Corporate Governance Policy (31.12.2016)

Statute of Frauenthal Holding AG - valid from July 27, 2017, German Version

Austrian Code of Corporate Governance version January 2015, German Version

 

Disclosures in accordance with section 243b UGB (Austrian Business Code)

Frauenthal Holding AG was one of the first companies to commit to implementation of the voluntary Austrian Code of Corporate Governance. On 27 March 2003 the Company undertook to adhere to these rules, which go beyond its legal obligations, wherever possible. In 2016 the Executive and Supervisory boards again attached prime importance to adhering as closely as possible to all the rules of the Code, and to maintaining and enhancing the Company’s high internal standards.

Frauenthal Holding AG’s corporate governance policies are based on Austrian law (in particular the Austrian Companies Act and Capital Market Act), the articles of association, the rules of procedures of the Company’s governing bodies and the Austrian Code of Corporate Governance.

The Code is constantly being developed in order to increase transparency for all stakeholders – which is also a long-standing goal of the Frauenthal Group. 


Corporate Governance Report

Frauenthal Holding AG has been listed on the Vienna Stock Exchange since 10 June 1991. The Austrian Code of Corporate Governance is generally recognised on this market. Frauenthal Holding AG complies with all binding L-Rules (legal requirements) and all C-Rules (comply or explain) with the exception of C-Rule 53 (independence of the Supervisory Board, see Composition of the Supervisory Board below for details) of the Code in its version of January 2015, and regularly has its compliance with the Code externally evaluated in accordance with R-Rule 62 (recommendation). The Code is available for download at www.corporate-governance.at and is posted at www.frauenthal.at.

Our compliance with the Code of Corporate Governance was last evaluated by our auditors, BDO Austria GmbH, at the start of 2017. The evaluation report certifies our adherence to the Code and the correctness of this Corporate Governance Report.

  


Executive Board

The Executive Board liaises with the Supervisory Board on Group strategy, reporting to it regularly on implementation and the Company’s current situation, including the risk outlook. The rules and procedures of the Supervisory Board, audit committee and Executive Board give form to the legal framework that defines the responsibilities of the Company’s governing bodies and how they function. 


Composition of the Executive Board

The Executive Board is made up of Martin Sailer and Wolfgang Knezek, who have equal rights.

As the Executive Board has only two members there is no need for a chairperson. Martin Sailer and Wolfgang Knezek bear joint overall executive responsibility. Martin Sailer is not a member of the supervisory board of any other company; Wolfgang Knezek serves on the Supervisory Board of VNL GmbH.

Martin Sailer was appointed to the Frauenthal Holding AG Executive Board in September 2008, and his term of office expires on 30 June 2021.

Born in 1962, Martin Sailer studied business administration from 1980–1984, and was a research assistant at the universities of Graz and St. Gallen for several years, after which he accumulated 28 years of experience in the financial departments of various international companies. After a spell with the corporate controlling department at Daimler-Benz AG, from 1989-1992, he was Head of Finance at a major car importer from 1993-1998, and was Vice President Finance at the Ventana Group between 1998 and 2000. Before joining Frauenthal, he was finance director of the Austrian and German subsidiaries of the Pfizer pharmaceutical group (2001–2008). He is also a member of the SHT Haustechnik AG Supervisory Board (Deputy Member since December 2014) and member of Supervisory Board of ÖAG (Chairman of the Supervisory Board from the start of April 2014, then Deputy Chairman since December 2014). Martin Sailer remains head of the finance department of Frauenthal Holding AG, and is also responsible for the Frauenthal Automotive Division and business development at holding company level.

Wolfgang Knezek was appointed to the Frauenthal Holding AG Executive Board in September 2015 and his term of office runs until 31 December 2017.

Wolfgang Knezek was born in 1963. He studied law at the University of Vienna from 1981 to 1987 and began his working life at Herba Apotheker AG in 1978. He became assistant to the management board at Hild Logistikservice GmbH in 1991, and was appointed as managing director in 1997. Mr Knezek joined the Executive Board of SHT Haustechnik AG in 2002. He was instrumental in the company’s turnaround in 2005, and in its achievement of market and service-quality leadership in the years that followed. A lawyer and logistics expert, he will continue to bring his extensive experience to bear in the future development of the Frauenthal Trade Division. Mr Knezek oversees the strategic alignment of and controlling at the Frauenthal Trade Division. He retains his post as a member of the Executive Board of SHT Haustechnik AG and has overall responsibility for the management of the Frauenthal Trade Division. Wolfgang Knezek is a member of the Executive Board of Verein Netzwerk Logistik (VNL) and the VNL GmbH Supervisory Board.


