Corporate governance declaration 2012/2013
The term corporate governance stands for responsible corporate management and control geared to long-term value creation. As a key foundation of sustainable business success, good corporate governance promotes the trust of investors, customers, employees and the public. The Executive Board and Supervisory Board are committed to securing the future of the Company and sustainable value growth through responsible governance geared to the long term.
In addition to the corporate governance declaration below, more information on corporate governance at thyssenkrupp is provided in the Corporate Governance Report for the 2012/2013 fiscal year.
thyssenkrupp AG has issued the following corporate governance declaration pursuant to § 289a German Commercial Code (HGB) which is part of its management report for the 2012/2013 fiscal year.
How the Executive Board and the Supervisory Board operate
The Executive Board and Supervisory Board work together closely in the interest of the Company. An intensive, continuous dialogue between the two boards is the basis for efficient corporate management. Their common goal is to ensure the continued existence of the Company and the sustainable creation of value. In accordance with the statutory requirements for a German stock corporation, thyssenkrupp AG has a two-tier governance system characterized by a separation of personnel between management and supervisory boards.
Executive Board responsible for management and conduct of business
The Executive Board of thyssenkrupp AG is responsible for managing the Group and the Group holding company. It performs its management task as a collegiate body. This task includes in particular corporate planning, defining the strategy of the Group, controlling and monitoring the Group, and Group financing.
The members of the Executive Board have joint responsibility for overall management. They work together as colleagues and keep each other informed of important measures and events in their departments. Notwithstanding the overall responsibility of all members of the Executive Board, the individual members of the Executive Board manage the departments they have been assigned on their own responsibility within the framework of Executive Board resolutions. The work of the Executive Board is specified in more detail in the rules of procedure for the Executive Board, in which matters reserved for the full Executive Board and other decision-making modalities are also defined in more detail. The allocation of departments to the individual members of the Executive Board is set out in an organization chart forming part of the rules of procedure.
The Executive Board regularly agrees the strategy of the Company with the Supervisory Board, ensures it is implemented and discusses the progress of implementation with the Supervisory Board at regular intervals. The Executive Board provides the Supervisory Board with regular and detailed written and verbal updates on all developments and measures of relevance to the Company related to business performance, financial position and results of operations, planning and target achievement, the risk situation and risk management. This also includes information on variances between business performance and planning. In the meetings of the Supervisory Board and the Audit Committee the Executive Board also reports regularly in depth on the subject of compliance, i.e. measures to ensure adherence to statutory requirements and Company policies.
As an integral component of a readily understandable strategy for creating a viable and robust structure for the Group, the Executive Board carries out strategic assessments and potential evaluations based on open and transparent perspectives for markets and competitors and based on an extended and standardized Group system of performance indicators. The results of the strategy process are discussed each year in May in meetings of the Strategy, Finance and Investment Committee and of the full Supervisory Board. The results of operational planning and the budget for the next fiscal year are discussed by these bodies each year in the fall.
In addition, the Executive Board holds monthly business reviews attended by the heads of the central corporate functions and of each business area at which the respective CEOs and CFOs report in detail on the current business situation.
Certain Executive Board decisions of particular importance are subject to the approval of the Supervisory Board. These have been decided by the Annual General Meeting and are set out in the Articles of Association of thyssenkrupp AG. Under Article 7 of the Articles of Association, for instance, the Supervisory Board's approval is required for fundamental changes to the Group's organizational structure, the Group's annual investment plan and its financing. Also subject to approval are the acquisition and disposal of equity interests in other companies where the value of an individual transaction exceeds €25 million.
The Executive Board passes resolutions in meetings that usually take place at least twice a month and are generally chaired by the Chairman of the Executive Board. Each member of the Executive Board may demand the convening of a meeting, giving notice of the subject for discussion; similarly, each member may demand that a subject be included on the agenda of a meeting. Decisions of the full Executive Board are made by simple majority of the members taking part in the resolution.
Information on the composition of the Executive Board, the individual Executive Board members and the changes to the composition of the Executive Board in the reporting year is provided here.
