Performance Report

Employees

The tremendous commitment of our employees plays a central role in ensuring the success of our business. It is therefore important to foster their skills and abilities by providing ongoing training, global human resources development programs and attractive working conditions.

Our employees – our potential

The Bayer Group had 106,200 employees in 2007. Europe still accounts for 53 percent of Group employees and thus the majority of our workforce. Our low staff fluctuation rate shows that employees value Bayer as an employer. In 2007 the turnover rate was nine percent worldwide. We do not provide a breakdown by age group, gender and region because of the widely varying conditions in the countries in which we operate.

The high esteem in which our company is held in this regard is reflected in the accolades we received in 2007. The news magazine Maclean’s voted us one of Canada’s top 100 employers, the Corporate Research Foundation singled us out as one of the best employers in China, and in March Fortune magazine included us in its list of the companies with the best reputation in North America.

Employees by region*

	2005	2006	2007
Europe	45.700	57.800	56.200
North America	13.100	17.200	16.800
Latin America/Africa/Middle East	10.600	13.700	14.300
Asia-Pacific	13.200	17.300	18.900
Total	82.600	106.000	106.200

* Full-time employees. Part-time employees are included pro rata based on their contractual working hours.

Employees by function*

	2005	2006	2007
Production	41.600	47.800	48.800
Marketing	25.200	37.400	36.900
Research & development	8.000	12.300	11.600
Administration	7.800	8.500	8.900
Total	82.600	106.000	106.200
of which trainees	2.700	3.100	2.700

* Full-time employees. Part-time employees are included pro rata based on their contractual working hours.

Managerial Staff Survey

Despite our acknowledged success and high in-house standards, we aim to improve our commitment to serving employees’ needs still further in the future. The latest survey of our roughly 25,000 managerial employees around the world, carried out in October 2007, provided a valuable insight into the mood in the company and changes that our workforce would like to see.

Managers were able to rate their responses to the questions in the survey on a scale ranging from 1 (don’t agree at all) to 5 (agree completely).

A clear commitment to employee rights

Our Human Rights Position documents our clear commitment to respect the rights of our employees worldwide

. Employees at all Bayer sites have the right to elect their own representatives. Where they do not do so, we make a special effort to ensure direct and open lines of communication. In addition to national employee committees, since 1992 we have had a European Forum, a platform for dialogue between employer and employee representatives from our European companies.

Full and timely information for our employees is provided on significant operational changes in compliance with the relevant national and international obligations. We believe that it is particularly important to reach a consensus on the solutions to be implemented. However, since the Bayer Group has operations all over the world

and there are considerable differences in the situation in many of these countries, it is not possible to give general figures. Bayer guarantees that employee representatives’ rights to consultation on significant operational changes are met, in accordance with the applicable national statutory and/or collectively agreed regulations.

Contractually agreed working hours at Bayer do not exceed 48 hours a week and the working conditions of around 60 percent of our global workforce are governed by binding collective agreements, for example industry-wide or special in-house agreements.

Diversity and equality of opportunity

As an innovative company, we value the skills and ideas of employees from different cultural and ethnic backgrounds. Our aim is therefore to provide working conditions that offer all employees respect and equal development opportunities, regardless of their gender, color, background or religion. Our directives specify that employee selection and development are to be based exclusively on professional qualifications, development potential and individual performance. For example, Bayer’s top management comprises executives from 16 nations. Our principles of equal treatment are set out in our Diversity Directive and our “Bayer Human Rights Position,” which is valid throughout the world.

Our objectives are twofold. Firstly, we want our workforce to reflect the diversity of society and our customers. Secondly, we want to encourage our employees to utilize their talent to the full. Fostering diversity is also geared to upholding Bayer’s position as the employer of choice for both present and potential employees. Diversity in the workplace is becoming ever more important as competition for talent increases. Consequently this issue has high priority in the training of our managers. For example, we have developed a mandatory online training module on antidiscrimination for our executives in Germany. At the start of 2008 we also stepped up our efforts to foster talent in the Asia-Pacific region to ensure that the rapidly growing population there is reflected in the broadly diversified structure of employees and managers in the Bayer Group. Diversity has a long tradition in the United States. For example, every two years employees and managers in North America meet up to discuss progress and scope for improvement at a “Bayer Diversity Conference.”

Equality of opportunity at Bayer naturally includes supporting the employment of severely disabled employees and those with health problems. Modern integration concepts take their interests into account and make sure they are given due consideration when we are filling vacancies. Last year a special program was introduced to integrate disabled employees in Brazil by providing suitable workplaces, raising the awareness of managers and employees and recruiting more disabled workers.

