Report by the Supervisory Board
Cooperation between Supervisory Board and Executive Board
In fiscal year 2015 / 2016 the Supervisory Board again regularly advised the Executive Board on the management of the Company and continuously supervised its conduct of business. We satisfied ourselves that the Executive Board’s work complied with all legal and regulatory requirements at all times. The Executive Board fulfilled its duty to inform and furnished us with regular written and verbal reports containing up-to-date and comprehensive information on all issues of relevance to the Company and the Group relating to strategy, planning, business performance, the risk situation and compliance. This also included information on variances between actual performance and previously reported targets as well as on budget variances (follow-up reporting). In the committees and in full Supervisory Board meetings, the members of the Supervisory Board always had ample opportunity to critically examine the reports and resolution proposals submitted by the Executive Board and contribute suggestions. In particular, we discussed intensively and examined the plausibility of all transactions of importance to the Company on the basis of written and verbal reports by the Executive Board. On numerous occasions the Supervisory Board dealt at length with the risk situation of the Company, the liquidity planning and the equity situation. Thanks to an analysis of the value potential of the Group’s businesses and the opportunities and risks of strategic steps, critical operating issues were presented to the Supervisory Board in a clear and differentiated way. Where required by law, the Articles of Association or the rules of procedure for the Executive Board, the Supervisory Board provided its approval of individual business transactions.
In the periods between meetings, the Supervisory Board Chairman and the Chairmen of the Audit Committee and the Strategy, Finance and Investment Committee engaged in a close and regular exchange of views and information with the Executive Board and were informed about major developments. The Supervisory Board Chairman and Audit Committee and Strategy, Finance and Investment Committee Chairmen reported on important findings immediately in the following Supervisory Board or Committee meeting.
Before the Supervisory Board meetings the shareholder and the employee representatives each held separate meetings to discuss the agenda items. There were no indications of 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.
Supervisory Board meetings
Four Supervisory Board meetings were held in the reporting year. The average attendance rate at meetings of the Supervisory Board and its committees was 97%. No Supervisory Board member attended fewer than half the meetings of the Supervisory Board and the relevant committees. The members of the Executive Board took part in the Supervisory Board meetings unless otherwise determined by the Supervisory Board Chairman.
In its first meeting in the reporting year on November 18, 2015 the Supervisory Board dealt firstly with the business and earnings situation in fiscal year 2014 / 2015. A further item on the agenda focused on the parent-company and consolidated financial statements for the year ended September 30, 2015. On the recommendation of the Audit Committee and after discussion with the auditors PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft (PwC), the Supervisory Board approved the consolidated and parent-company financial statements for the 2014 / 2015 fiscal year. Further, the corporate and investment planning for the 2015 / 2016 fiscal year was adopted. We also discussed and adopted the agenda for the Annual General Meeting on January 29, 2016 and addressed Executive Board matters. Finally we discussed the results of the Supervisory Board efficiency review, and in particular what measures could further improve the efficiency of Supervisory Board work. Alongside visits to the Group’s production sites to gain a direct on-site impression of production conditions and the work of the management as part of the learning program for the Supervisory Board, measures included improved electronic access to meeting documents, and the performance of the efficiency review in electronic form. These measures were subsequently implemented.
On January 28, 2016, the day before the Annual General Meeting, the Supervisory Board members convened for a meeting in which the Executive Board first reported on the situation of the Group. Other topics were the next day’s Annual General Meeting and questions relating to Executive Board compensation. In addition the Head of Corporate Function Technology, Innovation & Sustainability, Dr. Reinhold Achatz, gave a detailed report on the activities and strategy of his Corporate Function, including indirect financial targets, which was subsequently discussed by the full Supervisory Board.
In the meeting on May 19, 2016 the Supervisory Board first discussed the Group’s business situation and Strategic Way Forward on the basis of a comprehensive report by the Executive Board. A further main topic at this meeting were the activities and strategy of the Corporate Function Human Resources Strategy including the personnel development programs and the Corporate Function People Development & Executives Management, which we discussed on the basis of a detailed report by the heads of these functions, Peter Dollhausen and Dr. Detlef Hunsdiek. Under transactions requiring approval we dealt in particular with the sale of non-operating real estate. Other topics were the 2015 EMIR compliance audit pursuant to § 20 WpHG, the implementation of the governance@thyssenkrupp project in the Group, and Executive Board matters.
