Corporate Governance Report
Annual Corporate Governance Statement pursuant to sections 289a and 315 (5) of the Handelsgesetzbuch (HGB – German Commercial Code) for Deutsche Post AG and the Deutsche Post DHL Group and also part of the Group Management Report
This Annual Corporate Governance Statement contains information about the main components of the corporate governance structures at Deutsche Post AG and Deutsche Post DHL Group. These include the Declaration of Conformity by the Board of Management and the Supervisory Board of Deutsche Post AG, relevant corporate governance practices that exceed legal requirements, the working methods of the Board of Management and the Supervisory Board, the composition and working methods of the committees, the percentage of women on the Supervisory Board, Board of Management and in the top two executive tiers, and the targets for the composition of the Supervisory Board.
In December 2016, the Board of Management and the Supervisory Board once again issued an unqualified Declaration of Conformity pursuant to section 161 of the Aktiengesetz (AktG – German Stock Corporation Act), which reads as follows:
“The Board of Management and the Supervisory Board of Deutsche Post AG declare that the recommendations of the Government Commission German Corporate Governance Code in the version dated 5 May 2015 have been complied with since issuance of the Declaration of Conformity in December 2015 and that all recommendations of the Code in the version dated 5 May 2015 shall also be complied with in the future.”
We also intend to implement the suggestions made in the Code, with one exception: the Annual General Meeting will only be broadcast on the internet up to the end of the CEO’s address.
Our business relationships and activities are based on responsible business practice that complies with applicable laws, ethical standards, and international guidelines, and this also forms part of our Group strategy. Equally, we require our suppliers to act in this way. We encourage and facilitate long-term relationships with our stakeholders, whose decisions to select Deutsche Post DHL Group as a supplier, employer or investment of choice are increasingly based on the requirement that we comply with good corporate governance criteria.
Our responsible business practice contributes to society and allows our employees to share greatly in this by becoming involved. Response levels for our annual Group-wide Employee Opinion Survey were up one percentage point year-on-year in 2016, at 74 %. Since the same questionnaire was used throughout the Group, the results for all categories and questions are comparable across the divisions. The results reveal a positive trend for all issues and in most cases are on a level with or better than external benchmarks.
Our Code of Conduct, which was first issued in 2006, is firmly established in our company and is applicable to all regions and divisions. The Code of Conduct is based on the principles set out in the Universal Declaration of Human Rights and the United Nations (UN) Global Compact. It is consistent with recognised legal standards, including the applicable anti-corruption legislation and agreements. The Code of Conduct and all other Group guidelines, together with regional guidelines and procedures, provide the framework for ethical and environmentally sound corporate conduct. The guidelines serve as a clear point of reference for all employees, informing them of our values and principles. The Code is available in 21 languages and employees can familiarise themselves with its contents via webinars.
The Code of Conduct also sets out our commitment to the health of our employees, respect for human rights, our rejection of child and forced labour, and our position on diversity and inclusion. The Corporate Diversity & Inclusion Statement issued in 2013 reflects our belief that diversity represents both a key factor for success and a distinct competitive advantage. In the statement, we also undertake to promote an inclusive working environment and express our opposition to all forms of discrimination.
Our Diversity Council is an internal forum comprising executives from the central functions and divisions, and is chaired by the Board Member for Human Resources. The Diversity Council met three times during the year under review. Discussions focused on the issues of international orientation, the divisions’ differing diversity management requirements and women in management. The members are also advocates for diversity within their divisions.
