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Corporate management and control by the Board of Executive Directors and Supervisory Board |
- Corporate Governance: management and supervision of company activities
- Board of Executive Directors and Supervisory Board jointly responsible for the direction of the company
- Board of Executive Directors manages company operations
- Supervisory Board oversees and advises Board of Executive Directors
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Conversion of BASF Aktiengesellschaft into BASF SE
As of January 14, 2008 BASF took on the new legal European form of a European Company. A highly significant goal of the conversion into BASF SE was the strengthening of BASF's corporate governance structure. By reducing the size of the Supervisory Board to twelve members and broadening the European composition of the employees' representatives side, the future direction for a modern and efficient corporate constitution has been set. At the same time, the equal representation of shareholders and employees has been maintained. Proven structures such as the two tier administrative system of BASF's Board of Executive Directors and Supervisory Board, will be retained in the SE.
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Management and supervision in BASF SE
The legal foundations of BASF SE's corporate constitution are primarily the Council Regulation of the European Union, the German SE Implementation Act and the German Stock Corporation Act. Despite these new legal foundations, the previous fundamental elements of BASF Aktiengesellschaft's corporate constitution remain unchanged in BASF SE: these are the two-tier system consisting of BASF's Board of Executive Directors and the Supervisory Board, the equal representation of shareholders and employees in the Supervisory Board and the shareholders’ rights of co-administration and supervision at the Annual Meeting.
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Direction and management by the Board of Executive Directors
Under the two-tier administrative system of BASF SE, the Board of Executive Directors is responsible for the management of the company and represents BASF SE in business undertakings with third parties. BASF's Board of Executive Directors is strictly separated from the Supervisory Board: A member of the Supervisory Board cannot simultaneously be a member of the Board of Executive Directors. The Board of Executive Directors agrees on company goals and corporate strategy and manages and monitors the business units of the BASF Group through the planning and setting of the company budget, the allocation of resources and management capacities, the monitoring and decision making regarding vital individual measures and the control of operative management. The Board is obliged to act and decide in the company's best interests. It is dedicated to the goal of increasing the company's value in the long term. The decisions made by the Board of Executive Directors are based on a simple majority. In the case of a tied vote, the casting vote is given by the Chairman of the Board.
The Board of Executive Directors reports to the Supervisory Board regularly, comprehensively and in a timely manner on all relevant matters concerning the company with regard to strategic planning, business development, risk issues and risk management. Furthermore, they agree on corporate strategy. Where required by the Statutes of BASF SE, the Board of Executive Directors must have the approval of the Supervisory Board for certain transactions before they are concluded. Such cases include the acquisition and disposal of enterprises and parts of enterprises, the issuance of bonds or comparable financial instruments provided that the acquisition or disposal price in an individual case exceeds 3% of the equity reported in the last consolidated financial statements of the BASF Group.
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Monitoring of corporate management by the Supervisory Board
The Supervisory Board appoints the members of the Board of Executive Directors and monitors and advises the Board on management issues. Members of the Supervisory Board cannot simultaneously be members of the Board of Executive Directors. Structurally, this ensures a high level of autonomy with regards to the supervision of the Board of Executive Directors.
With the change in legal form to an SE come substantial changes in the Supervisory Board. The German Codetermination Act, which is the relevant statutory foundation regarding the size and composition of the Supervisory Board, does not apply to the SE. Together with the SE Council Regulation, other relevant statutory foundations include the Statutes of BASF SE and the Agreement Concerning the Involvement of Employees in BASF SE (Employee Participation Agreement) that was signed on November 15, 2007 by company management and the representatives of BASF Group's European employees.
Whilst the Supervisory Board of BASF Aktiengesellschaft acting until January 14, 2008, comprised 20 members, ten of whom were elected at the Annual Meeting and ten of whom were elected by employees employed in Germany by the German BASF Group Companies, the Supervisory Board of BASF SE comprises 12 members. Six members are elected by the shareholders at the Annual Meeting. The remaining six members are elected by the newly appointed 'BASF Europa Betriebsrat', the European employee representation body of the BASF Group, as agreed to in the Employee Participation Agreement.
Resolutions of the Supervisory Board are passed by a simple majority of the votes of the participating members of the Supervisory Board. In the event of a tie, the vote of the Chairman of the Supervisory Board, who must always be a shareholder representative, shall be the casting vote. This resolution process is also applicable for the appointment and dismissal of members of the Board of Executive Directors by the Supervisory Board.
The Supervisory Board established three committees: The Personnel Committee dealing with personnel issues and the granting of loans, the Audit Committee and, according to the recommendation of the German Corporate Governance Code, newly introduced in July 2007, the Nomination Committee. Among other things, the Personnel Committee is charged with setting Board members' remuneration and related contractual issues. The members of the Personnel Committee are Supervisory Board Chairman Professor Dr. Jürgen Strube (chairman) as well as Supervisory Board members Robert Oswald, Dr. Tessen von Heydebreck and Michael Vassiliadis.
The Audit Committee makes preparations for the negotiations and resolutions of the Supervisory Board for the approval of the Financial Statements and Annual Report of the BASF Group and deals with risk monitoring and the internal control over financial reporting. The Audit Committee is also responsible for business relations with the company's auditors: It prepares the Supervisory Board's proposal to the Annual Meeting regarding the selection of an auditor, monitors the auditor's independence, defines the key aspects of the audit together with the auditor, negotiates the auditing fees and establishes the conditions for the provision of the auditor's non-audit services. The members of the Audit Committee are Max Dietrich Kley (chairman), Ralf-Gerd Bastian, Franz Fehrenbach and Michael Vassiliadis. Max Dietrich Kley (former Chief Financial Officer of BASF) has particular knowledge and experience in the application of accounting principles and internal audit procedures, and has been named by the Supervisory Board as Audit Committee Financial Expert.
The Nomination Committee that will prepare the proposals for the election of Supervisory Board members at the Annual Meeting, is composed by the members of the Supervisory Board elected at the Annual Meeting, in other words, Prof. Dr. Jürgen Strube, Prof. Dr. François N. Diederich, Michael Diekmann, Franz Fehrenbach, Dr. Tessen von Heydebreck and Max Dietrich Kley.
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Shareholders' rights
At the Annual Meeting, shareholders perform their rights of co-administration and supervision. Each BASF share represents one vote. Shareholders may exercise their voting rights at the Annual Meeting either personally, through a representative of their choice or through a company-appointed proxy authorized by shareholders to vote according to their instructions. There are neither voting caps to limit the number of votes a shareholder may cast nor special voting rights. BASF has fully implemented the principle of "one share, one vote." All shareholders are entitled to participate in the Annual Meeting, to have their say concerning any resolution and to demand information about company issues to the extent that it serves to help make an informed judgment about the resolution under discussion. Half of the members of the Supervisory Board are elected at the Annual Meeting where above all the formal discharge of the Board of Executive Directors and the Supervisory Board is decided on as well as the distribution of retained profits, capital measures, the authorization of share buybacks and changes to the Statutes.
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