bylaws, the Supervisory Board of BRAIN AG consists of six members elected by the AGM. Unless the AGM approves a shorter period for the election of individual members – or for the entire Supervisory Board – the Supervisory Board members are appointed until the end of the Ordinary AGM that approves the discharge for the third financial year after the start of the period of office. The year in which the period of office starts is not included in the calculation. Re-election is permissible. When a Supervisory Board member is elected, a replacement member can be elected at the same time who moves up to the Supervisory Board if the Supervisory Board member steps down before the end of the respective period of office without a successor having been appointed. The appointment of the replacement member moving to the Supervisory Board up in this manner lapses as soon as a successor for the departing member has been appointed, although this is to occur at the latest as of the end of the period of office of the departing Supervisory Board member.
The periods of office of Dr. Ludger Müller and Christian Körfgen as members of the company’s Supervisory Board ended with the conclusion of the AGM on 7 March 2019. At their own request and for reasons relating to age and health, both of these individuals are no longer available for a further period of office. Prof. Dr. Bernhard Hauer and Dr. Michael Majerus were newly elected to the Supervisory Board at the AGM on 7 March 2018.
During the 2018/19 financial year, the Supervisory Board consisted of the following individuals:
Dr. Ludger Müller, Chairman (stepped down at the AGM on 7 March 2019)
Dr. Georg Kellinghusen, Supervisory Board member, Chairman (since the AGM on 7 March 2019)
Dr. Martin B. Jager, Deputy Chairman
Dr. Anna C. Eichhorn, Supervisory Board member
Prof. Dr. Bernhard Hauer, Supervisory Board member
Christian Körfgen, Supervisory Board member (stepped down at the AGM on 7 March 2019)
Dr. Michael Majerus, Supervisory Board member
Dr. Rainer Marquart, Supervisory Board member
In accordance with the recommendation in Number 5.4.2 of the German Corporate Governance Code (DCGK), the Supervisory Board of BRAIN AG includes an appropriate number of independent members, according to its own appraisal.
Given the ownership structure (MPBG held a total of 36.45 % of shares in BRAIN AG as of the 30 September 2018 financial year-end, corresponding to 6,581,607 shares), the Supervisory Board regards a total of four independent members as appropriate. With the setting of these mandates, the company’s largest anchor shareholder can be approximately represented on the Supervisory Board in accordance with the interest it holds in the company.
At present, all of the members of the Supervisory Board are deemed to be independent pursuant to the criteria of the German Corporate Governance Code (DCGK), as a consequence of which the proportion of independent members is fulfilled.
The competency profile and the objectives of the Supervisory Board are composed as follows: the Supervisory Board is of the opinion that one third of its members should cover, in particular, the areas of Entrepreneurship/New Business Areas and Corporate Finance/Capital Market. Moreover, the Supervisory Board regards the recruiting of a further individual with knowledge of the North American market of relevance to the company as a medium-term objective. In terms of diversity, the Supervisory Board wishes to continue for the time being with the ratio of women that it has achieved. To date, the Supervisory Board has not set a binding age limit or a limit for the maximum length of service.
With the appointment of Professor Dr. Bernhard Hauer, the company has again successfully acquired for the company a high level of scientific expertise and knowledge of the North American market, and with the appointment of Dr. Michael Majerus, the company has succeeded in continuing to appoint a total of one third of the members of the Supervisory Board to the Corporate Finance/Capital Market areas.
The Management Board of BRAIN AG has not formed any committees.
The Supervisory Board has currently formed a total of five committees to efficiently perform its work: an Audit Committee, a Personnel Committee, a Nomination Committee, a M&A Committee and an Innovation Committee. The committees prepare resolutions for the Supervisory Board as well as agenda items to be handled by the plenary meeting. In all cases, the committee chairs report on the committees’ work at the subsequent meeting.
