Porsche 2005 Annual Report Download - page 25

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“In order to permit independent advice to and super-
vision of the executive board by the supervisory board, the
supervisory board should have what it regards as a sufficient
number of independent members. A member of the super-
visory board is regarded as independent if he/she has no
business or personal relationship with the company or its
executive board that could lead to a conflict of interests.”
This recommendation does not allow for the special character
of Porsche AG’s shareholder structure. There have been and
still are many and varied relationships with holders of ordinary
shares that are members of the Porsche and Piëch families.
Members of both families sit on the Supervisory Board of
Porsche AG and undertake supervisory functions as co-owners.
We see no conflict of interests here.
“Shareholders and third parties are mainly supplied
with information by the consolidated financial statements.
They are to be informed during the fiscal year by means of
interim reports.”
The company issues interim reports. However, Porsche
rejects quarterly reporting on principle; the reasons have been
explained in detail.
“The total compensation of each member of the executive
board is to be disclosed by name, divided into non-performance-
related, performance-related and long-term incentive com-
ponents, unless decided otherwise by the General Meeting by
three-quarters majority.”
“Disclosure should be made in a compensation report which
as part of the corporate governance report describes the com-
pensation system for executive board members in a generally
understandable way.
(…) In the case of pension plans, the allocation to accrued
pension liabilities or pension funds are to be stated each year.
The substantive content of severance awards for executive
board members should be disclosed if in legal terms the awards
differ significantly from the awards granted to employees.
The compensation report should also include information on
the nature of the fringe benefits provided by the company.”
We show the salaries of the members of the Executive Board
subdivided into fixed and performance-related components.
Porsche AG does not operate a stock option scheme. We do
not comply with the recommendation of the Code to show the
payments to board members to be shown individually. In our
opinion, the associated disadvantages, particularly the inevit-
able upward leveling of the board members’ salaries and
the invasion of the individuals’ right to privacy, outweigh the
advantages to investors of such a practice. The investors
are, in any case, unaware of the criteria on which differences
between board members’ salaries are based. In any case, the
German Directors Remuneration Disclosure Act (VorstOG) ap-
plicable for the financial statements and consolidated financial
statements for the fiscal year beginning after December 31,
2005 leaves it up to the annual general meeting to pass a
resolution with a three-quarters majority of the share capital
entitled to vote against the publication of the salaries of the
individual board members.
A resolution to this effect was adopted unanimously at the
annual general meeting of Porsche AG on January 27, 2006.
As a result, the required information can be omitted for
five years.
“Members of the supervisory board should be elected
individually.”
In view of our specific shareholders’ structure, we consider
this recommendation to be unreasonable under normal
circumstances.
“Payments to the members of the supervisory board
should be reported individually in the corporate governance
report, subdivided by component.”
We show payments to the Supervisory Board in the notes
to the financial statements presented in the annual report
as a single sum. We do not state the sums paid to individuals
because we see no additional advantage for investors in
this in view of the level of payments involved and the require-
ments stated in the articles of incorporation and by laws.
“Also payments made by the company to the members
of the supervisory board or advantages extended for services
provided individually, in particular advisory or agency services
should be listed separately in the corporate governance
report.”
The ability to access the expertise of the individual members
of the families that are shareholders in the company on specific
subjects represents a particular advantage for Porsche AG.
This cooperation takes place on terms that are customary in
this business sector and which are also complied with in the
event of comparable business arrangements being undertaken
with third parties. The recommendation is inappropriate for
a family-owned business and is therefore not complied with.
Dr. Ing. h.c. F. Porsche Aktiengesellschaft
Supervisory Board and Executive Board