- Monitoring and advice in continuous dialogue with the Executive Board
- Efficient work in the Supervisory Board committees
- Meetings and resolutions of the Supervisory Board
- Corporate governance and Declaration of Conformity
- Audit of the parent-company and consolidated financial statements
- Composition of the Supervisory Board and Executive Board
Report by the Supervisory Board
In this report the Supervisory Board gives an account of its work in the 2008/2009 fiscal year. Central topics of the discussions with the Executive Board were the effects of the global financial and economic crisis on the ThyssenKrupp Group, the major investment projects of the steel business in Brazil and the USA, and the reorganization of the Group.
Dr. Gerhard Cromme
Chairman of the Supervisory Board
Monitoring and advice in continuous dialogue with the Executive Board
In the 2008/2009 fiscal year, the Supervisory Board continued to perform with great care the monitoring and advisory functions for which it is responsible under the law and the Articles of Association. Numerous issues and transactions requiring approval were discussed and decided upon in the individual meetings of the Supervisory Board.
We regularly advised the Executive Board on the management of the Company and continuously observed and supervised its conduct of business. The Supervisory Board was involved intensively from an early stage in all decisions of significance for the Company. Our cooperation with the Executive Board was characterized by an intensive and open exchange. In written and verbal reports, the Executive Board furnished us with regular, up-to-date and comprehensive information on all aspects of relevance to the Company, above all on the development of the business and financial situation and its effects on the employment situation, on investment projects and ongoing investments, and on fundamental issues of corporate planning and strategy. Against the background of the global financial and economic crisis we paid particular attention to the current earnings situation including the risk situation and risk management, as well as to the reorganization of the Group and the progress of the two major investment projects in Brazil and the USA. The Executive Board discussed and agreed the Company's strategic alignment with us. Where the actual course of business deviated from plans and targets, the Executive Board submitted detailed explanations in written or verbal form. Together with the Executive Board we discussed intensively the reasons for the deviations, enabling appropriate measures to be initiated.
All events of importance to the Company were discussed in detail by the committees and the full Supervisory Board on the basis of reports by the Executive Board. Where required by law and the Articles of Association, the Supervisory Board voted on the reports and resolution proposals of the Executive Board after detailed examination and discussion. We were also in regular contact with the Executive Board outside the Supervisory Board and committee meetings. We informed ourselves about major developments and decisions, and supported the Executive Board in an advisory capacity. In addition, I as Supervisory Board Chairman discussed the perspectives of the individual Group segments as well as the new Group structure and the effects of the global financial and economic crisis on ThyssenKrupp in separate meetings with the Executive Board. The stockholder and the employee representatives each held separate meetings before the Supervisory Board meetings to discuss key items on the agenda.
The Supervisory Board dealt at length with the business situation, the operational and strategic development of the Company and its areas of business, and the reorganization of the Group at four regular meetings and one extraordinary meeting in fiscal year 2008/2009. The periods of office of the employee representatives expired at the end of the Annual General Meeting on January 23, 2009. Directly after the Annual General Meeting a constituent meeting of the Supervisory Board was held with the new employee representatives, who had previously been elected at the delegates' meeting on December 09, 2008.
By means of written reports, the Executive Board informed the Supervisory Board immediately and in full, also between meetings, about particular events of major importance for assessing the Company's situation and development as well as for its management. Based on detailed documents, the Executive Board duly presented transactions requiring approval for resolution. No new transactions requiring approval were defined by the Supervisory Board in the reporting year. In consultation with the Supervisory Board Chairman resolutions were passed by written vote in cases where this was required by the situation. Conflicts of interest of Executive Board and Supervisory Board members, which must be disclosed to the Supervisory Board immediately and reported to the Annual General Meeting, did not occur in the year under review.
The average attendance at Supervisory Board meetings in the reporting year was 96%. No Supervisory Board member took part in fewer than half of the meetings. All of the committee meetings in the reporting year were fully attended.
Efficient work in the Supervisory Board committees
To carry out its functions, the Supervisory Board has set up a total of six committees, which effectively support the work of the full meetings. The committees prepare the resolutions of the Supervisory Board as well as the issues to be dealt with at the full meetings. Where legally permissible, in individual cases decision-making powers of the Supervisory Board were delegated to committees. This approach has proven very successful. All committees are chaired by the Supervisory Board Chairman, with the exception of the Audit Committee. Reports on the content and results of each committee meeting were given at the following full-session meetings. The Supervisory Board therefore had a comprehensive information base to deal with the respective issues. The compositions of the individual committees are shown under Supervisory Board Committees".
