Corporate Governance

Declaration of conformity by the Executive Board and the Supervisory Board of JENOPTIK AG in fiscal year dated December 14, 2016

Under § 161, Para. 1, Sent. 1 of the German Stock Corporation Act (AktG) the Executive Board and the Supervisory Board of a stock-listed company are required to issue a declaration once a year that the recommendations of the “Government Commission on the German Corporate Governance Code” as published by the Federal Ministry of Justice in the official section of the Federal Gazette (Bundesanzeiger) have been and are complied with or to indicate which recommendations have not been or are not applied and why not.

The JENOPTIK AG Executive Board and Supervisory Board support the recommendations of the “Government Commission on the German Corporate Governance Code” and state that pursuant to § 161 Para. 1 Sent. 1 of the German Stock Corporation Act:

Since the last declaration of conformity dated December 9, 2015, the recommendations of the “Government Commission on the German Corporate Governance Code” (“Code”) have been followed and will be followed in future with the following exceptions stated under 1. to 4. in the version dated May 5, 2015:

1. In accordance with Point 4.2.3 Para. 2 Sent. 6 of the Code, the remuneration of the Executive Board shall be capped both overall and in respect of its variable components.

This new recommendation, which was added to the Code dated May 13, 2013 has not been followed and will not be followed for the time being. It is planned, however, to follow this recommendation when new contracts with the members of the Executive Board will be concluded.

The system of the variable remuneration for the members of the Jenoptik Executive Board is described in the Remuneration Report on pages 53 to 57 of the 2015 Annual Report. The variable remuneration is capped. To ensure a long-term incentivizing effect, half of it is payable in the form of so-called virtual shares, which are only paid out after a holding period of four years. This ensures that it is highly consistent with the interests of the shareholders in a sustainable development of the company and the share price. The conversion of the portion of the variable remuneration granted in form of virtual shares is based on the volume-weighted average price of the Jenoptik share over the last quarter of the year before last. Therefore, in the event of a rise in the share price, there is a theoretical possibility that, on the allocation date, the value of the total variable remuneration will exceed the cap. However, as a rule, this will require a high level of target attainment and a positive development of the share price. A negative share price development results in the opposite effect. The Executive and Supervisory Boards take the view that applying the price of the year before last is appropriate as this price is the basis for measuring the share price development of the subsequent year relevant for remuneration. In this respect, the Executive Board also participates in share price development like each shareholder. There is no cap on the payment of virtual shares. The Executive and Supervisory Boards are of the opinion that, by applying a volume-weighted average annual rate, 'windfall profits' are avoided when calculating the amount to be paid.

2. In accordance with Point 4.2.3. Para. 4 of the Code care shall be taken in concluding Executive Board contracts to ensure that payments made to an Executive Board member upon premature termination of his contract including fringe benefits do not exceed the value of two years’ compensation (severance payment cap) and compensate for no more than the remaining term of the contract. The severance payment cap shall be calculated on the basis of the total compensation for the past full fiscal year and, if appropriate, also of the expected total compensation for the current fiscal year.

This recommendation has not been followed with respect to the Chairman of the Executive Board, Dr. Michael Mertin, who has served as a member of the Executive Boards since October 1, 2006; in this respect, the status quo was upheld. Dr. Mertin will not extend his contract of employment as member of the Executive Board, therefore it will expire in mid 2017 as scheduled. The contract of employment with the CFO has followed and will follow this recommendation. It is planned to also comply with the recommendation when contracts will be concluded with new members of the Executive Board, therefore the recommendation will be complied with in future. Regarding the explanation for the deviation from the Code we therefore refer to the Declaration of Conformity of the previous years.

3. In accordance with Point 5.4.6. Para. 2 Sent. 2 of the Code the remuneration of the members of the Supervisory Board shall be oriented towards sustainable growth of the enterprise if they are promised performance-related remuneration.

This recommendation has not been followed and will not be followed in the future. The Executive Board and Supervisory Boards take the view that the performance-related remuneration as stipulated in the Articles of Association is appropriate. Accordingly, members of the Supervisory Board will only receive performance-related remuneration in the amount of 10,000 euros or 20,000 euros if group earnings before tax exceed 10 percent or 15 percent of the group equity at the end of the fiscal year. If the return on equity is lower than 10 percent, there is no entitlement to remuneration beyond the fixed remuneration.

