Corporate Governance Report
Joint Corporate Governance Report?by?the Management Board?and Supervisory Board?of ElringKlinger AG
We believe that good corporate governance is of essential importance to the sustained success of a business. Within this context, responsible, value-driven management and transparency with regard to corporate communication are considered to be key elements that underpin sound governance in all areas of the enterprise. Embracing and pursuing these values of good corporate governance helps to strengthen the confidence of shareholders and the capital markets as a whole, as well as the trust placed in the company by its employees, customers and suppliers. With this in mind, the German Corporate Governance Code is to be seen as a guide to implementing generally accepted standards of good, sustainable corporate governance. ElringKlinger is committed to developing its corporate governance on a continual basis, thus securing the long-term success of the company and honoring the trust placed in it by its investors.
The Management Board and the Supervisory Board undertook a thorough review of the provisions set out in the German Corporate Governance Code in the version of February 7, 2017, and determined to what extent the recommendations presented in the Code shall be applied, having previously taken into careful consideration the interests of the company and its shareholders. The Declaration of Conformity passed on December 4, 2018, in respect of the Code, including the explanations regarding any departures from the recommendations set out in the Code, has been published on the company website and also forms part of the Corporate Governance Statement that has also been made available online.
Transparency for investors and the public
ElringKlinger is committed to an open and transparent approach with regard to corporate policy and communication. The company provides its shareholders with prompt and comprehensive information about company developments by utilizing communication vehicles such as the Internet, road shows, analyst meetings and events for private investors as well as by means of financial reports and ad hoc and press releases published on a regular basis.
Corporate bodies, management and supervisory structure
As is the case with all German stock corporations, ElringKlinger operates on the basis of a dual system of corporate governance. The division of responsibilities between the Management Board and the Supervisory Board is governed by the German Stock Corporation Act, the Articles of Association and the by-laws and terms of reference for the Management Board and the Supervisory Board.
The Management Board directs the company and manages its business on a day-to-day basis. In the period from January 1 to March 31, 2018, it consisted of three members and as from April 1, 2018, of four members appointed by the Supervisory Board. The duties performed by the Management Board are assigned on the basis of functional criteria. The Management Board is obliged to observe the interests of the company and increase enterprise value on a sustainable basis. Notwithstanding the individual duties assigned to each member, the members of the Management Board are jointly responsible for directing the company, deciding in particular on fundamental and significant issues relating to corporate policy, planning and the strategic direction of the company. The Management Board is responsible for preparing the annual financial statements and submitting quarterly announcements and the half-year report.
The Supervisory Board monitors the activities of the Management Board and acts in an advisory capacity. It consists of twelve members; in its present composition it has been elected to discharge its duties until the end of the General Meeting of Shareholders responsible for ratifying the acts of the Supervisory Board members for fiscal year 2019. In the past, no profile of skills and expertise was prepared for the Board as a whole. However, a profile of skills and expertise is to be drawn up prior to the next Supervisory Board election for staff representatives in 2020. Of the twelve members, six were elected by the employees of the German-based operating sites and six by the company's shareholders, as specified by the German Codetermination Act. Five of the members of the Supervisory Board elected by the shareholders are considered to be independent within the meaning of Section 5.4.2 of the Corporate Governance Code. They are Mr. Eberhardt, Professor Sachs, Mr. Kraut, Ms. Forst, and Ms. Sons. The Supervisory Board is of the opinion that the body thus includes an appropriate number of independent members within the meaning of the Code.
The Management Board and Supervisory Board operate in close and trusted collaboration for the purpose of determining the strategic route to be taken by the Group and safeguarding the long-term and sustained success of the company as a whole. The Management Board reports to the Supervisory Board regularly, thoroughly, and in a timely manner about all issues of relevance regarding strategy and its execution, corporate planning, the course of business, risk management, compliance, and business-related risks. The Supervisory Board monitors compliance with statutory provisions and company-specific guidelines. Significant decisions made at the Management Board level, such as acquisitions or the purchase and sale of property, are subject to the prior approval of the Supervisory Board. The Supervisory Board places great emphasis on the effectiveness of the risk management system and therefore requests detailed and regular reports on the tools and measures that make up the internal control system. The work of the Supervisory Board is conducted both through the plenum itself as well as through committees.
At present, members of the Supervisory Board form an Audit Committee, a Personnel Committee and – pursuant to the provisions set out in the German Codetermination Act – a Mediation Committee. The tasks, responsibilities and internal organization of the committees are in accordance with the authoritative statutory provisions and the requirements of the German Corporate Governance Code. At present, the Audit Committee comprises three members. It is responsible in particular for monitoring procedures relating to financial reporting and discussing with the independent auditor the annual financial statements prepared by the company. The Personnel Committee comprises three members, including the Chairman of the Supervisory Board. The Personnel Committee is responsible for preparing appointments to the Management Board and drawing up employment contracts. Definitive decisions are always made by the full Supervisory Board. The Mediation Committee consists of the Chairperson of the Supervisory Board, his Deputy as well as one member each elected by the Supervisory Board members representing the company's employees and the Supervisory Board members representing the company's shareholders. The sole duty of the Mediation Committee is to submit to the Supervisory Board recommendations for the appointment of Management Board members if the plenum of the Supervisory Board is unable to pass a resolution on such matters with the requisite majority.
For further information on the description of procedural methods adopted by the Management Board and Supervisory Board, please refer to the Corporate Governance Statement.
Shareholders exercise their voting right at the General Meeting of Shareholders. Each share is equipped with one vote. The General Meeting of Shareholders takes place once a year on a regular basis within the first six months of the fiscal year. The agenda as well as documents and reports compiled for shareholders are also published on the company's website. For the purpose of facilitating the exercise of voting rights, the company organizes proxy vote representatives for shareholders upon request. These representatives then vote on behalf of the shareholder and in accordance with his/her instructions at shareholder meetings. This does not affect the right of shareholders to seek their own representation by a proxy of their choice, who is then authorized to vote on their behalf. Among the standard resolutions to be passed by the General Meeting of Shareholders are those relating to the appropriation of profit, the ratification of the acts of the Management Board and the Supervisory Board as well as the appointment of the independent auditor. Beyond this, capital measures and other amendments to the Articles of Association require the approval of the General Meeting of Shareholders. Shareholders may submit counter-motions and questions relating to the individual items on the agenda and have the right to request the court appointment of a special auditor to review specific matters insofar as certain conditions have been met.