Corporate Governance
Basic understanding
Good corporate governance continues to be a core component of management at Software AG. The Executive Board and the Supervisory Board are committed to it, and all our divisions focus on it. Responsible, qualified and transparent corporate governance focuses on a company’s long-term success. It includes both compliance with the law and extensively following generally accepted standards and recommendations. The focus is on values such as sustainability, transparency and value orientation.
Software AG's Corporate Governance Report has been prepared jointly by the Executive Board and the Supervisory Board pursuant to Section 3.10 of the German Corporate Governance Code. It describes the principles of the Company's management and control structure and the fundamental rights of Software AG shareholders.
Collaboration between the Executive Board and Supervisory Board
The corporate bodies of Software AG are the Executive Board, the Supervisory Board and the Annual Shareholders' Meeting. The duties of these corporate bodies are governed by the German Stock Corporation Act, the Articles of Incorporation and the Rules of Procedure for the Executive Board and the Supervisory Board. In the year under review, the Executive Board and Supervisory Board again collaborated closely in an atmosphere of trust.
The Executive Board is solely responsible for the management of Software AG. It is committed to acting in the interests of the Company and the long-term enhancement of company value. In addition, it represents us vis-à-vis third parties. Presently our Executive Board is comprised of six members. It reports to the Supervisory Board regularly, in a timely manner and comprehensively concerning the company’s recent performance, corporate planning, the risk situation, risk management and compliance.
Our Supervisory Board is also comprised of six members. It advises and supervises the Executive Board in managing the Company. The two bodies jointly decide on corporate strategy and its implementation.
The Supervisory Board appoints the members of the Executive Board and is entitled to dismiss them for good cause. In addition, it discusses the quarterly reports and reviews and approves our financial statements and consolidated financial statements. Key Executive Board decisions such as financing measures and acquisitions require its consent.
At Software AG, the election of the Supervisory Board is in compliance with the recommendations of the Corporate Governance Code. All Supervisory Board members are elected individually. Our Rules of Procedure stipulate that if a Supervisory Board member leaves the Board prior to the expiration of his or her term of office, the successor's appointment is valid only until the next Annual Shareholders' Meeting.
Efficient committee work
The Supervisory Board’s Rules of Procedure provide for the establishment of three committees. They include the Committee for Compensation and Succession Issues, the Audit Committee and the Nominating Committee, which is responsible for preparing nominations for election of members to the Supervisory Board. In the past fiscal year, the Committee for Compensation and Succession Issues met three times, the Audit Committee once and the Nominating Committee once. The Supervisory Board provides information concerning its responsibilities and work in the Report of the Supervisory Board.
The Executive Board, Supervisory Board and committees work together closely with the objective of enhancing Software AG's value in the long term. The following change was made to the committees in fiscal 2008: After the Annual Shareholders’ Meeting, Mr. Justus Mische withdrew from both the Supervisory Board and the Staff and Nomination Committee, and was replaced by Mr. Willi Berchtold.
We maintain no direct or indirect business relationships with Supervisory Board members. In particular, no mutual consulting agreements or other contracts for work or services exist. Both employee representatives on the Supervisory Board are employees of Software AG.
Shareholders and Annual Shareholders’ Meeting
The Annual Shareholders' Meeting is one of our core institutions, through which shareholders can exercise their rights and their voting rights. Software AG invites its shareholders to participate in its Annual Shareholders' Meeting. Important decisions are made at the meeting, including approval of the actions of the Executive and Supervisory Boards, appointment of the Supervisory Board and external auditors, amendments to the Articles of Incorporation and corporate measures. Not least, the shareholders decide on profit distribution. As scheduled in the financial calendar, we inform our shareholders of our business developments, financial performance and financial position four times per year. We held our most recent Annual Shareholders' Meeting on April 29, 2008 in a new venue: the newly built "darmstadtium" convention center in Darmstadt. We welcomed about 450 participants – more than twice as many as last year. Because of the positive feedback we received, the next Annual Shareholders' Meeting on April 30, 2009 will take place there as well.
Pursuant to the recommendations of the Corporate Governance Code, we conduct the Annual Shareholders' Meeting in an expedient manner, preferably within a time frame of four hours, and we broadcast it live via the Internet. To conduct our Annual Shareholders’ Meeting efficiently the chairperson has the option to cut short speakers who stray from the topic at hand and to refer to detailed information already published on the website. Shareholders who do not wish to exercise their voting rights may authorize a member of the Company to vote by proxy in accordance with the shareholder’s instructions.
The invitation to the Annual Shareholders' Meeting and related documents and information such as the agenda, financial statements, Articles of Incorporation, and explanations of draft resolutions are published on the Software AG website along with the date of the Meeting. The resolutions adopted by previous shareholders' meetings as well as the quarterly reports of the preceding fiscal years may also be found there.
Open and transparent communication
We communicate openly, transparently, comprehensively and in a timely manner with all market participants. In 2008 we further intensified communication, taking part in additional conferences and meetings.
