5 Supervisory board
5.1. Tasks and responsibilities
It is the task 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 the matter of diversity when appointing the executive board members. The supervisory board determines target values for the percentage of women in the executive board.2 In cooperation with the executive board, it shall ensure a long-term succession planning. The supervisory board can delegate to committees preparations 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. A member may only be re-appointed earlier than one year before the end of the appointment period and the current appointment cancelled simultaneously under special circumstances. An age limit for members of the executive board shall be specified.
2 Refer to footnote 1.
The supervisory board shall issue rules of procedure for its work.
The rules of procedure for the executive board are defined in the articles of association of KRONES AG. These contain detailed instructions governing the work of the supervisory board. Separate written rules of procedure have therefore not to date been drawn up.
5.2 Tasks and Authorities of the Chairman of the Supervisory Board
The chair of the supervisory board is elected by the supervisory board among its members. They coordinate work in the supervisory board, chair its meetings and attend to the affairs of the supervisory board in external relations.
The chair of the supervisory board shall not hold the chair of the audit committee.
Between meetings, the chair of the supervisory board shall maintain regular contact with the executive board or the chair or spokesperson thereof, with which/whom he or she shall discuss issues of strategy, planning, business development, risk, risk management and compliance for the enterprise. The chair of the supervisory board will be informed without delay by the chair or spokesperson of the executive board of important events of significance to the assessment of the enterprise's situation or development or for the management of the enterprise. The chair of the supervisory board shall then inform the supervisory board and, if required, convene an extraordinary meeting of the supervisory board.
5.3 Formation of committees
In line with the enterprise's specific circumstances and the number of employees, the supervisory board shall form professionally qualified committees. Each committee chairperson reports regularly to the supervisory board on the work of his or her committee.
The supervisory board shall set up an audit committee which - unless another committee is responsible - in particular handles monitoring of the accounting process; the effectiveness of the internal monitoring system, the risk management system and the internal audit system; the audit of the annual financial statements, in particular the impartiality of the auditor, additional services provided by the auditor, the appointment of auditor, the definition of the focuses of the audit and the fee agreement; and compliance. The chair 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/her appointment ended at least two years previously.
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.
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 state specific objectives for its composition which, in line with the specific situation of the enterprise, take account of the international business of the enterprise, potential conflicts of interest, the number of independent supervisory board members pursuant to 5.4.2, a specified age limit for supervisory board members and a specified regulatory limit for the seniority in the supervisory board, as well as diversity. For listed enterprises to which the Codetermination Act, the Coal and Steel Codetermination Act or the Codetermination Supplementary Act applies, the supervisory board consists of at least 30 percent of women and at least 30 percent of men.3 For the other enterprises covered by the Equality Act, the supervisory board determines target values for the percentage of women.4
3 The minimum percentage of each 30 percent of women and men in the supervisory board must be considered when reelections and secondments become necessary as of 1 January 2016 for allocating individual or multiple supervisory board seats (Section 25 Paragraph 2 of the Introductory Act of the German Stock Companies Act as amended by the Act for the Equal Participation of Women and Men in Leadership Positions in the Private Sector and Civil Service from 24 April 2015, Federal Law Gazette I, p. 642, 656).
The determination must be carried out for the first time by 30 September 2015; the deadlines to be determined for the first time for achieving the target values may not be longer than until 30 June 2017 (Section 25 Paragraph 4 of the Introductory Act of the German Stock Companies Act as amended by the Act for the Equal Participation of Women and Men in Leadership Positions in the Private Sector and Civil Service from 24 April 2015, Federal Law Gazette I, p. 642, 656).
Proposals submitted by the supervisory board to the appointment bodies shall take account of these objectives. The objectives of the supervisory board and their level of implementation shall be stated in the corporate governance report.
For its recommendations for the election of new supervisory board members to the general meeting, the supervisory board shall make sure that the respective candidate can muster the time expenditure that is to be expected.
When proposing candidates to the general meeting, the supervisory board shall disclose any and personal and/or business relationships of each candidate with the enterprise, the executive bodies of the company or major company shareholders.
This disclosure recommendation 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.
The supervisory board is of the opinion that the requirements of paragraphs 5 and 6 are not clear and vague in their details and that it could violate the privacy of the persons concerned.
A major shareholder as defined in this recommendation is any shareholder that directly or indirectly holds over 10% of voting shares in the company.
The supervisory board shall have what it judges a reasonable number of independent members. A supervisory board member is in particular not to be considered independent for the purposes of this recommendation 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 exercise no directorships or similar positions or advisory tasks 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 supervisory board chair shall be announced to the shareholders.
Executive board members may not join the company supervisory board within two years of the end of their executive board term 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 chair of the supervisory board shall be an exception to be approved by the general meeting.
Each member of the supervisory board must ensure that he or she has sufficient time to fulfil their commission. 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 in the supervisory bodies of companies outside the group with comparable requirements.
The members of the supervisory board undertake the training and professional development measures required for the fulfilment of their tasks. Reasonable support for these measures shall be provided by the company.
Remuneration for the members of the supervisory board is specified by resolution of the general meeting or in the articles of association.
Work as chair or deputy chair of the supervisory board and chairmanship or membership of committees shall also be taken into account.
Remuneration does not take particular account of chairmanship of supervisory board committees.
The members of the supervisory board receive remuneration 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 designed to further the enterprise's long-term development.
The remuneration of members of the supervisory board shall be listed individually in the notes to the financial statements or in the management report, broken down into its component parts.
Remuneration paid by the enterprise to the members of the supervisory board or advantages extended for services rendered personally, in particular, advisory or agency services, shall also be listed separately in the corporate governance report.
If during a financial year a member of the supervisory board only attends half of the meetings of the supervisory board and of the committees to which they belong or fewer, this shall be noted in the supervisory board report. Participation also includes telephone or video conferences, but that should not be the rule.
5.5 Conflicts of interest
Each member of the supervisory board is bound to work in the enterprise's interests. 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 inform the supervisory board of any conflicts of interest, in particular those resulting from a consultant 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 which have occurred and how the conflicts are being dealt with. 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.
Advisory and other service or works agreements between a member of the supervisory board and the company require the supervisory board's approval.
The supervisory board shall examine the efficiency of its activities on a regular basis.