The Supervisory Board supports the Group’s diversity strategy, placing particular emphasis on the target of increasing the number of women on the Board of Management. The Supervisory Board considers anchoring diversity management in the company’s HR processes to be part of long-term succession planning, for which the Supervisory Board and Board of Management are jointly responsible. In the opinion of the Supervisory Board, the targeted increase in the number of women in executive positions is necessary to ensure that, overall, more suitable female candidates are available for vacant positions on the Board of Management. At 21.1 %, the number of women in upper and middle management around the world at Deutsche Post DHL Group has increased year-on-year as at 31 December 2016 (previous year: 20.7 %). The figure for Group companies in Germany was 20.7 %. Pursuant to the Gesetz für die gleichberechtigte Teilhabe von Frauen und Männern an Führungspositionen in der Privatwirtschaft und im öffentlichen Dienst (German Act regarding Equal Gender Representation in Executive Positions in the Public and Private Sectors), we also report on the targets set by the Board of Management and the Supervisory Board for Deutsche Post AG in the section on the Number of women on the Supervisory Board, Board of Management and in executive positions at Deutsche Post AG. The presentation adopted differs from the one used to determine the proportion of women in executive positions at Deutsche Post DHL Group.
The international composition of the Board of Management already reflects the company’s international activities.
Our business success depends to a large extent on our employees’ ability to do the best possible job. This is why we seek to enhance their physical, mental and social well-being, primarily through preventative action. Our Group-wide measures include developing insurance programmes for employees in regions in which there are no or only inadequate healthcare systems.
The Chief Compliance Officer, who reports directly to the Chief Financial Officer, is responsible for developing Group-wide standards and recommendations for Deutsche Post DHL Group’s compliance management system. He is supported in this task by the Global Compliance Office. Each of the four operating divisions has a compliance officer and a network of compliance managers, who are responsible for implementing and executing all compliance management activities. The divisional compliance officers report regularly to the Board of Management member for their division and maintain close contact with the Global Compliance Office. The actions taken and reports prepared by the divisional compliance officers and the Global Compliance Office are included in the quarterly reports to the full Board of Management and the annual report to the Supervisory Board’s Finance and Audit Committee.
The main compliance management activities at Deutsche Post DHL Group include systematically identifying potential compliance risks, devising suitable training and communications measures, evaluating business partner compliance, investigating cases of misconduct and imposing sanctions. The main purpose of the compliance programme is to prevent cases of non-compliance in the first place. Group-wide communications ensure that all employees are aware of the relevance of compliance and are informed of the designated rules of conduct. Our compliance hotline is a key factor in reporting breaches of the law or guidelines. The hotline is available in around 150 countries and assists employees in reporting potential breaches of the law or the Code of Conduct within the company. Compliance issues are addressed and resolved in a structured manner. The insights gained from reported cases are used to continuously improve the compliance management system.
As a listed German public limited company, Deutsche Post AG has a dual management system. The Board of Management manages the company. The Supervisory Board appoints, oversees and advises the Board of Management.
The Board of Management comprises the Chief Executive Officer (CEO), the Finance and Human Resources functions and four operating divisions: Post - eCommerce - Parcel; Express; Global Forwarding, Freight; and Supply Chain. Group management functions are centralised in the Corporate Center. The Group Strategy provides a framework for the whole Group. The Board’s rules of procedure lay down objectives for the basic internal structure and management of, and co-operation within, the Board of Management. Within this framework, Board members manage their departments independently and inform the rest of the Board about key developments at regular intervals. The Board of Management as a whole decides on matters of particular significance for the company or the Group, including all decisions that have to be presented to the Supervisory Board for approval, and all tasks that cannot be delegated. The Board of Management as a whole also decides on matters presented to it by individual members of the Board of Management for decision. When making decisions, members of the Board of Management may not act in their own personal interest or exploit corporate business opportunities for their own benefit. The Supervisory Board must be informed of any conflicts of interest without delay.
The Supervisory Board appoints, advises and oversees the Board of Management. It has established rules of procedure that include the basic internal structure, a catalogue of Board of Management transactions requiring Supervisory Board approval and rules for the Supervisory Board committees. The Supervisory Board meets at least twice every six months of the calendar year. Extraordinary Supervisory Board meetings are held whenever particular developments or measures need to be discussed or approved at short notice. In financial year 2016, the Supervisory Board held five plenary meetings, 22 committee meetings and one closed meeting, as described in the Report of the Supervisory Board. All current members attended more than half of the meetings of the Supervisory Board and the committees on which they serve. Thomas Kunz, who left the Supervisory Board at the end of the Annual General Meeting on 18 May 2016, was unable to take part in an extraordinary Supervisory Board meeting that was convened at short notice, and hence did not attend one of two meetings. Once again, the overall attendance rate remained high in the year under review, at around 94 %.
