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Corporate Governance

We at MorphoSys believe the essence of good Corporate Governance involves efficient cooperation between a company’s Management and Supervisory Board, respect for the shareholders’ interests, as well as openness and transparency of corporate communication. Moreover, we feel strong corporate governance is an integral part of the MorphoSys corporate value system. As such, the company believes that adherence to high Corporate Governance standards will ultimately increase shareholder value.

 

MorphoSys ensures compliance with the laws and rules of conduct, especially through the use of a Group-wide Code of Conduct, as well as through supplementary internal guidelines. MorphoSys’s “Code of Conduct” sets out the fundamental principles and key policies and practices for behavior in business. The Code serves as a valuable tool for employees and management staff particularly in business, legal, and ethical situations of conflict.

In addition, the Code of Conduct strengthens transparency and consistent management principles as well as the strengthening the trust in the Company of the financial markets, business partners, employees, and the public. Compliance with the Code of Conduct is carefully monitored. The Group-wide implementation of the Code is accompanied by the Code of Conduct Committee.

Statement on Corporate Governance under Sec. 289a of the German Commercial Code (HGB) for the 2016 financial year

In the Statement on Corporate Governance under Sec. 289a HGB, the Management Board and the Supervisory Board report on corporate governance. In addition to the annual Declaration of Conformity in accordance with Sec. 161 of the Stock Corporation Act (AktG), the Statement on Corporate Governance also includes relevant information on corporate governance practices and other aspects of corporate governance, including a description of the working practices of the Management Board and Supervisory Board.

Declaration of Conformity with the German Corporate Governance Code (the "Code") of the Management Board and the Supervisory Board of MorphoSys AG

The Management Board and Supervisory Board of MorphoSys AG declare the following under Sec. 161 of the German Stock Corporation Act:

  1. Since the last Declaration of Conformity on December 3, 2015, MorphoSys AG has complied with the recommendations of the “Government Commission on the German Corporate Governance Code” in the version from May 5, 2015 with the following exception:
    There is no cap on the overall or individual variable remuneration components of Management Board members’ remuneration (see Item 4.2.3 Para. 2 sentence 6 of the Code). Based on the Supervisory Board’s existing limitations for the Management Board’s variable remuneration components and their annual allocation, the Supervisory Board does not believe that an additional cap is required.

  2. MorphoSys will continue to comply with the recommendations of the “Government Commission on the German Corporate Governance Code” in the version dated May 5, 2015 with the exceptions described under Item 1.

Planegg, December 2, 2016

MorphoSys AG

For the Management Board For the Supervisory Board
Dr. Simon E. Moroney
Chief Executive Officer
Dr. Gerald Möller
Chairman

 

Relevant Information on Corporate Governance Practices

MorphoSys ensures compliance with laws and rules of conduct through the Group-wide application of the following documents: the Code of Conduct, the Compliance Management Handbook and supplementary internal guidelines.

MorphoSys’s Code of Conduct sets out the fundamental principles and key policies and practices for business behavior. The Code is a valuable tool for employees and executives, particularly in business, legal and ethical situations of conflict. It reinforces the principles of transparent and sound management and fosters trust in the Company from the financial markets, business partners, employees and the public. Compliance with the Code of Conduct is carefully monitored. The Group-wide application of the Code is overseen by the Compliance Committee, and the Code itself is routinely reviewed and updated when necessary.

The Compliance Handbook describes MorphoSys’s Compliance Management System (CMS) and is intended to ensure compliance with all legal regulations as well as set out high ethical standards that apply to both the management and all employees. The Management Board has overall responsibility for the compliance management system and is required to report regularly to the Audit Committee and the Supervisory Board. In carrying out its compliance responsibility, the Management Board has assigned the relevant tasks to various offices at MorphoSys.

