Declaration by Corporate Management pursuant to Section 289f and Section 315d of the German Commercial Code

With the Declaration by Corporate Management pursuant to Sections 289f and 315d of the German Commercial Code for Bayer AG and the Bayer Group, the company provides information on the main elements of the Bayer Group’s Corporate governance comprises the long-term management and oversight of the company in accordance with the principles of responsibility and transparency. The German Corporate Governance Code sets out basic principles for the management and oversight of publicly listed companies. structures, relevant corporate governance practices, the composition and procedures of the Board of Management and the Supervisory Board and its committees, and the objectives and concepts that must be established when composing the Board of Management and the Supervisory Board.

Declaration concerning the German Corporate Governance Code pursuant to Section 161 of the German Stock Corporation Act

The declaration issued in December 2017 concerning the German Corporate Governance Code is published on the Bayer website along with previous declarations: www.bayer.com/en/corporate-governance.aspx

In December 2017, the Board of Management and the Supervisory Board of Bayer AG again issued an unqualified declaration pursuant to Section 161 of the German Stock Corporation Act that they fully complied with the recommendations of the German Corporate Governance Code in the past and intend to maintain full compliance in the future.

Information on corporate governance practices

Bayer AG is subject to German stock corporation law and therefore has a dual governance system consisting of the Board of Management and the Supervisory Board. The Board of Management and the Supervisory Board of Bayer AG manage the company based on a transparent strategy that is geared toward the long-term success of the company and complies with applicable law and ethical standards.

Corporate governance comprises the long-term management and oversight of the company in accordance with the principles of responsibility and transparency. The German Corporate Governance Code sets out basic principles for the management and oversight of publicly listed companies. practices that go beyond the legal requirements are derived from our vision and our common values, which form the basis of the respectful working relationship between our employees and with our external partners. Compliance with responsible practices at every stage of the value chain is crucial in corporate governance. The main guidelines are summarized primarily in our Corporate Policies on compliance, human rights, and fairness and respect at work, as well as our Supplier Code of Conduct. The organization and oversight obligations of the Board of Management and the Supervisory Board are mainly ensured by compliance management and risk management systems.

Board of Management

Composition and objectives (diversity concept)

The Board of Management of Bayer AG is comprised of seven members and runs the company on its own responsibility with the goal of sustainably increasing the company’s enterprise value and achieving defined corporate objectives.

In the composition of the Board of Management, the Supervisory Board mainly takes into account specialist expertise and personal aptitude, as well as aspects such as age, gender, education and professional background. With regard to the proportion of women on the company’s Board of Management, the Supervisory Board aims to ensure that there is at least one woman serving on the Board of Management. This corresponds to a share of around 14% on the seven-member Board of Management.

Another aspect relating to the composition of the Board of Management that the Supervisory Board has resolved to pursue is Diversity designates the variation within the workforce in terms of gender, origin, nationality, age, religion, sexual orientation and physical capability. . Without basing selection decisions on this aspect in individual cases, the Supervisory Board aims to ensure that different age groups are adequately represented on the Board of Management, while also taking into account the experience required for a position on the Board of Management. Irrespective of this, members of the Board of Management should generally step down from that office when they turn 62. The composition of the Board of Management should adequately reflect the company’s international operations. The Supervisory Board therefore endeavors to include on the Board of Management several members of different nationalities or with an international background (e.g. several years of career experience outside Germany or the oversight of foreign business activities). The Supervisory Board also strives to ensure diversity with regard to the educational and professional background of the members of the Board of Management. In addition to the requisite specific professional expertise, management and leadership experience for the given task, members of the Board of Management should cover as broad a spectrum of knowledge, experience, and educational and professional backgrounds as possible.

With this concept for the composition of the Board of Management, the Supervisory Board pursues the goal of ensuring not just the greatest possible individual suitability of its various members, but also that as many different perspectives as possible are represented in the leadership of the company through a balanced and diverse Board of Management structure and that the candidate selection pool is as large as possible.

In accordance with statutory requirements, furthermore, there are also targets pertaining to the proportion of women at the first and second management levels below the Board of Management of Bayer AG. The Board of Management has set objectives of 20% women on the first management level of Bayer AG and 25% women on the second management level. These objectives are to be attained by June 30, 2022.

