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Porsche doubts further legitimacy on disclosure of management salariesFederal Ministry of Justice’s intended legislation on executive salaries

Stuttgart. Dr. Ing. h.c. F. Porsche AG, Stuttgart, maintains its opinion on the planned disclosure of executive salaries, even after today’s presentation of the draft bill by German Federal Minister of Justice Brigitte Zypries. In taking this fundamental stance, the fact remains that this disclosure requirement may be rejected at future shareholders’ meetings of listed companies. According to the draft bill, an itemized salary statement would no longer be necessary unless shareholders voted accordingly.

Porsche fully acknowledges the endeavors of the Federal Ministry of Justice to act in accordance with the German Constitution. However, with regard to the current voting situation in publicly owned companies, it is clear that a shareholder’s resolution of this kind is not usually passed, respecting the rights of board members to self-determination over personal data.

The reason for Porsche’s rejection of the draft bill is that the company does not believe investors will gain any insight from the disclosure. The only thing relevant to shareholders is whether or not executive salaries are commensurate with the performance of the company. It is sufficient to provide the total amount of the salaries and their composition from fixed and performance-related shares. Porsche already intends to do so in its annual report. Contrary to the assertion in the press release by the Federal Ministry of Justice, isolated information on the amount of individual salaries of a member of the Board of Management is not a suitable yardstick for measuring the fairness of management remuneration. This would require knowledge on the different circumstances of each board member which influence the calculation. Furthermore, previous experience has shown that disclosure of salaries has led to salaries being rounded upwards – without accounting for differences in performance, experience and responsibility of individual board members. This is hardly in the best interest of shareholders.

For this reason Porsche remains convinced that a legal obligation to disclose executive salaries is in violation of the German Constitution. Both the German Constitution and the European Convention for the Protection of Human Rights guarantee each citizen the right of self-determination over personal data, and this right can only be overridden within the bounds dictated by the constitutional principle of proportionality. Simple curiosity and the vague transparency demands of the vox populi are not sufficient grounds for such an infringement of rights.

GO

3/14/2005