The Compliance Officer arranges the exchange of information between the internal compliance-relevant posts. The Compliance Officer monitors the Company’s existing CMS and implements the CMS through appropriate measures and decisions taken on an individual basis. The Compliance Officer is the employee contact person for all compliance-related issues and implements the compliance requirements defined by the Compliance Committee.

The Compliance Officer is supported by a Compliance Committee that meets at regular intervals. The Compliance Committee supports the Compliance Officer in the implementation and monitoring of the CMS. The Compliance Committee is particularly responsible for the identification and discussion of all compliance-relevant issues and thus makes it possible for the Compliance Officer as well as the other members of the Compliance Committee to periodically verify MorphoSys’s compliance status and, if necessary, update the CMS. 

Composition of the Management Board and the
Supervisory Board

 

Management Board

The Management Board of the Company consists of a Chief Executive Officer and three other members. A schedule of responsibilities defines the different areas of responsibility as follows:

  • Dr. Simon Moroney, Chief Executive Officer, responsible for Strategy and Planning; Compliance & Quality Assurance; Internal Audit; Human Resources; Business Development & Portfolio Management; Legal; the coordination of individual areas of the Management Board; representation of the Management Board to the Supervisory Board.
  • Jens Holstein, Chief Financial Officer, responsible for Accounting and Taxes; Controlling; Corporate Finance & Corporate Development; Risk Management; IT; Technical Operations; Procurement & Logistics; Corporate Communications & Investor Relations; Environmental Social Governance (ESG).
  • Dr. Marlies Sproll, Chief Scientific Officer responsible for Development Partnerships & Technology Development; Target Molecule & Antibody Research; Protein Chemistry; Alliance Management; Intellectual Property.
  • Dr. Arndt Schottelius, Chief Development Officer (up to February 28, 2017), responsible for Preclinical Development; Clinical Research; Clinical Operations; Drug Safety & Pharmacovigilance; Regulatory Affairs; Project Management.
  • Dr. Malte Peters, Chief Development Officer (since March, 1, 2017), responsible for Preclinical Research; Clinical Development; Clinical Operations; Drug Safety & Pharmacovigilance; Regulatory Affairs; Project Management.

Biographies of the Management Board members

Supervisory Board

As of December 31, 2016, the MorphoSys AG Supervisory Board consisted of six members who oversee and advise the Management Board. The current Supervisory Board consists of professionally qualified members who represent MorphoSys AG shareholders. Dr. Gerald Möller, acting Chairman of the Supervisory Board, coordinates the Board’s activities, chairs the Supervisory Board meetings and represents the interests of the Supervisory Board externally. All Supervisory Board members are independent, as defined in the German Corporate Governance Code, and have many years of experience in the biotechnology and pharmaceutical industries. The members were duly elected by the shareholders during the 2015 Annual General Meeting. The Chairperson of the Supervisory Board is not a former member of MorphoSys AG’s Management Board.

The members of the Supervisory Board and its committees are listed in the table below.

 

Composition of the Supervisory Board

  Postition Initial
Appointment
End of
Period
Audit
Committee
Remuneration and Nomination
Committee
Science
and Technology
Committee
Dr. Gerald Möller Chairman 1999 2018   M  
Dr. Frank Morich Deputy Chairman 2015 2017     M
Karin Eastham (FE) Member 2012 2018 M C  
Klaus Kühn (FE) Member 2015 2017 C    
Dr. Marc Cluzel Member 2012 2018   M C
Wendy Johnson Member 2015 2017 M   M

FE=Independent Financial Expert     C=Chairperson     M=Member

 

Working Practices of the Management Board and Supervisory Board

To ensure good corporate governance, a guiding principle of the cooperation between the Management Board and Supervisory Board at MorphoSys AG is the open, comprehensive and regular communication of information. The dual board system prescribed by the German Stock Corporation Act clearly differentiates between a company’s management and supervision. The responsibility of both boards is clearly stipulated by the legislator and the boards’ bylaws and Articles of Association. The boards work closely together to make decisions and take actions for the Company’s benefit. Their stated objective is to sustainably increase the Company’s value.

