In 2004, SAP again improved corporate governance. Notably,
the Company took steps to carefully and thoroughly analyze
and implement new corporate governance directives introduced
in Germany and other countries.
To address German requirements, SAP focused on
revising its own Principles of Corporate Governance in the
light of amendments to the German Corporate Governance
Code published in 2003. In April 2004, the Company revised
its Principles and published them on its Web site with a compliance
declaration reflecting the new Code. One of the noteworthy
changes was the amendment of the terms of the stock
option plan for members of the SAP Executive Board to
incorporate a cap on windfall profits.
In two discretionary matters, the Company decided not
to follow the new German Corporate Governance Code:
- The SAP financial statements for 2003 already disclosed individualized
Executive Board compensation figures, but the
breakdown into fixed and variable elements was shown only
for the Executive Board as a body.
- SAP sees collective Executive Board responsibility as a significant
factor in the Company’s success, and therefore neither
the SAP AG Articles of Incorporation nor SAP’s Principles
of Corporate Governance contain provisions that envisage
individual performance as a criterion in determining appropriate
compensation for Executive Board members.
SAP amended its Corporate Governance Principles again in
early 2005 in respect of the disclosure of individualized Executive
Board compensation details in its 2004 financial reports.
For the first time, the Company is publishing the fixed and
variable elements in each Executive Board member’s compensation.
However, it is doing so not in the notes to the consolidated
financial statements, as envisaged in section 4.2.4 of the
German Corporate Governance Code, but in a separate compensation
report, which also contains additional information
disclosed voluntarily. The compensation report forms part of
this Annual Report and is available on SAP’s Web site.
SAP also acted on further rules under the U.S. Sarbanes-Oxley Act in the required time frame. In particular, this
involved extending the documentation of the internal audit
system and preparing for the first audit of that system by SAP’s
independent auditor pursuant to the new U.S. regulations.
According to the corporate governance rules of the
New York Stock Exchange (NYSE), foreign companies listed on
the NYSE must publish a report on their Web site stating any
substantial ways in which their corporate governance practices
differ from the NYSE corporate governance rules. To meet
this requirement, in 2004 SAP published its first corporate
governance report on its Web site, setting out in detail the
differences between SAP’s corporate governance practice and
the NYSE rules.
SAP’s work toward exemplary corporate governance
was acknowledged by independent specialists. Thus, in its
analysis of international companies early in 2005, Institutional
Shareholder Services, Inc. (ISS), a global leader in corporate
governance services, found SAP to enjoy the best corporate
governance of all major German companies. |