The Audit Committee consists of the following individuals until the end of their respective periods of office (the chair and up to two further members):
|Dr. Michael Majerus, since 7 March 2019||Chairman||yes|
|Dr. Georg Kellinghusen||Member (Chairman until 7 March 2019)||yes|
|Dr. Ludger Müller, until 7 March 2019||Member||no|
|Dr. Martin B. Jager, until 7 March 2019||Member||yes|
|Dr. Rainer Marquart, since 7 March 2019||Member||yes|
The Audit Committee concerns itself especially with supervising financial accounting, the financial accounting process, the efficacy of the internal control system, the risk management system, the internal audit system, the audit of the financial statements, as well as compliance. The Audit Committee submits a substantiated recommendation for the election of the auditor to the Supervisory Board, which comprises of at least two candidates if the audit mandate is to be put out to tender. The Audit Committee supervises the auditor’s independence and concerns itself with services to be rendered additionally by the auditor, the award of the audit mandate to the auditor, the setting of focus audit areas, as well as arranging the auditor’s fee.
Pursuant to the German Stock Corporation Act (Sections 107 (4), 100 (5) AktG), the audit committee must include at least one supervisory board member with expertise in the financial accounting or financial auditing areas. Dr. Georg Kellinghusen, who was the Chairman of the Audit Committee until the AGM on 7 March 2019, meets the statutory conditions pursuant to the German Stock Corporation Act (Sections 107 (4), 100 (5) AktG) and also possesses specialist knowledge and experience as a CFO over a more than thirty-year period, including at four listed companies. His activities focus on controlling, financial matters and financial accounting, among other areas. He also possesses broad knowledge in compliance topics as well as in the investor relations area. The current Audit Committee Chairman Dr. Michael Majerus meets the statutory conditions pursuant to the German Stock Corporation Act (Sections 107 (4), 100 (5) AktG), and also possesses specialist knowledge as a head of financial accounting and CFO, including at three listed companies. His activities focus on controlling, financial matters and financial accounting, among other areas. He also possesses broad knowledge in compliance topics as well as in the investor relations area.
The Personnel Committee consists of the following individuals until the end of their respective periods of office (the chair and up to two further members):
|Dr. Ludger Müller, until 7 March 2019||Chairman|
|Dr. Georg Kellinghusen since 7 March 2019||Chairman|
|Dr. Martin B. Jager||Member|
|Christian Körfgen, until 7 March 2019||Member|
|Dr. Michael Majerus, since 7 March 2019||Member|
The Personnel Committee concerns itself mainly with personnel matters relating to the Management Board. In particular, it plays a preparatory role for the Supervisory Board in the selection, appointment and recall from office of Management Board members, the agreeing and supplementation of Management Board contracts and pension arrangements, setting the compensation scheme for Management Board members and its implementation in the Management Board contacts, target setting for the variable compensation, setting and reviewing the appropriateness of overall compensation of each individual Management Board member, and approving the annual compensation report. It also submits recommendations for resolutions. Moreover, the Personnel Committee can pass resolutions on the Supervisory Board’s behalf in relation to the following matters: certain legal transactions with Management Board members (e. g. in the meaning of Section 112 of the German Stock Corporation Act [AktG]), and approving Management Board members’ outside activities pursuant to Section 88 AktG, especially where Supervisory Board mandates outside the BRAIN Group are accepted.
The Nomination Committee consists of the following individuals until the end of their respective periods of office (the chair and up to two further members):
|Dr. Ludger Müller, until 7 March 2019||Chairman|
|Dr. Georg Kellinghusen, since 7 March 2019||Chairman|
|Dr. Anna C. Eichhorn||Member|
The Nomination Committee submits appropriate candidates to the Supervisory Board for it to propose to the AGM for election. Until further notice, two Supervisory Board members belong to the Nomination Committee.
The M&A Committee consists of the following individuals until the end of their respective periods of office (the chair and up to three further members):
|Dr. Martin B. Jager||Chairman|
|Dr. Ludger Müller, until 7 March 2019||Member|
|Dr. Georg Kellinghusen||Member|
|Dr. Rainer Marquart||Member|
The M&A Committee advises the Management Board on all relevant strategic matters relating to the initiation and implementation of M&A transactions, especially in reviewing the strategic conformity of planned M&A measures, the implementation of acquisitions or disposals of companies or parts of companies, the valuation of target companies or transactions, the structuring and financing of transactions, the transaction-specific selection of suitable advisors, and the planning and implementation of integration scenarios. The M&A Committee prepares the decisions of the Supervisory Board in relation to the initiation and execution of M&A transactions, and prepares recommendations for Supervisory Board resolutions.
