5 Supervisory Board
5.1 Duties and Responsibilities
It is the duty of the Supervisory Board to regularly advise and supervise the Executive Board in the management of the enterprise. The Supervisory Board is to be involved in decisions of fundamental importance to the enterprise.
The Supervisory Board appoints and dismisses the members of the Executive Board. The Executive Board shall also consider diversity when appointing the Executive Board members. The Supervisory Board defines targets for the proportion of women in the Executive Board. Together with the Executive Board, the Supervisory Board shall ensure long-term succession planning. The Supervisory Board can delegate to committees preparation for the appointment of Executive Board members and the negotiation of the terms and conditions of an employment contract, including remuneration.
The maximum possible appointment period of five years should not be the standard term for the first contract. Only under special circumstances may a member be re-appointed earlier than one year before the end of the term of office, with simultaneous cancellation of the current term of office. An age limit for members of the Executive Board shall be defined.
The Supervisory Board shall issue rules of procedure for its work.
5.2 Duties and Powers of the Chairperson of the Supervisory Board
The chairperson of the Supervisory Board is elected by the Supervisory Board from among its members. He or she coordinates the work of the Supervisory Board, chair its meetings and attends to the affairs of the Supervisory Board in external relations.
The chairperson of the Supervisory Board should be willing to conduct discussions with investors to a reasonable extent on issues specific to the Supervisory Board.
Between meetings, the chairperson of the Supervisory Board shall maintain regular contact with the Executive Board, in particular with the chairperson or spokesperson thereof, and discuss with him or her issues of strategy, planning, business development, risk, risk management and compliance for the enterprise. The chairperson of the Supervisory Board will be informed without delay by the chairperson or spokesperson of the Executive Board of important events of significance for the assessment of the enterprise's situation or development or for the management of the enterprise. The chairperson of the Supervisory Board must then inform the Supervisory Board and, if required, convene an extraordinary meeting of the Supervisory Board.
5.3 Formation of Committees
The Supervisory Board shall form professionally qualified committees according to the enterprise's specific circumstances and the number of employees. Each committee chairperson reports regularly to the Supervisory Board on the work of that committee.
The Supervisory Board shall set up an audit committee which - unless another committee is responsible - in particular handles monitoring of the presentation of accounts, the accounting process the effectiveness of the internal monitoring system, the risk management system, the internal audit system, the auditing of the annual financial statements and and compliance.
The audit committee presents a reasoned recommendation to the Supervisory Board for the election of the auditor, which in the case that the audit mandate is put out to tender must comprise at least two candidates. The audit committee monitors the independence of the auditor and also deals with the services additionally provided by the auditor, the issuance of the audit mandate to the auditor, the determination of focal points for the audit and the fee agreement.
The chairperson of the audit committee shall have specialist knowledge of and experience in the application of accounting principles and internal control processes. He or she shall be independent and may only be a former member of the company Executive Board if his or her term of office ended at least two years previously. The chairperson of the Supervisory Board shall not hold the chair of the audit committee.
The Supervisory Board shall set up a nomination committee composed exclusively of shareholder representatives to appoint suitable candidates for the election of Supervisory Board members for the Supervisory Board's recommendation to the general meeting.
KRONES AG does not currently have a nomination committee.
Committees are useful mainly when the size of a body means its work thus becomes more efficient. Six representatives of shareholders sit on the Supervisory Board of KRONES AG and present proposals. We do not therefore believe it necessary to establish a nomination committee. The work in question is conducted by the standing committee.
5.4 Composition and Remuneration
The Supervisory Board must be comprised of members who together have all the necessary knowledge, skills and specialist experience to carry out Supervisory Board duties correctly and in full.
The Supervisory Board shall set concrete targets for its composition and draw up a skills profile for the full board. For its composition it shall, in line with the specific situation of the enterprise, take account of the international activities of the enterprise, potential conflicts of interest, the number of independent Supervisory Board members within the meaning of paragraph 5.4.2, a specified age limit for Supervisory Board members, a specified standard limit for the length of service on the Supervisory Board, and diversity. The particular rules of the co-determination laws must be observed for the elected employee representatives.
In the case of listed companies for which the Co-determination Act, the Coal and Steel Co-determination Act or the Co-determination Supplementary Act applies, the Supervisory Board consists of to at least 30& of women and to at least 30% of men.* For the other companies covered by the Equality Act, the Supervisory Board defines targets for the proportion of women.
* From 1 January 2016, the minimum proportion of 30% of women and 30% of men on the Supervisory Board must be observed when there is a need for re-elections and secondments in order to fill one or more seats on the Supervisory Board (section 25 (2) of the Introductory Act of the German Stock Corporation Act as amended by the Equal Participation of Women and Men in Leadership Positions in the Private Sector and Civil Service Act from 24 April 2015, FLG I p. 642).
