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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 and optimized beyond the established understanding of corporate governance defined in the German Corporate Governance Code. 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. In accordance with § 161 (1) Stock Corporation Act (AktG), the Executive Board and Supervisory Board issued a joint declaration of conformity in the reporting year, which was published on October 1, 2016. It is available on the Company’s website at > Company > Management > Corporate Governance.

In this reporting year thyssenkrupp AG continues to comply with all recommendations of theGovernment 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 1, 2016.

Three lines of defense model as framework for Groupwide risk management

An integrated governance, risk management and compliance (GRC) model, embedded in theGroupwide 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 GRC 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 GRC model.

Three lines of defense model

Three lines of defense model
Three lines of defense model

The first line of defense involves preventing risks where they occur, and where this is not practicable identifying and reducing them to an appropriate level. In the reporting period we continued to improve the internal control system in the Group by strengthening systematic risk management on the first line of defense with 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 includes functions such as Controlling, Accounting & Risk, Compliance, and Legal. These provide the framework for the internal control system, the risk management system, and compliance (for example via policies and other binding internal documents) and support the first line of defense with implementation. At the same time these functions oversee and manage 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.

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 CEO and takes part in meetings of the Supervisory Board and/or Audit Committee. Internal Auditing itself is subject to an external quality audit every five years; the last audit took place in spring 2015.

The three lines of defense 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.

Risk management and internal control 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 and Audit Committee about the status of the main risks in the Group and progress with the widening of the internal control system. The Audit Committee deals regularly with 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, in the sense of all Groupwide measures to ensure adherence to statutory requirements and binding internal regulations, is a key management and oversight duty at thyssenkrupp.

For thyssenkrupp compliance is a must. That is what it says in our mission statement, and something we take seriously according to our maxim “Compliance is a question of mindset”.

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 binding internal regulations: Any violations, in particular antitrust or corruption violations, will be met with zero tolerance.

The importance attached to compliance at thyssenkrupp is underlined by the fact that an Executive Board member was appointed especially for the corporate functions Legal & Compliance. In this capacity he reports regularly to the Supervisory Board and Audit Committee. The Chief Compliance Officer is responsible for the management of the compliance program and reports directly to the Executive Board member for Legal & Compliance. The heads of the compliance departments of Corporate and the business areas report directly to the Chief Compliance Officer.

More information on compliance at thyssenkrupp can be found in the “Compliance” section of the combined management report.

Supervisory Board targets for its own composition

Under the German Corporate Governance Code, the Supervisory Board must be composed in such a way that its members have the knowledge, skills and professional experience needed to perform their tasks properly. The Supervisory Board sets targets for its own composition. The election recommendations made to the Annual General Meeting must take these targets into account in the same way as the requirements of the law, the Articles of Association, and the German Corporate Governance Code. As this was the case in the election of the shareholder representatives at the Annual General Meeting on January 30, 2015, the current composition of the Supervisory Board meets these targets. Only the proportion of women on the Supervisory Board remains slightly short of target at currently 25 %.

In their meetings on September 7, 2016, the Executive Committee and Supervisory Board resolved that the targets for the composition of the Supervisory Board, last updated in September 2015, should be amended in line with new statutory requirements concerning specialist knowledge on the Supervisory Board. The following concrete targets were adopted:

  • Supervisory Board to have sufficient members with international experience, in particular in the expansion markets. Supervisory Board members as a whole to be familiar with the sectors in which thyssenkrupp operates
  • 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, 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

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.

Directors' dealings

Members of the Executive Board and Supervisory Board and persons close to them are required to disclose the purchase and sale of thyssenkrupp AG shares and debt certificates 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 2015 / 2016 fiscal year.

At September 30, 2016 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. 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 presenting key performance indicators and further valuation-relevant facts in the highest quality to all target groups fully, equally and quickly. To this end Investor Relations is directly established under the CFO. Together with the CFO, the CEO and the business area management teams, Investor Relations conducts a regular and intensive dialogue with capital market participants on roadshows, at investors’ conferences, at the Capital Market Day, in conference calls held on publication of the interim reports and Annual Report, and to report on current developments. All dates and venues, presentations, audio and video recordings of conference calls and events together with a wide range of further in-depth information can be found on the Investor Relations section of our website.

Also on our website we report on the latest developments in the Group. Visitors to our website will find for example press releases and stock exchange (ad hoc) announcements, a live stream of our annual press conference, The Company's Articles of Association, annual reports and interim reports. Anyone interested can subscribe to an electronic newsletter 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

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 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 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 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.

In accordance with the statutory provisions the auditor is elected each year by the Annual General Meeting for a period of one year. At the proposal of the Supervisory Board, the Annual General Meeting on January 29, 2016 elected PwC to audit the annual financial statements and review the interim financial reports for fiscal year 2015 / 2016. PwC has been auditing the parent-company financial statements and consolidated financial statements of thyssenkrupp AG since fiscal 2012 / 2013. PwC was engaged in 2012 following an external bidding process. The signatory auditors for the parent-company and consolidated financial statements of thyssenkrupp AG are Prof. Dr. Norbert Winkeljohann (since fiscal year 2012 / 2013) and Michael Preiß (since the reporting year). The statutory provisions and rotation requirements under §§ 319 and 319a HGB are fulfilled.

Source: Annual Report 2015/2016, p. 19-24

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