Governance Information • Jan 8, 2011
Governance Information
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The Supervisory Board of Fresenius Medical Care AG & Co. KGaA and the Board of Management of its General Partner (hereinafter referred to as the "Board of Management") declare that the recommendations of the "German Corporate Governance Code Government Commission", published by the Federal Ministry of Justice in the official section of the electronic Federal Gazette in the version as of June 18, 2009 have been met since issuance of the recent declaration. The following recommendations are the only ones not been applied:
According to clause 3.8 para. 3 of the Code, a deductible must be agreed upon in any D&O policy for the Supervisory Board equivalent to the mandatory minimum deductible implemented for the Management Board by the German Act on the Appropriateness of Management Board Remuneration (VorstAG). Such deductible amounts to 10% of the loss up to at least the amount of one and a half times the fixed annual compensation. Until end of June 2010, Fresenius Medical Care's current D&O policy was a group policy for a multitude of persons, which did not provide for a deductible in the recommended amount. Effective since July 1, 2010, a deductible was agreed for the Management Board of Fresenius Medical Care Management AG, which does comply with the requirement of the German Act on the Appropriateness of Management Board Remuneration (VorstAG). An equivalent deductible was agreed for the Supervisory Board as of July 1, 2010.
According to clause 4.2.3 para. 4 of the Code, in concluding Management Board contracts, care shall be taken to ensure that payments made to a Management Board member on premature termination of his contract without serious cause do not exceed the value of two years' compensation (severance payment cap) and compensate no more than the remaining term of the contract. The severance payment cap shall be calculated on the basis of the total compensation for the entire past financial year and if appropriate also the expected total compensation for the current financial year. The employment contracts with the members of the Management Board that have been newly executed as of the beginning of the year 2010 also do not contain severance payment arrangements for the case of premature termination of the contract without serious cause. Such severance payment arrangements would be contrary to the concept practiced by Fresenius Medical Care in accordance with the German Stock Corporation Act, according to which employment contracts of the members of the Management Board are, in principle, concluded for the period of their appointment. Therefore, a premature termination of the employment contract in principle requires a serious cause.
According to clause 5.4.1 of the Code attention shall be paid to an age limit to be specified for the members of the Supervisory Board in proposals for the election of members of the Supervisory Board. Similarly, according to clause 5.1.2 of the Code an age limit shall be specified for members of the Management Board. As in the past, Fresenius Medical Care will refrain from determining an age limit for members of the Supervisory Board and the Board of Management in the future since this would limit the selection of qualified candidates.
According to clause 5.4.6 of the Code, Members of the Supervisory Board shall receive fixed as well as performance-related compensation. The performance-related compensation should also contain components based on the long-term performance of the enterprise. Currently, Fresenius Medical Care pays a fixed compensation to the members of the Supervisory Board only. The introduction of a performancerelated compensation to the members of the Supervisory Board, linked to the success of the Company, is currently still under review.
In terms of the recommendations of the "German Corporate Governance Code Government Commission", published by the Federal Ministry of Justice in the official section of the electronic Federal Gazette in the version as of May 26, 2010, the Supervisory Board of Fresenius Medical Care AG & Co. KGaA and the Board of Management declare that these recommendations are considered. In addition to the aforesaid recommendations according to Code clauses 4.2.3 para.4, 5.1.2, 5.4.1 and 5.4.6 (not applied accordingly in its versions as of May 26, 2010, also) the following recommendations are the only ones not being applied:
According to clause 5.4.1 para. 2 and 3 of the Code, the Supervisory Board shall specify concrete objectives regarding its composition and recommendations by the Supervisory Board to the competent election bodies shall take these objectives into account. The objectives specified by the Supervisory Board and the status of implementation shall be published in the Corporate Governance Report. Fresenius Medical Care does not comply with these recommendations. The composition of the Supervisory Board of Fresenius Medical Care needs to be aligned to the enterprise's interest and has to ensure the effective supervision and consultation of the Management Board. Hence, in composing the Supervisory Board, knowledge, skills and expert experience of each individual are of precedence. In contrast, fixed diversity quotas would limit the selection of qualified candidates in the same general way as an age limit.
Bad Homburg, December 2010
Fresenius Medical Care AG & Co. KGaA Supervisory Board and Management Board (of Fresenius Medical Care Management AG)
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