Corporate Governance

Corporate Governance Code

With the Austrian Corporate Governance Code, which became effective in October 2002, Austrian corporations were given a framework for managing and supervising their enterprise.

The goal of the Code is to create responsible management and control of companies and groups, with an orientation toward sustained and long-term value creation and a high degree of transparency for all stakeholders of an enterprise.

The Code is based on the provisions of Austrian stock corporation law, securities law, and capital market law, and its fundamental principles are based on the OECD guidelines for corporate governance.

The Code was modified in February 2005 as a result of an amendment of the law, and toward the end of the year it was comprehensively revised on the basis of the Austrian Company Law Amendment Act 2005 as well as on the basis of the EU recommendation regarding the responsibilities of members of Supervisory Boards and the compensation of company directors.

The Code’s validity is driven by the voluntary self-regulation of companies. The Management Board and the Supervisory Board of voestalpine AG resolved in 2003 to recognize the Corporate Governance Code. By now, the amended regulations have already been implemented. Furthermore, the Management Board and the Supervisory Board addressed the revised version of the Code, which was published early in 2006, and approved its implementation. voestalpine AG has committed itself to comply with the 2006 version of the Austrian Corporate Governance Code; references in this Annual Report apply to this version of the Code.

Corporate Governance Report of voestalpine AG

In addition to the “L Rules”*, which are mandatory, the “C Rules” of the Code are being complied with with one single exception: Contrary to Rule 57, neither the Articles of Association nor the Rules of Procedure of the Supervisory Board stipulate an age limit for the nomination of Supervisory Board members for the company.

With regard to Rule 49 of the Code, the Supervisory Board approved the function of the law firm Binder Grösswang Rechtsanwälte, in which Supervisory Board member Dr. Michael Kutschera is a partner, as legal counsel of voestalpine AG for the issues of forced labor and restitution, for a financing project, for legal questions in connection with the issue of the convertible bond, for questions of company law and trademark rights, as well as for various individual questions. The fees for this case work are the normal hourly rates of the law firm Binder Grösswang Rechtsanwälte, which are between EUR 200 and 390 per hour. The total of the fees paid to the law firm Binder Grösswang Rechtsanwälte during the 2005/06 business year was EUR 149,498, net.

All of the members of the Supervisory Board who were elected by the Annual General Shareholders’ Meeting have confirmed that they consider themselves to be independent based on the criteria set forth by the Supervisory Board (Rule 53). These criteria for independence can be viewed on the company website (www.voestalpine.com).

Furthermore, with the exception of Dr. Ludwig Scharinger, who represents the shareholder OÖ Invest GmbH & Co OEG, and Dr. Josef Peischer, who represents the voestalpine employees’ private foundation (employee shareholding scheme), no member elected by the Annual General Shareholders’ Meeting is a shareholder with an investment of more than 10% or represents the interests of such a shareholder (Rule 54).

The Corporate Governance Code provides for a regular external evaluation of compliance with the Code. This evaluation was carried out by the Group’s auditors during the audit of the 2005/06 financial statement. As a result of this evaluation, the auditor has determined that the declaration given by voestalpine AG with regard to compliance with the 2006 version of the Corporate Governance Code, taking into account the reservation contained in the declaration, conforms to the actual conditions and/or facts.

The confirmation that the external evaluation was carried out can also be viewed on the voestalpine AG website.

* The Corporate Governance Code contains the following rules: “L Rules” (= Legal) are measures prescribed by law; “C Rules” (= Comply or Explain) must be justified in the event of non-compliance; “R Rules” (= Recommendations) are recommendations only.