The Executive Committee (Praesidium) met seven times in the reporting period. Between meetings, I maintained close contact with the Executive Committee members and discussed projects of particular importance to the Group. The main subjects of discussion in the Executive Committee were preparation of the full Supervisory Board meetings, the effects of the global financial and economic crisis on the Group, the reorganization of the Group, the progress reports on the construction of the plants in Brazil and the USA, and preparation of the efficiency review of the Supervisory Board.
The Personnel Committee, which prepares the personnel decisions of the Supervisory Board and is responsible for other Executive Board matters, met five times. Until the amendment of the Rules of Procedure for the Supervisory Board on September 04, 2009, it was also its responsibility to resolve in place of the Supervisory Board on the conclusion, amendment and ending of employment contracts with the members of the Executive Board and to determine an annual bonus. Major topics of discussion in the reporting year were the cancellation of the appointments of Mr. Jürgen H. Fechter and Dr. Karl- Ulrich Köhler as Executive Board members of ThyssenKrupp AG, the separation agreements with the two gentlemen, as well as the appointment of Dr. Alan Hippe as a member of the Executive Board of ThyssenKrupp AG and the associated change in the distribution of responsibilities of the Executive Board. Furthermore, the Personnel Committee recommended to the full Supervisory Board that in view of the current earnings situation no bonus should be paid to the members of the Executive Board of ThyssenKrupp AG for fiscal year 2008/2009. In addition, it gave its approval for the acceptance of external directorships by individual Executive Board members and the retention of the law firm Clifford Chance, to which Supervisory Board member Dr. Kersten v. Schenck belonged as a partner until June 30, 2009 and for which he now works in an 'of counsel'; capacity following his retirement as partner. Once again in the past fiscal year it was not necessary to convene the Mediation Committee in accordance with Art. 27 par. 3 German Codetermination Act (MitbestG).
The Audit Committee met four times. The meetings were regularly attended by the financial-statement auditors, the Chairman of the Executive Board, the Vice Chairman of the Executive Board and the Chief Financial Officer. The committee mainly dealt with the parent-company and consolidated financial statements, the audit reports of the financial statement auditors as well as the development of the risk management system and the compliance program. The Audit Committee also discussed the interim reports to be published. Another topic of discussion were the effects on the Group of the new Accounting Law Modernization Act. In its November 2008 meeting the committee was informed in detail about the Group's compliance activities. The auditors reported in detail on all findings and occurrences of significance to the work of the Supervisory Board that had arisen in the course of the audit of the annual financial statements and the audit review of the interim reports.
The Audit Committee also dealt with the engagement of the financial-statement auditors and submitted a proposal to the full Supervisory Board for the election of the auditors for fiscal year 2008/2009. After the election by the Annual General Meeting, the Audit Committee engaged the auditors to audit the parent-company and consolidated financial statements of ThyssenKrupp AG and to carry out audit reviews of the interim reports. In addition, the compensation for the auditors was resolved. In this connection the auditors' statement of independence in accordance with Section 7.2.1 of the German Corporate Governance Code was obtained and the qualification of the auditors monitored. Further areas dealt with included the award of non-audit-related contracts to the financial-statement auditors. The Audit Committee kept itself regularly informed about the status of the major steel and stainless investment projects in Brazil and the USA and discussed these projects in detail. One major topic in this connection was the progress of work on the coke plant in Brazil. The effects of the global financial crisis, especially with regard to the Group's refinancing possibilities, were also discussed regularly and in detail in the Audit Committee. The committee also dealt with the results of the Group's internal auditing and with regular reports on legal risks, satisfying itself in this way of the Company's compliance with the law.
The Strategy, Finance and Investment Committee met three times in the reporting year, dealing with the strategic development and the reorganization of the Group and the individual segments. It also discussed the corporate and investment planning and prepared the relevant resolutions of the Supervisory Board. The two investment projects in Brazil and the USA were also addressed in detail by this committee.
The Nomination Committee, formed in September 2007, began work in the reporting year discussing proposals for the forthcoming election of stockholder representatives at the Annual General Meeting on January 21, 2010. It established criteria on the basis of which it subsequently selected candidates and recommended them to the full Supervisory Board for nomination.
Meetings and resolutions of the Supervisory Board
Subjects of regular discussions in the full Supervisory Board meetings were the effects of the global financial and economic crisis on ThyssenKrupp, the sales, earnings and employment situation of the Group and its segments, the financial and ratings situation, and all major acquisition and disposal projects. The major investment projects in Brazil and the USA and the new organizational structure of the Group were also discussed in several meetings.