The Innovation Committee consists of the following individuals until the end of their respective periods of office (the chair and up to two further members):
|Dr. Anna C. Eichhorn||Chair|
|Dr. Martin B. Jager||Member|
|Dr. Rainer Marquart, until 7 March 2019||Member|
|Prof. Dr. Bernhard Hauer, since 7 March 2019||Member|
The Innovation Committee advises the Management Board on all matters concerning the company’s innovation strategy and innovation management, especially in relation to the design and development of new products and applications, the allocation of individual projects to business segments or subsidiaries, and the initiation and implementation of research and development partnerships. The Innovation Committee prepares the decisions of the Supervisory Board in relation to innovation strategy and innovation management, and prepares recommendations for Supervisory Board resolutions. The Innovation Committee held two meetings.
Remarks concerning the working methodology of the Management Board, the Supervisory Board, and the committees in the financial year are also presented in the report by the Supervisory Board, which is included in the annual report of BRAIN AG.
Dialog with investors
The Supervisory Board discussed the suggestion from Number 5.2 (2) of the German Corporate Governance Code (DCGK), and was in favor of the Supervisory Board Chairman being available to answer investors’ questions relating specifically to the Supervisory Board. The Management Board of BRAIN AG also welcomes this move.
Commitment to promote participation by women in management positions pursuant to Section 76 (4) and Section 111 (5) of the German Stock Corporation Act (AktG)
At its meeting on 23 September 2016, the Supervisory Board of BRAIN AG passed a resolution that the Supervisory Board should include one woman, corresponding to a 17 % ratio. The deadline for implementation was set at 30 June 2017. This objective was implemented on 9 March 2017 when Dr. Anna C. Eichhorn was elected to the Supervisory Board of BRAIN AG. The retention of this goal was confirmed at the meeting on 28 September 2017 for the period until 30 June 2022. Also on 28 September 2017, the Supervisory Board passed a resolution to leave the ratio of women for the Management Board of BRAIN AG unchanged at 0 % until 30 June 2022.
For the first management level below the Management Board, the Management Board of BRAIN AG passed a resolution to set a 14 % target for participation by women and determined that this goal should be implemented by 30 June 2017. This target was reached with a level of 14 % on 30 June 2017.
As a consequence, the Management Board of BRAIN AG has set the target for the proportion of women at the first management level below the Management Board at 14 %, with a deadline for implementation by the end of 30 September 2020. The target for the first management level maintains the status quo as of 30 June 2017, but does not exclude an increase in the proportion of women at this management level. At present, the company falls short of the target for the proportion of women at the first management level due to the further enlargement of this management level, although this does not alter the existing target for this management level. This shortfall mainly reflects the corporate strategy decision to create a further position for a technology unit head and to appoint one individual as the head of research. In the course of strengthening the management team, a vacancy for a technology unit head was also filled from within the company. Related headhunting efforts, however, have failed to fill the vacant positions with suitable candidates.
Considering the management matrix structure established within the company, especially including command and reporting lines between Management Board and subordinated levels, as well as taking into consideration the company’s size, only one management level exists below the Management Board in the meaning of Section 76 (4) AktG.
Corporate governance practices
Corporate governance at BRAIN AG
Good corporate governance refers to responsible corporate management with the aim of creating sustainable value. In particular, good corporate governance aims to strengthen trust and confidence in the company on the part of investors, business partners, employees and the general public. Efficient work by the Management and Supervisory boards forms an important precondition for this, as well as good collaboration not only between these two boards but also between these boards and the company’s employees. Considerable significance is ascribed to open and transparent corporate communications in this context.
The corporate structure is oriented to the responsible, transparent and efficient management and controlling of the company. For this reason, the company also supports the targets and principles of the German Corporate Governance Code (DCGK). The Management and Supervisory boards as well as the other management levels and employees are obligated to adhere to these principles of responsible corporate governance. The Management Board is responsible for compliance with corporate governance principles within the company.
BRAIN AG has established compliance structures in the light of the company’s current size, and will further develop them in relation to growing requirements imposed by the regulatory environment and with a view to the company’s development and growth.
