Corporate Governance Report
In the following section, the Executive Board and Supervisory Board report on corporate governance at ThyssenKrupp in accordance with section 3.10 of the German Corporate Governance Code. This section also includes the compensation report for the Executive Board.
Further development of corporate governance in the Group
thyssenkrupp is continuing to develop its understanding of good and responsible corporate governance. Under the project Governance@thyssenkrupp the corporate governance structures throughout the Group are being harmonized beyond the established understanding of corporate governance defined in the German Corporate Governance Code and made more transparent. The focus is on strengthening the transparency and reliability of our binding internal regulations and supporting managers in the use of internal corporate governance instruments.
Implementation of the German Corporate Governance Code
In the reporting year the Executive Board and Supervisory Board of thyssenkrupp AG again dealt intensively with the requirements of the German Corporate Governance Code, taking into account the amendments and additions adopted by the Government Commission on the German Corporate Governance Code in May 2015 which entered into effect on publication in the official section of the Federal Gazette ("Bundesanzeiger") on June 12, 2015. In accordance with § 161 (1) Stock Corporation Act (AktG), the Executive Board and Supervisory Board issued two joint declaration of conformity in the reporting year, which were published on November 19, 2014 and October 01, 2015. They are available on the Company's website at www.thyssenkrupp.com.
In this reporting year thyssenkrupp AG continues to comply with all recommendations of the Government Commission on the German Corporate Governance Code published by the Federal Ministry of Justice in the official section of the Federal Gazette, and will continue to comply with these recommendations in the future.
In addition, thyssenkrupp AG complies with all suggestions of the German Corporate Governance Code. The declarations of conformity issued in the last five years are permanently available on our website.
Our listed subsidiary Eisen- und Hüttenwerke AG also complies with the Code, taking into account the particularities of its membership of the Group. Individual deviations are presented and explained in the company's declaration of conformity of October 01, 2015.
Three lines of defense model as framework for Groupwide risk management
An integrated governance, risk management and compliance (GRC) model, embedded in the Groupwide GRC Policy, provides the basis for professional and efficient management and control in the Group. As a framework for this internal oversight system, thyssenkrupp uses the internationally established three lines of defense model adapted to the Group's specific organizational structure. The model shows at which level (line) the various responsibilities for risk management lie within the Group. At the same time it serves to define responsibilities within the corporate governance model.
The first line of defense involves preventing risks wherever they can occur, and where this is not practicable identifying and reducing them to an appropriate level. In the reporting period we implemented a project to improve the internal control system in the Group by strengthening systematic risk management on the first line of defense with highly automated internal controls in the business processes wherever possible. As there are cases where this is not fully feasible, further control measures have to be performed by management to ensure the effectiveness of the control system.
The second line of defense, which includes functions such as Controlling, Accounting & Risk, Compliance, and Legal, provides the framework for the internal control system, the risk management system, and compliance, for example via policies, regulations and operating instructions. At the same time these functions oversee the Group's risk landscape from the viewpoint of the Group as a whole. Close integration of the internal control system, risk management system and compliance maximizes the efficiency of risk prevention and management.
Three lines of defense model
The third line of defense is Corporate Function Internal Auditing, which independently reviews the appropriateness and efficiency of the risk management processes and systems implemented by the first two lines of defense. The head of Corporate Internal Auditing reports directly to the Executive Board Chairman and the Supervisory Board and/or Audit Committee in their meetings. Internal Auditing itself is subject to an external quality audit every five years; the last audit took place in spring 2015.
The model is subject to external supervision by the financial-statement auditors who take into account the results of the reviews performed by Internal Auditing in their assessment.
