Corporate Governance
Status: October 2010
Pursuant to § 161 of the German Stock Corporation Act (Aktiengesetz = AktG), the Management Board and Supervisory Board of companies listed on the stock exchange in Germany are required to make an annual declaration stating that the recommendations of the Government Commission on the German Corporate Governance Code have been and are being complied with or listing the recommendations not complied with and disclosing the reasons why not. This declaration must be permanently accessible for the shareholders.
The German Corporate Governance Code (the "Code") contains rules with different binding force. In addition to current and binding stock corporation law regulations, it also contains recommendations from which companies may deviate; they are obliged however, to make full annual disclosure of these deviations. The Code further contains guidelines which may be deviated from without disclosure.
For the period up to 02.07.2010, the following declaration refers to the version of the Code of 18.06.2009. For subsequent and future Corporate Governance Code practice of TELES AG, the following declaration refers to the Code in its revised version of 26.05.2010 (published 02.07.2010).
The Management Board and the Supervisory Board of TELES AG hereby declare that the recommendations of the "Government Commission of the German Corporate Governance Code" published by the Federal Ministry of Justice in the official section of the electronic Federal Journal have been and are being complied with since the last Compliance Statement of February 2010 with the following exceptions.
1. Rule 2.3 (Absentee Ballot)
The German Stock Corporation Act and the German Corporate Governance Code stipulate that stockholders may exercise their voting rights by Absentee Ballot.
The Annual General Meeting of TELES AG Informationstechnologien, held on 29.10.2010, will vote on the respective changes to the Company’s Articles of Association to implement these legal requirements.
2. Rule 3.8 (Management and Supervisory Board - D&O Insurance)
The German Corporate Governance Code stipulates that an excess of at least 10% of the damage or at least 1.5 times the fixed annual compensation of the respective Board member must be determined if the Company procures D&O insurance for the Management Board and Supervisory Board.
Due to the changes of the German Stock Corporation Act which have been implemented by the German Law for the Adequacy of Management Compensation (VorstAG) and the German Corporate Governance Code, the Management Board’s existing excess of the D&O Insurance has been increased to the required degree within the legal transition period.
With regard to members of the Supervisory Board, the determination of a higher excess has not been considered as being suitable to enhance motivation and a sense of responsibility among the board members who are already acting responsibly and in the interest of the Company due to their functions.
3. Rule 3.10 (Management and Supervisory Board – Corporate Governance Report)
According to Rule 3.10 of the Code, the Management Board and Supervisory Board report each year on the company’s Corporate Governance in the Annual Report (Corporate Governance Report). It is an integral part of the annual corporate governance statement of the company.
The Corporate Governance Report is part of the Management Report, which is part of the Annual Financial Accounts statement of TELES AG. Moreover, the Management and Supervisory Board of TELES AG are also publishing the Corporate Governance Report within the Annual Report of the TELES Group.
4. Rule 4.1.5. (Management Board – Diversity in executive positions)
The German Corporate Governance Code stipulates that the Management Board shall take diversity into consideration when staffing executive positions and shall, in particular, strive to promote gender equality.
At TELES, there were no vacant positions to be staffed during the respective reporting period.
5. Rule 4.2.3 (Management Board - Compensation)
In addition to § 87 I AktG the German Corporate Governance stipulates that the variable compensation elements must generally be based on a multi-year assessment and that for extraordinary developments a possibility of limitation (cap) must in general be agreed upon by the Supervisory Board.
Although the Management Board contracts provide for a variable compensation, the Management Board has waived its variable compensation for the years 2008 and 2009.
The German Corporate Governance further recommends that payments made to a Management Board member on premature termination of his contract shall be subject to a limitation in pay of compensation (severance pay cap).
Due to the short duration of the Management Board contracts (max. 3 years), the Supervisory Board has generally refrained from implementing such 2-year-severance-payment caps.
6. Rule 5.1.2 and 5.4.1 (Age Limit for Members of the Management Board and Supervisory Board, Diversity)
The German Corporate Governance Code recommends that the Supervisory Board specifies an age limit for members of the Management Board as well as of the Supervisory Board; it also recommends taking diversity into account when the candidates for the Supervisory Board are nominated.
Neither for the Management Board nor for the Supervisory Board of TELES an age limit has been specified, as in principal the expertise of experienced Management and Supervisory Board members shall be at the disposition of the Company. A solely age-related disqualification is not considered appropriate by the Management and Supervisory Board. Since the diversity requirements have been implemented in the German Corporate Governance Code, there has not been any replacement of corporate organs at which such aspects would have to be observed. In the future, the company will allow for such diversity aspects as far as possible.
7. Rule 5.3 (Formation of Committees)
The German Corporate Governance Code recommends that the Supervisory Board forms professionally qualified committees subject to the specific conditions of the company and the number of members. At present, the Supervisory Board of TELES AG consists of three members. As these members deal in their totality with the committee-related topics referred to in the Code - in addition to their other duties -the formation of committees is not appropriate and therefore not indicated.
8. Rule 5.4.1 (Constitution of the Supervisory Board)
The German Corporate Governance Code recommends that the Supervisory Board sets targets on who shall constitute the Supervisory Board taking into consideration the specific situation of the Company, the international activities of the Company, potential conflicts of interests, the age limit to be determined for Supervisory Board members and diversity. These specific targets shall provide for the promotion of equal participation of women.
The Supervisory Board intends to set these targets by the end of this year.
9. Rule 7.1.2 (Publication of Consolidated Financial Statements)
The German Corporate Governance Code recommends that the Consolidated Financial Statements shall be publicly accessible within 90 days of the end of the financial year and Interim Reports shall be publicly accessible within 45 day of the end of the reporting period. In principle, TELES AG publishes the Consolidated Financial Statements and the Interim Reports - as far as possible - within these respites. In case of need TELES reserves the right to take advantage of the legal respites.
Due to the continuing financial crisis at the beginning of this year 2010, more intensive sensitivity and plausibility checks were conducted during the annual audit. Therefore, the Consolidated Financial Statements for the financial year 2009, the first Quarterly Report 2010 and the Semi-Annual Accounts 2010 were published with delay.
Furthermore, the Corporate Governance Code recommends that half-year and quarterly financial reports shall be discussed by the Supervisory Board or its audit committee together with the Management Board before they are published. TELES AG is having its half-year and quarterly reports reviewed regarding plausibility by its auditor before they are published. An additional discussion with the Supervisory Board is not necessary in consideration of the company size and the close collaboration which is taking place between Management Board and Supervisory Board in any case.
Furthermore, the Corporate Governance Code recommends that the annual Corporate Governance Report should contain inter alia details of ownership, acquisition and disposal of company stocks by the Management Board and Supervisory Board (Rule 6.6), as well as specific information pertaining to company stock option programs (Rule 7.1.3). TELES AG publishes all of these information in its annual company report and refers to detailed internet-published company documents including, for example, the information pursuant to § 15a of the WpHG.
Berlin, October 2010
TELES AG Informationstechnologien
Prof. Dr. Sigram Schindler
CEO
Prof. Dr. Walter Rust
Supervisory Board Chairman