A globally consistent corporate message is required to earn the trust of investors, analysts and journalists. Regulatory bodies and the media review publications and press releases for inconsistencies and to ensure that laws and regulations are upheld. Our communications guidelines define how we deal with corporate communication. To read them, please go to http://www.softwareag.com/Corporate/inv_rel/default.asp.
Accordingly, the Executive Board immediately publishes insider information that affects Software AG, unless it is exempt from the publication requirement in specific cases. In accordance with legal stipulations, we maintain registries of persons with access to insider information who are instructed to maintain confidentiality. Software AG provides information to shareholders, analysts and journalists in accordance with standard criteria. This information is transparent for all capital market participants. All ad hoc announcements and press releases as well as presentations given at press and analysts' conferences and road shows are published promptly on the website of Software AG. The corresponding dates can be found in our financial calendar.
We have commissioned independent consulting firm IR Consult to carry out an annual perception study evaluating how investors and financial analysts perceive our financial communication. Criticism and suggestions provide motivation for further improvement. Our performance in the most recent study, conducted in September 2008, was good, with an overall rating of 2.09.
We also publish the purchase or sale of Software AG shares or related financial instruments, particularly derivatives, by members of our Executive and Supervisory Boards and certain other related parties. As soon as knowledge is acquired of these transactions, they must be posted on our website.
Pursuant to the Law to Implement Transparency Guidelines (TUG), the threshold for issuing a mandatory notification concerning shareholdings in listed companies was reduced to three percent of the voting rights, effective January 20, 2007. Foreign investment companies in particular had difficulties with publishing voting rights changes according to form and in due time. In close collaboration with Germany’s Federal Financial Supervisory Authority (BaFin), Software AG supported investors in improving the notification processes. TUG also stipulates that companies must make such notifications available Europe-wide. We use a suitable service provider for this purpose. In addition, we publish all information in German and English. We also fully comply with the Act on Electronic Commercial Registers, Registers of Cooperatives and Business Registers (EHUG), which came into force on January 1, 2007, by sending the operator of the electronic version of the Federal Gazette all documents requiring publication in electronic form as prescribed by the Act.
Changing voting shares pursuant to section 26 (1) of the Securities Trading Act (WpHG):
Date | Content | Available at |
January 15, 2008 (published on January 17, 2008) | The voting share of DWS Investment GmbH fell below the threshold of five percent. | See business register at https://www.unternehmensregister.de |
January 17, 2008 (published on January 18, 2008) | The voting share of DWS Investment GmbH exceeded the threshold of five percent. | See business register at https://www.unternehmensregister.de |
January 22, 2008 (published on January 25, 2008) | The voting share of DWS Investment GmbH fell below the threshold of five percent. | See business register at https://www.unternehmensregister.de |
January 23, 2008 (published on January 29, 2008) | The voting share of Baring Asset Management Limited fell below the threshold of three percent. | See business register at
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February 20, 2008 (published on May 9, 2008) | The voting share of Allianz Global Investors Kapitalanlagegesellschaft mbH exceeded the threshold of three percent. | See business register at
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March 11, 2008 (published on March 13, 2008) | The voting share of DWS Investment GmbH exceeded the threshold of five percent. | See business register at
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April 24, 2008 (published on May 8, 2008) | The voting share of MSDW Equity Finance Services (I) Cayman Ltd exceeded the threshold of three percent. | See business register at
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April 24, 2008 (published on June 20, 2008) | Correction of the voting rights notification of May 8, 2007: The voting share of MSDW Equity Finance Services (I) Cayman Ltd exceeded the threshold of three percent. | See business register at
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April 29, 2008 (published on June 9, 2008) | The voting share of Alken Asset Management LLP exceeded the threshold of five percent. | See business register at
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May 2, 2008 (published on May 8, 2008) | The voting share of MSDW Equity Finance Services (I) Cayman Ltd fell below the threshold of three percent. | See business register at
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May 2, 2008 (published on May 9, 2008) | The voting share of Allianz Global Investors Kapitalanlagegesellschaft mbH fell below the threshold of three percent. | See business register at
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May 2, 2008 (published on June 4, 2008) | Correction of the voting rights notification of May 8, 2007: The voting share of MSDW Equity Finance Services (I) Cayman Ltd fell below the threshold of three percent. | See business register at
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June 4, 2008 (published on June 20, 2008) | The voting share of Alken Fund SICAV exceeded the threshold of five percent. | See business register at
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Software AG deals with risks and opportunities responsibly, aided by an opportunity and risk management process that identifies and monitors all significant risks and opportunities. It is consistently refined and adjusted to correspond to changing conditions.
We present our risk management concept in the Risk and Opportunities Report. Opportunities that are strategic for the company are described in the Outlook section of the Management Report. Please refer to the Notes for information on Group accounting.
Directors’ dealings
No reportable transactions were announced in the 2008 calendar year.