Appropriate control and risk management system
Corporate governance at thyssenkrupp involves dealing responsibly with risks. The continuous and systematic management of business opportunities and risks is fundamental to professional governance. It helps ensure that risks are identified, evaluated and managed at an early stage. The Executive Board reports regularly to the Supervisory Board about the status of the main risks in the Group. The Audit Committee focuses on monitoring the effectiveness of the accounting process and the internal control, risk management and internal auditing system, as well as monitoring the independence of the financial statement auditors. thyssenkrupp continuously enhances the individual systems and adapts them to changing conditions. Key features of our control and risk management system are described in the opportunity and risk report.
Compliance: Inform, Identify, Report und Act
Compliance, in the sense of all Groupwide measures to ensure adherence to statutory requirements and internal company policies, is a key management and oversight duty at thyssenkrupp.
The Executive Board of thyssenkrupp AG has unequivocally expressed its rejection of antitrust violations and corruption in the thyssenkrupp Compliance Commitment. thyssenkrupp has made a clear commitment to compliance with laws and internal policies: Any violations, in particular antitrust or corruption violations, will be met with zero tolerance. All reports of misconduct will be investigated. To implement the Compliance Commitment a transparent management culture based on the Group's mission statement is subject to continuous improvement. Information on the mission statement can be found on our website at www.thyssenkrupp.com
The importance attached to compliance at thyssenkrupp is underlined by Dr. Donatus Kaufmann's position as member of the Executive Board responsible for Compliance and Legal. In this capacity he reports regularly to the Supervisory Board and Audit Committee. Responsibilities and reporting channels are structured in such a way that the Chief Compliance Officer reports directly to Dr. Donatus Kaufmann. Below Executive Board level, the heads of the corporate compliance departments and compliance departments of the business areas report directly to the Chief Compliance Officer.
The compliance program focusing on anti-corruption policies and antitrust law with its three pillars "inform", "identify" and "report and act" was rigorously continued in the 2014/2015 fiscal year and extended to include data protection and combating money laundering. In addition, numerous measures aimed at developing the program further were resolved and in part already implemented as part of our compliance strategy for the coming years up to 2020.
More information on compliance at ThyssenKrupp is provided on our "website".
Supervisory Board targets for its own composition
The Supervisory Board must be composed in such a way that its members have the knowledge, skills and professional experience needed to perform its tasks properly. The current composition of the Supervisory Board following the election of shareholder representatives at the Annual General Meeting on January 30, 2015, based on the recommendations of the Nomination Committee, takes into account not only the requirements of the law, the Articles of Association and the German Corporate Governance Code, but also the targets the Supervisory Board has set itself for its composition.
In their meetings on September 9, 2015, the Executive Committee, Nomination Committee and Supervisory Board agreed to update the targets for the composition of the Supervisory Board last resolved in November 2014. The subject of the change was an increase in the target proportion of women on the Supervisory Board to 30%. This is in line with the new statutory provisions on the minimum representation of women and men on supervisory boards which have been in effect since May 2015 and must be implemented from January 2016. The following concrete targets were resolved:
- Supervisory Board to have sufficient members with international experience, in particular in the expansion markets
- Consideration of special knowledge and experience in the application of accounting principles and internal control processes, expertise in the areas of accounting and auditing, also consideration of technical expertise, sector-specific knowledge of the company, and knowledge of financing strategies and financial instruments
- Experience in corporate management and the development and formulation of corporate strategies
- Avoidance of significant and non-temporary conflicts of interest (existing conflicts of interest or conflicts of interest to be expected in the future) and appropriate handling of other conflicts of interest
- Supervisory Board members to serve no more than a maximum three periods of office, and an age limit of 75 (i.e. Supervisory Board members to stand down from the Supervisory Board at the end of the Annual General Meeting after they reach 75)
- Increase in the proportion of women to at least 30%
- At least fifteen independent Supervisory Board members (on the assumption that the employee representatives generally meet the criteria for independence in accordance with the German Corporate Governance Code), otherwise at least five independent Supervisory Board members representing the shareholders.
Avoiding conflicts of interest
In the reporting year there were no consulting or other service agreements between Supervisory Board members and the Company. Conflicts of interest of Executive Board or Supervisory Board members, which must be disclosed immediately to the Supervisory Board, did not occur.
