Corporate Governance

Declaration of Compliance (Section 161 German Stock Corporation Act)

Corporate governance at STADA Arzneimittel AG is based on the German Corporate Governance Code, as published by the Government Commission on February 26, 2002 and amended most recently on June 18, 2009. The aim of the German Corporate Governance Code is to make Germany’s corporate governance rules transparent for both national and international investors.

• Declarations of Corporate Compliance (§ 161 AktG)
  • Declaration of Compliance 2011 (PDF)
  • Declaration of Compliance 2010 (PDF)
  • Declaration of Compliance 2009 (PDF)
  • Declaration of Compliance 2008 (PDF)
  • Declaration of Compliance 2007 (PDF)
  • Declaration of Compliance 2006 (PDF)
  • Declaration of Compliance 2005 (PDF)
  • Declaration of Compliance 2004 (PDF)
• Declaration of Corporate Governance according to § 289a HGB (PDF)
• Articles of Incoporation/Association (PDF)
• Disclosures according to WpHG and WpPG

Furthermore STADA Arzneimittel AG made the following explanations to the Corporate Governance in the Annual Report 2010:

Corporate governance structure

STADA Arzneimittel AG is a joint stock corporation under German law and as such has a dual management and monitoring structure which consists of the Executive Board and the Supervisory Board. The third body of the Company is the Annual General Meeting. Furthermore, STADA Arzneimittel AG has an Advisory Board according to the Articles of Incorporation.

Executive Board

The Executive Board of STADA Arzneimittel AG manages the Company in its own responsibility. The members of the Executive Board are jointly responsible for corporate governance. The Executive Board runs the businesses in accordance with the legal requirements, the Articles of Incorporation and the rules of procedure for the Executive Board. In addition, the Executive Board informs the Supervisory Board regarding all relevant Group events. The Executive Board comprises at least two people according to the Articles of Incorporation.

The Executive Board is appointed and dismissed exclusively in accordance with legal regulations. The Articles of Incorporation do not provide special provisions on the appointment or dismissal of individual and all members of the Executive Board. Only the Supervisory Board is responsible for the appointment and dismissal. It appoints Executive Board members for a maximum period of five years. A repeated appointment or extension of the term is allowed, for a maximum of five years each.

The Executive Board of STADA Arzneimittel AG included the following members on the balance sheet date:

• Hartmut Retzlaff, Chairman of the Executive Board (under contract until August 31, 2016)
• Helmut Kraft, Chief Financial Officer (under contract until December 31, 2014)
• Dr. Axel Müller, Chief Production and Development Officer (under contract until December 31, 2014)

Effective January 1, 2010, Helmut Kraft assumed his activities as Chief Financial Officer. In addition to the area of finance (Controlling and Accounting, Treasury and Taxes), and internal auditing, Helmut Kraft was also responsible for the areas of Purchasing and IT as of February 15, 2010, as well as for the area of Investor Relations as of September 16, 2010. Since September 16, 2010, the Chief Production and Development Officer has been responsible for Purchasing.

In financial year 2010, the Chief Production and Development Officer, Christof Schumann, left the Executive Board. The Supervisory Board of STADA Arzneimittel AG decided not to extend the contract of Christof Schumann at its meeting on May 10, 2010. On July 26, 2010, Christof Schumann declared that he would resign from his Executive Board responsibilities at STADA Arzneimittel AG effective July 31, 2010. This step was taken on the most agreeable terms with the Supervisory Board, which released Schumann from his employment contract with the regular expiration of the contract as of December 31, 2010. The Supervisory Board and Executive Board expressed their gratitude and recognition to Christof Schumann for his many years of successful commitment.

In a contract dated July 26, 2010, the Supervisory Board agreed with Dr. Axel Müller that he would become the new Chief Production and Development Officer of STADA Arzneimittel AG and that, subject to his personal availability, he would take up his Executive Board responsibilities no later than November 1, 2010. The Supervisory Board appointed Dr. Axel Müller as Executive Board member from his first day of employment until December 31, 2014. Dr. Axel Müller took up his position as Executive Board member on September 16, 2010, and, within the Executive Board, he is responsible for the areas of Production, Research and Development, Purchasing and Procurement, Portfolio Management, Facility Management as well as Quality Assurance and Quality Control.

In addition to his own Executive Board tasks, Hartmut Retzlaff took on the responsibility for the Executive Board functions of Christof Schumann within the period of July 31, 2010 to September 15, 2010.

Hartmut Retzlaff is the Executive Board member responsible for the areas of Marketing and Sales, Corporate Development, Corporate Strategy, Legal, Personnel, Compliance, Corporate Communications and Risk Management.

