We have received the following countermotions to Items 2, 3, 4 and 6 of the Agenda of our Annual Meeting on April 28, 2005.
Regarding Item 2 of the Agenda, shareholder Professor Dr. Rochlitz moves that one billion euros should be made available from the profit retained in 2004, with a corresponding reduction of the dividend, for a new company strategy opposing globalization. Shareholder Müller moves that the dividend from the profit retained in 2004 should be paid not in euros but in the form of company shares.
The reason that shareholder Rochlitz gives for his countermotion is that the company’s strategy to date has been aimed solely at reducing costs, particularly employment. BASF, he maintains, is taking part in the worldwide race for the cheapest production sites and is trying to make Ludwigshafen one of the cheapest sites. The reduction in jobs that has been ongoing for years is still being pursued. Employees are being placed under psychological pressure and exploited by the introduction of a performance-related annual bonus (linked to performance reviews). The company’s strategy, which fits into the existing market process, is doomed to failure. The elimination of jobs is reducing purchasing power in Germany and abroad. The company’s strategy to date ignores the long-term economic effects, is "self-destructive" and must therefore be realigned with the aid of the sum of one billion euros that is called for. Instead of global expansion, regional strengths must be developed, new jobs created, investment made in research and development, the product portfolio widened and the service offering extended.
The reason that shareholder Müller gives for his motion is that dividends, as a sign of peace, always ought to be distributed in a currency that is administered by shareholders non-violently, democratically and transparently.
Regarding Item 3 of the Agenda, the two shareholders mentioned above as well as shareholder Kutz and the Schutzgemeinschaft der Kapitalanleger e.V. (SDK) move that the actions of the Supervisory Board should not be formally approved. Regarding Item 4 of the Agenda, shareholder Rochlitz and shareholder Kutz also move that the actions of the Board of Executive Directors should not be formally approved.
The reason that shareholder Müller gives for his motion regarding Item 3 of the Agenda is that the Supervisory Board failed to ensure that the designation "Firma BASF AG" is used instead of "BASF AG" in corporate publications.
The reasons that shareholder Rochlitz gives for his countermotions regarding Items 3 and 4 of the Agenda are that BASF intends to reduce its permanent workforce to 32,000 by 2007, even if not by involuntary redundancies then by measures such as partial retirement, severance payments, etc. and in so doing is partly responsible for mass unemployment and the increasing pressure to perform, as well as adverse effects on health. Rochlitz goes on to say that BASF is achieving profits by lowering costs through job cuts and by reducing tax and social security contributions and bears partial responsibility for personal poverty and the destitution of the state’s coffers. Furthermore, BASF has generated, on all political levels, the massive resistance of the chemical industry to a sustainable chemicals policy (REACH: greater safety regarding chemicals) and emissions trading for greenhouse gases and has thus also promoted intervention against REACH by the Bush administration.
Shareholder Kutz points out in his reasons for his countermotions regarding Items 3 and 4 of the Agenda that the Board of Executive Directors and the Supervisory Board have not done justice to the prospects and visions, and points to "inadequate shareholder value." Developments in various operating divisions ought to be recognized earlier. The dividend is too low and not worthy of BASF.
The reason that the Schutzgemeinschaft der Kapitalanleger e.V. gives for its motion regarding Item 3 of the Agenda is that Dr. Jürgen F. Strube and Mr. Kley, as former members of the Board of Executive Directors, occupy all the decisive Supervisory Board positions with their chairmanships of the Supervisory Board, the Personnel Committee and the Audit Committee, which is not good Corporate Governance. Furthermore, the Supervisory Board is averse to an examination of the appropriateness of the remuneration of the Board of Executive Directors, since payments to individual members of the Board of Executive Directors are not disclosed. As President of the Union of Industrial and Employers’ Confederations of Europe (UNICE), Dr. Jürgen F. Strube was involved in the EU Commission’s European directive for defining the independence of supervisory boards being amended and continuing to permit dependent supervisory boards. As the result of the personal interlocking relationship (Dr. Jürgen F. Strube as member of the Supervisory Board of Allianz AG and Dr. Diekmann, chairman of the Board of Executive Directors of Allianz, as a member of BASF’s Supervisory Board), the Schutzgemeinschaft maintains that the efficiency of the Supervisory Board’s control function is reduced. This efficiency is further impaired by the fact that, with Prof. Dr. Köcher, Mr. Pötsch and Prof. Dr. Scholl, three members of the Supervisory Board of Allianz AG are represented on BASF AG’s Supervisory Board. With four out of 10 Supervisory Board posts, Allianz is overrepresented, having a share of only 4% of BASF AG’s capital. With four representatives of an insurance company and two bank representatives (Dr. von Heyderbreck, Deutsche Bank, and Mr. Studer, formerly UBS), the investor side of the Supervisory Board is not evenly balanced.