Supervisory Board

The Frauenthal Holding AG Supervisory Board held seven meetings in 2016. The Supervisory Board consists of six members elected by the Annual General Meeting and three members delegated by the works council. The six elected board members are Hannes Winkler (Chairperson), Dietmar Kubis (Deputy Chairperson), Oskar Grünwald, Johannes Strohmayer, Birgit Eckert and Johann Schallert. The members delegated to the board by the works council are August Enzian, Klaus Kreitschek and Thomas Zwettler.

As well as monitoring the Company’s day-to-day business activities, during the reporting period the Supervisory Board focused on strategic business development planning and maximisation of shareholder value for the Frauenthal Group and its divisions. As Hannes Winkler has been a member of the Frauenthal Holding AG Supervisory Board for more than 15 years and was an interim member of the Executive Board in 2015, he is not defined as an independent member within the meaning of C-Rule 53. Oskar Grünwald and Dietmar Kubis have likewise been members of the Frauenthal Holding AG Supervisory Board for more than 15 years, meaning that they are also not considered independent within the meaning of C-Rule 53. Although not predominantly independent, the Supervisory Board of Frauenthal Holding AG benefits from the long-standing experience of its members.


Composition of the Supervisory Board

Johannes Strohmayer also holds a supervisory board seat on another Austrian or foreign listed company. He is chairman of the supervisory board of Österreichische Staatsdruckerei Holding AG, which has been listed on the Vienna Stock Exchange since November 2011. 


Supervisory Board committees

Employee codetermination on supervisory boards is an aspect of the Austrian corporate governance system that is required by law. As well as the audit committee, which is required by law, a remuneration committee was set up, as well as a strategy committee in 2016. The audit committee met three times in the course of the year under review, the remuneration committee twice and the strategy committee twice.

  

Members of the audit committee

Oskar Grünwald (chairperson), Dietmar Kubis and employee representative August Enzian make up the audit committee. The committee is mainly responsible for overseeing the audit of the individual annual financial statements and preparations for their adoption, the audits of the consolidated financial statements, the dividend recommendation, the separate parent company and Group operating reviews, and the Corporate Governance Report. Oversight of the Group’s accounting processes, and the effectiveness of the internal controlling, internal audit and risk management systems are central priorities for the committee. A further important responsibility of the audit committee is preparing the Supervisory Board’s recommendation for the selection of the auditors, and monitoring the independence of the auditors of the individual and consolidated financial statements, particularly with regard to the provision of any additional services. A unanimity voting system has been adopted. 


Members of the remuneration committee

The remuneration committee consists of its chairperson Hannes Winkler, Dietmar Kubis and Birgit Eckert as members, and employee representative Klaus Kreitschek. This committee concludes Executive Board employment contracts, and determines the compensation of Executive Board members. It also sets the targets for the performance-related pay components and monitors their attainment. A unanimity voting system has been adopted.


Members of the strategy committee

Separate strategy committees have been formed for the Automotive and Trade Divisions. The strategy committee for the Automotive Division consists of Hannes Winkler as chairperson and Johann Schallert and Dietmar Kubis as members. The strategy committee for the Trade Division consists of Hannes Winkler as chairperson and Johann Schallert and Johanne Strohmayer as members. The remits of both strategy committees include discussing corporate strategy, ongoing checks to monitor strategy implementation and monitoring the strategy process. A unanimity voting system has been adopted. 


Independence of the Supervisory Board

The criteria for the independence of Supervisory Board members conform to the guidelines set out in Annex 1 to the Austrian Corporate Governance Code, and have therefore not been separately posted on the Group’s website. A Supervisory Board member may declare himself/herself to be independent if he/she has no business or personal relationships with the Company or its Executive Board which constitute a material conflict of interest and might therefore influence the member’s behaviour. Half of the members of the Supervisory Board of Frauenthal Holding AG are independent in this sense (Johannes Strohmayer, Birgit Eckert and Johann Schallert), and have no business or personal relationship with the Company or its Executive Board. 


Equal opportunities

As a company committed to sustainable business practices, Frauenthal addresses social responsibility issues such as equal opportunities at work. All employees are treated equally, regardless of gender, age, religion, culture, colour of skin, social background, sexual orientation or nationality.

 The Group is attempting to increase the number of women on management committees, the Supervisory Board and the Executive Board, as well as in senior management at Group companies by conducting targeted searches for suitable candidates when filling such positions.

 At the time of writing, out of the six executive board positions (three at Frauenthal Handel AG, two at Frauenthal Holding AG and two at SHT Haustechnik AG – Wolfgang Knezek holds two positions, at Frauenthal Holding AG and SHT Haustechnik AG), one is held by a woman. One of the nine members of the Supervisory Board is female.

One other senior management position at Frauenthal Holding AG is held by a woman. The Group actively supports staff who demonstrate readiness to take on management responsibilities. 


Compliance

Frauenthal Holding AG has implemented Group-wide compliance guidelines to prevent insider trading. Frauenthal was also one of the first listed companies in Austria to set up an e-learning platform to support inside area staff in keeping to the compliance guidelines and to guard against insider trading.