Bayer employees who feel discriminated against despite our efforts are encouraged to discuss the issues with their line manager or hr department. In the United States, for example, there are already special Diversity Councils to provide advice and mediation. Suspected discrimination is investigated by the responsible legal and hr departments and reported to the responsible Compliance Officer. This report includes any organizational and hr measures that have been agreed.

Fostering the development of female employees

There has been a gratifying increase in the number of female employees at Bayer in recent years. In 2007 women accounted for nearly 26 percent of the workforce in Germany and the proportion is continuing to rise. Equality of opportunity at Bayer includes equal opportunities of professional advancement: In the past 10 years, the proportion of female managers in Germany has more than doubled from eight percent to around 17 percent. However, the proportion of women in top management positions worldwide is still low, although it did rise from 3.8 percent in 2006 to 4.3 percent in 2007. Special programs such as the Women in Leadership series in the United States have been introduced to raise the number of female employees in managerial positions in the future. Bayer HealthCare is aiming to raise the proportion of women in top management positions (around 13 percent in 2007) over the next few years by increasing support for qualified women, as part of its talent management drive, and making jobs offered to them more family-friendly.

Clear employee participation in corporate success

Our employees share in the successful performance of our company. In 2007 we awarded variable payments totaling €490 million (2006: around €420 million) under our Group-wide short-term incentive (STI) program.

Employees are also able to participate in the company’s performance through a range of employee stock programs. To complement the established programs, the new “BayShare” program was rolled out to Portugal, Spain, Italy and the Netherlands in 2007, enabling our employees in these countries to purchase Bayer stock at an attractive discount to the market price. The “Aspire” program introduced in 2006 is a stock participation program for senior executives throughout the Bayer Group.

Our contribution to social welfare

As a responsible employer, we offer employees worldwide a high degree of social security. Our initial goal in the health care field is to provide health insurance cover for virtually all our employees. In many cases, we also aim to improve the medical care available to our employees within the framework of local health care provision. This applies particularly in countries where the public health care system can only provide restricted basic health care.

We were thus able to make further significant improvements to the health care available to many of our employees in 2007. For example, we set up our own medical stations in Honduras, Nicaragua, Panama and the Dominican Republic. We now have company-financed medical centers for employees in all Central American countries in which we have a presence. Employees in other countries benefit from similar models. In Romania, for example, employees have for many years been able to utilize the medical services of a private hospital in Bucharest as a result of an initiative by the company.

In addition, we regularly take action to improve the scope and quality of our employees’ health insurance. For example, since last year employees in Denmark, Sweden and Norway have not had to accept the normal waiting periods before visiting a specialist or being admitted to hospital. In Morocco, the costs of treating existing illnesses will in future be paid. In China, one of the fastest-growing locations for the Bayer Group, we offer our employees a range of opportunities to take out insurance against health risks. The spectrum ranges from travel accident insurance through full health care insurance, including insurance for employees’ children, to life insurance.

Occupational pension plans are another central element of our commitment to the welfare of our employees. We currently provide pension plans for around 80 percent of our employees either directly or through contributions to external pension funds or insurance companies. In countries where we have a large workforce, for example Germany, the United States, Brazil and Japan, nearly all our employees were entitled to join company pension plans in 2007. This is a further key area where we are adapting our activities to the benefit of our employees. In Serbia, for instance, we used a change in statutory regulations last year as an opportunity to introduce a modern occupational pension system. This will enable our employees there to virtually double their future pension benefits. Since the significance of occupational pensions is rising steadily in many countries to offset reductions in state pension benefits, we intend to introduce further pension plans internationally for our employees in the future.

Social security for employees by region (in percent)

Region/Area	Percentage of full-time employees with contractually agreed working time of max. 48 hours per week*	Percentage of employees with health insurance**	Percentage of employees eligible to take part in a company or company-financed pension program***	Percentage of employees covered by collective agreements, especially on wages and working conditions****
Europe	100	100	89	91
North America	100	90	100	11
Latin America / Africa / Middle East	100	100	48	43
Asia-Pacific	100	100	56	25
Bayer Group (total)	100	98	79	60

* standard employment contracts, excluding exempt employees
** state or employer/employee-funded
*** including programs to supplement statutory pension plans
**** sector or in-house agreements

Pioneering training projects for young people

Giving young people good opportunities for the future and securing skilled workers for our company by providing sound vocational training has always been a major focus of human resources policy at Bayer. Bayer has commissioned currenta to carry out vocational training at its sites in Dormagen, Krefeld-Uerdingen, Leverkusen and Wuppertal-Elberfeld in Germany. In 2007 we had around 2,700 young people on more than 20 training courses worldwide. The reduction in the number of trainees in 2007 (see above) was principally due to the divestment of some business operations and subsidiaries, the large number of young people who completed their training early in previous years and a modification in our recruitment system as a result of changes in the framework set in collective agreements.