2008 declaration of compliance pursuant to Section 161 of the German Stock Corporation Act (AktG)
On December 12, 2008, the Executive and Supervisory Boards submitted an unqualified declaration of compliance pursuant to Section 161 of the German Stock Corporation Act (AktG). The Company follows all recommendations of the German Corporate Governance Code dated June 14, 2007 and of the revised version dated June 6, 2008. The Executive Board and the Supervisory Board intend to comply with the Code (as amended on June 6, 2008) in the future as well.
Software AG implements the recommendations of the German Corporate Governance Code. However, separate preparation of Supervisory Board meetings by shareholder or employee representatives does not take place in a formal sense. Due to the small number of representatives, informal coordination is easily achieved.
Additional details can be found on the Internet at http://www.softwareag.com/inv_rel/. The current version of the German Corporate Governance Code published by the Commission of the German Corporate Governance Code can be found in English at http://www.corporate-governance-code.de/index-e.html.
Financial reporting standards and auditing
The 2008 Annual Shareholders' Meeting of Software AG has again appointed BDO Deutsche Warentreuhand Aktiengesellschaft, Frankfurt am Main, as Company auditor. In accordance with the internal rotation regulations set forth in Section 319a (1) No. 4 of the German Commercial Code (HGB), our financial statements for 2008 were audited by a new BDO team.
BDO advises the Company on individual tax matters in connection with tax returns and tax audits. No business, financial, personal, or other relationships that could cast doubt on the independence of the audit firm have existed at any time between BDO and its corporate bodies and audit managers on the one hand and Software AG and the members of its corporate bodies on the other.
Pursuant to the Annual Shareholders' Meeting resolution, the Supervisory Board, represented by the Chairman of the Audit Committee, has appointed the auditor and agreed on the fee. In connection with the awarding of the contract, the Chairman of the Audit Committee has also agreed with the auditor to comply with the reporting duties pursuant to the German Corporate Governance Code. BDO participates in meetings of the Supervisory Board's Audit Committee concerning the financial statements and consolidated financial statements and reports on key audit findings.
Remuneration report
The remuneration report is prepared in accordance with the recommendations of the German Corporate Governance Code and contains the information required by the German Commercial Code (HGB) and the International Financial Reporting Standards (IFRS). It is a part of the audited consolidated financial statements. The remuneration report was prepared pursuant to the provisions of the new German financial reporting standard No. 17 (DRS 17), which was applied for the first time in fiscal 2008. Last year’s figures were adjusted accordingly.
The remuneration report provides details on remuneration amounts and the structure of the remuneration system for the Executive and Supervisory Boards. Remuneration of Board members is reported as total amounts, while stating the proportion of the individual remuneration components to one another, and the total figure is broken down into fixed payments, performance-related components, and long-term incentive components.
Executive Board remuneration pursuant to Section 314 (1) No. 6a German Commercial Code (HGB)
Remuneration of active Executive Board members for fiscal 2008 is composed as follows:
| in € | Fixed
remuneration | Variable
remuneration/ bonuses | Other
remuneration components* |
Karl-Heinz Streibich
| 450,000.00 | 1,883,018.36 | 28,376.78 |
David Broadbent | 211,331.25 | 465,838.63 | 129,676.68 |
Mark Edwards | 203,151.68 | 881,491.74 | 253,129.47 |
Holger Friedrich
| 62,499.99 | 87,500.00 | 6,279.18 |
Dr. Peter Kürpick | 200,000.04 | 690,578.47 | 31,261.56 |
David Mitchell**
| 76,894.78 | 0.00 | 273,848.00 |
Arnd Zinnhardt | 231,999.96 | 1,203,694.65 | 34,687.66 |
*) €91 thousand of David Broadbent’s other remuneration components and €213 thousand of Mark Edwards’ other remuneration components include employer contributions to British social security and do not increase the entitlement of either Board member. This data is provided in a departure from the provisions of DRS 17 pursuant to Recommendation 4.2.5 of the Corporate Governance Code.
**) €276 thousand of David Mitchell’s other remuneration components is compensation associated with the end of his Board service.
Variable remuneration / bonuses
Individual Executive Board members are paid a bonus based on the Group's sales and earnings performance. In addition, a variety of quantitative and qualitative targets have been agreed on depending on area of responsibility. The bonuses are calculated based on the extent to which targets are achieved.
Medium and long-term remuneration components
a) Stock option program
The stock option plan (Management Incentive Plan II) has been in existence since 2001. No new options have been issued in conjunction with this program since January 1, 2005. As of December 31, 2008, 14,367 (2007: 34,835) subscription rights had been issued to Executive Board members. The plan will continue until the end of 2011. The conditions for exercising options were again met in fiscal 2008. Net revenue rose by more than 10 percent over the previous year, and profit from ordinary activities surpassed 10 percent of sales. The exercise price averaged €49.64 (2007: €65.08) for all persons eligible to exercise options in the year under review.