In the Supervisory Board meeting on September 7, 2016 the Group’s operating situation and Strategic Way Forward with particular reference to the business areas were again a focus of discussion. As in previous years, current developments in corporate governance were again a topic in this year’s September meeting. After reviewing observance of the recommendations and suggestions of the Corporate Governance Code we resolved to submit an unqualified declaration of conformity. In addition we adapted the rules of procedure for the Executive Board, the Supervisory Board, the Audit Committee, the Strategy, Finance and Investment Committee, the Executive Committee, and the Personnel Committee, and adopted new rules of procedure for the Nomination Committee and the Mediation Committee. We also reviewed the set concrete targets for the composition of the Supervisory Board and the implementation thereof and adjusted the targets. As part of Supervisory Board training, Dr. Donatus Kaufmann gave a presentation on “Current legal developments on the work of the supervisory board” and Prof. Dr. Bernhard Pellens on the subject “New transparency and accounting regulations – consequences for supervisory board work” which were subsequently discussed.
At thyssenkrupp compliance is a central component of good corporate governance and means much more than just abiding by the law: At thyssenkrupp compliance is a question of mindset. For this reason at each of its meetings the Supervisory Board obtained a detailed report on compliance from the Executive Board and discussed the strategic compliance measures at thyssenkrupp at length.
Report on the work of the committees
The primary task of the Supervisory Board’s six committees is to prepare decisions and topics for discussion at the full meetings. The Supervisory Board has delegated decision-making powers to the committees where this is legally permissible. The powers of the committees and the requirements on committee members are set out in the rules of procedure for the respective committees. The chairmen of the committees provided the Supervisory Board with regular detailed reports on the work of the committees in the reporting year. With the exception of the Audit Committee and the Strategy, Finance and Investment Committee, all committees are chaired by the Supervisory Board Chairman. The compositions of the six committees are shown in the section “Supervisory Board”.
The Executive Committee (Praesidium) met four times in the past fiscal year. In addition to preparing the full Supervisory Board meetings, the main subjects of deliberation were the financial position and earnings performance of the Group, the strategic development of the individual business areas, and the Groupwide projects to optimize effectiveness, efficiency and performance. As chairman of the committee, I was also in close contact with the other members of the Executive Committee outside meetings to agree on special projects.
The Personnel Committee held five meetings in the 2015 / 2016 fiscal year to prepare the personnel decisions of the Supervisory Board. Where required, resolutions were passed or recommendations for resolutions were made to the Supervisory Board. The meetings addressed general Executive Board matters as well as discussions on the reappointment of Dr. Donatus Kaufmann as Executive Board member for Legal & Compliance and – in fulfilment of our duty of care – succession planning. In addition, proposals for establishing the performance bonus and additional bonus and the structuring of pensions for the members of the Executive Board were dealt with. Details of Executive Board compensation are presented in the compensation report.
The Audit Committee met five times in the 2015 / 2016 fiscal year. Alongside Executive Board members, the meetings were also attended by representatives of the auditors PwC, who were elected by the 2016 Annual General Meeting and subsequently appointed by the Audit Committee. The auditors declared to the Audit Committee that no circumstances exist that could lead to the assumption of prejudice on their part. The Audit Committee obtained the required auditors’ statement of independence, reviewed their qualification, concluded the fee agreement, and selected the focus theme for the audit for the 2015 / 2016 fiscal year. In addition, a Groupwide survey of auditing quality was initiated; the results of this as well as the additional services provided by PwC alongside the audit of the financial statements were discussed in the Audit Committee. The Chairman of the Audit Committee was also in regular contact with the auditors between meetings. Heads of corporate functions were also available to provide reports and take questions in committee meetings on individual agenda items.
In the reporting year the committee’s work focused on examining the 2015 / 2016 parent-company and consolidated financial statements along with the combined management report, the proposal for the appropriation of net income and the auditors’ reports, and preparing the Supervisory Board resolution on these items. In addition, the interim financial reports (half-year and quarterly reports) were also discussed in detail and adopted, taking into account the auditors’ review report. The Audit Committee further monitored the accounting process and discussed the effectiveness of the internal control system, the risk management system and the internal auditing system. It also dealt with the main legal disputes and compliance in the Group. In addition in the presence of the head of Group internal auditing the committee discussed the internal audit results, the audit processes and the audit planning of the Group internal auditing team for the 2016 / 2017 fiscal year. Further main topics were the equity capital and rating situation, particularly in view of the interest rate situation, the revision of the earnings forecast in the course of the year, the contract management project, the 2015 EMIR compliance audit in accordance with § 20 WpHG, and the status of the tax inspection. Regular reports were provided on the status of the corporate initiatives daproh, daproh HR/HRT, unITe, and GSS.
In an additional meeting in September 2016 the committee members dealt in detail with current legal and accounting developments, the management of product risks, the systems and methodology of the corporate initiatives “impact” and “synergize+”, and a progress report on the implementation of the new revenue recognition standard IFRS 15. In addition, PwC reported in detail on the new rules for audit reports and on procedures and quality management in connection with the audit of the financial statements. The amendment of the audit policy was also discussed and the catalogue of non-audit services by the financial statement auditor subject to approval was established together with the budget for the performance of non-audit services for the 2016 / 2017 fiscal year.