On September 3, 2010, the Supervisory Board appointed Hartmut Retzlaff for a further five years as a member of the STADA Executive Board until August 31, 2016. His current contract ends on August 31, 2011. From that date the new contract continues until August 31, 2016.

In addition to that, the Supervisory Board, on September 3, 2010, prematurely extended the appointment of Helmut Kraft as Chief Financial Officer for five years, thus until December 31, 2014. His previous contract would have ended on December 31, 2012.

There were no loans outstanding to members of the Executive Board as of the balance sheet date.

The Executive Board members held the following mandates during the financial year 2010:

Hartmut Retzlaff is also member of the Administrative Board of HSBC Trinkaus & Burkhardt AG, member of the Supervisory Board of BIOCEUTICALS Arzneimittel AG, member of the Supervisory Board or Board of Directors of SA Neocare N.V., SA Eurogenerics N.V., Hemofarm A.D. (Chairman), STADApharm AB, Clonmel Healthcare Limited, SFS International Limited and STADA Financial Investments Limited.

Helmut Kraft is also member of the Supervisory Board of Hemofarm A.D.

Dr. Axel Müller is also member of the Supervisory Board or Board of Directors of Hemofarm A.D. and Clonmel Healthcare Limited.

Supervisory Board

In accordance with the provisions of the One-Third Participation Act, the Supervisory Board of STADA Arzneimittel AG is comprised of nine members of which six are representatives of the shareholders and three represent the employees. The members representing the shareholders are elected by the Annual General Meeting and the employee representatives are elected by the employees.

The Supervisory Board appoints the Executive Board members. Furthermore, the Supervisory Board monitors and advises the Executive Board in the running of its business operations. Through a regular dialog with the Executive Board, the Supervisory Board is informed of the business development, strategy and company planning. It agrees the company planning and approves the financial statements of STADA Arzneimittel AG and the STADA Group taking into consideration the auditor’s report.

The Supervisory Board included the following members on the balance sheet date:

• Dr. Martin Abend, Attorney, Dresden (Chairman)
• Manfred Krüger, Member of Worker’s Council released from duty, Mühlheim am Main (Deputy Chairman) (Employee Representative)
• Dr. Eckhard Brüggemann, Doctor, in retirement, Herne
• Heike Ebert, Head of Packaging, Niddatal (Employee Representative)
• Dr. K. F. Arnold Hertzsch, Self-employed pharmacist, Dresden
• Dieter Koch, Pharmacist, Kiel
• Constantin Meyer, Self-employed pharmacist, Seelze
• Carl Ferdinand Oetker, Banker, Düsseldorf
• Karin Schöpper, Head of Market Research, Bad Vilbel (Employee Representative)

On June 8, 2010, the Annual General Meeting elected Carl Ferdinand Oetker as shareholder representative to the Supervisory Board until the end of the original term of office of the departed predecessor, Uwe E. Flach, i.e. until the conclusion of the Annual General Meeting 2013. In a meeting of the Supervisory Board held directly after the Annual General Meeting, Carl Ferdinand Oetker was re-elected Chairman of the Audit Committee. On November 17, 2009, the District Court of Frankfurt am Main had appointed Carl Ferdinand Oetker as member of the STADA Supervisory Board, succeeding the member of the Supervisory Board, Uwe E. Flach, who left the board in 2009, until the end of the following Annual General Meeting 2010.

The Supervisory Board has established rules of procedure. In accordance with this, the following Supervisory Board committees have been formed as of the balance sheet date:

• Audit Committee

The Audit Committee is composed of two members from the shareholders and one from the employees. The Audit Committee deals in particular with questions of accounting, risk management, compliance, the required independence of the auditor, the award of the audit contract to the auditor, the determination of the main areas for the audit and the fees agreement with the auditor. In addition, it discusses the annual and interim reports with the Executive Board prior to their publication.

The Audit Committee included the following members on the balance sheet date: Carl Ferdinand Oetker (Chairman), Dr. Martin Abend, and Karin Schöpper.

• Human Resources Committee

The Human Resources Committee is made up of two members from the shareholders and one from the employees. The Chairman of the Supervisory Board is also the Chairman of the Human Resources Committee. The Human Resources Committee prepares the personnel decisions from the Supervisory Board and ensures together with the Executive Board that long-term succession planning takes place. Furthermore, it deals with the strategic issues of the Group.

The Human Resources Committee included the following members on the balance sheet date: Dr. Martin Abend (Chairman), Dieter Koch and Manfred Krüger.

Due to the size of STADA’s Supervisory Board with six shareholder representatives, the Supervisory Board believes that a Nomination Committee as recommended by the German Corporate Governance Code in the version of May 26, 2010 is structurally superfluous. Nevertheless, the Supervisory Board set up a Nomination Panel in 2010, consisting of the Chairmen of the Human Resources Committee and the Audit Committee. The Nomination Panel has been assigned the task to compile the goals and profiles for the composition of the future Supervisory Board and has taken up work in the meantime.