Management Board members have their own area of responsibility defined in the schedule of responsibilities and regularly report to their Management Board colleagues. Cooperation among Management Board members is governed by the bylaws. The Supervisory Board ratifies both the schedule of responsibilities and the bylaws. Management Board meetings are typically held weekly and chaired by the Chief Executive Officer. During these meetings, resolutions are passed concerning dealings and transactions that, under the bylaws, require the approval of the entire Management Board. At least half of the Management Board’s members must be present to pass a resolution. Management Board resolutions are passed by a simple majority and, in the event of a tied vote, the Chief Executive Officer’s vote decides. For material events, each Management Board or Supervisory Board member can call an extraordinary meeting of the entire Management Board. Management Board resolutions can also be passed outside of meetings by an agreement made orally, by telephone or in writing (also by email). A written protocol is completed for each meeting of the full Management Board and is submitted for approval to the full Management Board and for signature to the Chief Executive Officer at the following meeting.

Management Board strategy workshops are also held, in which the Group-wide strategic objectives are developed and prioritized.

The Management Board promptly and comprehensively informs the Supervisory Board in writing and at Supervisory Board meetings about planning, business development, the Group’s position, risk management and other compliance issues. Extraordinary meetings of the Supervisory Board are also called for material events. The Management Board involves the Supervisory Board in the strategy, planning and all fundamental Company issues. In addition to routine Supervisory Board meetings, a strategy meeting takes place between the Management Board and Supervisory Board once annually to discuss MorphoSys’s strategic direction. The Management Board’s bylaws specify that material business transactions require the approval of the Supervisory Board. Detailed information on the cooperation of the Management Board and Supervisory Board and important items of discussion during the 2016 financial year can be found in the Report of the Supervisory Board.

The Supervisory Board holds a minimum of two meetings per calendar half-year and at least six meetings per full calendar year. The Supervisory Board has supplemented the Articles of Association with rules of procedure that apply to its duties. In accordance with these rules, the Chairperson of the Supervisory Board coordinates the activities of the Supervisory Board, chairs the Supervisory Board meetings and represents the interests of the Supervisory Board externally. The Supervisory Board typically passes its resolutions in meetings but resolutions may also be passed outside of meetings in writing (also by email), by telephone or video conference.

The Supervisory Board has a quorum when at least two-thirds of its members (including either the Chairperson or Deputy Chairperson of the Supervisory Board) take part in the vote. Resolutions of the Supervisory Board are generally passed with a simple majority unless the law prescribes otherwise. In the event of a tied vote, the Chairperson of the Supervisory Board’s vote decides.

Protocols are completed for Supervisory Board meetings and resolutions passed outside of meetings. A copy of the Supervisory Board’s protocol is made available to all Supervisory Board members. The Supervisory Board conducts an efficiency evaluation regularly in accordance with the recommendation in Item 5.6 of the Code.

Composition and Working Practices of the Management Board's and Supervisory Board's Committees

The Management Board has not formed any committees.

The Supervisory Board has three committees: the Audit Committee, the Remuneration and Nomination Committee and the Science and Technology Committee. The members of the three committees formed by the Supervisory Board are professionally qualified.

Audit Committee

The main task of the Audit Committee is to support the Supervisory Board in fulfilling its supervisory duties with respect to the accuracy of the annual and consolidated financial statements, the activities of the auditor and internal control functions, such as risk management, compliance and internal auditing. The Audit Committee submits a recommendation to the Supervisory Board for the election at the Annual General Meeting of an independent auditor. The members of the Audit Committee are Klaus Kühn (Chairperson), Karin Eastham and Wendy Johnson. Klaus Kühn and Karin Eastham fulfill the prerequisite of being independent financial experts.