In Germany we also run a special one-year program to prepare less able youngsters for vocational training. In 2007 in Dublin, the European Foundation for the Improvement of Living and Working Conditions highlighted the exemplary nature of this initiative and its important role in combating youth unemployment. The recruitment and development of university graduates for future management functions also enjoys high priority at Bayer. We have currently four different international trainee programs for talented graduates.

Our careers portal “myBayerjob” also qualifies for top rankings. In February 2008, the Swedish management consultancy Potentialpark voted our website second out of the 104 European companies included in its survey. Internationally, we achieved a ranking among the top 10, improving our position from 19 in 2006 to six in 2007.

“Discovering Bayer” training program

The “Discovering Bayer” e-training program, which we have been piloting in the United States since summer 2007, is designed to introduce new employees around the world to our values and organizational structure as part of our Global Orientation Program and help them build personal networks within the Bayer Group.

Skills enhancement and ongoing training

We nurture the performance and qualification of our employees through advanced professional training and global personnel development programs. New training programs are developed around topical issues and the use of modern education and training methods. Our professional advanced training offering is based on the needs of our operational units and is subject to ongoing quality control.

Various new initiatives illustrate the enormous importance attached to personal development in the Bayer Group. Last year we established a special position to support the professional qualification and development of employees in Algeria and Tunisia. In South Korea, we will be piloting an innovative mentoring system as part of our Talent Management Program in 2008.

Many training courses have been devised specifically for the further qualification of our managers. These include not only our Country Division Head Program and Managing Directors Program but also the acclaimed “BayWay” international management training program, the content of which was revised in 2007 and which is being used highly successfully in international manager development. Our “Development Dialogue” and “360° Feedback” are also important and frequently used global personnel development tools. Last year more than 1,000 managers used our modern 360° Feedback system to obtain information from colleagues and employees about their personal strengths and weaknesses. In 2007 we invested two percent of our total personnel expenses of €7.6 billion in vocational and further training of employees. The decline in the proportion of personnel expenses allocated to vocational and further training was mainly due to the smaller number of trainees in the Group.

Vocational and advanced training (in % of personnel expenses)

2005	2006	2007
2,3	2,2	2,0

Flexible working hours

As a modern employer, we do a good deal to help our employees combine professional development with their personal lives. For example, our innovative worktime systems – ranging from flextime through part-time employment to teleworking – offer a maximum of flexibility. In Germany, our childcare provision and generous arrangements on time off to raise young children enable employees with children to benefit from professional opportunities. As a result, Working Mother magazine in the United States placed our U.S. company among the top 100 employers for working mothers in 2007 for the fifth time.

In Germany, Bayer introduced long-term accounts in 2007 to offer employees opportunities to shape their individual working life more flexibly in the future. Employees can save various time and compensation components in a special account to enable them to plan their working life more flexibly in the future, for example by taking paid leave immediately before retirement.

Action to deal with demographic change

Low birth rates and a progressively aging population will confront many western industrialized countries with severe challenges in the foreseeable future. Demographic change is also affecting the corporate sector. Smart, sustainable solutions are therefore needed to tackle the upcoming change in the age structure of the workforce.

In Germany, for example, around 30 percent of our managers and about 20 percent of other employees are over 50. However, looking at the situation worldwide and by type of employment, we identify considerable differences and many special cases that have to be taken into account in our strategic considerations.

We have therefore embarked on a systematic analysis of the age structure of the Bayer Group and the challenges related to this. The aim is to align our human resources to this demographic shift and ensure that they are developed accordingly. At the same time, we want to offer employees more support to ensure that they remain physically fit and employable throughout their working lives, for example through occupational health management.

We have developed a variety of measures and concepts to counter the expected shortage of skilled employees. We focus on maintaining and making optimal use of the experience and competencies of older employees, for example by offering them special ongoing training and personnel development programs, and intensive knowledge transfer between different generations and age groups.

In view of the tougher competition for skilled youngsters, our goal is to continue to position Bayer as an attractive employer and offer young people interesting professional prospects with our company. We are already well positioned here with a large number of high-quality vocational training places, four international graduate trainee programs, more than 600 internships for students in Germany every year and very good contacts to many universities and research institutes.

