Bayer

Report of the Supervisory Board

Werner Wenning, Chairman of the Supervisory Board of Bayer AG

During 2014 the Supervisory Board monitored the conduct of the company’s business by the Board of Management on a regular basis with the aid of detailed written and oral reports received from the Board of Management, and also acted in an advisory capacity. In addition, the Chairman of the Supervisory Board and the Chairman of the Board of Management maintained a constant exchange of information. In this way the Supervisory Board was kept continuously informed about the company’s intended business strategy, corporate planning (including financial, investment and human resources planning), earnings performance, the state of the business and the situation in the company and the Group as a whole.

Where Board of Management decisions or actions required the approval of the Supervisory Board, whether by law or under the Articles of Incorporation or the rules of procedure, the draft resolutions were inspected by the members at the meetings of the full Supervisory Board, sometimes after preparatory work by the committees, or approved on the basis of documents circulated to the members. The Supervisory Board was involved in decisions of material importance to the company. We discussed at length the business trends described in the reports from the Board of Management and the prospects for the development of the Bayer Group as a whole, the individual organizational units and the principal affiliated companies in Germany and abroad.

The term of office of Professor Ekkehard Schulz expired at the Annual Stockholders’ Meeting in April. Dr. Simone Bagel-Trah was elected to be his successor. The Supervisory Board elected Dr. Helmut Panke to succeed Professor Schulz as a member of the Audit Committee. Dr. Klaus Kleinfeld stepped down from the Supervisory Board effective September 30, 2014. The Local Court of Cologne appointed Professor Otmar Wiestler as his successor.

Six meetings of the full Supervisory Board took place during 2014. The Supervisory Board adopted two resolutions by way of a written vote, one on a planned acquisition and one on a divestment of part of a business. Professor Wiestler was unable to attend the only meeting that took place after he assumed his office. No other member of the Supervisory Board attended fewer than half of its meetings. The average attendance rate by Supervisory Board members at the meetings of the full Supervisory Board and of its committees held in 2014 was approximately 90 percent.

The members of the Board of Management regularly attended the meetings of the Supervisory Board.

Principal topics discussed by the Supervisory Board

The deliberations of the Supervisory Board focused on questions relating to the strategies and business activities of the Group as a whole and of the subgroups, as well as personnel decisions. The discussions at the respective meetings in 2014 centered on various topics. At the February meeting, the Supervisory Board discussed the 2013 Annual Report and the agenda for the 2014 Annual Stockholders’ Meeting. It also dealt at length with the planned acquisition of Dihon Pharmaceuticals in China, the Bayer Group’s risk management system and matters relating to the Board of Management’s compensation.

At an extraordinary meeting in April, the Supervisory Board discussed in detail the planned acquisition of the global consumer care business of the U.S. pharmaceutical company Merck & Co., Inc. At a further meeting in April, the Supervisory Board reviewed the development of the business in the first quarter and discussed the imminent Annual Stockholders’ Meeting. It also adopted a resolution on the acquisition of the consumer care business of Merck & Co., Inc. and a resolution on the divestment of the Interventional device business.

At an extraordinary meeting held in June, the Supervisory Board discussed matters relating to the Board of Management. It extended the contract of Dr. Marijn Dekkers as Chairman of the Board of Management until December 31, 2016 and appointed Johannes Dietsch as an additional member of the Board of Management with effect from September 1, 2014. Effective October 1, 2014, the Supervisory Board appointed Werner Baumann, previously Chief Financial Officer, as Chief Strategy and Portfolio Officer and Johannes Dietsch as Chief Financial Officer.

At the September meeting, the Supervisory Board focused on the future strategic alignment of the Bayer Group and approved the Board of Management’s proposal to demerge the MaterialScience ­subgroup.

At its meeting in December 2014, the Supervisory Board undertook the routine review of the fixed compensation of the members of the Board of Management and the pensions of the former members of the Board of Management. Also at this meeting, the Board of Management presented its planning for the business operations, the finances and the asset and liability structure of the Bayer Group in the years 2015 through 2017. In addition, the Supervisory Board resolved on the declaration concerning the German Corporate Governance Code. Following the meeting, an information and discussion forum took place entitled “Trends in pharmaceutical research and development.”

