Corporate Governance Report
The Executive Board – also on behalf of the Supervisory Board – reports in the following on corporate governance at ThyssenKrupp in accordance with section 3.10 of the German Corporate Governance Code:
ThyssenKrupp has always attached great importance to corporate governance. The Executive Board and Supervisory Board are committed to securing the future of the Company and sustainable value creation through responsible corporate governance geared to the long term.
We are convinced that good and transparent corporate governance meeting the requirements of recognized international and national standards is a key factor in business success. Corporate governance is therefore part of how we see ourselves and embraces all areas of the Company. We aim to justify on a sustained basis the trust placed in us by investors, financial markets, business partners, employees and the general public, and continually enhance corporate governance in the Group.
Detailed information on this subject is also available on our website. The current Declaration of Conformity and previous Declarations of Conformity can also be accessed online.
- Unqualified Declaration of Conformity again
- Transparency for stockholders and the general public
- Cooperation between Executive Board and Supervisory Board in the interest of the Company
- Appropriate control and risk management system
- Compliance as a key management duty of the Executive Board
- High transparency through comprehensive information
- Directors' dealings
- Financial-statement audit by KPMG
Unqualified Declaration of Conformity again
ThyssenKrupp AG has been complying with all recommendations of the German Corporate Governance Code for years. In the reporting year, the Executive Board and Supervisory Board once again intensively discussed the requirements of the Code, especially the amendments adopted by the Government Commission on the German Corporate Governance Code on June 18, 2009 regarding the composition of the supervisory board and management board compensation. Based on these discussions, on October 01, 2009 the Executive Board and Supervisory Board issued the Declaration of Conformity in accordance with Art. 161 par. 1 of the Stock Corporation Act (AktG), stating that ThyssenKrupp AG complies with all the recommendations of the German Corporate Governance Code as amended on June 18, 2009. The Company also continues to comply with all suggestions of the Code.
ThyssenKrupp also conforms with the new provisions added to the Code concerning D&O insurance for Executive Board and Supervisory Board members and moving from the Executive Board to the Supervisory Board. The new Code recommendations regarding diversity in the composition of Executive Board and Supervisory Board are likewise complied with. Also, stronger emphasis is given to the aspect of independence.
The Code is also implemented at our exchange-listed subsidiary Eisen- und Hüttenwerke AG, taking into account the particularities of its membership in the Group. Individual variances are presented and explained in the Company's Declaration of Conformity of October 01, 2009.
Transparency for stockholders and the general public
Stockholders, analysts, stockholder associations, the media and interested members of the public are kept regularly informed about important recurring dates, such as the date of the Annual General Meeting or the publication dates for our quarterly reports, by a financial calendar which is published in the Annual Report, the quarterly reports and on the Company's website. Our active investor relations work also keeps us in close contact with our stockholders. For example, we hold regular meetings with analysts and institutional investors. An intensive dialogue takes place at analysts' and investors' conferences and in regular conference calls. Separate conference calls are held on topical issues. All the presentations we prepare for these events and also for road shows and investors' meetings are freely accessible on the internet. Video and audio recordings of key events can also be replayed on our website. The venues and dates of road shows and investors' meetings are also available online.
The Annual General Meeting of ThyssenKrupp is always prepared with the aim of providing stockholders with all relevant information at an early stage. In particular we post the Annual Report for the past fiscal year on our website soon after the Supervisory Board meeting at which the annual financial statements are adopted. The invitation to the Annual General Meeting including the agenda and an explanation of the conditions for participation and, for the 2010 Annual General Meeting, of the rights of stockholders is generally issued one-and-a-half months before the date of the Annual General Meeting. All documents and information on the Annual General Meeting are also made available on our website. In addition, there is a facility to address questions to members of our Investor Relations department via an infoline or electronically. We publish the attendance figure and voting results on our website directly after the Annual General Meeting.
Stockholders can exercise their voting rights at the Annual General Meeting in person or by proxy, for which they can authorize a representative of their choice or a company-nominated proxy acting on their instructions. Proxy voting instructions can also be issued to the company-nominated proxy via the internet before and during the Annual General Meeting up to the end of the general debate. Stockholders unable to attend the Annual General Meeting and interested members of the public can view the meeting in full on the internet. The Act Implementing the Shareholders' Rights Directive (ARUG) of July 30, 2009 also creates the legal basis for the exercise of voting rights by postal vote and the exercise of all or individual rights by way of online attendance, even if stockholders are unable to be present at the place of the Annual General Meeting or do not want to authorize someone to vote for them. Regarding implementation of the ARUG Act, the Executive Board and Supervisory Board will propose to the Annual General Meeting that provision be made for this in the Articles of Association.