The Code does not define what is meant by sustainable development of the company. If the term was to be interpreted according to § 87 Para. 1 Sent. 2 and 3 of the German Stock Corporation Act, performance-related remuneration components for Supervisory Board members should always have a calculation base which is several years in length. As this is not the case at Jenoptik and due to the lack of clarity of the definition, we disclose a deviation from Point 5.4.6 Para. 2 Sent. 2 of the Code as a precautionary measure. The members of the Supervisory Board are obliged to serve exclusively the interests of the company and are not affected in their decision-making process by the opportunity for variable remuneration and its amount. Just as for the members of the Executive Board, employees and shareholders, they profit from a generally sustainable development of the company. The return on equity of 10 percent or 15 percent respectively which triggers payment of the variable remuneration is ambitious enough and was approved by the Annual General Meeting in June 2012 with almost 98 percent of the votes.

4. In accordance with Point 5.4.1 Para. 2 Sent. 1 of the Code the Supervisory Board shall specify a regular limit of length of membership in the Supervisory Board when naming specific targets regarding its composition.

This recommendation has not been followed and will not be followed in the future. The Supervisory Board has decided, not to specify a regular limit regarding the length of membership in the Supervisory Board. It is not consistently compatible with the procedure for elections of employee representatives to the Supervisory Board as stipulated in the Co-Determination Act.

December 14, 2016
JENOPTIK AG

Background information from the preamble to the Code.

On September 6, 2001, the “Government Commission on the German Corporate Governance Code” was appointed to develop internationally and nationally recognized principles for correct and responsible corporate governance. As stated in the Code's preamble, "The Code aims at making the German Corporate Governance system transparent and understandable. Its purpose is to promote the trust of international and national investors, customers, employees and the general public in the management and supervision of listed German stock corporations."

The Commission presented the German Corporate Governance Code to the general public on February 26, 2002. The Code provides "regulations" that describe the legal norm currently valid in Germany, in addition to further "recommendations" and "suggestions." The "recommendations" are indicated by the use of the word "shall" in the Code. Companies that deviate from one or more recommendations must disclose this fact in an annual declaration of conformity in accordance with § 161 of the German Stock Corporation Act. The Code thereby "enables companies to reflect sector and enterprise-specific requirements."

"Suggestions" are indicated in the Code by the use of the words "should" or "can" and can be deviated from without disclosure. 

Code strengthens confidence into German enterprises.

JENOPTIK AG welcomes the German Corporate Governance Code, which is in the economic interests of Germany and of the companies, and which will contribute towards increasing the trust of investors in the German economy in Germany and abroad. JENOPTIK AG is aware of the significance of investor trust and has maintained an open and transparent corporate style from the very beginning. JENOPTIK AG also welcomes the Code's deliberate flexibility concerning further national and international corporate governance developments. The Code indeed reflects the fact that corporate governance is to be treated as a continual process, and not merely a set of regulations fixed in print, but rather a continuing process. For individual companies, this is a matter of earning the trust of investors, customers, employees and the general public - all of which goes without saying for Jenoptik.

(status: 08.06.2017)

Matthias Wierlacher, Chairman of the Supervisory Board
Chairman of Thueringer Aufbaubank, Erfurt

Michael Ebenau, Deputy Chairman*
1st commissioner of the local council of IG Metall Jena-Saalfeld, Jena

Astrid Biesterfeldt*
Deputy Vice President Business Unit Energy & Drive at JENOPTIK Advanced Systems GmbH, Hamburg

Evert Dudok
Executive Vice President Communications, Intelligence and Security bei Airbus Defence and Space

Elke Eckstein
Member of the Managing Board / COO Weidmüller Aktiengesellschaft, Bielefeld

Thomas Klippstein*
Chairman of the group's works' council of JENOPTIK AG, Jena

Dörthe Knips*
Chairman of the works' council of JENOPTIK Laser GmbH, Jena

Dieter Kröhn*
Chairman of the works' council of JENOPTIK Advanced Systems GmbH, Essen

Doreen Nowotne
Independent management consultant

Mag. Heinrich Reimitz
Member of the Executive Board of ECE European City Estates GmbH, Vienna (Austria)

Stefan Schaumburg*
Trade union secretary of IG Metall, regional office in Frankfurt

Prof. Dr. rer. Nat. habil. Diplom-Physiker Andreas Tünnermann
Director of the Institute for Applied Physics and professor for Applied Physics at Friedrich-Schiller-University Jena and director of the Fraunhofer-Institut für Angewandte Optik und Feinmechanik, Weimar

* employee representative

The Code of Conduct is a binding guideline for law-abiding and responsible conduct within the Jenoptik-Group.

In order to ensure a high level of integrity as well as of ethical and legal standards within the Group and to maintain Jenoptik's reputation at all times, the Code of Conduct summarizes principles of behavior we have always taken for granted. It contains minimum standards that are binding upon all Jenoptik employees in the world.