Proposals of the Supervisory Board to the general meeting shall consider these targets while simultaneously striving to satisfy the skills profile for the full board. The progress of implementation shall be published in the corporate governance report. This shall also provide information on the Supervisory Board’s assessment of the reasonable number of independent shareholder members and the names of these members.
In making its proposals for the election of new Supervisory Board members to the general meeting, the Supervisory Board shall satisfy itself that the respective candidate can devote the amount of time that is expected. The proposal shall be accompanied by a curriculum vitae setting out the relevant skills, abilities and experience of the candidates; this shall be supplemented by an overview of their substantive activities alongside the position on the Supervisory Board and updated annually for all Supervisory Board members and published on the enterprise’s website.
When proposing candidates to the general meeting, the Supervisory Board shall disclose any and personal and business relationships of each candidate with the enterprise, the executive bodies of the company or major shareholders in the company.
This recommendation to disclose is limited to circumstances that would, in the assessment of the Supervisory Board, be considered by an objective shareholder as significant when deciding how to vote.
In the view of the Supervisory Board, the requirements of paragraphs 5 and 6 are unclear and vague in detail and may infringe the privacy of the persons concerned.
A major shareholder within the meaning of this recommendation is any shareholder who directly or indirectly holds over 10% of voting shares in the company.
The Supervisory Board shall have what it judges to be a reasonable number of independent members; the Supervisory Board shall consider the ownership structure accordingly. For the purposes of this recommendation, a Supervisory Board member is in particular not to be considered independent if he or she has a personal or business relationship with the company, with executive bodies of the company, with a shareholder with a controlling interest or an associated enterprise of that shareholder, and that relationship could constitute a significant and not merely temporary conflict of interests. The Supervisory Board shall have no more than two former members of the Executive Board. Supervisory Board members shall not exercise any directorships or advisory roles for any of the enterprise's major competitors.
Elections to the Supervisory Board shall be held on an individual basis. The deadline for an application for the legal appointment of a Supervisory Board member shall be the next annual general meeting. Proposed candidates for the chair of the Supervisory Board shall be announced to the shareholders.
Executive Board members may not join the company’s Supervisory Board within two years of the end of their term of office on the Executive Board unless they are proposed for election by shareholders holding over 25% of the voting rights in the company. In the latter case, the move to become chairperson of the Supervisory Board shall be an exception to be approved by the general meeting.
Each member of the Supervisory Board must ensure they have sufficient time to perform their duties. No member of the Executive Board of a listed company shall hold any more than a total of three Supervisory Board roles in listed companies outside the group or on the supervisory bodies of companies outside the group that have comparable requirements.
The members of the Supervisory Board are themselves responsible for undertaking the training and professional development measures required for the performance of their duties. The company shall provide reasonable support for these measures.
The remuneration of the members of the Supervisory Board is defined by resolution of the general meeting or in the Articles of Association.
The chairing or deputy chairing of the Supervisory Board and the chairing or membership of committees shall also be taken into account.
The remuneration does not take particular account of the chairing of Supervisory Board committees.
In the view of the Supervisory Board, the current additional remuneration for members of committees is also reasonable and proportionate for the chairs of those committees in the light of the size of these bodies.
The members of the Supervisory Board receive a remuneration that is commensurate with their functions and with the situation of the company. Any performance-related remuneration guaranteed to the members of the Supervisory Board shall be oriented to sustainable corporate development.
The remuneration of members of the Supervisory Board shall be itemised in the notes to the financial statements or in the management report, broken down into its component parts.
Payments made by the enterprise to the members of the Supervisory Board or advantages extended for services provided individually, in particular advisory or agency services, shall also be itemised.
If, during a financial year, a member of the Supervisory Board only attends half or fewer of the meetings of the Supervisory Board and of the committees to which he or she belongs, this shall be noted in the Supervisory Board report. Participation also includes telephone or video conferences, but that should not be the norm.
5.5 Conflicts of Interest
Each member of the Supervisory Board has a duty to work in the interests of the enterprise. No member of the Supervisory Board may pursue personal interests in their decisions or use business opportunities intended for the enterprise for themselves.
Each member of the Supervisory Board shall disclose to the Supervisory Board any conflicts of interest, in particular those resulting from a consultancy or directorship function for clients, suppliers, lenders or other third parties.
In its report, the Supervisory Board shall inform the general meeting of any conflicts of interest that have occurred and how the conflicts are being handled. Material conflicts of interest and those which are not merely temporary in respect of the person of a Supervisory Board member shall result in the termination of their appointment.
Consultancy and other contracts for work or services between a member of the Supervisory Board and the company require the consent of the Supervisory Board.
The Supervisory Board shall examine the efficiency of its activities on a regular basis.