Report of the Supervisory Board
The Supervisory Board again properly executed its duties in 2014 in accordance with the law as well as the company’s Articles of Association and rules of procedure. In particular, the Supervisory Board monitored the work of the Executive Board diligently and regularly.
Cooperation with the Executive Board
The cooperation with the Executive Board was characterized by intensive, trustworthy exchange. During fiscal 2014, the Executive Board provided the Supervisory Board with regular written and verbal reports on the business development of Merck KGaA and the Merck Group. In particular, the Supervisory Board was informed about the market and sales situation of the company against the background of macroeconomic development, the financial position of the company and its subsidiaries, along with their earnings development, as well as corporate planning. Within the scope of quarterly reporting, the sales and operating results were presented for the Merck Group as a whole, and broken down by division. Aside from the Supervisory Board meetings, the Chairman of the Supervisory Board also maintained and continues to maintain a regular exchange of information with the Chairman of the Executive Board.
Key topics of the Supervisory Board meetings
Five Supervisory Board meetings were held in fiscal 2014. Four of the meetings were ordinary Supervisory Board meetings while the one on May 9, 2014 was an inaugural meeting. At these meetings, the Supervisory Board discussed the reports of the Executive Board in detail and discussed company developments and strategic issues together with the Executive Board.
At the meeting held on February 28, 2014, the Executive Board first reported on business performance during 2013. In addition, the Supervisory Board intensively addressed the annual financial statements and consolidated financial statements for 2013 and the corresponding management reports. The auditor explained the audit report. The Executive Board reported on the financial statements. Furthermore, the Supervisory Board resolved upon the Statement of Compliance with the German Corporate Governance Code as well as the Statement on Corporate Governance, which simultaneously includes the joint report of the Executive Board and Supervisory Board. The Supervisory Board also approved the proposals to be made to the Annual General Meeting. Lastly, the Executive Board presented the plans for fiscal 2014.
Following the Annual General Meeting on May 9, 2014, at which the elections of the new shareholder representatives on the Supervisory Board were held, an inaugural meeting took place at which Mr. Wolfgang Büchele was elected the new Chairman of the Supervisory Board and Mr. Michael Fletterich was elected Vice Chairman.
The meeting held on May 13, 2014 focused on current business developments in the first quarter of 2014. The report of the Research and Development Committee of the Board of Partners of E. Merck KG was a further focus of the meeting. The Supervisory Board also dealt with the report of the Group Compliance Officer and the report of the Group Data Privacy Officer.
At its meeting on July 31, 2014, the Supervisory Board focused intensively on the report of the Executive Board on business performance in the second quarter of 2014. In addition, KPMG explained the report on the first half of 2014. Risk management within the company was a further topic. The Head of Risk Management presented the status report for the first half of 2014. No risks that threaten the continued existence of the company were identified.
At its fifth meeting on November 11, 2014, the Supervisory Board elected a new Nomination Committee. Furthermore, the Supervisory Board dealt with the report of the Executive Board on the third quarter of 2014. The 2014 status reports of Internal Auditing as well as on compliance and data protection were additional topics of focus. The report of the Research and Development Committee, Chemicals was also discussed. Furthermore, Merck’s strategic direction was reported on and discussed.
Annual financial statements
The annual financial statements of Merck KGaA, the consolidated financial statements of the Merck Group, and the management reports for Merck KGaA and the Merck Group including the accounts, were audited by KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin. The auditors issued an unqualified audit opinion on the annual financial statements and management report for Merck KGaA in accordance with German Auditing Standards. For the consolidated financial statements prepared in accordance with International Financial Reporting Standards, the auditors issued the auditor’s report, reproduced in the Annual Report of the Merck Group. In addition, the auditors audited the calculation of Merck KGaA’s participation in the profits of E. Merck KG in accordance with Art. 27 (2) of the Articles of Association. The annual financial statements of Merck KGaA, the consolidated financial statements of the Merck Group, the management reports for Merck KGaA and the Merck Group, and the proposal by the Executive Board for the appropriation of the net retained profit were presented and distributed to the Supervisory Board, together with the auditor’s reports.