The Strategy, Finance and Investment Committee held five meetings in the 2015 / 2016 fiscal year. Discussions focused on the strategic development of thyssenkrupp’s business model. The committee also discussed in detail the reports presented previously to the Supervisory Board on the business activities and strategy of the individual business areas and corporate functions. Further, the Group’s corporate and investment planning for the reporting year was discussed, taking into account the Group’s current rating and financial situation, and corresponding Supervisory Board resolutions were prepared.
The members of the Nomination Committee convened for one meeting in the past fiscal year. A focus of the discussions was succession planning for the Supervisory Board taking into account the recommendations of the German Corporate Governance Code and the Supervisory Board’s targets for its own composition.
There was once again no cause to convene the Mediation Committee under § 27 (3) Codetermination Act in the reporting year.
Corporate Governance and Declaration of Conformity
Taking into account the version of the Code of May 5, 2015 which remained unchanged in 2016, the Executive Board and Supervisory Board issued a declaration of conformity which has been permanently available on the Company’s website since October 1, 2016. In addition the Executive Board – also on behalf of the Supervisory Board – reports on corporate governance at thyssenkrupp in the corporate governance report and the corporate governance declaration.
Audit of the parent-company and consolidated financial statements
Elected by the Annual General Meeting on January 29, 2016 to audit the financial statements for the 2015 / 2016 fiscal year, PwC audited the parent-company financial statements for the fiscal year October 1, 2015 to September 30, 2016 prepared by the Executive Board in accordance with HGB (German GAAP) rules, and the management report on thyssenkrupp AG, which is combined with the management report on the Group. The auditors issued an unqualified audit opinion. In accordance with § 315a HGB, the consolidated financial statements of thyssenkrupp AG for the fiscal year from October 1, 2015 to September 30, 2016, and the management report on the Group, which is combined with the management report on the Company, were prepared on the basis of International Financial Reporting Standards (IFRS) as applicable in the European Union. The consolidated financial statements and the combined management report were also given an unqualified audit opinion by PwC. The auditors also confirmed that the Executive Board has installed an appropriate reporting and monitoring system which is suitable in its design and handling to identify at an early stage developments which could place the continued existence of the Company at risk.
By resolution of the Audit Committee of February 11, 2016, the Supervisory Board tasked the financial statement auditors for the reporting year with the following focus theme: Analysis of project management at thyssenkrupp Marine Systems.
The financial-statement documents and audit reports for the 2015 / 2016 fiscal year were discussed in detail in the meetings of the Audit Committee on November 21, 2016 and the Supervisory Board on November 23, 2016. The auditors reported on the main findings of their audit. They also outlined their findings on the internal control and risk management systems in relation to the accounting process and were available to answer questions and provide additional information. The Chairman of the Audit Committee reported in depth at the full Supervisory Board meeting on the Audit Committee’s examination of the parent-company and consolidated financial statements. Following examination and discussion of the parent-company financial statements, the consolidated financial statements, and the combined management report by the Supervisory Board no objections were raised. In line with the recommendation by the Audit Committee, the Supervisory Board then approved the result of the audit by the financial statement auditors. Following completion of our examination we came to the conclusion that no objections were to be raised and we established the financial statements of thyssenkrupp AG and approved the consolidated financial statements. Following our own examination and taking the earnings and financial situation into account, the Supervisory Board concurred with the Executive Board’s proposal for the appropriation of net income. Together with the Executive Board, we propose to the Annual General Meeting that a dividend of €0.15 per share be paid for the 2015 / 2016 fiscal year.
Personnel changes on the Supervisory Board and Executive Board
There were two changes on the Supervisory Board of thyssenkrupp AG, both on the employee representatives’ side. Firstly Dr. Sabine Maaßen stepped down from the Supervisory Board of thyssenkrupp AG at March 15, 2016. By court appointment effective March 30, 2016, Tanja Jacquemin was appointed to the Supervisory Board. After Dr. Sabine Maaßen’s departure, Markus Grolms was elected as the new Vice Chairman of the Supervisory Board as of April 8, 2016. At the close of May 31, 2016 Martin Dreher also left the Supervisory Board. Effective June 1, 2016 Tekin Nasikkol became a new member of the Supervisory Board by court appointment. The Supervisory Board members thanked Dr. Sabine Maaßen and Martin Dreher for their good work over many years.
In the past fiscal year the Supervisory Board resolved the reappointment of an Executive Board member for five further years: In the meeting on May 19, 2016 the appointment of Dr. Donatus Kaufmann as Executive Board member of thyssenkrupp AG was renewed until January 31, 2022.
The Supervisory Board thanks the Executive Board members, all employees of the Group worldwide and the employee representatives of all Group companies for their efforts and achievements in the 2015 / 2016 fiscal year.
The Supervisory Board
Prof. Dr. Ulrich Lehner
Essen, November 23, 2016
Source: Annual Report 2015/2016, p. 12-18