Stock option awards from the Management Incentive Plan II (MIP II) (Table 1)
| Balance on Jan. 1, 2008 | Average exercise price | Fair value of stock option at grant time | Remaining term of options | Stock options granted in
2008 | |||
| No. of options | - in € - | Years | No. of options | ||||
Karl-Heinz Streibich
| 16,875 | 20.38 | 8.44 | 3.5 | 0 | ||
David Broadbent | 6,558 | 10.82 | 7.80 | 3.5 | 0 | ||
Mark Edwards | 10,152 | 13.58 | 7.30 | 3.5 | 0 | ||
Arnd Zinnhardt | 1,250 | 9.73 | 4.40 | 2.0 | 0 | ||
Stock option awards from the Management Incentive Plan II (MIP II) (Table 2)
| Forfeited options in
2008 | Exercised options in 2008 | Average exercise price | Average market price on day exercised | Expired options in 2008 | |||
| No. of options | - in € - | No. of options | |||||
Karl-Heinz Streibich
| 0 | 7,500 | 21.00 | 52.98 | 0 | ||
David Broadbent | 0 | 3,750 | 18.92 | 45.11 | 0 | ||
Mark Edwards | 0 | 7,968 | 17.30 | 48.10 | 0 | ||
Arnd Zinnhardt | 0 | 1,250 | 9.73 | 52.98 | 0 | ||
Stock option awards from the Management Incentive Plan II (MIP II) (Table 3)
| Balance on Dec. 31, 2008 | Of which were exercisable | Remaining term of options | Exercise price range | Expenses from MIP II stock options | |||
No. of options | Years | - in € - | |||||
Karl-Heinz Streibich
| 9,375 | 9,375 | 2.5 | 15.72 – 26.47 | 10,551.99 | ||
David Broadbent | 2,808 | 2,574 | 2.5 | 16.47 – 23.89 | 4,100.74 | ||
Mark Edwards | 2,184 | 2,184 | 2.5 | 16.47 – 22.93 | 6,348.07 | ||
Arnd Zinnhardt | 0 | 0 | - | - | 781.63 | ||
b) Phantom share plan
A portion of the variable remuneration is paid as a long-term component on the basis of a phantom share plan. As in the previous year, the portion accruing for fiscal year 2008 is converted into virtual (phantom) shares on the basis of the average share price of Software AG stock in February 2008 less 10 percent. The resulting number of shares will become due in three identical tranches with terms of one, two, and three years. On the due dates in March 2010 to 2012, the number of phantom shares will be multiplied by the then-applicable share price for February. This amount is adjusted to reflect the amount (measured in percent) by which the shares outperform or underperform the TecDAX30 index and is then paid to the members of the Executive Board. The adjustment for this out- or underperformance is limited to 50 percent. The members of the Executive Board receive an amount per phantom share equal to the dividends paid to Software AG shareholders prior to payment of a phantom share tranche. For the phantom shares due in 2009, Executive Board members could for the first time elect to extend the shares due for a period of six years, rather than receiving a payment. During the extension period, the Board member has an opportunity four times per year (each time the Company’s financial results are announced) to demand payment of extended shares. The number of phantom shares is adjusted over the entire term by the amount (measured in percent) by which Software AG shares outperform or underperform the TecDAX30 index. The adjustment for this out- or underperformance is limited to 50 percent. At the time of payment, the number of shares is multiplied by the average price of Software AG stock on the sixth to tenth trading day after publication of the financial results. The members of the Executive Board receive an amount per phantom share equal to the dividends paid to Software AG shareholders prior to payment of the phantom shares. Personnel expenses of €3,995 thousand (2007: €3,524 thousand) were incurred under this plan during fiscal 2008; these expenses are reflected under "long-term components" in the table.
c) Management Incentive Plan III (MIP III)
A new incentive program based on the performance of Software AG stock was initiated for Executive Board members and managers in the third quarter of 2007. So far, 1,050,000 ownership rights have been issued to Executive Board members. If performance targets are reached by June 30, 2016, the holders of these ownership rights are entitled to a payment of the value by which the Software AG stock surpasses the base price of €72.36. The performance target was defined as the attainment of Group revenues of €1,000,000,000 with a simultaneous doubling of net income after taxes compared to fiscal year 2006 by no later than 2011.
