02.3
Non-financial Performance Indicators
CORPORATE GOVERNANCE
COMPLIANCE
For us, compliance means adhering to defined ethical and legal guidelines as part of our business activities. An integral part of our corporate culture is to follow the compliance guidelines. We have implemented Fresenius Medical Care’s compliance program, which is one of the most demanding in our industry, in all of our business regions. The guidelines therefore apply to all our subsidiaries.
We continued our compliance training activities in 2008. As part of this training, local compliance officers were given the opportunity to exchange experiences in their business region. These officers are key to the success of the compliance program, as the chart below shows. They ensure that the Company adheres to the same high ethical and legal standards around the world and that each employee is fully informed about our code of conduct and its goals. At the same time, they are responsible for training measures and ensuring compliance with the guidelines. Compliance officers act as contacts for our employees and can be reached via special telephone numbers, by e-mail, or in person.
In the year under review, we implemented measures to monitor and audit the effectiveness of the compliance program. We increased the resources in the Corporate Compliance organisation to introduce further compliance initiatives.
Our compliance activities have been recognized outside the Company by the Ethisphere Institute. In 2008 we were named one of the “World’s Most Ethical Companies”. Ethisphere, a think tank committed to identifying and fostering best practice in the areas of international politics, business ethics, compliance, and corporate responsibility, presented the award at the Ethisphere and Forbes Magazine joint conference “Driving Profit through Ethical Leadership”, held in June 2008.
| Chart 02.3.4 | Organizational structure of the compliance program |
GROUP MANAGEMENT AND MONITORING STRUCTURE
Fresenius Medical Care shares are listed on the stock market in the U.S. (as American Depositary Receipts) and in Germany. We are therefore subject to a number of regulations and recommendations regarding the management, administration and monitoring of the Company. In addition to mandatory requirements according to stock corporation and commercial law, we comply with the regulations of Deutsche Börse and adhere voluntarily to most of the recommendations of the German Corporate Governance Code. At the same time, we are subject to the regulations connected to our listing in the U.S., in particular the Sarbanes-Oxley Act (SOX) and portions of the Corporate Governance Rules of the New York Stock Exchange. The Sarbanes-Oxley Act includes provisions regulating companies and their auditors and is aimed at improving financial reporting and auditor independence, among other matters. The extension of regulations for financial reporting and related internal control systems is designed to increase the trust of investors and other interested parties. We fully meet all of the current requirements set forth in this law.
Although we are a non-U.S. company (a so-called foreign private issuer), we are nevertheless obliged to comply with the provisions of the Sarbanes-Oxley Act with regard to implementing control over financial reporting in accordance with SOX section 404. We already voluntarily implemented these provisions ahead of time by December 31, 2005 and fulfilled them again in 2008.
Fresenius Medical Care’s declaration concerning significant differences between the systems of corporate governance in Germany and the U.S. – based on the listing standards of the New York Stock Exchange – can be accessed on the Internet at www.fmc-ag.de.
The Articles of Association of Fresenius Medical Care, also specifying the responsibilities of the various bodies of the Company, can also be found online.
The legal form of Fresenius Medical Care is that of a partnership limited by shares (Kommanditgesellschaft auf Aktien – KGaA). In this legal form, the most important bodies of the Company are the General Meeting, the Supervisory Board and the general partner Fresenius Medical Care Management AG. In 2008, there were no significant changes to the Group management and monitoring structure.
Fresenius Medical Care continues to strive for a corporate governance that provides the highest transparency possible. The Management Board of the general partner manages the business of the Company. In addition to the Company’s Supervisory Board, Fresenius Medical Care Management AG also has its own Supervisory Board that includes at least two independent members who are not connected to the Company in any other way. Furthermore, Fresenius Medical Care Management AG continues to guarantee the independence requirements of its Supervisory Board via a so-called pooling agreement, which Fresenius SE has also joined.