Supervisory Board responsible for monitoring the management of the Company
The Supervisory Board appoints, monitors and advises the Executive Board and is directly involved in decisions of fundamental importance for the Company.
Pursuant to Article 9 subsection 1 of the Articles of Association, § 96 subsection 1 German Stock Corporation Act (AktG) and § 7 subsection 1 sentence 1 No. 3 German Codetermination Act (MitbestG), the Supervisory Board consists of 20 members, of whom ten are appointed by the shareholders and ten by the employees. Seven shareholder representatives were elected at the Annual General Meeting on January 21, 2010, while three further shareholder representatives were designated by the Alfried Krupp von Bohlen und Halbach Foundation based on the right of designation granted in Article 9 subsection 2 of the Articles of Association. Information on the current composition of the Supervisory Board and the changes in the reporting year is provided here.
The term of office of the employee representatives ends with the close of the Annual General Meeting in 2014 resolving on ratification of the acts of the boards for fiscal year 2012/2013. The term of office of the Supervisory Board members elected by the Annual General Meeting ends with the close of the Annual General Meeting in 2015 resolving on ratification of the acts of the boards for fiscal year 2013/2014. The end of the term of office of the members currently designated by the Alfried Krupp von Bohlen und Halbach Foundation depends on the duration of the concrete designation periods.
To perform its duties and to support a focused discussion of the issues the Supervisory Board has set up a total of six committees, which support the work of the full Supervisory Board meetings: an executive committee, a mediation committee pursuant to § 27 subsection 3 Codetermination Act, a personnel committee, an audit committee, a strategy, finance and investment committee, and a nomination committee. The committees prepare the topics and resolutions of the Supervisory Board. In addition, the personnel committee resolves in place of the full Supervisory Board on certain matters defined in the rules of procedure that can by law be transferred to the committee for resolution. The Supervisory Board has set up rules of procedure that also define the responsibilities of the committees. In addition, the audit committee has its own rules of procedure. Details of the composition of the committees are shown here.
The Supervisory Board conferred closely with the Executive Board on the development of a new and viable Group strategy. In the course of their work together and as a result of an improved process for analyzing the value potential of the Group's businesses and the opportunities and risks of strategic measures, the Supervisory Board receives clear and differentiated information on operational issues, including critical matters.
With extraordinary meetings – most recently in November 2012 on the efficiency review, in December 2012 on the adoption of the annual financial statements and in March 2013 to elect a new Supervisory Board Chairman – as well as additional committee meetings, the Supervisory Board fulfills its monitoring and advisory function with great intensity. In the periods between board/committee meetings, too, the Supervisory Board Chairman and the Chairman of the Audit Committee engage in a close and regular exchange of views and information with the Executive Board. They report on important findings immediately in the following Supervisory Board or Committee meeting
Under § 9 of its rules of procedure, the Supervisory Board carries out an efficiency review once a year. This generally takes the form of a self-assessment based on an evaluation of questionnaires completed by the Supervisory Board members. Key areas of this efficiency review were an assessment of the reporting to the Supervisory Board, the meetings, and the composition and structure of the Supervisory Board. The analysis and discussion in the extraordinary Supervisory Board meeting in November 2012 showed that in the opinion of its members the Supervisory Board met high to very high standards with regard to the efficiency of its work. The Supervisory Board also took up suggestions for further improving its work.
In September 2010, the Supervisory Board established concrete targets for its composition pursuant to Section 5.4.1 of the German Corporate Governance Code. These targets are set out in the Corporate Governance Report on page 64 of the 2009/2010 Annual Report. These targets include criteria such as technical expertise, knowledge of the company, independence and international background. The Supervisory Board confirmed these targets in general in its meeting on September 07, 2012 and in particular added a new target on the number of independent Supervisory Board members. The changes to the targets are listed in the Corporate Governance Report on page 20 of the 2011/2012 Annual Report. Both Annual Reports can be found on the website of the Company.
