Corporate Governance Statement
Corporate governance statement pursuant to Sections 289f and 315d of the German Commercial Code (HGB)
General
In this statement, the Management Board of Maschinenfabrik Berthold HERMLE AG - also on behalf of the Supervisory Board - provides information on corporate governance issues pursuant to Sections 289f and 315d of the German Commercial Code (HGB). The following breakdown conforms to the breakdown as per Section 289f.
1. Declaration of compliance pursuant to Section 161 of the German Stock Corporation Act (AktG)
In accordance with the regulations of Section 161 of the AktG, the Management Board and the Supervisory Board of Maschinenfabrik Berthold HERMLE AG have issued a declaration detailing adherence to or deviation from the recommendation of the German Corporate Governance Code as amended on 28 April 2022, which came into force on 27 June 2022 (GCGC 2022). This statement is permanently available to the general public on the HERMLE website at www.hermle.de (menu item: Investor Relations/Pflichtveröffentlichungen/Kodex§ 161 AktG) and is detailed below:
The Management Board and the Supervisory Board declare that apart from various individual points the recommendations of the Government Commission on the German Corporate Governance Code as amended on 28 April 2022, which came into force on 27 June 2022 (GCGC 2022), are not complied with. This is justified in that Maschinenfabrik Berthold HERMLE AG conducts its operations in accordance with the principles of open information policy that it has put in place to date, which were implemented as part of the rules of procedure of the Management Board and the Supervisory Board. In that respect, the mandatory requirements were complied with in full.
The Management Board and the Supervisory Board hold the view there are various reasons for not implementing recommendations of the GCGC 2022 that extend beyond this. As detailed below, Maschinenfabrik Berthold HERMLE AG therefore deviates considerably from the recommendations of the GCGC 2022, wherein it may be assumed for the following statements that all GCGC 2022 recommendations that are not identified as being positively regarded in the following have been deviated from.
The recommendations under B. regarding the appointment of members to the Management Board are largely not complied with. In view of the successful, decade-long practice in the appointment of Management Board members and the continuity in the Management Board, the previous framework conditions for the appointment of board members shall essentially be retained and no further restrictions shall be deliberately imposed – albeit in compliance with all legal framework conditions and requirements.
The recommendations under C. on composition, under D. on working methods, under E. on conflicts of interest and under F. on transparency and external reporting of the Supervisory Board are largely not complied with, as the applicable legal regulations together with the rules of procedure of the Management Board and the Supervisory Board are judged to be fully sufficient for the topics dealt with there. Furthermore, we believe that the Code recommendations under C. to F. are geared towards international major DAX-listed Groups but not to an SME with a limited number of ordinary shareholders who, in part and also on the basis of a right of delegation under the articles of association, are represented personally in the supervisory committees.
Finally, the recommendations on the remuneration of the Management Board and the Supervisory Board under G. (GCGC 2022) are predominantly not complied with. In addition to the basic provisions for the remuneration of Management Board members in accordance with Section 87 of the AktG for DAX-listed companies in Section 87 a of the AktG, the legislator has regulated the obligation to establish a remuneration system that is to be put before the shareholders’ general meeting in accordance with Section 120 a, Para. 1 of the AktG, wherein with only a few exceptions the specified, comprehensive individual requirements of the remuneration system are only then to be implemented in the remuneration system if they are indeed part of contractual agreements with Management Board members. Correspondingly, in accordance with Section 162 of the German Stock Corporation Act (AktG) the obligation pertains to draw up a remuneration report containing, in particular, evidence of compliance with the remuneration system. In accordance with Section 120 a, Para. 4 of the AktG, this is to be approved by the shareholders' meeting for the respective previous business year. To date, Maschinenfabrik Berthold HERMLE AG has completely fulfilled all these legal requirements within the timespan prescribed by the legislator and will also do this in future. Maschinenfabrik Berthold HERMLE AG also considers these requirements by the legislator to be absolutely sufficient to ensure appropriate remuneration for the Management Board and the Supervisory Board and also transparency in this regard. In particular, we expressly view the individual complexities designated in the recommendations under G of the GCGC 2022 as being unsuitable for a company of our dimensions with regard to ensuring fair and transparent remuneration of the Management Board members that remains beneficial to the company as well. In addition, in the past Maschinenfabrik Berthold HERMLE AG had variable remuneration based on the company's results, but no share-based remuneration for the board members, and from today's perspective such share-based remuneration is not planned for the future.