Wolfgang Knezek is the Group Compliance Officer. 


Remuneration report 

 Executive Board

The remuneration committee of the Supervisory Board is responsible for determining Executive Board pay. The compensation of the Executive Board consists of a fixed salary and a variable component of up to EUR 200,000 per annum (gross), geared to the personal performance of each Board member. The variable component is based on target setting agreements that contain quantitative and qualitative objectives. The quantitative objectives include budget and liquidity targets. Qualitative objectives relate to goals for individual divisions, for the Group as a whole, and for human resource and management development.

In 2016 the total remuneration of the Executive Board, including contributions to pension funds and accident insurance plans, was EUR 960,000. Remuneration of EUR 575,000 (including a variable component of EUR 200,000) was paid to Martin Sailer and EUR 385,000 (including a variable component of EUR 110,000) to Wolfgang Knezek. Payment of retirement benefits is not tied to performance criteria. Members have no contractual entitlements to termination benefits on leaving office.

On 1 June 2011 the Frauenthal Holding AG Supervisory Board approved a share option plan for 2012–2016 for members of the Company’s Executive Board and for Frauenthal Group senior management. Under the plan, members can be awarded up to 10,000 options annually, each entitling them to subscribe to one no par bearer share at a price of EUR 2.00, for outstanding performance during the FY 2011–2015 period. The exercise price of EUR 2.00 corresponds to the rounded-up average carrying value of Frauenthal treasury shares according to the annual financial statements of Frauenthal Holding AG for the year ended 31 December 2010. Options granted cannot be exercised until three years after their allocation to plan members, and must be exercised by the end of the same financial year. 

 They are not transferable, and must be exercised in person. Shares acquired by exercising options will be subject to a 36-month holding period. All plan participants will be entitled, before expiry of the holding period, to sell as many of the shares acquired by exercising the options as are needed to pay the personal income tax to which they become liable through exercise of the options, out of the net sales proceeds. 

 

Allocations from the share option plan

Following the expiry of the existing share option plan, a new five-year share option plan was adopted on 20 April 2016. 

The new plan covers the Executive Board members and around 10-15 senior managers of the Frauenthal Group. On the basis of a discretionary decision by the Frauenthal Holding AG Supervisory Board, under the plan members can be allocated up to 10,000 options per year for outstanding performance in the 2016-2020 financial years. Each option entitles members to subscribe to one no par bearer share at a price of EUR 2.00. The options are non-transferable and can be only exercised by the beneficiary in person during a three-week period starting three years after the date of their allocation. Shares acquired by exercising options will be subject to a 36-month holding period.

As a special long-term incentive, the new plan also provides for the allocation – at the discretion of the Supervisory Board – of a maximum of 50,000 options to top managers during the year that their respective period of office comes to an end, particularly if they have made a significant contribution to increasing shareholder value and the success of the Frauenthal Group during the period of office in question. These options would be subject to different exercise and holding periods. Under the new plan, the total number of options is limited to a maximum of 250,000.

Further details are provided in a written report by the Executive and Supervisory boards, dated 1 June 2011 and 23 May 2016, which is available for inspection at corporate headquarters and on the corporate website (www.frauenthal.at). Additional information can also be drawn from Note [49] to the consolidated financial statements, Share option plan. 


Supervisory Board

Members of the Supervisory Board receive annual basic compensation of EUR 5,000, due at the end of the year. If membership of the Board commences or ends during a calendar year, basic compensation is calculated on a pro rata basis. Members may also receive performance-related compensation of EUR 5,000 each. This bonus is only granted in financial years when the Annual General Meeting approves the payment of a dividend for the previous financial year. It is due upon approval of a resolution to this effect by the Annual General Meeting, and is only paid to members who sat on the Supervisory Board in the previous financial year. Until further notice, members of the Supervisory Board (except members delegated by the works council) will also receive a flat attendance fee of EUR 2,000 for each Board meeting they attend. The same applies to attendance of meetings of Supervisory Board committees unless these take place on the same day as meetings of the full Board. In addition, the Company compensates members' travel expenses incurred in relation to attendance at meetings of the Supervisory Board and Board committees.

The remuneration of the Supervisory Board in 2016 totalled EUR 104,000. 

As in previous years, Hannes Winkler waived his entitlement to compensation for attendance in 2016. No stock option plans are granted to Supervisory Board members.


Directors and officers (D&O) insurance cover

Frauenthal Holding AG has taken out directors and officers (D&O) insurance cover for the Executive Board, chief executives of Group companies and the Supervisory Board, and bears the cost of EUR 42,000 (2014: EUR 42,000). 


Related party transactions

Disclosures on related party transactions are made in Note [51] to the consolidated financial statements, Related party disclosures. 

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