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Declaration of compliance of the GK Software SE

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Declaration of compliance

On 20 April 2020, the Management and Supervisory Boards at GK Software SE declared that, since issuing the last annual declaration of compliance in April 2019, the recommendations of the “Government Commission on German Corporate Governance Code” had been met, apart from the exceptions noted in the declaration published in April 2019, and continue to be met with the following exceptions.

A. Management and supervision

I. Geschäftsführungsaufgaben des Vorstands

  • Principle 3, Recommendation A.1 The Management Board will mainly select candidates for management positions on the basis of their personal skills and abilities in the interests of the Company. Only after this will other objective background issues in the candidates like their age, origin or gender be taken into account in order to not generally restrict the interests of the Company. In setting the target rate for the proportion of women at top management level below the Management Board, the Management Board will take into account the fact that this only involves three persons.
  • Principle 5, Recommendation A.2 The work to fully complete the compliance system is being prepared. The Management Board is planning to disclose its main features once it has been completed. Opportunities for employees and outside parties to provide information about any legal infringements without the content being published already exist.

III. The function of the annual shareholders’ meeting

  • Principle 8, Recommendation A.5 The Company’s articles of association do not envisage any rules for this case. The Management Board will comply with the statutory provisions envisaged for these cases and shall reserve the right to summon an extraordinary shareholders’ meeting.

B. Appointments to the Management Board

  • Principle 9, Recommendation B.1 The Supervisory Board will mainly take into account personal suitability, which results from the individual skills and specialist expertise in candidates, when filling vacant positions on the Management Board so as to not generally restrict the interests of the firm. Other criteria will only be taken into consideration after this. The Supervisory Board will particularly take into account the fact that the Management Board only consists of two members when setting the target size for the share of women on the Management Board.
  • Principle 9, Recommendation B.2 The Supervisory Board and the Management Board will jointly ensure long-term planning with regard to successors. This method will be adapted to the relevant requirements in the specific situation in each individual case and will be described in the declaration on corporate management for the year 2020.
  • Principle 9, Recommendation B.5 There is no age limit for members of the Management Board; GK Software SE believes that the professional qualifications of the members of the Management Board play a more important role.

C. Composition of the Supervisory Board

I. Composition of the Supervisory Board

  • Principle 11, Recommendation C.1 The composition of the Supervisory Board at GK Software SE is not decided by the Supervisory Board, but by the Company’s annual shareholders’ meeting. The Supervisory Board seeks to engage in successful cooperation between its members and constructive cooperation with the Management Board. The nominations for candidates submitted by the Supervisory Board to the annual shareholders’ meeting will take into account the geographical distribution and the degree of complexity of the business activities at GK Software. Criteria such as the age, background or gender of the candidates are not primar factors in considerations. The Supervisory Board will particularly take into account the fact that the Supervisory Board only consists of three members when setting the target size for the share of women on the Supervisory Board.
  • Principle 11, Recommendation C.2 There is no provision for an obligatory age limit for the members of the Supervisory Board, as the older members of the Supervisory Board particularly enrich the board as a result of their wide experience and their specialist qualifications are more important.

II. Independence of the members of the Supervisory Board

  • Principle 12, Recommendation C.7 In special situations, for example, in the case of suggestions for necessary appointments to supervisory boards by a court, the Management Board will also suggest candidates who do not match the criteria in the Code regarding independence, for the benefit of the Company. The Company does not see any restrictions in independence in the members of the Supervisory Board either, even if membership of this body has continued for twelve years.
  • Principle 12, Recommendation C.10 In special situations, for example, in the case of suggestions for necessary appointments to supervisory boards by a court, the Management Board will suggest candidates who do not match all the criteria in the Code regarding independence, for the benefit of the Company.

D. How the Supervisory Board operates

I. Rules of procedure

  • Recommendation D1 The rules of procedure for the Supervisory Board are not made public.