In the meeting on November 27, 2008 we focused primarily on the parent-company and consolidated financial statements for the year ended September 30, 2008 – including the Executive Board's proposal for the appropriation of net income – and the corporate plan for fiscal 2008/2009. On the basis of a detailed report by the Executive Board we also discussed the strategic development of the Group and the effects of the financial and economic crisis. The previously mentioned investment projects in Brazil and the USA were widely discussed. After detailed deliberation we approved the increase in the investment budgets for both projects. The Supervisory Board also noted with assent the bonuses for fiscal year 2007/2008 for the individual Executive Board members determined by the Personnel Committee on the basis of the current bonus policy, and adopted the agenda for the Annual General Meeting of ThyssenKrupp AG on January 23, 2009 together with the proposals for resolution. We also gave our approval for the sale of the shares in Dufer S.A. held by ThyssenKrupp Services and the acquisition of the outstanding minority shareholding in ThyssenKrupp Röhm Kunststoffe GmbH. Another subject of discussion was a progress report on the new ThyssenKrupp Quarter in Essen. In the absence of the Executive Board, the Supervisory Board dealt with the efficiency review of the Supervisory Board which had previously been prepared by the Executive Committee.
In the meeting on January 23, 2009, immediately before the Annual General Meeting, the Executive Board informed us primarily about the current situation of the Group. We also used the meeting to prepare the Annual General Meeting afterwards. Executive Board matters were also addressed. After discussing the appointment of Dr. Alan Hippe to the Executive Board of ThyssenKrupp AG at this meeting, the corresponding resolution was passed by written procedure at the end of January.
Immediately after the Annual General Meeting on January 23, 2009 a constituent meeting of the Supervisory Board was held in which Dr. Gerhard Cromme was confirmed as Chairman of the Supervisory Board and Mr. Bertin Eichler was again elected Vice Chairman of the Supervisory Board. New members from the employee representative side were appointed to the committees.
In an extraordinary Supervisory Board meeting held on March 27, 2009 against the background of the global economic crisis we discussed with the Executive Board the position of the Group, the ratings situation and the status of the major projects in Brazil and the USA. A major topic of this meeting was the plan presented by the Executive Board to reorganize the Group, which we discussed in detail. Following previous discussions in the Personnel Committee, the Supervisory Board also dealt with Executive Board personnel matters and adopted a new organization chart for the Executive Board.
We used the meeting on May 13, 2009, following the regular report on the state of the Group, to discuss with the Executive Board in particular the revised plan for the reorganization of the Group. The Executive Board also gave a detailed report on the ThyssenKrupp PLuS program to reduce net working capital and secure earnings. The financial position of the Group and the ratings situation were other subjects of discussion, as were the plans of the Executive Board to delay investment projects. We discussed individual action programs to increase efficiency in the segments and addressed the situation of the shipyards and the Group's automotive suppliers. Another subject of discussion was the progress of the work on the ThyssenKrupp Quarter. In addition, we approved the purchase of land in Madrid as part of the European Manufacturing Concept of the Elevator segment. In the absence of the Executive Board, the Supervisory Board discussed and resolved an amendment to the bonus policy for the Executive Board.
Important topics of our discussions in the meeting on September 04, 2009 were the report by the Executive Board on the state of the Group, progress reports on the construction of the new steelmaking and processing plants in Brazil and the USA, and the adoption of the new Group organizational structure and a new organization chart for the Executive Board. In connection with the reorganization the Executive Board informed us about the future alignment of the two divisions Materials and Technologies. In this meeting we also approved the increase in the stake held by the Brazilian company Vale S.A. in ThyssenKrupp CSA Siderúrgica do Atlântico Ltda. In addition, acting on the proposal of the Personnel Committee the Supervisory Board resolved in view of the current earnings situation not to pay a bonus to the members of the Executive Board for fiscal year 2008/2009.
Corporate governance and Declaration of Conformity
The Supervisory Board again continuously monitored the further development of corporate governance standards in the reporting year. The Executive Board – also on behalf of the Supervisory Board – reports on corporate governance at ThyssenKrupp in the corporate governance report in accordance with section 3.10 of the German Corporate Governance Code. We discussed the implementation of the Code at ThyssenKrupp in depth in the Supervisory Board meeting on September 04, 2009, focusing in particular on the amendments made to the Code by the Government Commission on the German Corporate Governance Code in its meeting on June 18, 2009. In implementation of new legal requirements and the new recommendations of the Code, we dealt with the compensation system for the Executive Board in the absence of the Executive Board and resolved amendments to the Rules of Procedure for the Supervisory Board and the Audit Committee. The Supervisory Board also determined that it includes what it considers an adequate number of independent members.