Stock option awards (Table 1)
Balance on Jan. 01, 2008 | Average exercise price | Value of option at time of grant | Remaining term | Options granted in
2008 | ||||
| No. of options | - in € - | Years | No. of options | |||||
Karl-Heinz Streibich
| 300,000 | 72.36 | 20.41 | 3.4 | 0 | |||
David Broadbent | 150,000 | 72.36 | 20.41 | 3.4 | 0 | |||
Mark Edwards | 150,000 | 72.36 | 20.41 | 3.4 | 0 | |||
Holger Friedrich | 0 | 72.36 | - | 3.4 | 150,000 | |||
Dr. Peter Kürpick | 150,000 | 72.36 | 20.41 | 3.4 | 0 | |||
David Mitchell
| 125,000 | 72.36 | 20.41 | 3.4 | 0 | |||
Arnd Zinnhardt | 150,000 | 72.36 | 20.41 | 3.4 | 0 | |||
Stock option awards (Table 2)
| Forfeited options in
2008 | Average exercise price | Exercised options in
2008 | Expired options in
2008 | |||
| No. of options | - in € - | No. of options | ||||
Karl-Heinz Streibich
| 0 | - | 0 | 0 | ||
David Broadbent | 0 | - | 0 | 0 | ||
Mark Edwards | 0 | - | 0 | 0 | ||
Holger Friedrich | 0 | - | 0 | 0 | ||
Dr. Peter Kürpick | 0 | - | 0 | 0 | ||
David Mitchell
| 125,000 | 72.36 | 0 | 0 | ||
Arnd Zinnhardt | 0 | - | 0 | 0 | ||
Stock option awards (Table 3)
| Balance on Dec. 31, 2008 | Of which were exercisable | Remaining term* | Exercise price | Expenses from MIP III
options | |||
| No. of options | Years | - in € - | |||||
Karl-Heinz Streibich
| 300,000 | 0 | 3.4 | 72.36 | 1,010,086.40 | ||
David Broadbent | 150,000 | 0 | 3.4 | 72.36 | 505,043.70 | ||
Mark Edwards | 150,000 | 0 | 3.4 | 72.36 | 505,043.70 | ||
Holger Friedrich | 150,000 | 0 | 3.4 | 72.36 | 63,455.16 | ||
Dr. Peter Kürpick | 150,000 | 0 | 3.4 | 72.36 | 505,043.70 | ||
David Mitchell
| 0 | - | - | - | -149,035.00 | ||
Arnd Zinnhardt | 150,000 | 0 | 3.4 | 72.36 | 505,043.70 | ||
* The assumed remaining term until December 31, 2008, at 3.4 years, corresponds to the assumed remaining term of the previous year, which was until December 31, 2007. Because of the financial market crisis, the Company assumes that it will take one year longer than estimated last year to achieve this program’s performance targets.
Long-term remuneration components
| Long-term remuneration components | Pension expenses* | Performance
phantom shares | Expenses from performance
phantom shares** | |
Karl-Heinz Streibich
| 1,055,191.13 | 77,161.00 | 20,589 | 1,112,898.22 |
David Broadbent | 438,582.59 | 44,285.18 | 8,658 | 485,444.13 |
Mark Edwards*** | 726,678.41 | -95,965.98 | 14,125 | 836,500.91 |
Holger Friedrich | 988,555.56 | 0.00 | 1,115 | 55,555.56 |
Dr. Peter Kürpick | 494,429.48 | 13,841.00 | 9,620 | 539,025.32 |
David Mitchell****
| -2,654,334.80 | 0.00 | 0 | 0.00 |
Arnd Zinnhardt | 915,103.01 | 5.380.00 | 17,855 | 965,139.59 |
*) Based on Recommendation 4.2.5 of the Corporate Governance Code and at variance with the provisions of DRS 17, we have included pension expenses in this table of Executive Board remuneration.
**) The expenses attributable to the fair value at the time the options were awarded are included in the long-term remuneration components.
***) The negative value from pension expenses is due largely to the negative development of the British pound.
****) The negative value of the long-term remuneration components is due to the forfeiting of options from the MIP III program as well as the withdrawal of entitlement from the phantom share program.
Expenses amounting to €45 thousand (2007: €2 thousand) were charged to the pension expenses for Executive Board members in fiscal 2008. Employer contributions to social security for two members of the Executive Board resulted in expenses of €304 thousand (2007: €473 thousand). In accordance with Recommendation 4.2.5 of the Corporate Governance Code, these two items were recognized in total remuneration of the Executive Board. This relates to remissions from the company for British social security, which will not increase the future pensions for either of the Executive Board members.
Total remuneration for members of the Executive Board amounted to €9,414 thousand (2007: €34,005 thousand) in the year under review. Included in the total remuneration for the previous year is the fair value of the MIP III options in the amount of €20,920 thousand which represents a nonrecurring long term element. We were required to report in this manner for the first time in fiscal year 2008 in accordance with the provisions of DRS 17. Last year’s values were adjusted accordingly.
The Executive Board members received a total of 71,962 (2007: 61,546) phantom shares under the phantom share plan. Remuneration for former Executive Board members totaled €291 thousand (2007: €169 thousand).
Pension provisions for former Executive Board members amounted to €1,765 thousand (2007: €1,886 thousand).
Other remuneration components
A member of the Executive Board who resigns due to a change of control within twelve months of such change and without good cause will receive a severance payment equal to three annual salaries based on the annual target remuneration most recently agreed and the average target performance ratio for the preceding three full fiscal years. In case of resignation, the above mentioned regulation is not applicable if the position of the Executive Board member has only been altered marginally with the change of control.