The Nomination Committee included the following members on the balance sheet date: Dr. Martin Abend and Carl Ferdinand Oetker.

The Supervisory Board regularly reviews the efficiency of its activities. The subject of these efficiency reviews includes, in addition to the qualitative criteria to be established by the Supervisory Board, in particular the procedural flows in the Supervisory Board and the information flow between the committees and the plenary as well as the prompt and sufficient information provision of the Supervisory Board.

There were no loans outstanding to members of the Supervisory Board as of the balance sheet date.

The Advisory Board members held the following mandates during the financial year 2010:

Heike Ebert is at the same time member representative of the Frankfurter Volksbank eG.

Carl Ferdinand Oetker is or was at the same time member of the Advisory Board or Board of Directors of EWABO Chemikalien GmbH & Co. KG (Chairman of the Advisory Board), wink Stanzwerkzeuge GmbH & Co. KG (Chairman of the Advisory Board), wink Danmark A/S (member of the Supervisory Board until September 23, 2010), Lampe Asset Management GmbH (member of the Advisory Board), Dale Investment Advisors GmbH (member of the Advisory Board), Stiftung Hamburger Admiralität (member of the Board of Trustees), Cloverfield Inc. (member of the Board of Directors) and a member of the Board of Trustees of North Rhine-Westphalia of the Stifterverband für die Deutsche Wissenschaft (since June 15, 2010).

The term of all of the shareholder representatives on the Supervisory Board members ends with the completion of the Annual General Meeting 2013.

Annual General Meeting and shareholders

The shareholders assume their rights in the Annual General Meeting and exercise their voting rights. Every STADA Arzneimittel AG share¹⁾ has one vote. Shareholders have the option to exercise their voting right themselves in the Annual General Meeting or to have their voting right exercised by an authorized representative of their choice or by a voting representative from the Company, but bound by instructions. Every shareholder is entitled to participate in the Annual General Meeting, to speak on individual agenda items there and to request information about Company issues, if this is required for the appropriate assessment for an item on the agenda.

The Annual General Meeting passes resolutions, among other things, on the allocation of profits, the approval of the Executive Board and Supervisory Board, the selection of the auditor as well as any changes to the Articles of Incorporation and capital-changing measures.

Advisory Board

Members of the Advisory Board of STADA Arzneimittel AG are appointed by the Chairman of the Supervisory Board on the proposal of the Executive Board and the Supervisory Board. According to the Company’s Articles of Incorporation, the duty of the Advisory Board is to support and advise the Executive and Supervisory Boards. Furthermore, members of the Advisory Board are available to act as proxy for shareholders who do not wish to exercise their voting rights in person at the Annual General Meeting. The Advisory Board had 13 members on the balance sheet date.

Transparent corporate governance

In order to ensure transparent corporate governance STADA informs shareholders, financial analysts, other capital market participants, the media and the interested public regularly and promptly about the situation of the Company and about any significant business changes.

The reporting about the situation and results of STADA Arzneimittel AG and the STADA Group is delivered by the Annual Report, the interim reports and at press and analysts conferences which can generally be followed live and can be viewed for some time as a recording on the STADA website at www.stada.de and www.stada.com.

The consolidated financial statements are made available within 90 days after the financial year end and the interim financial statements within 45 days after the end of the reporting period.

Through a comprehensive Internet presence at www.stada.de and www.stada.com, STADA meets the legal requirements for simultaneous and equivalent information to all market participants about Company events relevant to them. On the STADA website all interested individuals can find all compulsory information such as ad hoc releases and annual or interim reports as well as comprehensive Company and share information such as press releases, Company profile, presentations and current share price information on STADA (including peer group comparisons).

The Company generally publishes current presentations for the capital market on its website.

In 2010, STADA again participated in numerous external corporate presentations and conferences for institutional investors in relevant European and US-American and Asian capital markets. The presentations shown there correspond to the Company presentations published on the Company website, which are regularly updated. The dates of these events are published by STADA retrospectively on the Company website.

The provisions of the German Corporate Governance Code are continuously fulfilled, with few explained exceptions only – see the preceding Declaration of Compliance.

The Declaration on Corporate Governance is issued within the scope of the separate financial statements of STADA Arzneimittel AG. Here, the opportunity is taken advantage of to reference the declaration published on the STADA website.

Details on the remuneration of the Executive Board and the Supervisory Board are presented in this Annual Report in the Management Report as part of the Remuneration Report as well as in the Notes to the Consolidated Financial Statements in Note 48.