Code Suggestions
We will partly follow the new suggestion in section 4.2.3
of the Code. The suggestion is that executive board membership
contracts should not provide for severance pay
on premature termination without just cause of more than
two times annual compensation including expenses or
more than the compensation for the remaining term of the
contract. Our Supervisory Board has always insisted that
the compensation contracts of Executive Board members
must be reasonable, including, for example, provisions
concerning severance pay, and it will continue to do so.
Except where the termination arises out of a change of
control, however, we do not believe it is practicable in
Executive Board member contracts to cap severance pay
on premature termination without just cause. To agree
such a cap from the outset would be contrary to the spirit
of our Executive Board contract, which is normally concluded
for a fixed term and does not in principle provide for
the possibility of ordinary termination by notice. Moreover, in practice the Company would find a contractual severance
pay cap difficult to enforce against an Executive
Board member in the circumstances where it would be
relevant. Also, an agreement in this respect that had been
concluded in advance might not make adequate provision
for the particular facts and surrounding circumstances
that later actually give rise to the premature ending of an
Executive Board member’s work. We will follow the new
suggestion where the termination arises out of a change
of control, and also insofar as that, in the event of premature
termination of an Executive Board member’s contract
by agreement, we will continue our past practice of
negotiating severance pay that is reasonable.
There are also two other suggestions in the Code that we do not follow:
- We do not follow the suggestion in section 5.4.6 of the Code that Supervisory Board members be appointed at different times and for different terms. We hold block votes for all shareholder representatives on the Supervisory Board and they have equal terms of office. If a Supervisory Board seat becomes vacant during the regular period of office, by-elections are held for the remainder of the regular period of office. This ensures an efficient, standardized process for electing Supervisory Board members and enables them to work together effectively.
- We have not agreed to pay Supervisory Board members performance-oriented compensation based on SAP’s long-term success as suggested in the Code, section 5.4.7 (2). We doubt whether the long-term success of SAP is the right basis for Supervisory Board compensation or improves the Supervisory Board members’ motivation in respect of SAP. Variable remuneration at SAP is therefore linked to the dividend, and can thus be readily determined by applying the Supervisory Board compensation provisions in the Articles of Incorporation. We believe that this thus ensures transparent, appropriate compensation for Supervisory Board members that reflects their legal responsibilities.
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