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. In the thyssenkrupp Group, corporate governance stands for responsible corporate management and control geared to long-term value creation. At thyssenkrupp good corporate governance takes in all areas of the company.
thyssenkrupp Code of Conduct
While the Group mission statement describes our goals and standards, the concrete principles and ground rules for our work and our behavior towards business partners and the public are summarized in the thyssenkrupp Code of Conduct. This provides employees, managers, and board members with guidelines on subjects such as the requirements for compliance, equality and non-discrimination, cooperation with the employee representatives, occupational safety and health, environmental and climate protection, as well as data protection and information security. Suppliers are required to follow the thyssenkrupp Supplier Code of Conduct. In addition, thyssenkrupp has signed the United Nations Global Compact, the BME Code of Conduct, and the Diversity Charter.
All these principles are implemented with the aid of the existing programs and management systems and the Indirect Financial Targets. Details are presented in the sustainability section of our website (www.thyssenkrupp.com) as well as in this annual report (in the sections “Fundamental information about the Group”, “Targets”).
Integrated governance, risk management, and compliance model
The risk management system is designed on the basis of international standards.
Dealing responsibly with risks is part of corporate governance at thyssenkrupp, because the continuous and systematic management of business risks – but also opportunities – is fundamental to professional governance. An integrated governance, risk management and compliance (GRC) model, embedded in the Groupwide GRC Policy, provides the basis for risk management in the Group. As a framework for this, thyssenkrupp uses the internationally established three lines of defense model adapted to the Group’s specific organizational structure. This model shows the responsibilities for risk management in the Group within each line of defense and how these are segregated within the GRC model.
Three lines of defense model
Risks have to be prevented where they occur. If this is not practicable they must be identified and reduced to an appropriate level. Systematic risk management on the 1st line of defense must be strengthened with automated internal controls in the business processes wherever possible. As there are cases where this is not fully possible, further control measures have to be performed by management to ensure the effective-ness of the control system.
The 2nd 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 binding internal documents – and support the 1st line of defense with im-plementation. At the same time these functions oversee and manage the Group’s risks 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.
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. The Executive Board of thyssenkrupp AG has unequivocally expressed its rejection of antitrust violations and corruption in the thyssenkrupp Compliance Commitment. We treat violations, in particular antitrust or corruption violations, with zero tolerance.
The importance attached to compliance at thyssenkrupp is underlined by the fact that a dedicated Execu-tive Board member is responsible for the corporate functions Legal & Compliance. This Board member reports regularly to the Supervisory Board and Audit Committee on compliance issues. The Chief Compli-ance Officer is responsible for the management of the compliance program and reports directly to the Executive Board member for Legal & Compliance. More information on compliance at thyssenkrupp can be found in the “Compliance” section of the combined management report.
The 3rd line of defense is Corporate Function Internal Auditing, which independently reviews the appropriateness and efficiency of the processes and systems implemented by the other two lines of defense. The head of Corporate Internal Auditing reports on the auditing function to the Audit Committee once a year. 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 supplemented by the work of the external financial statement auditors.
Key features of our control and risk management system are described in the opportunity and risk report.
Further development of corporate governance in the Group
thyssenkrupp continuously develops its understanding of good and responsible corporate governance. One element of this is the project governance@thyssenkrupp, in which the corporate governance structures throughout the Group are being harmonized, tightened and optimized beyond the established understanding of corporate governance defined in the German Corporate Governance Code. The focus is on increasing transparency and ensuring full compliance with our binding internal regulations and supporting managers in the use of internal corporate governance instruments.
In the two-tier governance system prescribed by German stock corporation law, the Executive Board of thyssenkrupp AG is responsible for managing the Company. The Supervisory Board of thyssenkrupp AG is responsible for advising and overseeing the Executive Board. The Company has taken out directors and officers (D&O) liability insurance with an appropriate deductible for the members of the Executive Board and Supervisory Board.
On the basis of the management structure it has adopted, the Executive Board bears responsibility for managing the Company in the interest of the Company, i.e. taking into account the concerns of the shareholders, employees and other stakeholders, with the aim of sustainable value creation. It makes provisions for compliance with the statutory requirements and binding internal regulations, and works to ensure that these are observed by the Group companies. The Executive Board has established appropriate compli-ance and risk management systems. Significant business transactions are subject to the approval of the Supervisory Board; they are listed in Annex 2 of the Rules of Procedure for the Executive Board.