Implementation status of the objectives

In the future there should continue to be at least one woman on the Board of Management.

In accordance with the target set by the Supervisory Board, the Board of Management has one female member, namely Erica Mann. However, she will leave the company effective March 31, 2018. Erica Mann will be succeeded by Heiko Schipper, meaning that the Board of Management will not comprise any women for the time being. We will continue to intensively pursue our target of having one woman on the Board of Management by our deadline of June 30, 2022, or beforehand if at all possible. The goal of adequate representation of different age groups, while also taking into account the experience required for Board of Management positions, was achieved. The ages of the members of the Board of Management were relatively evenly spread across a range of 49 to 61 years as of December 31, 2017. Four of the seven members of the Board of Management are citizens of a country other than Germany. All members of the Board of Management have amassed many years of career experience outside Germany. The members of the Board of Management also have diverse educational and professional backgrounds: some have completed various business-related courses of study or training, while others have studied in various scientific fields including medicine.

Procedure and committees

The Board of Management performs its tasks according to the law, the Articles of Incorporation and the Board’s rules of procedure, and works with the company’s other governance bodies in a spirit of trust.

Online Annex: A 4.1-1

limited assurance

The Board of Management of Bayer AG defines the long-term goals and the strategies for the company and the Group and sets forth the principles and directives for the resulting corporate policies. It coordinates and monitors the most important activities, defines the portfolio, develops and deploys managerial staff, allocates resources and decides on the Group’s financial steering and reporting.

The members of the Board of Management bear joint responsibility for running the business as a whole. However, the individual members manage the areas assigned to them on their own responsibility within the framework of the decisions made by the full Board. The allocation of functions among the members of the Board of Management is defined in a written schedule.

The full Board of Management makes decisions on all matters of fundamental importance and in cases where a decision of the full Board is prescribed by law or otherwise mandatory. The rules of procedure of the Board of Management contain a list of topics that must be dealt with and resolved by the full Board.

Meetings of the Board of Management are held regularly. They are convened by the Chairman of the Board of Management. Any member of the Board of Management may also demand that a meeting be convened. The Board of Management makes decisions by a simple majority of the votes cast, except where unanimity is required by law. In the event of a tie, the Chairman has the casting vote.

According to the Board of Management’s rules of procedure and the functional responsibilities assigned to its members, the Chairman bears particular responsibility for leading and coordinating the Board’s work. He represents the company and the Group in dealings with third parties and the workforce on matters relating to more than one part of the company or the Group. He also bears special responsibility for certain functions.

In addition to the function of Board Chairman, there are three functions with special responsibility for the operating divisions and three further functions: Finance; Human Resources, Technology and Sustainability (the incumbent also serving as Labor Director); and Innovation.

A Deal Committee was established within the Board of Management that makes final decisions with regard to acquisitions and divestitures and license transactions of a defined, medium size. There are no other committees within the Board of Management.

Supervisory Board

Composition and objectives (diversity concept and expertise profile)

Under the German Codetermination Act, half of the Supervisory Board’s 20 members are elected by the stockholders, and half by the company’s employees.

The Supervisory Board endeavors to ensure that its members together possess the necessary expertise, skills and professional experience to properly perform their duties. It strives particularly to ensure that the members of the Supervisory Board possess expertise, skills and professional experience in the following areas: management and leadership of international companies, a business understanding with regard to the company’s main areas of activity, research and development, finance, controlling / risk management, human resources and governance / compliance.