BRAIN AG publishes leaflets and organizes talks in order to inform its employees about how to identify insider situations at an early stage. The Management Board as well as staff participating in exploratory discussions involve the compliance department at an early juncture in such discussions, as well as in preparatory measures that might lead to insider situations. Regulations relating to closed periods in accordance with the Market Abuse Directive (MAR) are applied not only to the Management Board but also to all staff working in the executive management area as well as in the finance and legal areas, and to staff in the communications area.
Along with capital market law topics of relevance to BRAIN AG, regular training is also conducted on genetic technology safety and occupational safety.
Compliance and risk management meetings are conducted at regular intervals in order to coordinate current measures and medium- and long-term steps to ensure compliance and risk minimization.
The representative of the compliance department participates regularly in further training.
BRAIN AG has also established whistle-blower arrangements for potential misconduct on the part of its own employees. Employees can notify the whistle-blower office of potential misconduct, either anonymously or openly. After initial allocation, and depending on the corporate areas involved, the whistle-blower office forwards such notification to the Management Board and/or Supervisory Board to instigate countermeasures in the instance of actual misconduct, or for archiving at the whistle-blower office if it is established that no misconduct has occurred.
Furthermore, BRAIN AG has decided to obligate its subsidiaries’ managers to comply with closed periods 30 days before the publication of business results. This enables transparent communication with the respective managers in the periods preceding the publication of business results, and ensures that the same governance rules apply to the persons involved.
Notes to the statement of conformity
In December 2019, the Management and Supervisory boards issued an updated statement of conformity pursuant to Section 161 of the German Stock Corporation Act (AktG) in relation to the German Corporate Governance Code (DCGK). With the exception of the differences listed there, the company has complied with the recommendations of the DCGK during the 2018/19 financial year and will continue to comply with them in the future.
As far as the DCGK recommendations are concerned, the company also intends to comply with them in the future.
Outline of the compensation scheme
Management Board compensation
The Supervisory Board sets Management Board compensation at an appropriate level on the basis of performance appraisal and reflecting any Group remuneration. It also regularly reviews such compensation. When setting and reviewing Management Board compensation, the Supervisory Board takes into consideration the fact that – pursuant to the provisions set out in Section 87 (1) AktG – the total compensation of an individual Management Board member must be suitably related to the Management Board member’s responsibilities and performance as well as the company’s position, and must not exceed normal compensation without special reasons. Consequently, particular criteria for setting appropriate Management Board compensation include the tasks and responsibilities of the individual Management Board members, their personal performance, the performance of the overall Management Board, the company’s business and financial position, the company’s success and future prospects, and the level and structure of Management Board compensation at comparable companies. The compensation scheme of BRAIN AG is oriented to the company’s sustainable development and growth. Compensation is set so that it is competitive in a national and international comparison, thereby offering an incentive for committed and successful work.
The Management Board compensation scheme is especially oriented to the company’s sustainable development and growth. The monetary compensation components include fixed and one variable element. The Supervisory Board in each case sets the targets for one-year variable compensation for one financial year. A subsequent change of the assessment parameters is not foreseen. Variable compensation can take both positive and negative developments into account. Along with these elements, the Management Board members receive ancillary benefits such as contributions to insurance policies and pensions. The employee stock ownership plan, which has also been updated, ensures long-term incentive effects for the Management Board members. In March 2019, the Supervisory Board approved for the Management Board members the issue of stock options from the employee stock ownership plan (ESOP).
Management Board compensation according to 4.2.5 German Corporate Governance Code (DCGK)
The Compensation Report, which forms part of the company’s Group Management Report, provides precise information about the compensation structure and compensation of individual Management Board members pursuant to Section 4.2.5 of the German Corporate Governance Code (DCGK), and about the compensation of the Supervisory Board members. This report is presented in the notes to the consolidated financial statements.
Supervisory Board compensation
Pursuant to Section 14 (1) of the company’s bylaws, all Supervisory Board members receive not only reimbursement of their outlays but also a fixed annual payment of € 15,000.00. The Supervisory Board Chair receives twice this amount, and the Deputy Supervisory Board Chair receives one and a half times this amount. Supervisory Board members who have not been Supervisory Board members for a full year of service receive the aforementioned compensation pro rata temporis to the level of one twelfth for each month of service they commence. All Supervisory Board members also receive a meeting fee of € 1,000.00 for each meeting of the Supervisory Board and its committees they attend. The chairs of the Supervisory Board committees also receive an annual payment of € 15,000.00.