II. Cooperation on the Supervisory Board and with the Management Board

  • Principle 14, Recommendation D.2 The Supervisory Board at GK Software SE does not form any committees due to the size of the body (the Supervisory Board only consists of three members), as the provision of consistent and extensive information for all members of the Supervisory Board can be guaranteed most efficiently at meetings where all the members of the Supervisory Board are present. Any issues can be handled and answered appropriately by the whole body.
  • Principle 14, Recommendation D.3 See the reasons for deviating from recommendation D.2.
  • Principle 14, Recommendation D.4 See the reasons for deviating from recommendation D.2.
  • Principle 14, Recommendation D.5 See the reasons for deviating from recommendation D.2.
  • Recommendation D.7 The Supervisory Board normally meets together with the members of the Management Board, as both committees believe that the flow of information and discussions about topics affecting the Company can be best handled in this way.
  • Principle 14, Recommendation D.5 See the reasons for deviating from recommendation D.2.

F. Transparency and outside reporting

  • Recommendation 7.1.2 The consolidated accounts are not published within 90 days of the end of the financial year, but after four months in line with the current guidelines published by Deutsche Börse AG. The interim reports are not made available after 45 days, but after two months according to the current guidelines published by Deutsche Börse AG. GK Software SE believes that the periods of time set by Deutsche Börse AG are sufficient to provide shareholders with detailed information.

G. Remuneration for the Management Board and the Supervisory Board

I. Remuneration for the Management Board

  • Principle 23 The annual shareholders’ meeting on 29 June 2015 decided in line with Sections 286 Para. 5 and Section 314 Para. 2 Sentence 2 of the German Commercial Code that any individual disclosure of the earnings of the Management Board for the financial years 2015 to 2019 should not take place before 28 June 2020. There will therefore not be an item on the agenda to decide the remuneration system and the specific remuneration of the individual members of the Management Board at the Company’s annual shareholders’ meeting, which will decide on the accounts from the 2019 financial year.
  • Recommendation G.1 It is not possible to precisely determine which relative proportion of the fixed earnings, on the one hand, and the short-term and the long-term variable elements of remuneration, on the other hand, have in terms of the overall target remuneration. While the ratio of fixed earnings and maximum short-term variable earnings has been defined, the long-term variable remuneration takes place exclusively in the form of share options, the value of which at the time when they are exercised cannot be determined when they are issued.
  • The remuneration system stipulates which connection exists between achieving the previously agreed performance criteria and the variable remuneration. However, the Supervisory Board still retains the right to consider the Company’s overall situation when assessing the goals that have actually been reached.
  • Recommendation G.6 The variable remuneration, which results from achieving long-term goals, does not generally exceed the share arising from short-term goals. However, it is deliberately assumed that there is a value lever, which cannot be precisely determined, for the instruments when providing remuneration for the long-term goals (share options) if growth has been recorded, as the Company presents it - and this can and should create a situation where the remuneration of the long-term goals should significantly exceed that of the short-term goals.
  • Recommendation G.10 The members of the Management Board are not expected to mainly invest the variable amounts of the remuneration that is granted to them in Company shares, because the long-term remuneration is already exclusively granted in share options.
  • Recommendation G.11 The Supervisory Board at GK Software does not have the opportunity to withhold or reclaim any variable remuneration that has been earned, even in justified cases. In these cases, mutual agreement is sought with the members of the Management Board.
  • Recommendation G.13 The Supervisory Board will consider in future contracts that payments to a member of the Management Board will not exceed the value of two annual salaries if his or her work on the Management Board ends prematurely.
  • Recommendation G.14 The Supervisory Board will consider in future contracts that promises for services are not agreed if the employment contract is ended prematurely by the member of the Management Board due to a change of control. As the members of the Management Board were both appointed to their positions more than a decade ago, the practice adopted for years has been used in one of the current contracts.
  • Recommendation G.15 In the case of members of the Management Board. who hold supervisory board positions within the Group, the remuneration is not currently included in their normal salary, as the decisions were made before the corresponding rules of the Code were adopted and the additional responsibility associated with this is rewarded. The Supervisory Board is planning to consider that remuneration for supervisory board positions with the Group will be included in their salary when making future decisions.