The Supervisory Board has also resolved to pursue diversity in its composition, for instance with regard to age, gender, education and professional background. With respect to the international business alignment of Bayer AG, the Supervisory Board strives to ensure at all times that several of its members have international business experience or an international background in other respects. Further objectives concerning the composition of the Supervisory Board are that different age groups be suitably represented on the Supervisory Board and that, absent special circumstances, a member should not hold office beyond the end of the next Annual Stockholders’ Meeting following his or her 72nd birthday. With a view to avoiding potential conflicts of interest and taking into account the ownership structure of the company and the number of independent Supervisory Board members, the Supervisory Board has set itself the goal that more than half of the stockholder representatives be independent. In addition, the Supervisory Board aims for at least three quarters of its total membership (stockholder and employee representatives) to be independent. The Supervisory Board assesses the independence of its members according to the recommendation contained in Section 5.4.2 of the German Corporate Governance Code. In assessing independence, the Supervisory Board also considers the criteria given in the recommendation of the European Commission of February 15, 20051. Finally, the Supervisory Board has set a standard limit on the duration of any person’s membership of the Supervisory Board in line with the recommendation in Section 5.4.1, Paragraph 2 of the Code. Absent special circumstances, no person should remain a member of the Supervisory Board for more than three full terms of office. For members of the Supervisory Board serving at the time the standard limit was introduced (September 2015) who have already exceeded this limit or will exceed it by the end of their current term of office, the limit will be applied with effect from the conclusion of their current term of office.

The stated objectives refer to the Supervisory Board as a whole unless otherwise determined. However, since the Supervisory Board can only nominate candidates for election as stockholder representatives, it can only take the objectives into account in these nominations. The objective for Supervisory Board elections is that neither women nor men account for less than 30% of the membership.

The Supervisory Board aims to achieve a balanced and diverse composition, to the extent that it can influence this. The aim is to ensure that as many different perspectives as possible are represented in the leadership of the company and that the candidate selection pool is as large as possible.

Implementation status of the objectives

The Supervisory Board has several members with international business experience or an international background. The ages of the members of the Supervisory Board were relatively evenly spread across a range of 47 to 71 years as of December 31, 2017. The objective that a member should step down from the Supervisory Board at the Annual Stockholders’ Meeting following his or her 72nd birthday – absent special circumstances – is being met. Two members of the Supervisory Board were previously members of the company’s Board of Management: Werner Wenning was Chairman of the Board of Management until 2010, and Prof. Dr. Wolfgang Plischke was a member of the Board of Management until 2014. One member of the Supervisory Board, Dr. Paul Achleitner, has been a member of the Supervisory Board for more than three terms of office. However, neither Werner Wenning nor Prof. Dr. Wolfgang Plischke nor Dr. Paul Achleitner has any personal or business relationship with the company or a governance body of the company that in the opinion of the Supervisory Board gives rise to a material conflict of interest of a more than temporary nature.

There are no indications of any possible lack of independence in the case of the other Supervisory Board members. Thus the Supervisory Board considers all of its members to be independent. The proportion of women on the Supervisory Board is currently 30% for the full Supervisory Board and 30% for both the employee and the stockholder representatives. Four members of the Supervisory Board are citizens of a country other than Germany. Numerous other members have many years of international business experience. The members of the Supervisory Board have also completed various different vocational training and study courses.

Procedure and committees

The role of the Supervisory Board is to oversee and advise the Board of Management. The Supervisory Board is directly involved in decisions on matters of fundamental importance to the company, regularly conferring with the Board of Management on the company’s strategic alignment and the implementation status of the business strategy. The Report of the Supervisory Board in this Annual Report provides details about the work of the Supervisory Board and its committees.

Online Annex: A 4.1-2

limited assurance

The Chairman of the Supervisory Board coordinates its work and presides over the meetings. Through regular discussions with the Board of Management, the Supervisory Board is kept constantly informed of business policy, corporate planning and strategy. The Supervisory Board approves the annual budget and financial framework. It also approves the financial statements of Bayer AG and the consolidated financial statements of the Bayer Group along with the combined management report, including the nonfinancial statement, while also taking into account the reports by the auditor.

The Supervisory Board has the following committees:

Presidial Committee: This comprises the Chairman and Vice Chairman of the Supervisory Board along with a further stockholder representative and a further employee representative. The Presidial Committee serves primarily as the mediation committee pursuant to the German Codetermination Act. It has the task of submitting proposals to the Supervisory Board on the appointment of members of the Board of Management if the necessary two-thirds majority is not achieved in the first vote at a plenary meeting. Certain decision-making powers in connection with capital measures, including the power to amend the Articles of Incorporation accordingly, have also been delegated to this committee. On a case-by-case basis, furthermore, the Supervisory Board can delegate certain responsibilities to the Presidial Committee. Finally, the Presidial Committee may also undertake preparatory work for full meetings of the Supervisory Board.