Cooperation between Executive Board and Supervisory Board in the interest of the Company
The Executive Board and Supervisory Board work together closely in the interest of the Company. Their common goal is to ensure the continued existence of the Company and the sustainable creation of value.
In accordance with statutory requirements ThyssenKrupp AG has a two-tier governance system characterized by a clear separation of management and supervisory functions. Acting in the Company's interest the Executive Board is responsible for managing the Company, developing the Company's strategy, agreeing this strategy with the Supervisory Board and implementing it. The Supervisory Board oversees and advises the Executive Board and is directly involved in decisions that are of fundamental importance for the Company. The Supervisory Board is made up of employee representatives, members elected by the Annual General Meeting, and members designated by the Alfried Krupp von Bohlen und Halbach Foundation. Under the right of designation resolved by the Annual General Meeting of ThyssenKrupp AG in January 2007, the Foundation may designate up to three members to the Supervisory Board, subject to the provisions of the Articles of Association. The designated Supervisory Board members also perform their duties exclusively in the interest of ThyssenKrupp. The Supervisory Board appoints the Executive Board members. Fundamental decisions require its approval.
In accordance with the recommendation of the German Corporate Governance Code, with Dr. Cromme and Dr. Kriwet the Supervisory Board of ThyssenKrupp AG includes no more than two former Executive Board members. In addition, the Supervisory Board verifies the independence of its members. For this, it has established principles for assessing independence which are in line with the requirements of the Code. According to these principles, the majority of the current Supervisory Board members can be regarded as independent, so independent counseling and oversight of the Executive Board is ensured.
The Executive Board provides the Supervisory Board with regular detailed updates on business policy and all issues of relevance to the Company related to planning, business development, the risk situation and the risk management system. Variances between the actual course of business and the Company's plans and targets are explained and the reasons provided. The Executive Board's reports also include the subject of compliance, i.e. the measures in place to ensure adherence to statutory provisions and the Group's internal policies. Under the Articles of Association of ThyssenKrupp AG, important transactions require the approval of the Supervisory Board.
The Company has taken out directors and officers (D&O) liability insurance with an appropriate deductible for all members of the Executive Board. This will be adapted to the requirements of the Law on the Appropriateness of Management Board Remuneration in good time. In accordance with a new recommendation of the German Corporate Governance Code, D&O insurance with an appropriate deductible has also been agreed for the members of the Supervisory Board effective October 01, 2009.
Again this year, the only case of a consultancy or other service contract between members of the Supervisory Board and the Company related to Dr. v. Schenck, who is a member of our Company's Supervisory Board and was until June 30, 2009 a partner in the international law firm Clifford Chance. Since his retirement as partner he works in an 'of counsel' capacity for this law firm. To the extent that Clifford Chance provided legal advice to the Company in 2008/2009, the engagement was approved by the Supervisory Board Personnel Committee. Conflicts of interest of Executive or Supervisory Board members, which must be disclosed immediately to the Supervisory Board, did not occur.
The period of office of the stockholder representatives elected to the Supervisory Board of ThyssenKrupp AG by the Annual General Meeting ends at the close of the Annual General Meeting on January 21, 2010. The Nomination Committee has submitted proposals for the election of new Supervisory Board members by the Annual General Meeting. In accordance with the German Corporate Governance Code the criteria of independence and diversity were also taken into account and weighed in the interest of the Company. The periods of office of the employee representatives on the Supervisory Board end at the close of the Annual General Meeting resolving on the ratification of the acts of the Supervisory Board in fiscal year 2012/2013.
Appropriate control and risk management system
Good corporate governance involves dealing responsibly with risks. The Executive Board ensures appropriate management and control of risks in the Company. Against the background of the financial and economic crisis, particular attention must be paid to financial risks such as liquidity and default risks. Systematic risk management performed as part of our value-based Group management approach ensures that risks are identified and assessed at an early stage and that risk positions are optimized. The Executive Board keeps the Supervisory Board informed about existing risks and their development. The Audit Committee of the Supervisory Board regularly concerns itself with monitoring of the accounting process, the effectiveness of the internal control, risk management and internal auditing systems as well as monitoring of the auditing of the financial statements. The internal control, risk management and internal auditing systems are continuously evolved and adapted to changing conditions. With the integration of central risk management in the Corporate Center Controlling of ThyssenKrupp AG as part of the reorganization of the Group we expect that planning and reporting processes will improve still further. More details of our control and risk management system can be found under Risk Report.