The nomination committee took account of the established targets in its proposals for new members in 2013. The Supervisory Board now includes several members with international business experience and other international connections. None of the Supervisory Board members exceeded the targeted maximum age of 70 at the time of election. The target of maintaining a female proportion of at least 20% was achieved until Prof. Dr. Beatrice Weder di Mauro resigned. The Supervisory Board will continue to pursue its targets in the future, e.g. in the preparation of election proposals for the Annual General Meeting.
Under § 8 subsection 2 of the rules of procedure each Supervisory Board member must disclose conflicts of interest to the Supervisory Board without delay. The Supervisory Board reports to the Annual General Meeting on conflicts of interest that have occurred and their treatment.
Declaration of Conformity in accordance with Art. 161 of the Stock Corporation Act (AktG)
§ 161 of the Stock Corporation Act (AktG) requires the executive board and supervisory board of a listed German stock corporation to declare at least once a year whether the German Corporate Governance Code has been and is being complied with, or which of the Code's recommendations have not been or are not being applied and why not. On the basis of intensive discussions the Executive Board and Supervisory Board issued the following Declaration of Conformity pursuant to § 161 subsection 1 AktG at October 01, 2013:
Key corporate governance practices
Compliance: Inform, Identify, Report and Act
Compliance, in the sense of measures to ensure adherence to statutory requirements and internal company policies is a key management duty at thyssenkrupp.
The Executive Board of thyssenkrupp AG has unequivocally expressed its rejection of antitrust violations and corruption in the thyssenkrupp Compliance Commitment. It contains a clear commitment to compliance with the law and internal policies: violations, in particular antitrust and corruption violations, will not be tolerated (zero tolerance). All reports of misconduct will be pursued. To implement the Compliance Commitment a transparent leadership culture based on the Group mission statement is subject to continuous improvement.
In the past fiscal year, our compliance work was shaped by a number of key events, to which the Executive Board and Supervisory Board have responded by intensifying compliance activities and strengthening the compliance organization. The Chairman of the Supervisory Board, Dr. Ulrich Lehner, has also made the issue of compliance a key area of his work alongside corporate governance. In response to media reports, an internal investigation of press and other trips involving individual members of the Executive Board was carried out at the end of 2012. In February 2013, the premises of thyssenkrupp Steel Europe in Duisburg were searched by the Federal Cartel Office on suspicion of price fixing for deliveries of certain steel products to the German auto industry and its suppliers. In June 2013, a final fine of €88 million was imposed on thyssenkrupp in the so-called rail cartel case. The Group carried out an amnesty program from April to June 2013.
In its meeting on November 21, 2012 the Supervisory Board once again expressly emphasized and made clear the corporate responsibility of the Executive Board with regard to compliance. The fundamental understanding is that the management bears corporate responsibility for compliance, going beyond the individual obligations of an Executive Board member. The resolution clearly states that in the event of serious or repeated compliance violations in the area of responsibility of an Executive Board member, action involving the entire spectrum of personnel measures may be taken. The Executive Board therefore determined in its meeting on December 18, 2012 that the executives of the Group bear joint corporate responsibility for compliance in our Company; the business areas implemented the resolution in their units.
Our Compliance Program on anti-corruption and antitrust law is based on three pillars – "inform", "identify", and "report and act". It is regularly updated internally and reviewed externally on the basis of the applicable legal requirements as well as by auditors. The appropriateness and effectiveness of the compliance system was confirmed in November 2011 by KPMG AG Wirtschaftsprüfungsgesellschaft in connection with certification to the new Auditing Standard 980 of the Institute of Public Auditors in Germany. The report by KPMG is available for downloading on the thyssenkrupp website.
Our compliance program is continuously optimized to take into account current compliance developments, including the findings from our internal compliance work. In the reporting period the compliance organization was adjusted in line with the new Group structure resulting from the ACT project. Both centrally at thyssenkrupp AG and in the business areas and regions, the chief compliance officer will be supported in the future by around 60 full-time compliance officers worldwide. They will advise, inform and educate employees around the world about important legal requirements and internal policies; their work will also include performing proactive compliance audits and investing suspected cases of non-compliance. The compliance officers in turn are supported in the business areas and Group companies by a network of some 320 compliance managers – generally managing directors of Group companies – who ensure that the compliance program is implemented at operating level in their areas of responsibility.
