Merck 2010 Annual Report Download - page 115

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1. Until June 30, 2010, for its Executive Board and Supervisory Board members Merck KGaA
maintained a Directors & Officers (“D&O”) liability insurance policy that did not include a
deductible in accordance with section 93 (2) sentence 3 AktG and section 3.8 (2) and (3) of
the German Corporate Governance Code. The company dispensed with a deductible in the
past because D&O insurance policies with the required deductible were not actively offered
by the insurance industry and the individual agreement on a deductible is not offset by a
substantial reduction in the premium.
Effective July 1, 2010, Merck KGaA introduced a deductible in accordance with section 93
(2) sentence 3 AktG and section 3.8 (2) and (3) of the German Corporate Governance Code.
This takes into account the minimum requirements specified by the German Corporate
Governance Code, since a deductible of at least 10% of the loss up to at least one and a half
times the fixed annual compensation of the Executive Board member or Supervisory Board
member has been agreed.
2. Contrary to section 5.4.1 sentence 2, an age limit is not taken into account when proposing
candidates for election to the Supervisory Board. The age of Supervisory Board members is
not a criterion for their qualifications and competence. Moreover, we do not wish to forgo
the many years of experience of Supervisory Board members.
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(Section 4.2.5 and 5.4.6 of the German Corporate Governance Code)
The compensation report is part of the audited Notes to the Consolidated Financial Statements.
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Contrary to members of the Board of Management of German stock corporations, the members
of the Executive Board of Merck KGaA are not employed officers of the company. Rather, they
are personally liable general partners of both Merck KGaA and the general partner E. Merck KG,
and in this capacity they receive profit-based compensation from E. Merck KG. Therefore, the
obligation to individually publish the compensation of management board members of publicly
listed German stock corporations does not apply to the Executive Board of Merck KGaA. The
following presentation of individual compensation is therefore being made on a voluntary
basis.
Contrary to publicly listed German stock corporations, at Merck KGaA it is not the Supervisory
Board, but the Board of Partners of E. Merck KG that decides on the amount and composition
of compensation. E. Merck KG has transferred the execution of this right to its Personnel
Committee. Among other things, the Personnel Committee is responsible for the following
decisions: contents of contracts with Executive Board members, granting of loans and advance
salary payments, approval for taking on honorary offices, board positions and other sideline
activities, as well as the division of responsibilities within the Executive Board of Merck KGaA.
The compensation system defined by the Personnel Committee for Executive Board members
takes into account various compensation-relevant aspects, including the responsibility of the
individual Executive Board members, their individual performance, the performance of the
company, as well as the amount of compensation paid to executive board and management
Company 111Consolidated Financial Statements More informationManagement Report Corporate governance
Statement on corporate governance