In the event of illness, five members of the Executive Board will receive full pay based on the annual target remuneration for a period of six months. After six months, the variable remuneration component will be reduced by 1/12 for every month that follows. Salary payments will cease at the end of the term of the contract in any event. Any health insurance benefits received by the Board member must be credited against such payments. In the event of illness, one Executive Board member will continue to be paid 90 percent of his average after-tax annual remuneration for the preceding three years for a period of six months.
In case of permanent disability, the employment contract of the Executive Board member concerned will terminate at the end of the month in which the permanent disability was determined or at the end of the month in which the Executive Board member has been incapacitated for work for an uninterrupted period of twelve months. In such a case, severance pay will be provided for one Executive Board member in the amount of €158 thousand. Another member will receive severance payment equal to the member's total fixed salary for the remainder of the contract period, but not to exceed six months.
The remaining Executive Board members will receive no severance pay in such a case. From the time of their departure until completion of their 65th year of age, the German members of the Executive Board will receive a disability pension of €11 thousand per month, and the CEO will receive €15 thousand per month. British members of the Executive Board are subject to the provisions of the Permanent Health Insurance Plan applicable in the United Kingdom. Under this plan, British members of the Executive Board will receive 90 percent of their average annual after-tax remuneration for the preceding three years until they reach the pensionable age of 60 years. This entitlement will be adjusted to reflect inflation in years in which the inflation rate is less than five percent. If the inflation rate exceeds five percent, the entitlement will be adjusted annually by five percent.
The Company maintains life insurance policies for five Executive Board members. For four Executive Board members, the insured amount equals €500 thousand in the event of death and €1,000 thousand in the event of disability. For one Executive Board member, the insured amount equals four times his fixed annual remuneration.
Five members of the Executive Board will receive pensions of €11 thousand per month for life after completing their 65th year of age, regardless of their age when they joined the Company. The CEO's pension amounts to €15 thousand. This pension commitment also comprises a widow's annuity of €6 thousand per month, with €9 thousand per month for the widow of the CEO. In the event an Executive Board member leaves the Company prior to the age of 65, such Executive Board member will still be entitled to pension benefits, but they will be reduced on a pro rated basis. The beneficiary will not be entitled to claim an adjustment or indexation of the entitlement. One member of the Executive Board will receive an annual pension for life after completing his 60th year in the amount of 1.66 percent of the average fixed remuneration for the preceding three years multiplied by the member’s number of service years. This entitlement will be adjusted to reflect inflation in years in which the inflation rate is less than five percent. If the inflation rate exceeds five percent, the entitlement will be adjusted annually by five percent.
Instead of a pension plan, one member of the Executive Board receives a monthly allowance for maintaining a second place of residence in the amount of €2 thousand ($3 thousand) as well as weekend flights home.
In addition, all members of the Executive Board are entitled to be provided with a suitable company car.
No additional commitments have been made regarding severance pay in the event an employment contract is not extended or a shareholder change occurs, nor regarding supplementary state benefit paid to unemployed people who enter self-employment or found a new business, continuation of salary payments in the event of early termination of employment, or interest on severance payments. There are also no entitlements to payments based on customary practice.
Remuneration of Executive Board members for fiscal 2007 is composed as follows:
Due to the new German financial reporting standard No. 17 (DRS 17), which has to be applied for the first time in fiscal 2008, the previous year’s data is presented in accordance with the provisions of DRS 17. The previous year’s data deviates from this because it was presented pursuant to the previously valid interpretations of the provisions of Section 314 (1) No. 6a of the German Commercial Code (HGB).
| Fixed remuneration | Variable remuneration / bonuses | Other remuneration components* | |
| - in € - | |||
Karl-Heinz Streibich
| 450,000.00 | 1,500,774.20 | 19,384.30 |
David Broadbent | 244,852.38 | 444,813.03 | 208,550.28 |
Mark Edwards | 236,073.82 | 887,264.69 | 338,604.42 |
Dr. Peter Kürpick | 200,000.04 | 547,135.33 | 26,487.52 |
David Mitchell | 102,843.71 | 486,340.09 | 15,485.30 |
Arnd Zinnhardt | 231,999.96 | 967,165.60 | 34,589.40 |
Christian Barrios Marchant**
| 19,333.33 | 36,000.00 | 836,120.56 |
Alfred Pfaff***
| 166,666.64 | 0.00 | 1,851,406.92 |
*) €180 thousand of David Broadbent’s other remuneration components and €293 thousand of Mark Edwards’ other remuneration components include employer contributions to British social security and do not increase the entitlement of either Board member. This data is provided in a departure from the provisions of DRS 17, but pursuant to Recommendation 4.2.5 of the Corporate Governance Code.
**) €834 thousand of Christian Barrios Marchant’s other remuneration components is compensation associated with the end of his Board service.
***) Alfred Pfaff’s other remuneration components include compensation associated with the end of his Board service in the amount of €1,830 thousand.
