Mercedes 2006 Annual Report Download - page 142

126
Declaration of Compliance with the
German Corporate Governance Code
126
Section 161 of the German Stock Corporation Act (AktG) requires
the Board of Management and the Supervisory Board of a listed
stock corporation to declare each year that the recommendations
of the “German Corporate Governance Code Government
Commission” published by the Federal Ministry of Justice in the
official section of the electronic Federal Gazette have been and
are being met or, if not, which recommendations have not been or
are not being applied. Shareholders must be given permanent
access to such declaration.
The German Corporate Governance Code (“Code”) contains
rules with varying binding effects. Apart from outlining aspects
of the current German Stock Corporation Act, it contains recom-
mendations from which companies are permitted to deviate.
However, if they do so, they must disclose this each year. The Code
also contains suggestions which can be ignored without giving
rise to any disclosure requirement. The Board of Management and
the Supervisory Board of DaimlerChrysler AG have decided
to disclose not only deviations from the Code’s recommendations
(see I.) but also – without being legally obliged to do so –
deviations from its suggestions (see II.).
For the period from December 2005 until July 24, 2006, the fol-
lowing declaration refers to the Code in effect as of June 2, 2005.
For the corporate governance practice of DaimlerChrysler AG
since July 25, 2006, this declaration refers to the requirements of
the Code in effect as of June 12, 2006, published in the electronic
Federal Gazette on July 24, 2006.
The Board of Management and the Supervisory Board of
DaimlerChrysler AG declare that both the recommendations and
the suggestions of the “German Corporate Governance Code
Government Commission” have been and are being met. The Board
of Management and the Supervisory Board also intend to follow
the recommendations and suggestions of the German Corporate
Governance Code in the future. The following recommendations
and suggestions are the only ones that have not been or are not
being applied:
I. Deviations from the Recommendations of the
German Corporate Governance Code
1. Deductible with the D&O insurance
(Code Clause 3.8, Paragraph 2) The Directors’ and Officers’
Liability (D&O) insurance obtained by DaimlerChrysler AG excludes
coverage for intentional acts and omissions or for breaches of
duty knowingly committed by members of the Board of Manage-
ment and the Supervisory Board. As a result, the question of
whether or not a deductible is advisable arises only in the context
of negligent breaches of duty.
We do not believe that it is advisable to have a deductible for cases
of negligence by members of the Supervisory Board because it
would impede the company’s ability to staff its Supervisory Board
with prominent members of the community from Germany and
abroad who have extensive business experience. Qualified candi-
dates would be deterred by having to accept far-reaching liability
risks for potential negligence. The fact that a deductible is fairly
unusual in other countries makes this even more of a problem.
The D&O insurance of DaimlerChrysler AG does provide for a
deductible for cases of ordinary or gross negligence by members
of the Board of Management. Moreover, in cases of gross negli-
gence, the Presidential Committee of the Supervisory Board which
is responsible for the Board of Management members’ service
contracts may agree to make a percentage deduction from the
variable portion of the compensation of the member of the
Board of Management concerned. In terms of its overall financial
result, this would be the same as an additional deductible.
In the view of DaimlerChrysler AG this rule enables individual cases
to be judged more fairly on their merits than the blanket
approach of the Code.