Remuneration & Nomination Committee

The Remuneration and Nomination Committee is responsible for preparing and reviewing the Management Board’s compensation system annually before its final approval. When necessary, the Committee searches for suitable candidates to appoint to the Management Board and Supervisory Board and submits appointment proposals to the Supervisory Board. The Committee also prepares the contracts made with Management Board members. The members of the Remuneration and Nomination Committee are Ms. Karin Eastham (Chairperson), Dr. Gerald Möller and Dr. Marc Cluzel.

Science & Technology Committee

The Science and Technology Committee advises the Supervisory Board on matters concerning proprietary drug and technology development and prepares the relevant Supervisory Board resolutions. The members of the Science and Technology Committee are Dr. Marc Cluzel (Chairperson), Dr. Frank Morich and Ms. Wendy Johnson.

Declaration of Conformity with regard to the German Corporate Governance Code

Declaration of Conformity of the Management and Supervisory Board of MorphoSys AG with regard to the German Corporate Governance Code (“Code”)

The Management Board and the Supervisory Board of MorphoSys AG declare pursuant to Section 161 of the German Stock Corporation Act:

  1. From December 3, 2015, the date of its most recent Declaration of Conformity, MorphoSys AG has complied – with the exception described below – with the recommendations of the “Government Commission on the German Corporate Governance Code” in the Code version dated May 5, 2015:
  • The amount of compensation of the Management Board members does not provide for a cap, neither overall nor for individual compensation components (see item 4.2.3 para. 2 sentence 6 of the Code). Against the background of already existing means of the Supervisory Board to cap variable compensation components of the Management Board members as well as the annual allocation of such variable components, the Supervisory Board considers an additional cap relating to the overall and individual compensation components as unnecessary.
  1.  MorphoSys AG will continue to comply – with the exception described above under item 1 – with the recommendations of the “Government Commission on the German Corporate Governance Code” in the Code version dated May 5, 2015.

 

Planegg, December 2, 2016
MorphoSys AG

 

For the Management Board For the Supervisory Board
Dr. Simon E. Moroney
Chief Executive Officer
Dr. Gerald Möller
Chairman of the Supervisory Board

 

Archive

Compensation

Remuneration of the Management Board

The Management Board’s remuneration system is intended to provide an incentive for performance-oriented and sustainable corporate management. Therefore, the aggregate remuneration of the Management Board members consists of different components: fixed components, an annual cash bonus based on the achievement of corporate targets (short-term incentive – STI), a variable compensation component with a long-term incentive (long-term incentive – LTI) and other remuneration components. Variable remuneration components with long-term incentive consist of performance share plans from the current and prior years as well as a convertible bond program from the year 2013. Management Board members also receive fringe benefits in the form of non-cash benefits, mainly the use of a company car and the payment of insurance premiums. All remuneration packages are reviewed annually for their scope and appropriateness by the Remuneration and Nomination Committee and compared to the results of an annual Management Board remuneration analysis. The amount of compensation paid to Management Board members highly depends on their individual areas of responsibility, their personal achievement of goals, the Company’s economic situation and success and the Company’s business prospects versus its competition. All decisions concerning adjustments to remuneration packages are made by the entire Supervisory Board. The Management Board’s remuneration and index-linked pension scheme were last adjusted in July 2016.

For a list of remuneration relating to individual Management Board members, divided into fixed components as well as short- and long-term incentivizing components, see the Remuneration Report as part of the Annual Report 2016 (see page 77 ff).