Stock option awards from the Management Incentive Plan II (MIP II) (Table 1)
| Balance on Jan. 1, 2007 | Average exercise price | Fair value of stock option at time of award | Remaining term | Granted options in 2007 | ||
| No. of options | - in € - | Years | No. of options | |||
Karl-Heinz Streibich
| 30,000 | 20.99 | 8.19 | 4.5 | 0 | |
David Broadbent | 14,994 | 18.92 | 7.39 | 4.5 | 0 | |
Mark Edwards | 31,244 | 16.37 | 6.23 | 4.5 | 0 | |
Arnd Zinnhardt | 40,000 | 11.66 | 2.20 | 3.0 | 0 | |
Christian Barrios Marchant
| 35,625 | 14.91 | 2.94 | 4.5 | 0 | |
Stock option awards from the Management Incentive Plan II (MIP II) (Table 2)
| Forfeited stock options in 2007 | Average exercise price | Exercised options in 2007 | Average exercise price | Average market price on day exercised | Expired options in 2007 | |||||
| No. of options | - in € - | No. of options | - in € - | No. of options | ||||||
Karl-Heinz Streibich
| 0 | - | 13,125 | 19.97 | 56.22 | 0 | ||||
David Broadbent | 0 | - | 8,436 | 17.78 | 58.08 | 0 | ||||
Mark Edwards | 0 | - | 21,092 | 15.50 | 57.77 | 0 | ||||
Arnd Zinnhardt | 0 | - | 38,750 | 11.72 | 57.23 | 0 | ||||
Christian Barrios Marchant
| 10,784 | 15.10 | 24,841 | 14.83 | 56.22 | 0 | ||||
Stock option awards from the Management Incentive Plan II (MIP II) (Table 3)
| Balance on Dec. 31, 2007 | Of which were exercisable | Remaining term | Exercise price range | Expenses from MIP II stock options
| ||
| No. of options | Years | - in € - | ||||
Karl-Heinz Streibich
| 16,875 | 13,125 | 3.5 | 15.72 – 26.47 | 61,414.25 | |
David Broadbent | 6,558 | 4,455 | 3.5 | 12.39 – 23.89 | 0.00 | |
Mark Edwards | 10,152 | 7,968 | 3.5 | 9.73 – 22.93 | 48,700.31 | |
Arnd Zinnhardt | 1,250 | 1,250 | 2.0 | 9.73 | 22,011.50 | |
Christian Barrios Marchant
| 0 | 0 | - | - | 32,890.19 | |
Stock option awards from the Management Incentive Plan III (MIP III) (Table 1)
| Balance on Jan. 1, 2007 | Granted options in
2007 | Average exercise price | Value of option at time of award | Forfeited options in 2007 | Exercised options in 2007 | Expired options in 2007 | |
| No. of options | - in € - | No. of options | |||||
Karl-Heinz Streibich
| 0 | 300,000 | 72.36 | 20.41 | 0 | 0 | 0 |
David Broadbent | 0 | 150,000 | 72.36 | 20.41 | 0 | 0 | 0 |
Mark Edwards | 0 | 150,000 | 72.36 | 20.41 | 0 | 0 | 0 |
Dr. Peter Kürpick | 0 | 150,000 | 72.36 | 20.41 | 0 | 0 | 0 |
David Mitchell | 0 | 125,000 | 72.36 | 20.41 | 0 | 0 | 0 |
Arnd Zinnhardt | 0 | 150,000 | 72.36 | 20.41 | 0 | 0 | 0 |
Stock option awards from the Management Incentive Plan III (MIP III) (Table 2)
| Balance on Dec. 31, 2007 | Of which were exercise-
able | Remaining term | Exercise price | Expenses from MIP III stock options | Value of option at time of award* | |
| No. of options | Years | - in € - | ||||
Karl-Heinz Streibich
| 300,000 | 0 | 3.4 | 72.36 | 357,683.00 | 6,123,000.00 |
David Broadbent | 150,000 | 0 | 3.4 | 72.36 | 178,841.00 | 3,061,500.00 |
Mark Edwards | 150,000 | 0 | 3.4 | 72.36 | 178,841.00 | 3,061,500.00 |
Dr. Peter Kürpick | 150,000 | 0 | 3.4 | 72.36 | 178,841.00 | 3,061,500.00 |
David Mitchell | 125,000 | 0 | 3.4 | 72.36 | 149,035.00 | 2,551,250.00 |
Arnd Zinnhardt | 150,000 | 0 | 3.4 | 72.36 | 178,841.00 | 3,061,500.00 |
Long-term remuneration components
| Long-term remuneration components* | Pension expenses | Performance phantom
shares | Expenses from performance phantom
shares** | |
| - in € - | No. of options | - in € - | ||
Karl-Heinz Streibich
| 7,005,779.98 | 24,150.00 | 16,809 | 1,023,833.26 |
David Broadbent | 3,434,468.41 | 35,560.82 | 7,258 | 420,708.37 |
Mark Edwards*** | 3,733,219.99 | -1,989.56 | 12,775 | 845,375.79 |
Dr. Peter Kürpick | 3,474,943.79 | 8,571.00 | 7,830 | 506,643.00 |
David Mitchell | 2,666,042.71 | 0.00 | 2,234 | 114,792.71 |
Arnd Zinnhardt*** | 3,830,227.43 | -32,924.00 | 14,640 | 890,850.82 |
Christian Barrios Marchant
| 0.00 | 245.67 | 0 | 0.00 |
Alfred Pfaff***
| 5,180.40 | -30,830.00 | -5,114 | -277,786.41 |
*) The value of the MIP III options at the time they were awarded is included in the long-term compensation components.