Compliance as a key management duty of the Executive Board
Compliance, in the sense of measures to ensure adherence to statutory provisions and internal Company policies and observance of these measures by the Group companies, is a key management duty at ThyssenKrupp. A compliance program was introduced directly after the merger of predecessor companies Thyssen and Krupp in 1999. It has been regularly reviewed and revised as necessary ever since, most recently in October 2009. The Groupwide compliance activities focus on antitrust law and anticorruption policies. The compliance program contains far-reaching measures to ensure adherence to corruption and antitrust regulations and the Group policies based on them.
The Executive Board of ThyssenKrupp AG has unequivocally expressed its rejection of antitrust violations and corruption in the ThyssenKrupp Compliance Commitment. Antitrust violations and corruption are not tolerated in any way and result in sanctions against the persons concerned. All employees are requested to cooperate actively in their areas of responsibility in implementing the compliance program. The Compliance Commitment is supplemented by various Group policy statements and publications which explain the underlying statutory provisions in more detail.
A compliance unit has been set up to develop, manage and implement the program. Key tasks are performed by full-time compliance officers. For example they hold regular training sessions to inform employees about the relevant statutory provisions and internal policies and are available to answer individual questions. More than 6,500 employees have received training worldwide. Particular emphasis was placed on training in countries which may have higher compliance risks. Classroom training sessions are supplemented by Groupwide interactive e-learning programs, which have been completed by approximately 28,000 (anticorruption) and 22,000 (antitrust) employees. As a further compliance element, ThyssenKrupp has introduced a whistleblower hotline. It is run for us by an external law firm. The whistleblower hotline is available to employees of the Group and also third parties to report possible infringements of laws or policies at ThyssenKrupp companies. Here again, the focus is on antitrust violations and corruption. The hotline can be contacted from anywhere in the world and is toll-free.
Further compliance measures relate among other things to capital market law and adherence to the corresponding Group policy. The statutory provisions prohibiting insider dealing are supplemented by an insider policy, which sets out principles for trading in securities of the Company for directors and employees and ensures the requisite transparency. The Group has a long-established clearing office for ad hoc disclosures in which representatives of various specialist departments carry out assessments to identify any matters subject to ad hoc reporting requirements, with a view to ensuring potential inside information is handled in compliance with the law. All persons who need access to inside information to perform their work at ThyssenKrupp AG are entered in an insider register.
High transparency through comprehensive information
To maximize transparency and ensure equal opportunities for everyone, the aim of our corporate communications is to make information available equally to all target groups as soon as possible. Stockholders and potential investors have constant access to the latest developments at the Group on our website, where all press releases and stock exchange (ad hoc) announcements made by ThyssenKrupp AG are published in German and English. The Company's Articles of Association and the Rules of Procedure for the Executive Board, Supervisory Board and Audit Committee can also be viewed on our website, as can the consolidated financial statements, interim reports and details of how ThyssenKrupp implements the recommendations and suggestions of the German Corporate Governance Code.
All stockholders and interested parties can subscribe to an electronic newsletter on the website which reports news from the Group.
Directors' dealings
According to Art. 15a of the Securities Trading Act (WpHG) the members of the Executive Board and Supervisory Board or persons close to them are obligated to disclose the purchase and sale of ThyssenKrupp AG shares and related financial instruments whenever the value of such transactions amounts to €5,000 or more within a calendar year. For the 2008/2009 fiscal year, ThyssenKrupp AG was notified of the following transactions:
At September 30, 2009 the total volume of shares in ThyssenKrupp AG held by all Executive and Supervisory Board members was less than 1% of the shares issued by the Company.
Information on other directorships held by Executive Board and Supervisory Board members on supervisory boards or comparable corporate bodies in Germany and elsewhere is contained on pages 269-271. No member of the Executive Board has more than three supervisory board seats at listed companies outside the Group. Details of related party transactions are given in the Notes to the Consolidated Financial Statements.
Financial-statement audit by KPMG
In line with European Union requirements, ThyssenKrupp draws up its consolidated financial statements and quarterly financial statements in accordance with the International Financial Reporting Standards (IFRS). The statutory parent-company financial statements of ThyssenKrupp AG, on which the dividend payment is based, are drawn up in accordance with German GAAP (HGB). For the reporting period we again agreed with the auditors KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin that the Chairman of the Audit Committee would be informed immediately of any possible grounds for exclusion or bias arising during the audit insofar as they are not immediately eliminated, and that the auditors would report immediately on any findings and occurrences during the audit which have a significant bearing on the duties of the Supervisory Board. It was also agreed that the auditors would inform the Supervisory Board or make a note in the audit report of any facts ascertained during their examination which conflict with the Declaration of Conformity issued under Art. 161 Stock Corporation Act (AktG) by the Executive Board and Supervisory Board.
Source: Annual Report 2008/2009, p. 53-59
