Declaration on Corporate Governance pursuant to § 289a of the German Commercial Code (HGB)
Declaration of conformity pursuant to § 161 of the German Stock Corporation Act (AktG)
The Board of Management and Supervisory Board submitted the following declaration of conformity with the German Corporate Governance Code for Talanx AG prior to approval of the annual financial statements:
The German Corporate Governance Code (“DCGK”) sets out major statutory requirements governing the management and supervision of German listed companies and contains both internationally and nationally recognised standards for good and responsible enterprise management. The purpose of the Code is to foster the trust of investors, customers, employees and the general public in German enterprise management. Under § 161 AktG it is incumbent on the boards of management and supervisory boards of German listed companies to provide an annual declaration of conformity with the recommendations of the “German Corporate Governance Code Government Commission” published by the Federal Ministry of Justice, or to explain which recommendations of the Code were/are not being applied and for which reasons (“comply or explain”).
I. German Corporate Governance Code 2013
The Board of Management and Supervisory Board declare pursuant to § 161 AktG that Talanx AG, in its implementation of the German Corporate Governance Code (DCGK), has diverged in three respects from the recommendations contained in the version of the Code dated 13 May 2013:
1. Item 4.2.3 Para. 4 DCGK (caps on severance payments in Management Board contracts)
Premature termination of a Management Board contract without serious cause may only take the form of cancellation by mutual consent. Even if the Supervisory Board insists upon setting a severance cap when concluding or renewing a Board of Management contract, this does not preclude the possibility of negotiations also extending to the severance cap in the event of a member leaving the Board of Management. The scope for negotiation over a member leaving the Board of Management would also be restricted if a severance cap were agreed, which could be particularly disadvantageous in cases where there is ambiguity surrounding the existence of serious cause for termination. In the opinion of Talanx AG, it is therefore in the interest of the company to diverge from the recommendation contained in Item 4.2.3 Para. 4 DCGK.
2. Item 5.2 Para. 2 DCGK (Chairmanship of the Audit Committee)
The current Chairman of the Finance and Audit Committee is also the Chairman of the full Supervisory Board. Although other members of the Finance and Audit Committee also have special knowledge and experience of the application of accounting principles and internal control procedures, the current Chairman of the Committee is the only member to have spent his whole career in the insurance sector. He can look back on 29 years on the boards of management of insurance companies and insurance holding companies, of which 20 years were spent as Chairman of the Board of Management, sharing direct responsibility for the income situation of the company concerned and the presentation of this income on the balance sheet. In his double role as Chairman of the Finance and Audit Committee and of the full Supervisory Board, he coordinates the work of both committees single-handedly and can thus optimise the efficiency of their activities. His position does not lead to a concentration of power on either the Finance and Audit Committee or the full Supervisory Board, as he has only one vote on each committee, like the other members. The company therefore believes that the current Chairman of the Supervisory Board is the most suitable person to act as Chairman of the Finance and Audit Committee. It is thus in the company’s interest to deviate from the recommendation in Item 5.2 Para. 2 DCGK.
3. Item 4.2.3 Para. 2 DCGK (Maximum limits on variable components of remuneration in Management Board contracts)
Part of the variable remuneration for members of the Board of Management is granted in the form of Talanx share awards. The maximum number of share awards granted depends on the total amount of variable remuneration, the amount of which is limited (cap), i. e. the allocation of share awards is subject to the maximum limit. A vesting period of four years applies to share awards. This means that members of the Board of Management will share in both positive and negative developments at the company during this period, as reflected in the share price. The equivalent value of the share awards is paid out to members of the Board of Management after expiry of the vesting period. The amount paid out is determined based on the price of Talanx shares on the disbursement date, plus an amount equal to all dividends per share paid out during the vesting period. The share awards thus track the performance of Talanx shares.
The amount of variable remuneration resulting from the granting of share awards is therefore limited at the time of allocation of the share awards, but not again at the time of payment. The company does not believe that it makes sense to impose a further limit on the amount of variable remuneration resulting from the granting of share awards on the disbursement date, given that the share awards are intended to balance the interests of shareholders and members of the Board of Management of Talanx AG. From the company’s perspective, payment in Talanx share awards represents, in economic terms, a compulsory investment in Talanx shares with a four-year lock-up period.
Talanx AG therefore formally declares, purely as a precaution, that it has diverged from Item 4.2.3 Para. 2 DCGK.
II. German Corporate Governance Code 2012
The Board of Management and Supervisory Board furthermore declare, pursuant to § 161 AktG, that Talanx AG has diverged from the following recommendations of the DCGK as amended on 15 May 2012 since its last declaration of conformity on 20 March 2013:
1. Item 4.2.3 Para. 4 DCGK (Caps on severance payments in Management Board contracts)
For the reasons for the deviation from Item 4.2.3 Para. 4 DCGK, cf. I.1 above.
2. Item 5.2 Para. 2 DCGK (Chairmanship of the Audit Committee)
For the reasons for the deviation from Item 5.2 Para. 2 DCGK, see I.2 above.
Apart from the above exceptions, the company will continue to comply with the recommendations of the DCGK.
Hannover, 25 February 2014
On behalf of the Board of Management On behalf of the Supervisory Board
The declaration of conformity and other information on corporate governance at Talanx is also available on the website at www.talanx.com.