Merck 2014 Annual Report Download - page 150

145CORPORATE GOVERNANCE → Statement on Corporate Governance
STATEMENT ON CORPORATE GOVERNANCE
The Statement on Corporate Governance contains the Statement
of Compliance, relevant information on practices within the
company as well as a description of the procedures of the
corporate bodies.
JOINT REPORT OF THE EXECUTIVE BOARD
AND THE SUPERVISORY BOARD
ACCORDING TO SECTION3.10 OF THE
GERMAN CORPORATE GOVERNANCE CODE
INCLUDING STATEMENT OF COMPLIANCE
The German Corporate Governance Code is geared toward the
conditions found in a German stock corporation (“Aktiengesell-
schaft” or “AG”) and does not take into consideration the special
characteristics of a corporation with general partners (“Kommandit-
gesellscha ft auf Aktien” or “KGaA”) such as Merck KGaA, Darm-
stadt, Germany.
Given the structural differences between an AG
and a KGaA, several recommendations of the German Corporate
Governance Code are to be
applied to a KGaA only in a modified
form. Major differ ences
between the two legal forms exist in
terms of liability and management. While, in the case of an AG,
only the AG is liable as a legal entity, the general partners of a
KGaA also have unlimited personal liability for the company’s
obligations (section 278 (1) of the German Stock Corporation
Act– “AktG”). At Merck KGaA, Darmstadt, Germany, this per-
tains to both E. Merck KG, Darmstadt, Germany – which pursu-
ant to Art. 8 (5) of the Articles of Association is excluded from
management and representation – as well as to the managing gen-
eral partners, who together make up the Executive Board of Merck
KGaA, Darmstadt, Germany. The members of the Executive Board
of Merck KGaA, Darmstadt, Germany, are therefore subject to
un-
limited personal liability. Unlike an AG, their executive authority is
not conferred by the Supervisory Board, but rather by their status
as general partners.
Consequently, in addition to other responsibilities typical of
the supervisory board of an AG (see description of the procedures
of the Supervisory Board on page 157 et seq.), the supervisory
board of a KGaA does not have the authority to appoint the man-
agement board, draw up management board contracts or specify
compensation of the management board. This legal form also in-
volves special features with regard to the General Meeting. For
example, in a KGaA, many of the resolutions made require the
consent of the general partners (section285 (2) AktG), particularly
also the adoption of the annual financial statements (section286
(1) AktG).
Merck KGaA, Darmstadt, Germany, applies the Code analogously
where these regulations are compatible with the legal form of a
KGaA. In order to enable shareholders to compare the situation at
other companies more easily, to a broad extent we base corporate
governance on the conduct recommendations made by the Gov-
ernment Commission of the German Corporate Governance Code
and forego having our own, equally permissible, code. The recom-
mendations of the Code in both of the last two versions dated
May13, 2013 and June 24, 2014, the intent and meaning of which
are applied, were complied with in the period between the last
Statement of Compliance issued on February 28, 2014 with three
exceptions. In the future, the recommendations of the Code will
again be adhered to with four exceptions. Further details can be
found on page 146.
For a clearer understanding, the following gives a general
explanation of the application of German company law at Merck
KGaA, Darmstadt, Germany with additional references to the
General Meeting and shareholder rights.
Merck KGaA, Darmstadt, Germany
The general partner E. Merck KG, Darmstadt, Germany, holds
around 70 % of the total capital of Merck KGaA, Darmstadt,
Germany (equity interest); the shareholders hold the remainder,
which is divided into shares (share capital). E. Merck KG, Darm-
stadt, Germany, is excluded from the management of business
activities. The general partners with no equity interest (Executive
Board) manage the business activities. Nevertheless, due to its
substantial capital investment and unlimited personal liability,
E. Merck KG, Darmstadt, Germany, has a strong interest in the
businesses of Merck KGaA, Darmstadt, Germany, operating effi-
ciently in compliance with procedures, and exercises its influence
accordingly. The participation of Merck KGaA’s, Darmstadt, Ger-
many, in the profit/loss of E. Merck KG, Darmstadt, Germany, in
accordance with Articles 26 et seq. of the Articles of Association
further harmonizes the interests of the shareholders and of E.Merck
KG, Darmstadt, Germany. E. Merck KG, Darmstadt, Germany, ap-
points and dismisses the Executive Board. In addition, E. Merck KG,
Darmstadt, Germany, has created bodies – complementing the ex-
pertise and activities of the Supervisory Board – to monitor and
advise the Executive Board. This task applies primarily to the Board
of Partners of E. Merck KG, Darmstadt, Germany. Based on the
provisions of the German Stock Corporation Act, the Articles of
Association of Merck KGaA, Darmstadt, Germany, and the rules of
procedure of the various committees, Merck KGaA, Darmstadt, Ger-
many, has a set of rules for the Executive Board and its supervi sion
that meet the requirements of the Code. The investors, who bear the
entrepreneurial risk, are protected as provided for by the Code.