Improvement in occupational safety

In 2007 Bayer came closer to its goal of reducing the number of injuries resulting in days lost to under 2.0 (MAQ: the number of occupational injuries resulting in days lost for every one million hours worked). Across the Group, the number of injuries resulting in days lost dropped by just under six percent. At the same time, there was a perceptible drop in the number of reportable injuries compared with the previous year. This was aided by the Managing Safety Initiative launched by the Product Supply unit at Bayer HealthCare. CURRENTA implemented programs such as “ArguS,” which focuses on safety arguments and recognizing and reporting risk factors, while the CHEMPARK sites ran a safe cycling program to prevent road accidents.

Safety still plays an important role in our advanced training programs. In collaboration with the employer’s accident liability insurance association, we provided instruction for around 600 safety officers and managers responsible for safety at our German sites.

Our intranet-based occupational safety training has been very well received by employees in Germany. Known as “Pegasus,” this practical electronic safety training system enables employees to complete the training prescribed by law online via the Bayer Training Portal at times convenient to them. Alongside production-related aspects, the program includes occupational safety issues of relevance to administrative staff such as ergonomic workplace organization. Pegasus was developed by training specialists at Bayer Business Services in collaboration with occupational safety experts at CURRENTA.

The main reason for the decline in the injury rate was joint action by occupational safety experts at CURRENTA and the subgroup managers. For example, Bayer MaterialScience runs a successful series of workshops to raise employees’ awareness of safety issues.

* MAQ = million working hour quota (injuries per million hours worked)

* The data give details of the occupational injuries suffered by contractors (external companies commissioned by us who work on our premises), who do not directly report to Bayer employees. Only those injuries leading to at least one day lost are included.
** MAQ = million working hour quota (injuries per million hours worked); working hours of contractors estimated in some cases

* Reportable injuries comprise all injuries that require treatment beyond first aid. This includes occupational injuries resulting in days lost.
** MAQ = million working hour quota (injuries per million hours worked)

Fatal occupational injuries

There were three fatal accidents at Bayer in 2007: Our operations in Bangladesh, India and Colombia each lost one employee in traffic accidents while they were on company business. There were no accidents on Bayer sites or at Bayer facilities involving the death of contractors’ employees in 2007.

Fatal occupational injuries

	2003	2004	2005	2006	2007
Bayer employees	1	4	3	5	3
Contractor employees	1	1	1	4	-
Total	2	5	4	9	3

Modern occupational health management

Our modern health care arrangements and high-quality occupational safety concepts are beneficial for our employees as well as for Bayer as an employer. After all, health is essential for employee satisfaction, motivation and performance.

In the reporting period, 30 new cases of illness directly attributable to work-related factors were diagnosed and recognized as such in accordance with either statutory or in-house regulations.

CURRENTA offers occupational health management based on a holistic approach at the three CHEMPARK sites in Germany (Dormagen, Krefeld-Uerdingen and Leverkusen). The focus is on identifying factors that could cause health problems and optimizing workflows to meet employees’ health requirements. Alongside issues directly related to health, this includes fostering and maintaining the physical, mental and social wellbeing of our employees. To maintain the health of its staff, CURRENTA operates a systematically structured health management system for each business unit under the umbrella of the Health Committee. The existing reintegration management system for currenta employees who have been unfit for work for a continuous or total period of six weeks within a year has been further developed into a three-stage management system. Where necessary, a multidisciplinary and multifunctional integration system supports this process.

Our commitment to preventive health care is of particular importance to employees in countries where the public health care system is not able to offer this. For this reason, Bayer CropScience offers employees in many countries a regular voluntary health check-up, with a special focus on preventing cancer and cardiovascular disease. In other countries, public health programs are supported (e.g. through encouragement for employees to participate). At the same time, employees who have been off sick for more than six weeks will still be entitled to free medical examinations. In addition, the HSEQ Directive issued by Bayer CropScience calls on all sites to support the health of employees by running special programs on stress management, fitness, healthy eating and giving up smoking.

An increasing number of sites have now introduced a range of attractive offers. In the United States, Bayer offers WorkLife programs to help employees and their families balance the needs and requirements of work, family commitments and private life. These include the Employee Assistance Program (EAP), which provides confidential advice on personal and psychological problems for employees at difficult times in their lives and the Work Life Benefits Program, which covers a wide range of practical assistance. Bayer’s site in Pittsburgh is running a three-year pilot program known as “Wellness Works,” which offers employees and adult relatives medical checkups to identify health risks and foster healthy lifestyles through individual wellness programs.

Bayer also endeavors to ensure that it is prepared to handle global health risks. In view of the possible threat of pandemics and epidemics, Bayer has developed a Group-wide pandemic contingency plan. Our employees have been given extensive information on preventive measures to avoid bird flu. Up-to-date information is available in the intranet at all times.