Efficient committee work

The Rules of Procedure of the Supervisory Board stipulate the formation of two committees: the Committee for Remuneration and Succession Issues and the Audit Committee. The Committee for Remuneration and Succession Issues met twice, and the Audit Committee met once during the year under review. The tasks of the Supervisory Board and its accomplishments in the year under review are described on page 34 et seq. The Executive Board and the Supervisory Board and its committees work closely together, which serves to further Software AG’s long-term enterprise value.

Software AG’s good corporate governance is reflected in the special knowledge and expertise of the Chairman of the Audit Committee in applying accounting principles and internal review procedures. Karl Heinz Achinger is Chairman of the Audit Committee. Mr. Achinger, who holds a degree in business administration and is an independent management consultant, has been on the Supervisory Board of Software AG since January 1, 2002. He has accumulated extensive knowledge and experience in his approximately 30 years of entrepreneurial activity in the international IT market. Mr. Achinger was the founder of debis Systemhaus, which he ran until shortly before it was taken over by Deutsche Telekom. During this period, he also spent several years as a member of the management of Capgemini. From December 2002 until October 2003, he managed Software AG on an interim basis, acquiring in-depth knowledge of the Company’s business processes and key financial ratios. His involvement with the supervisory boards of other companies afforded him insight into a variety of internal control procedures, enabling him to help Software AG follow the best market practices.

Software AG maintains no direct or indirect business relationships with Supervisory Board members. In particular, no consulting agreements or other contracts for work or services have been entered into. Both employee representatives on the Supervisory Board are employees of the Company.

 

Authorized capital and share repurchase

Software AG has authorized capital pursuant to Section 5 (5) of the Company’s Articles of Incorporation. The Executive Board is authorized, with the consent of the Supervisory Board, to increase the Company’s share capital on one or more occasions on or before May 12, 2011 up to a total of €42 million by issuing up to 14 million new bearer shares against cash contributions or contributions in kind (Authorized Capital). In the event of a capital increase against contributions in kind that occurs in connection with an acquisition, the Executive Board has restricted any exclusion of subscription rights to a maximum of 5.6 million shares.

The Company is also authorized to acquire treasury shares with a share in the issued share capital not to exceed €8,410,800 on or before November 11, 2007. Treasury shares may be purchased on the stock market or through a public purchase offer directed to all shareholders of the Company.

 

Significant shareholders

The Software AG Stiftung, with registered offices in Darmstadt, holds approximately 30 percent of the outstanding shares in Software AG. The Software AG Stiftung is an independent, non-profit legal entity dedicated to therapeutic pedagogy, social therapy, pedagogy, work with youths, assistance to seniors, environmental protection, and research. No shareholders other than the Software AG Stiftung hold more than 10 percent of the share capital of Software AG.

 

Annual Shareholders’ Meeting

All shareholders are invited to participate in the Annual Shareholders’ Meeting. The Annual Shareholders’ Meeting resolves on approval of the actions of the Executive and Supervisory Boards, appointment of the external auditors, amendments to the Articles of Incorporation, and capital increases. In the interests of good corporate governance, German legislation requires any capital increases to be approved by all Company shareholders. We inform our shareholders of business developments and the financial performance and financial position of the Company four times per year as scheduled in the financial calendar.

Pursuant to the recommendations of the Corporate Governance Code, we conduct the Annual Shareholders’ Meeting in an expedient manner within a time frame of 4 hours. To facilitate participation, we transmit the Annual Shareholders’ Meeting via the Internet. This ensures responsible and efficient use of the right to address the Meeting and is thus in the interests of the majority of the shareholders. The amendment to the Articles of Incorporation required in this respect was presented for voting at the 2006 Annual Shareholders’ Meeting and passed by a 99.9 percent majority. Shareholders who do not wish to attend the Shareholders’ Meeting in person may authorize a member of the Company to exercise their voting rights by proxy in accordance with the instructions of the shareholder. All proxies must be executed in writing. The invitation to the Annual Shareholders’ Meeting and related documents and information such as the agenda, the financial statements, the Articles of Incorporation, and explanations of draft resolutions are published on the Company website along with the date of the Meeting. In addition, shareholders may view the resolutions adopted by previous Shareholders’ Meetings as well as the quarterly financial statements for the preceding financial year and earlier fiscal years.