**) The expenses attributable to the fair value of the phantom shares at award time are included in the long-term compensation components.
***) The negative expenses from pension expenses result from actuarial gains.
Supervisory Board remuneration
Remuneration for Supervisory Board members is made up of fixed and performance-related components. Members receive additional remuneration for their work on the Committee for Compensation and Succession Issues, the Audit Committee as well as the Nominating Committee.
In addition to reimbursement of their expenses, members of the Supervisory Board receive a fixed annual remuneration in the amount of €25 thousand as well as annual performance-related remuneration of €2 thousand for each percentage point or fraction thereof in excess of five percent by which the growth of currency-adjusted net income has exceeded the previous year's figure (Variable Remuneration I).
The figures reported in the consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) for the relevant fiscal year or fiscal years are utilized for calculating performance-related remuneration.
Furthermore, Supervisory Board members receive annual compensation based on long-term corporate profits in the amount of €200 for each percentage point or fraction thereof by which the growth in value of Software AG stock exceeds the growth of value of the TecDAX30 index for the same period (Variable Remuneration II). Starting in fiscal year 2008, the growth in value of the stock is assessed on the basis of a three-year comparison of the XETRA closing rates, and the growth in value of the TecDAX30 will be assessed on the basis of a 3-year comparison of the index.
Remuneration of the Chairman/Deputy Chairman
The Chairman of the Supervisory Board receives twice the remuneration stated, and the Deputy Chairman one and a half times such amount.
Other arrangements
In addition, members of the Supervisory Board receive an attendance fee of €1,500 each time they participate in person in a meeting of one of their committees. Attendance fees are paid only once for multiple committee sessions occurring on the same day or for a session that takes place on consecutive days. The attendance fee is €2,500 for the committee chairmen.
Remuneration is payable one week after approval of the financial statements for the year by the Supervisory Board or, if applicable, the Annual Shareholders' Meeting. Members of the Supervisory Board who were on the Board for only a part of the fiscal year will receive remuneration for each day of their first month of activity and one-twelfth of the annual remuneration for each additional month.
Remuneration of Supervisory Board members for fiscal year 2008 is composed as follows:
| Fixed remuneration | Variable
remuneration I | Variable
remuneration II | Remuneration for committee work | |
Frank F. Beelitz
| 50,000.00 | 64,000.00 | 17,200.00 | 7,500.00 |
Willi Berchtold
| 16,803.28 | 21,508.20 | 5,780.33 | 1,500.00 |
Dr. Andreas Bereczky
| 37,500.00 | 48,000.00 | 12,900.00 | 5,500.00 |
Rainer Burckhardt | 25,000.00 | 32,000.00 | 8,600.00 | 1,500.00 |
Justus Mische
| 8,196.72 | 10,491.80 | 2,819.6775 | 3,000.00 |
Monika Neumann | 25,000.00 | 32,000.00 | 8,600.00 | 4,500.00 |
Alf Henryk Wulf | 25,000.00 | 32,000.00 | 8,600.00 | 3,000.00 |
Total remuneration for members of the Supervisory Board amounted to €519 thousand (2007: €775 thousand) in the year under review.
Remuneration of Supervisory Board members for fiscal year 2007 is composed as follows:
| Fixed remuneration | Variable
remuneration I | Variable
remuneration II | Remuneration for committee work | |
Frank F. Beelitz
| 50,000.00 | 116,000.00 | 28,000.00 | 15,000.00 |
Karl Heinz Achinger
| 13,458.90 | 31,224.66 | 7,536.99 | 6,500.00 |
Dr. Andreas Bereczky
| 33,013.70 | 76,591.78 | 18,487.67 | 4,500.00 |
Rainer Burckhardt
| 16,027.40 | 37,183.56 | 8,975.34 | 0.00 |
Justus Mische | 25,000.00 | 58,000.00 | 14,000.00 | 9,000.00 |
Monika Neumann | 25,000.00 | 58,000.00 | 14,000.00 | 9,000.00 |
Reinhard Springer
| 8,972.60 | 20,816.44 | 5,024.66 | 3,000.00 |
Alf Henry Wulf
| 16,027.40 | 37,183.56 | 8,975.34 | 0.00 |