Committees of the Supervisory Board

The Supervisory Board has a Presidial Committee, an Audit Committee, a Human Resources ­Committee and a Nominations Committee. The current membership of the committees is shown under “Governance Bodies.”

The meetings and decisions of the committees, and especially the meetings of the Audit Committee, were prepared on the basis of reports and other information provided by the Board of Management. Reports on the committee meetings were presented at the meetings of the full Supervisory Board.

Presidial Committee: This comprises the Chairman and Vice Chairman of the Supervisory Board along with a further stockholder representative and a further employee representative. The Presidial Committee serves primarily as the mediation committee pursuant to the German Codetermination Act. It has the task of submitting proposals to the Supervisory Board on the appointment of members of the Board of Management if the necessary two-thirds majority is not achieved in the first vote at a plenary meeting. Certain decision-making powers in connection with capital measures, including the power to amend the Articles of Incorporation accordingly, have also been delegated to this committee. The Presidial Committee may also undertake preparatory work for full meetings of the Supervisory Board.

In 2014 the Presidial Committee was not required to convene in its capacity as the mediation committee. Based on an authorization granted by the Supervisory Board, the Presidial Committee adopted three resolutions in 2014 on financing measures related to the acquisition of the consumer care business of Merck & Co., Inc.

Audit Committee: The Audit Committee comprises three stockholder representatives and three employee representatives. The Chairman of the Audit Committee in 2014, Dr. Klaus Sturany, satisfies the statutory requirements concerning the independence and the expertise in the field of accounting or auditing that a member of the Supervisory Board and the Audit Committee is required to possess. The Audit Committee meets regularly four times a year.

Its tasks include examining the company’s financial reporting along with the financial statements of Bayer AG, the consolidated financial statements of the Bayer Group, the combined management ­report, the proposal for the use of the distributable profit of Bayer AG, and the interim financial ­statements and management reports of the Bayer Group, all of which are prepared by the Board of Management. On the basis of the auditor’s report on the audit of the financial statements of Bayer AG, the consolidated financial statements of the Bayer Group and the combined management report, the Audit Committee develops proposals concerning the approval of the statements by the full Super­visory Board. The Audit Committee is also responsible for the company’s relationship with the external auditor. The Audit Committee submits a proposal to the full Supervisory Board concerning the auditor’s appointment, prepares the awarding of the audit contract to the audit firm appointed by the Annual Stockholders’ Meeting, suggests areas of focus for the audit and determines the auditor’s ­remuneration. It also monitors the independence, qualifications, rotation and efficiency of the auditor. In addition, the Audit Committee oversees the company’s internal control system – along with the procedures used to identify, track and manage risk – and the internal audit system. It also deals with corporate compliance issues and discusses developments in this area at each of its meetings.

The Chairman of the Board of Management and the Chief Financial Officer regularly attended the meetings of the Audit Committee. Representatives of the auditor were also present at all the meetings and reported in detail on the audit work and the audit reviews of the interim financial statements.

The meetings focused on a number of topics. At the February meeting, the Audit Committee discussed the consolidated financial statements and the Group’s tax strategy and tax risks. It also carefully considered the risk report, which covered the risk management system, planning and market risks, legal risks, corporate compliance, the report on process and organizational risks and the internal control system, and the report by Corporate Auditing. At this meeting the Audit Committee also discussed IT security and submitted a recommendation to the full Supervisory Board concerning the resolution to be put before the Annual Stockholders’ Meeting on the appointment of the auditor of the financial statements.

The April meeting mainly dealt with the yearly report of the Group Compliance Officer and with ­determining the main areas of focus for the audit of the 2014 financial statements. At the July meeting, the quarterly financial statements as well as legal and compliance issues were discussed as always. At its meeting in October, the Audit Committee discussed the planned bidding process for the audit of the ­financial statements in addition to the fixed items on the agenda.

