Chapter 3 pages 148–184 Corporate Governance Report 149 Compensation Report 162 Compliance 157 Report of the Supervisory Board 176 Management and Supervisory Boards 159 Declaration of Conformity Pursuant to ­­ Board of Executive Directors 159 Section 161 AktG 183 Supervisory Board 160 Declaration of Corporate Governance 184 3Corporate Governance About This Report 1 To Our Shareholders 2 Management’s Report 3 Corporate Governance 4 Consolidated Financial Statements 5 Overviews Corporate Governance Report Corporate Governance Super visory Board; and the shareholders’ rights of co-administra- the establishment of appropriate systems for control, compliance tion and supervision at the Annual Shareholders’ Meeting. and risk management as well as establishing a company-wide Report compliance culture with undisputed standards. Direction and management by the Board of Executive Directors Decisions that are reserved for the Board as a whole by law, through Corporate governance refers to the entire system for the Board of Executive Directors’ Rules of Procedure or through managing and supervising a company. This includes its ▪ Board of Executive Directors strictly separate from the resolutions adopted by the Board, are made at regularly held Board organization, values, corporate principles and guidelines Supervisory Board meetings called by the Chairman of the Board of Executive Directors. as well as internal and external control and monitoring ▪ Responsible for company management Board decisions are based on detailed information and analyzes mechanisms. Effective and transparent corporate gover- ▪ Sets corporate goals and strategic direction provided by the business areas and specialist units, and, if deemed nance ensures that BASF is managed and supervised necessary, by external consultants. Board decisions can generally responsibly with a focus on value creation. It fosters the The Board of Executive Directors is responsible for the management be made via a simple majority. In the case of a tied vote, the casting confidence of our investors, the financial markets, our of the company, and represents BASF SE in business undertakings vote is given by the Chairman of the Board. However, the Chairman customers and other business partners, employees, and the with third parties. BASF’s Board of Executive Directors is strictly of the Board does not have the right to veto the decisions of the public in BASF. separated from the Supervisory Board, which monitors the Board of Board of Executive Directors. Members of the Board of Executive Executive Directors’ activities and decides on its composition. A Directors are authorized to make decisions individually in their member of the Board of Executive Directors cannot simultaneously assigned areas of responsibility. Board of Executive Directors be a member of the Supervisory Board. As the central duty of company management, the Board of Executive Directors agrees on The Board can set up Board committees to consult and decide on manages company and represents BASF SE in business the corporate goals and strategic direction of the BASF Group as individual issues such as proposed material acquisitions or divesti- with third parties well as its individual business areas; determines the company’s tures; these must include at least three members of the Board of Supervisory Board internal organization; and decides on the composition of manage- Executive Directors. For the preparation of important decisions, ment on the levels below the Board. It also manages and monitors such as those on acquisitions, divestitures, investments and personnel, appoints, monitors and advises Board of Executive BASF Group business by planning and setting the corporate budget, the Board has various commissions at the level below the Board Directors allocating resources and management capacities, monitoring and that carefully assess the planned measure and evaluate the associ- making decisions on significant individual measures, and super- ated opportunities and risks, and based on this information, report Shareholders vising operational management. and make recommendations to the Board – indepen dently of the exercise rights of co-administration and supervision at affected business area. Annual Shareholders’ Meeting The Board’s actions and decisions are geared toward the company’s best interests. It is committed to the goal of sustainably increasing The Board of Executive Directors informs the Supervisory Board the company’s value. Among the Board’s responsibilities is the regularly, without delay and comprehensively, of all issues impor- The fundamental elements of BASF SE’s corporate governance preparation of the Consolidated and Separate Financial Statements tant to the company with regard to planning, business develop- system are: its two-tier system, with a transparent and effective of BASF SE and reporting on the company’s financial and non finan- ment, risk situation, risk management and compliance. Further- sepa ra tion of company management and supervision between cial performance. Furthermore, it must ensure that the company’s more, the Board of Executive Directors coordinates the company’s BASF’s Board of Executive Directors and the Supervisory Board; activities comply with the applicable legislation and regulatory strategic orientation with the Supervisory Board. the equal representation of shareholders and employees on the requirements, as well as internal corporate directives. This includes BASF Report 2019 149 About This Report 1 To Our Shareholders 2 Management’s Report 3 Corporate Governance 4 Consolidated Financial Statements 5 Overviews Corporate Governance Report The Statutes of BASF SE and the Supervisory Board have defined Two-tier management system of BASF SE certain transactions that require the Board of Executive Directors to obtain the Supervisory Board’s approval prior to their conclusion. Board of Executive Directors Supervisory Board Such cases include the acquisition and disposal of enterprises and parts of enterprises, as well as the issue of bonds or comparable financial instruments. However, this is only necessary if the acquisi- appoints the Board of Executive Directors tion or disposal price or the amount of the issue in an individual case exceeds 3% of the equity reported in the last approved Consolidated monitors the Board of Executive Directors Financial Statements of the BASF Group. advises the Board of Executive Directors For more information on risk management, see the Forecast from page 133 onward The members of the Board of Executive Directors, including their areas of responsibility and memberships on the supervisory bodies of other companies, are listed from page 159 onward reports to Supervisory Board ­Compensation of the Board of Executive Directors is described in detail in the Compensation Report from page 169 onward 6 members 12 members appointed by the Supervisory Board 6 shareholder representatives elected by the Annual Shareholders’ Meeting and Competence profile, diversity concept and succession Chairman appointed by the Supervisory Board 6 employee representatives planning for the Board of Executive Directors Chairman elected by the Supervisory Board The Supervisory Board works hand in hand with the Board of Executive Directors to ensure long-term succession planning for the composition of the Board of Executive Directors. BASF aims to fill The aim is to enable the Supervisory Board to ensure a reasonable The number of Board members is based on the insights gained by most Board positions with candidates from within the company. It is level of diversity with respect to education and professional experience, BASF as a company with an integrated leadership culture and is the task of the Board of Executive Directors to propose a sufficient cultural background, international representation, gender and age determined by the needs arising from cooperation within the Board number of suitable candidates to the Supervisory Board. when appointing members of the Board of Executive Directors. of Executive Directors. In May 2018, this was reduced from eight to Independent of these individual criteria, the Supervisory Board is seven members in the course of the changes to the composition of BASF’s long-term succession planning is guided by the corporate convinced that ultimately, only a holistic approach can determine an the Board of Executive Directors, and again in January 2020 to six strategy. It is based on systematic management development individual’s suitability for appointment to the Board of Executive members as part of ongoing efficiency measures. The standard age characterized by the following: Directors of BASF SE. The overall aim is to ensure that the Board of limit for members of the Board of Executive Directors is 63. – Early identification of suitable candidates of different professional Executive Directors as a whole has the following profile, which backgrounds, nationalities and genders serves as a diversity concept: The current composition of the Board of Executive Directors meets – Systematic development of leaders through the successful – Many years of management experience in scientific, technical and the competence profile and the requirements of the diversity concept assumption of tasks with increasing responsibility, where possible commercial fields in full. in different business areas, regions and functions – International experience based on background and/or professional – Desire to shape strategic and operational decisions, and proven experience success