Corporate Governance
Status: November 2011
Pursuant to § 161 of the German Stock Corporation Act (Aktiengesetz = AktG), the Board of Directors 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.
The following declaration refers to the Code in its revised version of 26.05.2010 (published 02.07.2010).
The Board of Directors 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 2011 with the following exceptions.
1. Rule 2.3.3 (General Meeting – Postal Votes)
Since the revised version of 26.05.2010 the Code recommends assisting the shareholders in the use of postal votes, wherein the Code does not give a recommendation to offer postal votes. It merely recommends that the company support shareholders in the use of postal votes in the event that the Board of Directors decides to make this option available.
With resolution of the Annual General Meeting on 29.10.2010, in accordance with the option granted by § 118 para. 2 AktG, TELES took the precaution of implementing a new clause in its Articles of Association authorizing the Board of Directors to allow postal votes.
According to the point of view of the Board of Directors, the practical implementation of postal votes is still subject to too many legal uncertainties. Furthermore, postal votes do not provide any recognizable additional benefit to shareholders in the personal exercise of their rights when compared to the proxy voting service offered by TELES. In light of this and in consideration of the substantial administrative effort in connection with postal votes, for now the Board of Directors refrained from offering the option of postal votes.
2. Rule 3.8 (Board of Directors and Supervisory Board - D&O Insurance)
The Code stipulates that an excess corresponding to the legal requirements for the Board of Directors shall be determined for the Supervisory Board respectively, in case the Company procures a Directors' and Officers' Liability Insurance.
The Board of Directors' existing excess of the D&O Insurance has been amended to the required degree.
With regard to the members of the Supervisory Board, the determination of an excess has not been considered as being suitable to enhance motivation and sense of responsibility of the board members who are already acting responsibly and in the interest of the Company due to their functions.
3. Rule 4.2.3 (Board of Directors - Compensation)
In addition to § 87 para. 1 AktG the German Corporate Governance Code 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 contracts provide for a variable compensation, due to the current economic situation of the Company, for the years 2008 and 2009 no variable compensation has been granted to the Board of Directors. For 2010 the Directors have waived their variable compensation in advance.
The Code further recommends that payments made to a Director on premature termination of his contract, shall be subject to a limitation to two annual compensations (severance payment cap).
Within the management contract of Mr. Oliver Olbrich, Mr. Frank Paetsch as well as last year of the former member of the Board of Directors Mr. Richard Fahringer the Supervisory Board agreed upon a 2-year-severance-payment-cap in case of premature termination. In case of future extensions of the contracts it is intended to agree upon such a severance payment cap, as far as the term exceeds one year.
4. Rule 5.1.2 (Age Limit for Directors, Diversity)
The Code recommends that the Supervisory Board specifies an age limit for members of Board of Directors; it also recommends to take diversity into account when appointing Directors, and in particular, to aim for an appropriate consideration of women.
TELES refrains from determination of an age limit for Directors, as in principal the expertise of experienced Directors shall be at the disposition of the Company. A solely age-related disqualification is not considered appropriate by the Board of Directors and Supervisory Board.
In the Company's interest, when appointing Directors, the Supervisory Board mainly pays attention to the availability of maximum professional competence, and thereafter takes further criteria into consideration. Due to the internationality of the Company the availability of key skills, language competence and experiences in different cultural environments is appreciated. Therefore, in the past Directors positions has been regularly filled with foreign managers.
5. Rule 5.3 (Supervisory Board, Formation of Committees)
The 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 considered to be appropriate to enhance the efficiency of Supervisory Board's work and is therefore not indicated.
6. Rule 5.4.1 (Constitution of the Supervisory Board, Age Limit, Diversity, Further Training and Professional Development Measures)
Since the revised version of 26.05.2010 the Code recommends that the Supervisory Board sets targets for the constitution of 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 and diversity. These specific targets shall provide for an appropriate participation of women.
The Supervisory Board has not yet determined concrete targets for its constitution so far, and after consideration of the specific situation of the Company does not intend to set these targets for the time being. In the Company's interest, when constituting the Supervisory Board, it is mainly appreciated that candidates have the maximum professional competence as well as international experiences. Only thereafter further criteria are taken into consideration.
Furthermore, the Company refrains from determination of an age limit for Supervisory Board members, as in principal the expertise of experienced Supervisory Board members shall be at the disposition of the Company. A solely age-related disqualification is not considered appropriate.
Additionally, the Code recommends that the Company appropriately supports the Supervisory Board members in further training and professional development measures required for the performance of their duties.
In principal the Company supports the Supervisory Board members in reasonable further training and professional development measures under the statutory reimbursement of expenses. Which requirements to be fulfilled for the adequacy of Company's support subject to this recommendation is currently unclear. For the avoidance of doubt, a deviation from the recommendation is declared herewith.
7. Rule 7.1.2 (Publication of Financial Statements)
Subject to the recommendation of the Code, the Consolidated Financial Statements shall be publicly accessible within 90 days after the end of the financial year and Interim Reports shall be publicly accessible within 45 day after 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 crisis during the first half of the year 2011, more intensive sensitivity and plausibility checks were conducted during the annual audit. Therefore, the Consolidated Financial Statements for the financial year 2010 and the Financial Reports during the period 2011 were published with delay.
Berlin, November 2011
TELES AG Informationstechnologien
Prof. Dr. Sigram Schindler
CEO
Prof. Dr. Walter Rust
Supervisory Board Chairman