SHAREHOLDERS
Company shareholders exercise their rights by voting at the General Meeting. Each ordinary share of Fresenius Medical Care AG & Co. KGaA entitles the holder to one vote at the General Meeting. Our preference shares do not bear any voting rights. To compensate for this, preference shareholders receive a preference in earnings distribution and a higher dividend. Shares with multiple or preference voting rights do not exist. As a matter of principle, at the General Meeting, the general partner (as far as it is a shareholder in the Company, which was not the case in the year under review) or its sole shareholder Fresenius SE can exercise the voting rights connected with the shares it holds. However, the general partner and its sole shareholder Fresenius SE are subject to various legal bans on voting on certain resolutions. These include the election of the Supervisory Board, ratification of the actions of the general partner and members of the Supervisory Board, and the selection of the auditor of the annual financial statements. The purpose of this is to guarantee that the shareholders in the partnership limited by shares (KGaA) can solely decide on these matters, particularly those concerning control of the Management.
GENERAL MEETING
According to the basic principles of the German Corporate Governance Code, shareholders can exercise their voting rights at the Annual General Meeting themselves, by proxy via a representative of their choice, or by a company-nominated proxy acting on their instructions. Proxy voting instructions to a company nominee can be issued before and during the Annual General Meeting until the end of the open discussion period.
All documents and information about the meeting are easily accessible on our Web site.
In the year under review, the ordinary General Meeting of Fresenius Medical Care AG & Co. KGaA took place on May 20, 2008 in Frankfurt / Main (Germany). More than 74 % of the ordinary share capital and 4 % of the preference share capital were represented. In 2007, about 74 % of the ordinary share capital and 5 % of the preference share capital were represented at the ordinary General Meeting. We broadcast the speech of the Chairman of the Management Board live over the Internet for those shareholders unable to attend. The speech is available on our Web site at www.fmc-ag.de.
GENERAL PARTNER
The general partner – Fresenius Medical Care Management AG – represented by its Management Board is responsible for managing the Company and conducting the Company’s business. Its actions and decisions are geared toward the interests of the Company. The seven members of the Management Board of the general partner are introduced here.
As a stock corporation (Aktiengesellschaft) the general partner has its own Supervisory Board consisting of six members. It appoints the members of the Management Board and advises and supervises them in managing the Company. In accordance with clause 5.1.3 of the German Corporate Governance Code, the Supervisory Board has established rules of procedure.
SUPERVISORY BOARD
The Supervisory Board of Fresenius Medical Care AG & Co. KGaA consists of six members. All six members are elected by the General Meeting according to the provisions of the German Stock Corporation Act (Aktiengesetz, AktG). Such resolution of the General Meeting requires a majority of at least 75 % of the votes cast. As described above, Fresenius SE is barred from voting on this issue. In accordance with clause 5.1.3 of the German Corporate Governance Code, the Supervisory Board has established rules of procedure.
The Chairman of the Supervisory Board is responsible for coordinating and directing the Supervisory Board. Further information on the tasks assumed by the Supervisory Board in 2008, on the activities of Supervisory Board committees as well as on efficiency evaluations undertaken in that year is included in the Report of the Supervisory Board.
COOPERATION OF GENERAL PARTNER AND SUPERVISORY BOARD
The general partner and the Supervisory Board of the Company work closely together in the Company’s interest with the joint goal of growing the Company’s value in the long term in compliance with corporate governance principles and compliance regulations. The general partner regularly informs the Supervisory Board of the Company about all relevant issues regarding business policy, corporate planning and corporate strategy, about the profitability of the Company as well as the course of business and the Company’s position including an assessment of the current risks.
AVOIDANCE OF CONFLICTS OF INTEREST
In their decisions and in conjunction with their tasks and activities, the members of the Management Board of the general partner and of the Supervisory Board of Fresenius Medical Care AG & Co. KGaA as well the Supervisory Board of Fresenius Medical Care Management AG do not pursue personal interests or give unjustified advantages to other people. Any sideline activities or business dealings with the Company are to be reported to the Supervisory Board immediately and must receive its approval. The Supervisory Board reports to the General Meeting about possible conflicts of interest and how to deal with them. There were no conflicts of interest among members of the Management Board or the Supervisory Board in the year under review.
COMPENSATION OF MANAGEMENT BOARD AND SUPERVISORY BOARD
Compensation for Management Board members comprises fixed and performance-related components. Since 2006, Fresenius Medical Care has disclosed the compensation of its Management Board members on an individual basis. Compensation for the Supervisory Board is governed by article 13 of the Articles of Association. Our Supervisory Board members receive a fixed compensation.
