Report of the Supervisory Board
During 2010 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 maintained a constant exchange of information with both the Chairman of the Board of Management serving until September 30, 2010, and with his successor. 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.
The documents relating to Board of Management decisions or actions which – by law or under the Articles of Incorporation or the rules of procedure – required the approval of the Supervisory Board were inspected by the Supervisory Board at its plenary meetings, sometimes after preparatory work by the committees. In certain cases the Supervisory Board gave its approval on the basis of documents circulated to its 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.
Four plenary meetings of the Supervisory Board took place during 2010. No member of the Supervisory Board attended fewer than half of its meetings. The members of the Board of Management attended all 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. The discussions at the respective meetings in 2010 centered on various topics. At the February meeting, the Supervisory Board discussed the 2009 Annual Report and the agenda for the 2010 Annual Stockholders’ Meeting. It also dealt at length with the Bayer Group’s risk management system and matters related to the Board of Management’s compensation. At its September meeting, the Supervisory Board dealt mainly with the company’s situation and strategic issues and discussed the new recommendations of the German Corporate Governance Code. At the meeting in December 2010, 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 2011 through 2013. In accordance with the new recommendation of the Corporate Governance Code with regard to the appropriate consideration of women for membership of supervisory and management boards, the Supervisory Board resolved at this meeting on measures to increase the proportion of women on both boards and also resolved on the target described in the Corporate Governance Report regarding the composition of the Supervisory Board. In addition, the results of the audit of the Supervisory Board’s efficiency were discussed and amendments made to its rules of procedure. Following the December meeting, an information and discussion forum took place on the subject of the legal basis for the Supervisory Board’s activities.
Committees of the Supervisory Board
The Supervisory Board has a Presidial Committee, an Audit Committee, a Human Resources Committee and a Nominations Committee*.
Work of the committees
In 2010 the Presidial Committee was not required to convene in its capacity as the Mediation Committee under Section 27 Paragraph 3 of the German Codetermination Act, or to make any other decisions.
The Audit Committee met four times during the year, addressing in particular the company’s and the Group’s accounting and financial reporting, the Group’s risk management system, the internal control system and corporate compliance issues. The Audit Committee also set the budget for the services of the external auditor and discussed with the auditor the main areas of the audit for the 2010 fiscal year. The Chairman of the Board of Management and the Chief Financial Officer regularly attended the meetings of the Audit Committee. The auditor was present at all the meetings of the Audit Committee, reporting in detail on the audit work and the audit reviews of the interim financial statements.
The meetings of the Audit Committee also dealt with a number of other topics. At the February meeting, it discussed 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 it also 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 focused on the Bayer Group’s financial management system and the Compliance Officer’s yearly report.
The Human Resources Committee convened on two occasions and also passed one resolution after the relevant documents had been circulated to its members. The subjects of the meetings and of this resolution passed outside of the meetings were matters concerning the compensation of the members of the Board of Management and their service contracts.
On one occasion in 2010, in accordance with its responsibilities, the Nominations Committee discussed possible candidates for future election to the Bayer AG Supervisory Board as representatives of the stockholders and developed the target set by the Supervisory Board for its composition.
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 plenary meetings of the Supervisory Board.
The Supervisory Board dealt with the ongoing development of corporate governance at Bayer, taking into account the amendments made to the German Corporate Governance Code in May 2010. At its meeting in December, the Supervisory Board amended its own rules of procedure in line with the new recommendations of the Code and the new statutory requirements. In December 2010 the Board of Management and the Supervisory Board issued a new declaration of compliance, which is also reproduced in the Corporate Governance Report
Membership of the Supervisory Board
Karl-Josef Ellrich left the Supervisory Board on June 30, 2010. Roswitha Süsselbeck, an elected substitute, joined the Supervisory Board on July 1, 2010. The Supervisory Board elected Willy Beumann to succeed Mr. Ellrich as a member of the Human Resources Committee.
Financial statements and audits
The financial statements of Bayer AG were prepared according to the requirements of the German Commercial Code and Stock Corporations 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 Corporations 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 plenary meeting of the 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 distribution of the profit, the consolidated financial statements of the Bayer Group and the combined management report. We found 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 €1.50 per share.
The Supervisory Board would like to thank the Board of Management and all employees for their dedication and hard work in 2010.
Leverkusen, February 24, 2011
For the Supervisory Board:
* The description of the responsibilities and membership of the committees, which forms part of the Report of the Supervisory Board, can be found in the Corporate Governance Report
and therefore is not reproduced here.