The Executive Board of thyssenkrupp AG must consist of at least two members. The Executive Board members bear joint responsibility for overall business management; they decide on key management measures such as corporate strategy and corporate planning. The Executive Board Chairman is responsible for coordinating all the directorates of the Executive Board and for communicating with the Supervisory Board; he also represents the Executive Board. More detailed information on the individual members of the Executive Board and their areas of responsibility (directorates) can be found on the Company’s website (www.thyssenkrupp.com). The Executive Board has not formed any committees.
The Supervisory Board advises and oversees the Executive Board in its management of the Company. It determines the number of members the Executive Board has above the minimum number, appoints and dismisses the members of the Executive Board, and defines their directorates. It also determines the compensation of the Executive Board members (details of Executive Board compensation are provided in the compensation report). The Supervisory Board reviews the parent-company and consolidated financial statements along with the combined management report of thyssenkrupp AG, adopts the parent-company financial statements and approves the consolidated financial statements and the combined management report. It examines the proposal for the appropriation of net income and with the Executive Board submits it to the Annual General Meeting for resolution. On the substantiated recommendation of the Audit Committee, the Supervisory Board proposes the auditors for election by the Annual General Meeting. After the corresponding resolution is passed by the Annual General Meeting, the Audit Committee awards the contract to the auditors and monitors the audit of the financial statements together with the independence, qualifications, rotation and efficiency of the auditors. Details of the activities of the Supervisory Board in the 2017 / 2018 fiscal year are contained in the report by the Supervisory Board. The compensation of the Supervisory Board members is determined by the Annual General Meeting. It was last resolved in the Annual General Meeting of January 17, 2014. The compensation paid to the individual Supervisory Board members is presented in the compensation report.
The composition of the Supervisory Board of thyssenkrupp AG is governed by law and the detailed provisions of § 9 of the Articles of Association. In accordance with the German Codetermination Act, it must be composed of 10 shareholder representatives and 10 employee representatives. Under the Articles of Association, the Alfried Krupp von Bohlen und Halbach Foundation has a designation right.
In accordance with § 27 (1) of the Codetermination Act, the chairman of the Supervisory Board is elected from among the Supervisory Board members. The task of the Supervisory Board chairman is to coordinate the work of the Supervisory Board and chair the Supervisory Board meetings. Public statements by the Supervisory Board are issued by the Supervisory Board chairman. At thyssenkrupp at least one Supervisory Board member must have expertise in the fields of accounting or auditing. All members of the Supervisory Board are subject to a statutory secrecy obligation. More detailed information on the individual members of the Supervisory Board and its six committees can be found on the Company’s website (www.thyssenkrupp.com).
Shareholders and Annual General Meeting
The shareholders of thyssenkrupp AG exercise their rights at the Company’s Annual General Meeting. At the Annual General Meeting the shareholders regularly pass resolutions on the appropriation of net income, the ratification of the acts of the Executive Board and Supervisory Board, and the election of the financial-statement auditors. Shareholders can exercise their voting rights at theAnnual 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. They can also cast their votes in writing by postal vote. The Annual General Meeting can be viewed live and in full on the Company’s website (www.thyssenkrupp.com). Also on our website we make all documents and information on the Annual General Meeting available to shareholders in good time.
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).
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 19, 2018 elected PwC to audit the annual financial statements and review the interim financial reports for fiscal year 2017 / 2018 and to review the interim financial reports for fiscal year 2018 / 2019 drawn up before the 2019 Annual General Meeting. 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 Harald Kayser (since fiscal year 2017 / 2018) and Michael Preiß (since fiscal year 2015 / 2016). The statutory provisions and rotation requirements under §§ 319 and 319a HGB are fulfilled.
Avoiding conflicts of interest
In the reporting year there were no consulting or other service agreements between Supervisory Board members and the Company. There were no conflicts of interest that Executive Board or Supervisory Board members would have had to disclose immediately to the Supervisory Board. 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 22 to the consolidated financial statements.
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 instru-ments whenever the value of the transactions amounts to €5,000 or more within a calendar year. No transactions were reported to us in the 2017 / 2018 fiscal year.
More information on corporate governance
Source: Annual Report 2017/2018, p. 11-15