Shareholder Kutz has submitted the following motion regarding Item 6 of the Agenda:
"Motion not to vote for the resolution on the authorization to buy back shares and put them to further use for servicing the Stock Option Plan (Item 6 of the Agenda) because of the lack of success and target failure of this Stock Option Plan."
He submits the following reasons to substantiate this motion:
"The Stock Option Plan is a self-serving instrument without any service in return, i.e., assets are transferred from shareholders to the Board of Executive Directors and senior executives. It now also becomes clear why disclosure of individual manager salaries is not desired or why this is resisted. Accordingly, it is not fair to use the comparison with international management personnel, United States, that is cited. You are lagging behind success. Take as your example the CEO of Apple, Steve Jobs; he received only $1 as his annual salary in 2004."
Regarding the countermotions of shareholder Rochlitz:
BASF continues to be faced with the necessity of asserting itself successfully in the face of global competition. A flexible work organization and personnel costs conforming to the market serve to secure sustainable jobs that stand up to international comparison. It is our aim to successfully shape our customers’ and employees’ future with our products and services and thus grow profitably and enhance the value of our company. For us, sustainable enterprise means combining economic success with environmental protection. We do not consider that it makes any sense to alter the company’s strategy or to redistribute the profit retained. We emphatically reject the shareholder’s accusations, particularly concerning the responsibility for mass unemployment, poverty, adverse effects on employee health and the alleged resistance to a sustainable chemicals policy.
Shareholder Rochlitz has advanced the same arguments for supporting his countermotions, with only slight deviations in some cases, as he has in past years at our Annual Meeting. In each case, the countermotions were rejected with an overwhelming majority.
Regarding shareholder Müller’s countermotions:
The motion to distribute shares instead of a cash dividend is neither expedient nor practicable. Moreover, any shareholder is able to use the cash dividend to buy shares on the stock exchange at the prevailing market price.
Regarding shareholder Kutz’s countermotions:
BASF has fully exploited its opportunities in the 2004 financial year and has grown more vigorously than the market. With an increase in value of more than 22 percent, BASF shares performed significantly better than the Euro STOXX 50 index. With a dividend increase from EUR 1.40 to EUR 1.70 per share, BASF offers a very attractive dividend return.
BASF offers eligible senior executives the acquisition of option rights, which only come into effect if defined success targets are achieved. The benchmarks for this are the share performance and a worldwide industry index. Participants have to make their own investment in BASF shares before they can take part in the Stock Option Program. In comparisons carried out by independent parties, BASF’s Stock Option Program has repeatedly achieved top positions in past years. The shareholder’s accusations are irrelevant and unfounded.
Regarding the countermotion of the Schutzgemeinschaft der Kapitalanleger e.V.:
There are no legal reasons against Dr. Jürgen F. Strube or Mr. Kley holding chairmanships of the Supervisory Board and the Audit and Personnel Committees. These important positions should be filled by particularly suitable figures on the Supervisory Board. This is the case with Dr. Jürgen F. Strube and Mr. Kley. Their knowledge of BASF’s business and processes and their many years of experience as head of the company or chief financial officer are important conditions for effective supervision of, and competent advice to, the Board of Executive Directors. Their positions comply with the recommendations of the German Corporate Governance Code.
In spite of public discussion and the existence of relevant draft legislation, we still do not see any convincing argument for the individualized disclosure of the remuneration of the Board of Executive Directors. This does not afford any additional justifiable gain in knowledge and does not warrant the associated encroachment on the individual’s rights to privacy. The suitability of the total remuneration undoubtedly can be assessed on the basis of the total remuneration of the Board of Executive Directors listed in the Financial Report, broken down into fixed and variable components.
The BASF shareholders’ Supervisory Board members are elected by the Annual Meeting of BASF Aktiengesellschaft. Their functions in their regular occupations were disclosed in detail before the election in 2003. It is inappropriate to ascribe Prof. Dr. Köcher, managing director of the Institut für Demoskopie Allensbach, Mr. Pötsch, chief financial officer of Volkswagen AG, and Prof. Dr. Scholl, chairman of the Supervisory Board of Robert Bosch GmbH, to Allianz AG.
Dr. Jürgen F. Strube is not, as the SDK maintains, a member of the Supervisory Board of Allianz AG but of Allianz Lebensversicherungs AG. An “interlocking relationship” does not exist.
The Board of Executive Directors