 

Remuneration of the Supervisory Board

The remuneration of Supervisory Board members is governed by the Company’s Articles of Association and a corresponding Annual General Meeting resolution on Supervisory Board remuneration. In the 2016 financial year, Supervisory Board members received fixed compensation, attendance fees and expense allowances for their participation in Supervisory Board and committee meetings. Each Supervisory Board member has received annual fixed compensation (€ 85,400 for Chairpersons, € 51,240 for Deputy Chairpersons and € 34,160 for all other members) for their membership of the Supervisory Board. The Chairperson receives € 4,000 for each Supervisory Board meeting chaired and the other members receive € 2,000 for each Supervisory Board meeting attended. For committee work, the committee Chairperson receives € 12,000 and other committee members each receive € 6,000. Committee members also receive € 1,200 for their participation in a committee meeting. Participation in a Supervisory Board or committee meeting by telephone or video conference results in a 50 % reduction in compensation for meeting participation. In certain cases, a fixed expense allowance is granted for travel time for meetings personally attended. Therefore, Supervisory Board members residing outside of Europe who personally take part in a Supervisory Board or committee meeting are entitled to a fixed expense allowance of € 2,000 (plus any sales tax due) for additional travel time in addition to attendance fees and reimbursed expenses.

Supervisory Board members are also reimbursed for travel expenses and value-added taxes (VAT) on their compensation.

In the 2016 financial year, Supervisory Board members received a total of € 529,680 (2015: € 529,270) excluding the reimbursement of travel expenses. This amount consists of fixed compensation and attendance fees for participating in Supervisory Board and committee meetings.

No loans were granted to Supervisory Board members by the Company.

For a list of remuneration relating to individual Supervisory Board members, see the Remuneration Report as part of the Annual Report 2016 (see page 77 ff).

Managers' Transactions (formerly known as "Directors' Dealings")

Pursuant to Art. 19 para. 5 subparagraph 1, sentence 1 of the European Market Abuse Regulation (“MAR”) the Members of the Management and Supervisory Boards of MorphoSys AG, as well as persons closely associated with them , are legally bound to report trading in MorphoSys stock to the German Federal Financial Supervisory Authority (BaFin). Every transaction conducted on their own account relating to the shares or debt instruments of MorphoSys or to derivatives or other financial instruments linked thereto must be reported.

All transactions have to be published unless the total value of these tradings executed by such person within one calendar year does not exceed EUR 5,000.

Notes:
Participants in the MorphoSys stock option and/or convertible bonds programs who choose to “exercise and sell” receive the difference between the so-called exercise price (price determined at the time of issuing the options) and the Xetra closing price of the MorphoSys stock on the day of exercise, as a taxable income.

All reported transactions of MorphoSys AG are published via GlobeNewswire.

Managers' Transactions

No declared transactions in 2017 to date.

ACCOUNTING AND EXTERNAL AUDIT

For the election of the Company auditor, the Audit Committee of the Supervisory Board submits a nomination proposal to the Supervisory Board. At the 2016 Annual General Meeting, PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft was appointed auditor for the 2016 financial year. As proof of its independence, the auditor submitted a Declaration of Independence to the Supervisory Board. The lead auditor of these consolidated financial statements was Mr. Dietmar Eglauer, who has audited the consolidated financial statements since 2014. PricewaterhouseCoopers GmbH has been the auditor for MorphoSys AG since the 2011 financial year. Information on other consulting, audit and valuation services provided by PricewaterhouseCoopers GmbH to MorphoSys AG during the 2016 financial year can be found in the Notes under Item 6.1. (see page 128)

 

Holdings of the Boards as of December 31, 2016

  Shares Convertible Bonds Performance Shares
Management Board
Dr. Simon Moroney 514,214 88,386 37,220
Jens Holstein 7,000 90,537 25,134
Dr. Arndt Schottelius1) 10,397 60,537 25,134
Dr. Marlies Sproll 57,512 60,537 25,134
Supervisory Board
Dr. Gerald Möller (Chairman) 11,000 0 0
Dr. Frank Morich 1,000 0 0
Dr. Marc Cluzel 500 0 0
Karin Eastham 2,000 0 0
Wendy Johnson 500 0 0
Klaus Kühn 0 0 0

1) Member of the Management Board until February 28, 2017

For a detailed description of the stock option schemes and convertible bonds programs for the employees of MorphoSys Group, we refer to the latest financial reports.