In accordance with the new Law on Corporate Integrity and Modernization of the Right of Avoidance (UMAG) of November 1, 2005, we have changed our registration and legitimization procedures: Starting with the 2006 Annual Shareholders’ Meeting of May 12, 2006, the relevant date for participation in the Meeting was changed to the record date as set forth in the Law on Corporate Integrity and Modernization of the Right of Avoidance. Accordingly, holders of bearer shares need only to present written confirmation of their shareholdings from the depository bank. This confirmation must relate to the 21st day prior to the Annual Shareholders’ Meeting (record date). The aforementioned law also ensures that our Annual Shareholders’ Meeting is conducted efficiently. It allows the chairperson to cut short speakers who stray from the topic at hand and to refer to detailed information already published on the website.

 

Open and transparent communication

Our comprehensive, corporate-wide written Disclosure Policy ensures that information of relevance to investors is dealt with uniformly all over the world. The Disclosure Policy governs the publication of financial results and significant events as well as internal processes for evaluating the relevance of information. Accordingly, the Executive Board immediately publishes all information that directly affects the Company, unless exempt from the publication requirement in specific cases. In addition, in accordance with legal stipulations, lists are kept of any persons having access to insider information, and such persons are instructed to maintain confidentiality. When providing information, Software AG deals with shareholders, analysts, and journalists in accordance with uniform criteria and in a manner that is transparent for all capital market participants. All ad hoc announcements and press releases as well as presentations given at press or analysts conferences and investor road shows are published immediately on the website of Software AG.

The purchase or sale of shares in the Company or related financial instruments, particularly derivatives, by members of the Executive and Supervisory Boards of the Company as well as certain other related parties are published on the Company website as soon as Software AG acquires knowledge of any such transactions. No notifiable securities transactions took place in fiscal 2006.

Pursuant to the new law to implement transparency guidelines, effective January 20, 2007, any shareholders with more than 3 percent of the voting rights in a listed company must notify the company of their shareholdings. This represents a drop from the previous threshold. The law also stipulates that companies must make such notifications available Europe-wide. Software AG uses suitable service providers for such purpose. Moreover, Software AG publishes all information on the Company in German and in English.

The shares held by Company management of which the Company is aware are not subject to reporting requirements under Section 6.6 of the German Corporate Governance Code, as the combined shares of the Executive and Supervisory Boards do not exceed 1 percent of the shares issued by the Company.

We present our risk management concept in the Risk Report on page 60 et seqq. Information on Group accounting can be found on page 70 of the Notes.

 

2006 Declaration of Compliance pursuant to Section 161 of the German Stock Corporation Act (AktG)

On February 22, 2007, the Executive and Supervisory Boards submitted an unqualified declaration of compliance stating that the Company has followed all recommendations of the Commission of the German Corporate Governance Code as amended on June 12, 2006. Software AG has also agreed to comply with the recommendations of the Code in fiscal 2007.

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 (4 and 2, respectively), informal coordination is easily achieved.

Please see the Investor Relations section of our website at www.softwareag.com for additional details on this and corporate governance at Software AG in general.

The current version of the German Corporate Governance Code published by the Commission of the German Corporate Governance Code can be found at www.corporate-governance-code.de.

 

Auditor

The Annual Shareholders’ Meeting of Software AG appointed BDO Deutsche Warentreuhand Aktiengesellschaft, Frankfurt am Main, as Company auditor. No business, financial, personal, or other relationships that could cast doubt on the independence of the audit firm have existed at any time between the audit company and its corporate bodies and audit managers on the one hand and Software AG and the members of its corporate bodies on the other. BDO has advised Software AG on tax issues as well since 1997.

Based on the appointment of the auditor by the Annual Shareholders’ Meeting, the Supervisory Board of Software AG has assigned BDO to audit the Company’s financial statements and has agreed upon a fee for these services. In connection with the audit engagement, the Supervisory Board has also agreed with the auditor to comply with the reporting duties pursuant to the German Corporate Governance Code.

The auditor participates in Supervisory Board meetings concerning the financial statements and consolidated financial statements and reports on key audit findings.

page previous   page forward