Declaration of Conformity
Declaration by the Board of Management and the Supervisory Board of BayWa AG on the recommendations of the Government Commission German Corporate Governance Code pursuant to Sec. 161 AktG [German Stock Corporation Act]
The Board of Management and the Supervisory Board of BayWa AG made the last declaration of compliance pursuant to Sec. 161 AktG on 9 November 2022. The Board of Management and the Supervisory Board of BayWa AG declare that the recommendations of the “Government Commission German Corporate Governance Code” in the version of 28 April 2022 (announced in the Federal Gazette on 27 June 2022, hereinafter “GCGC”) have been and will be complied with, with the exception of the following:
1 Recommendation B.5
Contrary to the recommendation in section B.5, the Supervisory Board will not set an age limit for members of the Board of Management and will thus not indicate this in the Corporate Governance Statement. BayWa AG does not consider setting a general age limit a suitable criterion for selecting members of the Board of Management. The suitability to exercise an executive position is contingent on the experience, knowledge, and skills of the respective person. Setting an age limit would generally and improperly limit the selection of suitable candidates for executive positions. BayWa AG does therefore not consider rigid age limits sensible, as they also restrict flexibility in personnel decisions.
2 Recommendation C.1 Sentences 1, 4 and 5
In section C.1 sentence 1, the Code recommends the determination of specific objectives for the composition of the Supervisory Board, and the preparation of a profile of skills and expertise for the full Board. According to section C.1 sentence 4, proposals by the Supervisory Board to the General Meeting of Shareholders are to take such objectives into account while simultaneously aiming to fulfil the overall profile of required skills and expertise of the full Board. Section C.1 sentence 5 recommends publishing the implementation status in the form of a qualification matrix in the Corporate Governance Statement. BayWa AG will not formulate a specific objective or prepare a profile of skills and expertise for the entire Board, in addition to the qualification matrix. At BayWa AG, we believe that the professional qualification earned through experience is an essential criterion for accepting a seat on the Supervisory Board and thus for the composition of the Supervisory Board overall.
3 Recommendation C.2
BayWa AG will also not set an age limit for members of the Supervisory Board and will thus not indicate this in the Corporate Governance Statement, contrary to the recommendations in section C.2. BayWa AG does not consider setting a general age limit a suitable criterion for selecting members of the Supervisory Board. The suitability to exercise a position on the Supervisory Board is contingent on the experience, knowledge and skills of the respective person. Setting an age limit generally and improperly limits the selection of suitable candidates for supervisory positions. BayWa AG wishes to continue to rely on the expertise of experienced and accomplished Supervisory Board members. That is why BayWa AG does not consider rigid age limits sensible.
4 Recommendation C.4
This recommendation provides that a member of the Supervisory Board should not accept more than a total of five Supervisory Board mandates at listed non-group companies or comparable functions, with an appointment as Chair of the Supervisory Board being counted twice. It is not defined with sufficient specificity what a comparable function within the meaning of the recommendation C.4 is. None of the Supervisory Board members holds more than five Supervisory Board mandates with external listed companies. The Supervisory Board of BayWa AG includes one member who is a member of more than five other supervisory bodies aside from their position on BayWa AG’s Supervisory Board. The Company does not wish to lose the expertise of this Supervisory Board member. Considering all aspects of this situation and in particular the unclear definition of the term “a comparable function” within the meaning of recommendation C.4, a deviation from recommendation C.4 is declared as a mere precaution.
5 Recommendation C.10 Sentence 1, alternatives 1 and 3
The Chair of the Supervisory Board as well as the chair of the committee dealing with the remuneration of the Board of Management are to be independent from the Company and the Board of Management. According to recommendation C.7, paragraph 2, 1st bullet point, independence is not at hand if the chair of the Supervisory Board was a member of the Board of Management within the two years before becoming a member of the Supervisory Board. Prof. Lutz has been the chairman of the Supervisory Board of BayWa AG since 6 June 2023. Prior to that, he acted as the Chief Executive Officer of the company. By appointing Prof. Lutz, BayWa AG is following an assessment and evaluation by the legislator. Pursuant to Sec. 100 (2) item 4 AktG, it is possible for a member of the Board of Management to switch to the Supervisory Board if the company’s shareholders holding more than 25% of the votes of the company propose the election. The chair of the Supervisory Board of BayWa AG is simultaneously the chair of the committee tasked with executive remuneration. In particular in accordance with the BayWa AG Corporate Governance Rules, the chair of the Supervisory Board has the most direct contact to the Board of Management and, as a member of several committees of the Supervisory Board, has the most detailed overview of the overall performance of the Board of Management. That is why the chairperson of the Supervisory Board has always also been the chairperson of the remuneration committee in recent years. BayWa AG does not wish to deviate from this tried and tested practice.
6 Recommendation D.6
Section D.6 provides for regular meetings of the Supervisory Board without the Board of Management. BayWa AG does not consider it appropriate to provide for periodic intervals for meetings of the Supervisory Board without the Board of Managements for reasons of efficiency. Instead, the Supervisory Board will retain the existing rule of meeting without the Board of Management if necessary, in accordance with section 3.6 paragraph 2 GCGC 2017.
7 Recommendation G.7 Sentence 1
According to recommendation G.7 sentence 1, the performance criteria for all variable components of the remuneration for Board of Management members are to be mainly geared to strategic objectives. The Code does not define what strategic objectives are as opposed to operative objectives. From the perspective of BayWa AG, a clear distinction is not possible. What is more, clear strategic objectives can often not be defined unambiguously. The Supervisory Board does not want to be restricted in defining objectives and wishes to avoid unnecessary discussions about distinctions.
8 Recommendation G.10
According to recommendation G.10, variable remuneration granted to members of the Board of Management is to be predominantly invested in Company shares or to be granted predominantly as share-based remuneration. Any variable remuneration components that have been granted are not to be accessible to the Board of Management member until after a period of four years. BayWa AG does not consider the share price a direct indicator of a remuneration policy that aims at a sustainable and long-term performance development. The administrative burden associated with this recommendation and the risks imposed on each Board of Management member with regard to insider-trading make this provision impracticable. Long-term variable remuneration components are disbursed to all members of BayWa AG’s Board of Management over a period of three years; BayWa AG considers this timeline customary and appropriate.
9 Recommendation G.12
According to recommendation G.12, if a Board of Management member’s contract is terminated, the disbursement of any remaining variable remuneration components attributable to the period up until contract termination is to be based on the originally agreed targets and comparison parameters, and on the due dates or holding periods stipulated in the contract. Upon resignation, a member of the Board of Management loses the ability to influence the Company’s business success. The Board of Management and the Company are intent on processing the contract swiftly. The employment contracts of all members of the Board of Management contain provisions according to which, if the Board member leaves the Company, any balance is to be disbursed in full and any repayments are to be made in full. From the perspective of BayWa AG, this provision is well-balanced in existing contracts.
10 Recommendation G.15
If Board of Management members are also members of intra-group Supervisory Boards, the corresponding remuneration is to be credited according to recommendation G.15. The fixed remuneration of the members of BayWa AG’s Board of Management generally also covers any work for affiliated companies. Board of Management members only receive additional remuneration for specific, particularly complex mandates.
Munich, 8 November 2023
The Board of Management The Supervisory Board