We are continuing to intensify our compliance efforts after the ending of the amnesty program. A key aspect of this are the training programs carried out by the compliance officers, in which our employees learn about compliance requirements and risks as well as possible sanctions. This training is the central component of the "inform" pillar of our compliance program. In the reporting year more than 2,400 employees worldwide took part in extensive face-to-face training on cartel law and corruption prevention. In particular with the new regional compliance officers and the compliance departments in the business areas, we will significantly increase these local training activities in the coming year. In the third cycle of the e-learning program initiated in August 2012, 41,883 employees (anti-corruption) and 36,089 employees (antitrust) had successfully completed the training courses as of the end of the reporting period. That means that based on a cut-off point of eight weeks after registration, the program has currently been completed by 98.5% of those registered. Our subsidiaries in the USA and Canada have their own programs. Also, in September 2013 a global e-learning program for compliance managers was launched, aimed at informing them about their role in implementing the compliance program in the operating units. In addition, we carry out regular webinars on current issues and keep employees informed with internal newsletters.
We also provide compliance advice on key business transactions, e.g. in connection with major projects or on the engagement of intermediaries. For this the employees can contact their compliance officers in the business areas, regions and at Corporate or call our central hotline. The compliance officers advise the operating units on integrating compliance into their business processes.
The "identify" pillar of the compliance program focuses on regularly reviewing critical business operations based on a risk-oriented, structured, audit process. An additional element in the identification of compliance risks is our whistleblower system. Alongside the options of directly contacting a supervisor or the compliance department, this provides employees with a further channel for reporting possible infringements of laws or policies without revealing their identity. Here too the focus is on antitrust and anticorruption compliance. Information submitted via an online form or the hotline – which can be contacted from anywhere in the world and is toll-free – is forwarded for further internal review. In addition thyssenkrupp has established an ombudsman as a further contact for employees wishing to report information. The ombudsman works on behalf of thyssenkrupp but is authorized to pass on information without naming the informant. Regardless of the source, all information concerning misconduct is systematically followed up in an internal review. It is ensured that no employee suffers disadvantages as a result of reporting information in good faith to the ombudsman or whistleblower system. Third parties (customers, suppliers, etc.) can also contact the whistleblower hotline or the ombudsman.
The third pillar "report and act" signifies intensive compliance reporting in all three dimensions of the thyssenkrupp matrix. In the event of proven cartel law infringements or corruption, we systematically impose sanctions on the employees concerned.
Our experience shows that the basis for successfully implementing the compliance program is a corporate culture that stands for values such as openness, transparency and credibility. The actions of the company and its employees are guided by these values – as part of the corporate responsibility of managers for compliance. thyssenkrupp has a clear commitment to ensuring compliance with the law and internal policies: violations, particularly of antitrust and anticorruption rules, will not be tolerated under any circumstances.
Group mission statement as framework for a sustainable corporate culture
We have formulated the way we see the Group in our mission statement – WE are thyssenkrupp. It strengthens employee identification with the Company, provides orientation and forms the basis for our actions. It thus plays an important role in the change management process, which is aimed at helping us achieve the standards set out in our mission statement.
The Group mission statement was developed in 2011 by employees worldwide. Together they defined the standards for transforming the thyssenkrupp Group into a technology and materials company.
Other important corporate principles
While the mission statement formulates our goals and standards, the concrete principles and basic rules governing our dealings with business partners and the general public are summarized in the thyssenkrupp Code of Conduct. It provides employees, managers and board members with an orientation framework on topics such as compliance with the law, equal treatment and non-discrimination, cooperation with employee representatives, health & safety, sustainable environmental & climate protection and data protection & information security. Requirements for suppliers are set out in the thyssenkrupp Supplier Code of Conduct. In addition thyssenkrupp has signed the United Nations Global Compact, the BME Code of Conduct and the Charter of Diversity.
The principles are implemented through the existing programs and management systems. Detailed information on this is provided in the sustainability report on this website. In addition, the Management Report for fiscal year 2012/2013 provides information on related developments in the fiscal year.