Overall, in view of the relative lower market capitalisation of the company, the shareholder structure, the very lean and therefore efficient company organisation to date as well as the additional costs associated with full implementation, Maschinenfabrik Berthold HERMLE AG has decided in favour of a merely very limited implementation of the recommendations of the GCGC.
However, Maschinenfabrik Berthold HERMLE AG complies with various individual regulations of the GCGC 2022 that go beyond the legal requirements; these are listed below:
Recommendation A.2 Observance of diversity when filling management positions
Recommendation A.4 Compliance Management System with disclosure of the principles
Recommendation A.5 Disclose and statement in the management report on the main features of the internal control system and the risk management system and on the appropriateness and effectiveness of these systems.
Suggestion A.7 Limitation of the time of the shareholders' meeting to a maximum of four to six hours
Recommendation B.1 Observance of diversity by the Supervisory Board in the composition of the Management Board
Recommendation B.4 Reappointment of the Management Board before the end of one year prior to the end of the term of appointment only in the case of special circumstances
Recommendation C.4 Multiple mandates of Supervisory Board members
Recommendation C.11 Supervisory Board mandates for former Management Board members
Recommendation C.12 Position of Supervisory Board members towards competitors
Recommendation D.5 Consultation of the Chair of the Supervisory Board with the Management Board on issues of strategy, business development, risk situation, risk management and compliance of the company
Recommendation D.7 Information on Supervisory Board meetings in the report of the Supervisory Board
Recommendation D.8 Agreement on immediate notification of the Supervisory Board by the auditor in the event of significant findings and occurrences
Recommendation D.9 Agreement on the provision of information to the Supervisory Board by the auditor in the event that incorrect declarations regarding the Code are identified
Recommendation E.3 Secondary activities of Management Board members
Recommendation F.3 Publication of quarterly reports or information during the year on significant changes in the business outlook and the risk situation
Recommendation F.5 Publication of the declaration of compliance on the website for five years
Recommendations G.12-G.14 Benefits in the event of termination of contracts of Management Board members
Recommendation G.15 Offsetting the remuneration for intra-group Supervisory Board mandates in the Management Board remuneration
Recommendation G.16 Decision of the Supervisory Board on the offsetting of remuneration for Supervisory Board mandates outside the Group in the Management Board remuneration
Recommendation G.18 Fixed remuneration of Supervisory Board members
2. Remuneration system remuneration report pursuant to Section 162 of the AktG
The Management Board and the Supervisory Board of Maschinenfabrik Berthold HERMLE AG have drawn up a remuneration report for the 2024 financial year in accordance with the regulations of Section 162 of the AktG. This report is permanently available for perusal on the HERMLE website at www.hermle.de together with the final auditor’s remarks. This is also the location where the current remuneration system pursuant to Section 87a of the AktG as well as the latest remuneration resolution pursuant to Section 113, Para. 3 of the AktG can be viewed.
3. Corporate governance practices
Maschinenfabrik Berthold HERMLE AG is the listed parent company of an international group and has a dual management system. For this reason, the AktG, our articles of association and various company-specific requirements of the German Corporate Governance Code (GCGC) form the basis for the division of responsibilities between the Management Board and the Supervisory Board and the organisation of the management and monitoring structure within the Group.
The essential aspects for our business activities are determined primarily by their importance for ensuring customer satisfaction and the long-term and sustainable success of the company. The main focus is on the direct impact of our activities on business partners, employees and the immediate business environment, as well as on ensuring efficient and sustainable business operations. More information on sustainability at HERMLE can be found in the non-financial statement pursuant to Sections 289b and 315b of the German Commercial Code (HGB). This can be accessed at www.hermle.de Menu item: Investor Relations / Nachhaltigkeitsbericht/Nichtfinanzielle Erklärung. This non-financial statement includes an overview of all the essential information on our sustainability activities.
Compliance Management at Maschinenfabrik Berthold HERMLE AG is designed to ensure full compliance with the company’s rules and values and to guarantee that all business activities within the Group are legally compliant. Compliance forms the basis for integrity within a business environment. It reinforces the strong commitment of Maschinenfabrik Berthold HERMLE AG to ethical and fair conduct within its own organisation and establishes the framework for interactions with external partners. The Compliance Management System of Maschinenfabrik Berthold HERMLE AG is composed of multiple interlinked components. It encompasses prevention, detection and response and is supported by the implemented Risk Management System, guidelines and employee training and counselling. Mechanisms for reporting suspected or actual violations of company rules and legal regulations are in place to detect and investigate misconduct. Any misconduct is dealt with consistently.