Human Resources Committee: On this committee, too, there is parity of representation between stockholders and employees. It consists of the Chairman of the Supervisory Board and three other members. The Human Resources Committee prepares the personnel decisions of the full Supervisory Board, which resolves on appointments or dismissals of members of the Board of Management. The Human Resources Committee resolves on behalf of the Supervisory Board on the service contracts of the members of the Board of Management. However, it is the task of the full Supervisory Board to resolve on the total compensation of the individual members of the Board of Management and the ­respective compensation components, as well as to regularly review the compensation system on the basis of recommendations submitted by the Human Resources Committee. The Human Resources Committee also discusses the long-term succession planning for the Board of Management.

The Human Resources Committee convened on two occasions and passed one written resolution. The matters discussed at these meetings concerned the compensation and contracts of the members of the Board of Management, the appointment of Johannes Dietsch to the Board of Management and the extension of Dr. Marijn Dekkers’ term of office as Chairman of the Board of Management.

Nominations Committee: This committee carries out preparatory work when an election of stock­holder representatives to the Supervisory Board is to be held. It suggests suitable candidates for the Supervisory Board to propose to the Annual Stockholders’ Meeting for election. The Nominations Committee comprises the Chairman of the Supervisory Board and the other stockholder representative on the Presidial Committee.

At one meeting and on several other occasions in 2014, the Nominations Committee discussed ­candidates for the Supervisory Board elections that were necessary in 2014 as well as the mid-term ­planning for the composition of the stockholder side of the Supervisory Board.

Corporate Governance

The Supervisory Board dealt with the ongoing development of corporate governance at Bayer, taking into account the June 24, 2014 version of the German Corporate Governance Code. In December the Board of Management and the Supervisory Board issued a new declaration concerning the German Corporate Governance Code.

Financial statements and audits

The financial statements of Bayer AG were prepared according to the requirements of the German ­Commercial Code and Stock Corporation Act. The consolidated financial statements of the Bayer Group were prepared according to the German Commercial Code and the International Financial ­Reporting Standards (IFRS). The combined management report was prepared according to the German Commercial Code. The auditor, PricewaterhouseCoopers Aktiengesellschaft, Wirtschaftsprüfungs­gesellschaft, Essen, has audited the financial statements of Bayer AG, the consolidated financial ­statements of the Bayer Group and the combined management report. The conduct of the audit is ­explained in the auditor’s reports. The auditor finds that Bayer has complied, as appropriate, with the German Commercial Code, the German Stock Corporation Act and/or the International Financial Reporting Standards endorsed by the European Union, and issues an unqualified opinion on the financial statements of ­Bayer AG and the consolidated financial statements of the Bayer Group. The financial statements of Bayer AG, the consolidated financial statements of the Bayer Group, the combined ­management report and the audit reports were submitted to all members of the Supervisory Board. They were discussed in detail by the Audit Committee and at a meeting of the full Supervisory Board. The auditor submitted a report on both occasions and was present during the discussions.

We examined the financial statements of Bayer AG, the proposal for the use of the distributable profit, the consolidated financial statements of the Bayer Group and the combined management ­report. We have no objections, thus we concur with the result of the audit.

We have approved the financial statements of Bayer AG and the consolidated financial statements of the Bayer Group prepared by the Board of Management. The financial statements of Bayer AG are thus confirmed. We are in agreement with the combined management report and, in particular, with the assessment of the future development of the enterprise. We also concur with the dividend policy and the decisions concerning earnings retention by the company. We assent to the proposal for ­distribution of the profit, which provides for payment of a dividend of €2.25 per share.

The Supervisory Board would like to thank the Board of Management and all employees for their ­dedication and hard work in 2014.

Leverkusen, February 25, 2015

For the Supervisory Board:

Werner Wenning

Chairman

Last updated: February 26, 2015  Copyright © Bayer AG
http://www.annualreport2014.bayer.com