Audit Committee: The Audit Committee comprises three stockholder representatives and three employee representatives. The Chairman of the Audit Committee in 2017, Dr. Klaus Sturany, satisfies the statutory requirements concerning the expertise in the field of accounting or auditing that a member of the Supervisory Board and the Audit Committee is required to possess. The Audit Committee meets regularly four times a year. Its tasks include in particular oversight of financial reporting, the financial reporting process, the effectiveness and ongoing development of the internal control system, the risk management system, the internal audit system, the compliance system and the audit of the financial statements. The Audit Committee prepares the resolutions of the Supervisory Board concerning the financial statements and management report of Bayer AG and the proposal for the use of the distributable profit, as well as resolutions concerning the consolidated financial statements and management report of the Bayer Group and the agreements with the auditor (particularly the awarding of the audit contract, the determination of the main areas of focus for the audit and the audit fee agreement). The committee submits a reasoned proposal to the full Supervisory Board concerning the auditor’s appointment that contains at least two candidates in the tender process, and takes appropriate measures to determine and monitor the auditor’s independence. It is also responsible for approving all services performed by the auditor in addition to the audit of the financial statements. The audit focuses particularly on whether the financial statements have been prepared in compliance with the statutory requirements and whether the financial reporting provides a true and fair view of the financial position and results of operations of the company and the Group. The Audit Committee discusses developments in the area of (Corporate) compliance comprises the observance of statutory and company regulations on lawful and responsible conduct. at each of its meetings. The Chairman of the Board of Management and the Chief Financial Officer regularly attended the meetings of the Audit Committee. Representatives of the auditor were also present at all the meetings and reported in detail on the audit work and the audit reviews of the interim financial reports.

Human Resources Committee: On this committee, too, there is parity of representation between stockholders and employees. It consists of the Chairman of the Supervisory Board and three other Supervisory Board members. The Human Resources Committee prepares the personnel decisions of the full Supervisory Board, which resolves on appointments or dismissals of members of the Board of Management. The Human Resources Committee resolves on behalf of the Supervisory Board on the service contracts of the members of the Board of Management. However, it is the task of the full Supervisory Board to resolve on the total compensation of the individual members of the Board of Management and the respective compensation components, as well as to regularly review the compensation system on the basis of recommendations submitted by the Human Resources Committee. The Human Resources Committee also discusses the long-term succession planning for the Board of Management.

Nominations Committee: This committee carries out preparatory work when an election of stockholder representatives to the Supervisory Board is to be held. It suggests suitable candidates for the Supervisory Board to propose to the Annual Stockholders’ Meeting for election. The Nominations Committee comprises the Chairman of the Supervisory Board and the other stockholder representative on the Presidial Committee.

Innovation Committee: The Innovation Committee is primarily concerned with the innovation strategy and innovation management, the strategy for the protection of intellectual property, and major research and development programs at Bayer. Within its area of responsibility, the committee advises and oversees the management and prepares any Supervisory Board decisions. The Committee comprises the Chairman of the Supervisory Board and seven other members of the Supervisory Board, with parity of representation between stockholder and employee representatives. The Chairman of the Board of Management and the member of the Board of Management responsible for Innovation regularly attend the meetings of the Innovation Committee.

Further information

Securities transactions by members of governance bodies

Members of the Board of Management or Supervisory Board and persons with whom they have close relationships are legally obligated to report own-account transactions in shares or debt securities of Bayer AG, associated derivatives or other associated financial instruments to Bayer AG and the German Federal Financial Supervisory Authority (BaFin) as soon as the total volume of transactions made by a member of the Board of Management or Supervisory Board, or a person with whom he or she has a close relationship, within a calendar year has reached the €5,000 threshold. The transactions reported to Bayer AG in 2017 were duly published and can be viewed on the company’s website.

1 Annex 2 to the recommendation of the European Commission of February 15, 2005, on the role of nonexecutive or supervisory directors of listed companies and on the committees of the (supervisory) board (2005/162/EC)

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