At October 01, 2009 the Executive Board and Supervisory Board jointly issued an updated Declaration of Conformity in accordance with Art. 161 of the German Stock Corporation Act (AktG) and made it permanently available to stockholders on the Company website. ThyssenKrupp AG complies with all recommendations of the Code as amended on June 18, 2009, published by the Federal Ministry of Justice in the official section of the electronic Federal Gazette (Bundesanzeiger) on August 05, 2009. The Company also complies with all the Code's suggestions.
Audit of the parent-company and consolidated financial statements
The parent-company financial statements for the period October 01, 2008 to September 30, 2009, prepared by the Executive Board in accordance with HGB (German GAAP) rules, and the management report of ThyssenKrupp AG were audited by KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin. The audit contract had been awarded by the Audit Committee of the Supervisory Board in accordance with the resolution of the Annual General Meeting on January 23, 2009. The auditors issued an unqualified audit opinion. In accordance with Art. 315a HGB, the consolidated financial statements of ThyssenKrupp AG for the fiscal year from October 01, 2008 to September 30, 2009 and the management report on the Group were prepared on the basis of IFRS, the accounting standards applicable in the European Union. The consolidated financial statements and the management report on the Group were also given an unqualified audit opinion.
The Audit Committee had selected the following key audit area for the reporting period: determination of the elements of the internal control system in the ThyssenKrupp Group's accounting relevant to the preparation of the consolidated financial statements. The report on this as well as the other audit reports and financial statement documentation were sent to all Supervisory Board members in good time. They were discussed at length in the Audit Committee meeting on November 13, 2009 and in the Supervisory Board meeting on November 26, 2009. In both meetings the auditors reported on the main results of the audits and were available to answer questions and provide supplementary information. The Chairman of the Audit Committee reported in detail at the full Supervisory Board meeting on the Audit Committee's discussion of the parent-company and consolidated financial statements. Following our own examination and discussion of the parent-company financial statements, the consolidated financial statements, the management report and the management report on the Group, we approved the result of the audit and, in the meeting on November 26, 2009, approved the parent-company and consolidated financial statements drawn up by the Executive Board as recommended by the Audit Committee. The parent-company financial statements are thus adopted. After examining and weighing all arguments, we concurred with the proposal of the Executive Board for the appropriation of net income in order to maintain the dividend continuity of recent years. We regard the proposed dividend as appropriate.
Composition of the Supervisory Board and Executive Board
As already mentioned in the previous Annual Report, Dr. Heinrich v. Pierer resigned his seat on the Supervisory Board at the close of November 15, 2008. As his replacement, the Alfried Krupp von Bohlen und Halbach Foundation designated Mr. Jürgen R. Thumann to the Supervisory Board effective November 16, 2008. Mr. Heinrich Hentschel, Mr. Klaus Ix, Mr. Hüseyin Kavvesoglu and Dr. Klaus T. Müller stepped down from the Supervisory Board at the close of the Annual General Meeting on January 23, 2009. Ms. Susanne Herberger, Mr. Bernd Kalwa, Mr. Peter Remmler and Mr. Klaus Wiercimok were elected to the Supervisory Board by the delegates' meeting on December 09, 2008. As successor to Mr. Markus Bistram, who resigned his seat on the Supervisory Board at the close of September 15, 2009, Mr. Markus Grolms was appointed as member of the Supervisory Board by court resolution with effect from October 14, 2009. We thanked the departed Supervisory Board members for their work and their constructive support for the Company and the Executive Board in the past years.
Mr. Jürgen H. Fechter and Dr. Karl-Ulrich Köhler left the Executive Board at the close of March 31, 2009, and Dr. Wolfram Mörsdorf at the close of April 14, 2009. Dr. Alan Hippe was appointed to the Executive Board of ThyssenKrupp AG with effect from April 01, 2009. We thanked the departed Executive Board members for their long-standing work for the Group.
The Supervisory Board expresses thanks and recognition to the management, employees and employee representatives of all Group companies for their personal commitment and efforts in a difficult environment.
The Supervisory Board
Dr. Gerhard Cromme
Chairman
Düsseldorf, November 26, 2009