In accordance with Art. 14 (2) of the Articles of Association, the Supervisory Board also examined the annual financial statements of Merck KGaA and the management report for Merck KGaA, the proposal for the appropriation of net retained profit and the auditor’s report presented in accordance with Article 27 (2) of the Articles of Association. It also examined the consolidated financial statements of the Merck Group as well as the management report for the Merck Group, and took note of the auditor’s report of KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin.
The discussion of the relevant agenda item at the Supervisory Board’s meeting on February 27, 2015 to approve the financial statements was also attended by the auditors who sign the audit opinion on the annual financial statements of Merck KGaA and the consolidated financial statements of the Merck Group. These auditors furthermore reported on their audit at this meeting.
The Supervisory Board took note of and approved the results of the audit. On completion of its examination, the Supervisory Board raised no objections and thus approved the annual financial statements and management report for Merck KGaA, the consolidated financial statements of the Merck Group and the management report for the Merck Group prepared by the Executive Board, as well as the report presented by the auditors in accordance with Article 27 (2) of the Articles of Association. Following its own examination of the situation, the Supervisory Board gave its consent to the proposal of the Executive Board for the appropriation of net retained profit.
Corporate governance and Statement of Compliance
Corporate governance is a topic of high priority for the Supervisory Board. In its own estimation, the Supervisory Board has an adequate number of independent members. There were no conflicts of interest, as defined by the German Corporate Governance Code, involving Supervisory Board members during 2014. After addressing corporate governance topics in detail, the Executive Board and Supervisory Board resolved to adopt and issue the updated Statement of Compliance on February 18, 2015 (Executive Board) and on February 27, 2015 (Supervisory Board) and jointly issued it on February 27, 2015 in accordance with section 161 of the German Stock Corporation Act. The statement is permanently available on the website of Merck KGaA (www.merckgroup.com Investors → Corporate Governance). More information about corporate governance at Merck KGaA, including the compensation of the Executive Board and Supervisory Board, is given in the Statement of Compliance.
Apart from the Nomination Committee, the Supervisory Board of Merck KGaA currently has no further committees on account of the special features that apply to the Supervisory Board of a corporation with general partners (KGaA) under German company law and because a corresponding need for this has not emerged to date. The members of the Nomination Committee held a meeting on February 6, 2014. In order to prepare for the election of the shareholder representative members of the Supervisory Board by the Annual General Meeting on May 9, 2014, they spoke with one another about the professional and personal qualifications of suitable candidates for the Supervisory Board. The Supervisory Board elected a new Nomination Committee on November 11, 2014. No report is given on the work of further committees.
With the exception of Crocifissa Attardo and Edeltraud Glänzer, who were absent from the meeting on November 11, 2014, all the Supervisory Board members attended all the ordinary Supervisory Board meetings. The following changes in the composition of the Supervisory Board took place in 2014: Wolfgang Büchele, Michaela Freifrau von Glenck, Albrecht Merck, Helga Rübsamen-Schaeff, Gregor Schulz and Theo Siegert were elected as shareholder representatives to the Supervisory Board by the Annual General Meeting on May 9, 2014. In addition, Siegfried Karjetta and Tobias Thelen were appointed to the Supervisory Board. Moreover, on April 1, 2014 the delegates’ assembly elected Crocifissa Attardo, Mechthild Auge, Gabriele Eismann, Michael Fletterich, Edeltraud Glänzer, Dietmar Oeter, Alexander Putz, and Karl-Heinz Scheider as employee representatives with effect from the conclusion of the Annual General Meeting on May 9, 2014.
Darmstadt, February 27, 2015
The Supervisory Board of Merck KGaA