4. Modus operandi of the Management Board and Supervisory Board
Maschinenfabrik Berthold HERMLE AG is a public limited company (Aktiengesellschaft) under German law. A basic principle of German corporate law is the dual management system consisting of a management board and a supervisory board, both of which have independent competences. The Management Board and the Supervisory Board of HERMLE AG manage and oversee the work of the company together in a trustworthy and honest manner.
The structure of the corporate management and supervision of Maschinenfabrik Berthold HERMLE AG are as follows:
The shareholders of Maschinenfabrik Berthold HERMLE AG exercise their rights at the company’s Annual General Meeting (AGM). The AGM is always held in the first eight months of the business year. The AGM is chaired by the Chair of the Supervisory Board. The AGM decides on all matters assigned to it by law and the articles of association. The ordinary shares of the company are entitled to vote. Subject to mandatory legal provisions, reference shares do not grant voting rights.
Invitation to and participation in the AGM are in accordance with the statutory provisions and the articles of association.
Supervisory Board
In accordance with Sections 96, Para. 1 and 101, Para. 1 of the AktG, Sections 1 Para. 1 and 4 Para. 1 of the Drittelbeteiligungsgesetz (One-Third Participation Act) in conjunction with Section 8, Para. 1 of the articles of association, the Supervisory Board of Maschinenfabrik Berthold HERMLE AG consists of six members, of whom four members are appointed by the shareholder side (by direct appointment of at most one member in accordance with Section 8 (2) of the articles of association and the election of the remaining members by the AGM, wherein currently four members are elected by the AGM). Two Supervisory Board members are elected by the employees. This ensures the interests of shareholders and employees are represented on the Supervisory Board. The Chair of the Supervisory Board is elected by the Supervisory Board from among its members. The Supervisory Board was elected for five years at the Annual General Meeting held on 7 July 2021. In accordance with the regulations of Section 100, Para. 5 of the AktG, the Supervisory Board will ensure that election recommendations for future new appointments to the Supervisory Board provide for at least one member having expertise in the field of financial reporting and at least one member having expertise in the field of final auditing.
Management Board
The Management Board’s role is to manage the company on its own responsibility and in accordance with the statutory provisions, the articles of association and the rules of procedure for the Management Board. The Board consists of three members. Management Board meetings are usually held once a week and additionally to address individual topics, as required. Due to the size of the Management Board, no committees were formed.
Information on Sections 76, 111 of the AktG and diversity policy
The diversity policy for the Management Board and the Supervisory Board of Maschinenfabrik Berthold HERMLE AG ensures that people of various age groups, professional qualifications, educational or vocational backgrounds and, if possible, genders are represented on both boards. In principle, the best qualified person from the group of applicants shall be considered for all positions. The increase in the proportion of women is planned for the entire workforce. More information about the respective measures and implementation as well as the results for the 2024 financial year are to be found in the employee section of the group management report.
As part of the Act on Equal Participation of Women and Men in Management Positions, the Supervisory Board of Maschinenfabrik Berthold HERMLE AG has decided that the number of women on the Supervisory Board, which currently includes one woman, should remain constant. The Supervisory Board has set this target for the period until expiry of the current term of office of the Supervisory Board elected on 7 July 2021, i.e. until the next AGM in 2026.
With regard to the composition of the Management Board, the Supervisory Board has decided that the number of women on the Management Board, which currently does not include any women, should remain constant. The Supervisory Board has set this target for the period until 31 December 2025, as all contracts with members of the Management Board extend until at least this date and there are no plans to expand the Board during this period.
The Management Board of Maschinenfabrik Berthold HERMLE AG has decided that the proportion of women should remain constant at the previous level of 10% at the first management level below the Management Board (senior executives) and at 5% at the second management level (heads of department and employees with a prominent area of responsibility who are paid over and above the standard salary). In the event of new appointments, the most professionally and personally suitable applicants shall continue to be considered. These targets apply until 30 June 2026.
The target quotas at the first and second management levels are currently being slightly exceeded.
This Corporate Governance Statement pursuant to Sections 289f and 315d of the German Commercial Code (HGB) can also be accessed on our website www.hermle.de under the menu item Investor Relations/Pflichtveröffentlichungen/Erklärung zur Unternehmensführung.
The documents referred to in Section 289 Paragraph 2 (1a) of the German Commercial Code (HGB) will be prepared within the statutory provisions and will subsequently also be available on the aforesaid website.