Further details on the compensation of the Management and Supervisory Boards as well as detailed information on the stock option programs can be found in the financial report of this annual report here.
TRANSPARENCY OF OUR REPORTING
We attach special importance to informing our shareholders simultaneously and uniformly about our Company in our regular financial reporting events. Ad hoc releases and our Web site play an essential role in these efforts. They provide institutional investors and private shareholders with equal and timely access to the information we release. All ad hoc releases as well as other news for investors and the media are also published on our Web site.
We keep our shareholders informed of key dates by means of a financial calendar that is published in the annual report, in quarterly reports and on the Web site of Fresenius Medical Care.
INFORMATION ON DIRECTORS’ DEALINGS AND SHAREHOLDING
According to article 15a of the German Securities Trading Act (Wertpapierhandelsgesetz, WpHG), members of the Management and Supervisory Boards or other employees in management positions are required to inform the Company when buying or selling shares in Fresenius Medical Care and related financial instruments if the volume exceeds €5,000 within a single year. During 2008, we received a total of ten disclosures according to article 15a of the German Securities Trading Act, which we published on our Web site in keeping with the regulations as well as in the Annual Document.
RISK AND OPPORTUNITIES MANAGEMENT
In our opinion, good corporate governance means managing the risks of our business responsibly and recognizing opportunities for future development in sufficient time. We have a comprehensive management system in place that takes care of identifying risks and opportunities early, optimizing the risk profile and minimizing the costs related to these risks through timely intervention. Our risk management is an integral component of our day-to-day business and is reviewed on a regular basis by independent external auditors. Our compliance program also plays a significant role in ensuring that our employees adhere to national and international regulations. Further information on Fresenius Medical Care’s compliance activities as well as risk and opportunities management can be found on this page and here.
FINANCIAL ACCOUNTING AND REPORTING
Fresenius Medical Care prepares its consolidated financial statements in accordance with the United States Generally Accepted Accounting Principles (U.S. GAAP) and publishes them within 90 days after the end of the fiscal year.
GERMAN CORPORATE GOVERNANCE CODE AND DECLARATION OF COMPLIANCE FOR 2008
The German Corporate Governance Code includes key recommendations for the management and monitoring of companies listed on a German stock exchange with the aim of making the rules for managing and monitoring companies in Germany more transparent for investors. The code is also intended to boost the trust of the public as well as that of employees and customers in the management and monitoring of listed stock corporations.
The majority of the guidelines, recommendations and suggestions in the code have been an integral and active part of Fresenius Medical Care’s day-to-day operations since the founding of the Company.
Fresenius Medical Care submitted the Declaration of Compliance required annually by article 161 of the German Stock Corporation Act in accordance with the recommendations of the German Corporate Governance Code as of June 6, 2008, and made it accessible to its shareholders. Fresenius Medical Care AG & Co. KGaA complies with the recommendations specified by the German Corporate Governance Code for 2008. The following recommendations are the only ones which have not been or are not being applied:
CODE CLAUSE 5.1.2 AND 5.4.1 “AGE LIMIT MANAGEMENT AND SUPERVISORY BOARD”
According to clause 5.4.1, an age limit shall be specified for the members of the Supervisory Board. According to clause 5.1.2 of the code the same shall apply for members of the Management Board. As in the past, Fresenius Medical Care will refrain from determination of an age limit for members of the Supervisory Board and the Board of Management since this would limit the selection of qualified candidates.
CODE CLAUSE 5.4.6 “COMPENSATION SUPERVISORY BOARD”
Based on clause 5.4.6. of the Code, members of the Supervisory Board shall receive fixed as well as performance-related compensation. The performance-related compensation should also contain components based on the long-term performance of the enterprise. Currently, Fresenius Medical Care pays a fixed compensation to the members of the Supervisory Board only. In addition, the introduction of a performance-related compensation, linked to the success of the Company, to the members of the Supervisory Board is regularly considered.
In accordance with clause 3.10 of the Code, this and all former declarations of compliance are available on our corporate Web site at www.fmc-ag.de in the Investor Relations / Corporate Governance section.