Details of the other directorships held by Executive Board and Supervisory Board members on statutory supervisory boards or comparable German and non-German control bodies of business enterprises are provided in the sections of the same name under "Additional information". Details of related party transactions are given in Note 23 to the consolidated financial statements.
According to § 15a Securities Trading Act (WpHG), members of the Executive Board and Supervisory Board and persons close to them are required by law to disclose the purchase and sale of thyssenkrupp AG shares or related financial instruments whenever the value of the transactions amounts to €5,000 or more within a calendar year. No transactions were reported to us in the 2014/2015 fiscal year.
At September 30, 2015 the total volume of thyssenkrupp AG shares held by all Executive Board and Supervisory Board members amounted to less than 1% of the shares issued by the Company.
Shareholders and Annual General Meeting
The shareholders of thyssenkrupp AG exercise their rights at the Company's Annual General Meeting, which is chaired by the Chairman of the Supervisory Board in accordance with the Articles of Association. The Annual General Meeting takes place once a year. Each share confers one vote and has an accounting par value of €2.56.
Shareholders can exercise their voting rights at the Annual General Meeting in person or by proxy, for which they can authorize a person of their choice or a Company-nominated proxy acting on their instructions. Proxy voting instructions to Company-nominated proxies can be issued via the internet before and during the Annual General Meeting up to the end of the general debate. Shareholders can also cast their votes in writing by postal vote – without authorizing a proxy. The Annual General Meeting can be viewed live and in full on the Company's website. Also on our website we make all documents and information on the Annual General Meeting available to shareholders in good time. In addition, questions can be addressed to members of our Investor Relations department via an infoline or e-mail.
Transparency through high-quality information
Our dialogue with the capital market is aimed at informing all target groups fully, equally and quickly, and presenting valuation-relevant facts in the highest quality. For example as part of our investor relations work we regularly meet up with analysts and institutional investors. The venues and dates of roadshows and investors' conferences are posted in the Investor Relations section of our website. An intensive dialogue also takes place at analysts' and investors' conferences, at our annual Capital Markets Day, and in conference calls, which are held to present interim reports and Annual Report and on an ad hoc basis to report on current developments. The presentations for these events are freely available on the website. Our Investor Relations department also makes extensive facts and data available on the website to help analysts and investors better understand and value our business models and their upside potential. We also offer audio and video recordings of conference calls and major events. We provide information on recurring dates, such as the date of the Annual General Meeting or the publication dates of interim reports, in a financial calendar published in the Annual Report, the interim reports and on the Company's website.
Information about the latest developments in the Group is also provided on our website. press releases and stock exchange (ad hoc) announcements of thyssenkrupp AG are published there in German and English, and information and images are made available on important events. The Annual Press Conference is also streamed live on the internet for everyone who is interested. The Company's Articles of Association and the rules of procedure for the Executive Board and Supervisory Board can also be viewed on the website, as can the annual reports, interim reports and information on implementation of the recommendations and suggestions of the German Corporate Governance Code. All interested parties can subscribe to an electronic newsletter on the website which reports news from the Group.
Deductible in D&O insurance
The Company has taken out directors and officers (D&O) liability insurance for the members of the Executive Board and Supervisory Board with an appropriate deductible pursuant to § 93 (2) sentence 3 Stock Corporation Act (AktG) (Executive Board members) and the German Corporate Governance Code (Supervisory Board members).
Accounting and financial statement auditing by PricewaterhouseCoopers
In line with European Union requirements, ThyssenKrupp prepares the consolidated financial statements and interim reports in accordance with the International Financial Reporting Standards (IFRS). However 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 once again agreed with the financial-statement auditors, PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Frankfurt am Main, that the Chairman of the Audit Committee would again 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 or 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 that conflict with the declaration of conformity issued.
Source: Annual Report 2014/2015, p. 18-22