For the members of the Management and Supervisory boards, the company has taken out D&O (directors & officers) insurance cover with an appropriate deductible pursuant to Section 93 (2) Clause 3 of the German Stock Corporation Act (AktG) (Management Board). No deductible was arranged for Supervisory Board members.
Shareholders and AGM
The shareholders exercise their co-management and controlling rights at the Shareholders’ General Meeting (the Annual General Meeting/AGM), which is chaired by the Supervisory Board Chair pursuant to the company’s bylaws. Each share in BRAIN AG grants one vote. Shareholders can exercise their voting rights at the AGM itself, or have it exercised by a proxy of their choosing or by a company proxy. The Management Board is authorized to ensure that shareholders that do not attend the AGM can also participate in the AGM and exercise their rights wholly or partly by way of electronic communications (online participation), or to issue their votes without participating in the meeting by way of written or electronic communications (postal option). The Management Board is also authorized to set the specific arrangements relating to the scope and procedure for online participation and postal voting. These are to be announced in the convening document for the AGM. All shareholders are entitled to participate in the AGM, to speak on the respective agenda items, and to request information about the company’s affairs, where such information is required in order to arrive at an objective assessment of an agenda item.
The third public Ordinary AGM of BRAIN AG was held on 7 March 2019 in Zwingenberg. The invitation for the AGM was published in good time in the German Federal Gazette (Bundesanzeiger) pursuant to statutory regulations, including the agenda with the proposed resolutions of the management and of the Supervisory Board as well as the terms for participating in the AGM and the exercising of voting rights, among other matters. All reports and documents required by law were available on the website of BRAIN AG from the date when the AGM was convened. Directly following the AGM, BRAIN AG published the attendance and voting results on its website. Five out of six items on the agenda were submitted to the vote at the AGM. All proposed resolutions were accepted with significant majorities given an attendance of the share capital of BRAIN AG of 77.81 %. At the third AGM, the attendance of shareholders exceeded the already high attendance at the first two AGMs of BRAIN AG.
Notifiable securities transactions
The Management and Supervisory board members, other individuals with management responsibilities with regular access to the company’s insider information and who are authorized to take important business decisions, as well as certain individuals closely related to the aforementioned, are obligated by law to disclose to BRAIN AG the purchase and sale of BRAIN shares and related financial instruments, especially derivatives, from upwards of an amount of € 5,000 in the calendar year. Notifications of corresponding transactions are also published on our website at www.brain-biotech.com/investors. Two such securities transactions were notified to the company for the 2018/19 financial year by Dr. Georg Kellinghusen (published on 13 March 2019) and by Manfred Bender (published on 14 March 2019). Dr. Georg Kellinghusen purchased shares for a price totaling € 107,724.88. Manfred Bender purchased shares for a price totaling € 54,801.06.
The shares of BRAIN AG are listed in the Prime Standard segment of the Frankfurt Stock Exchange. The company is thereby subject to the highest level of statutory and stock exchange law transparency regulations. In particular, BRAIN AG reports on the situation and development of the company and Group in both German and English in the following form:
- annual financial report for the financial year,
- interim financial report as of the first half of the financial year (6M),
- quarterly statements as of the first quarter (3M) and after the first nine months of the financial year (9M),
- quarterly telephone conferences,
- corporate presentations,
- publication of insider information, corporate announcements and IR announcements,
- publication of notifications of shareholding threshold levels,
- publication of ad hoc statements,
- publication of PR, IR and marketing releases.
Financial accounting and auditing
The unaudited quarterly financial statements as of 31 December 2018 (3M) and 30 June 2019 (9M) as well as the unaudited half-year financial report (6M) as of 31 March 2019 and the consolidated financial statements for the financial year ending 30 September 2019 were prepared in accordance with Section 315e (1) of the German Commercial Code (HGB) and International Financial Reporting Standards (IFRS). The separate financial statements of BRAIN AG for the 2018/19 financial year were prepared in accordance with the regulations of the German Commercial Code (HGB), and the German Stock Corporation Act (AktG).
Zwingenberg, December 2019
Management Board and Supervisory Board