The Board of Management and the Supervisory Board regularly discuss the Group’s strategy, the divisions’ objectives and strategy, the financial position and performance of the company and the Group, key business transactions, the progress of acquisitions and investments, compliance and compliance management, risk exposure and risk management, and all material planning and related implementation issues. The Board of Management informs the Supervisory Board promptly and in full about all issues of significance. The Chairman of the Supervisory Board and the CEO maintain close contact about current issues and discuss these regularly with other Board of Management members, including between Supervisory Board meetings.
The Supervisory Board carries out an annual efficiency review of its work, which includes assessing co-operation with the Board of Management. The review is based on a questionnaire and personal discussions between the Chairman of the Supervisory Board and the Supervisory Board members. For financial year 2016, the Supervisory Board concluded that it had performed its monitoring and advisory duties efficiently and effectively.
All Supervisory Board decisions, particularly ones relating to transactions requiring Supervisory Board approval, are discussed in detail in advance by the relevant committees. Each plenary Supervisory Board meeting includes a detailed report on the committees’ work and decisions taken.
None of the Supervisory Board members hold positions on the governing bodies of, or provide consultancy services to, the Group’s main competitors. The Supervisory Board has not been informed of any conflicts of interest affecting individual members during the year under review.
Executive committees prepare the decisions to be made by the entire Board of Management and take decisions on matters delegated to them. The duties of the executive committees include preparing for and / or approving investments and transactions. The Deutsche Post Executive Committee is responsible for the Post - eCommerce - Parcel division; the cross-divisional DHL Executive Committee is in charge of the Express, Global Forwarding, Freight, and Supply Chain divisions; the CC & GBS Executive Committee covers the Corporate Center (CC) and Global Business Services (GBS). The CEO, the CFO and the Board Member for Human Resources have permanent representation on the committees, whilst the Board members responsible for the divisions are represented on the committees in relation to matters affecting their divisions. Executives from the first and second levels immediately below the Board of Management also attend executive committee meetings that cover topics relevant to their fields. For example, Accounting & Controlling, Corporate Finance, Corporate Development and Legal Services are invited to take part in discussions on acquisitions. The Deutsche Post Executive Committee meets once a month, the DHL Executive Committee twice a month and the CC & GBS Executive Committee usually every quarter.
Business review meetings also take place once a quarter. These meetings are part of the strategic performance dialogue between the divisions, the CEO and the CFO. The business review meetings discuss strategic initiatives, operational matters and the budgetary situation in the divisions.
The Supervisory Board has formed six committees to ensure its duties are discharged effectively. In particular, these committees prepare the resolutions to be taken in the plenary Supervisory Board meetings. The Supervisory Board has delegated the final decisions on certain topics such as approvals of property purchases or sales above a fixed threshold to committees.
The Executive Committee’s duties include preparing the appointment of members of the Board of Management, drawing up their contracts of service and determining the Board of Management remuneration for approval by the plenary meeting of the Supervisory Board.
The Finance and Audit Committee oversees the accounting process, the effectiveness of the internal control system, the risk management and internal auditing systems, and the audit of the financial statements, and particularly the selection of the auditors and their independence. It approves the engagement of the auditors of the financial statements to perform non-audit-related services. It examines corporate compliance issues and discusses the half-yearly and quarterly financial reports with the Board of Management before publication. Based on its own assessment, the committee submits proposals for the approval of the annual and consolidated financial statements by the Supervisory Board. The Chairman of the Finance and Audit Committee, Stefan Schulte, is a financial expert as defined in sections 100 (5) and 107 (4) of the AktG.
The Personnel Committee discusses human resources principles for the Group.
The Mediation Committee carries out the duties assigned to it pursuant to the Mitbestimmungsgesetz (MitbestG – German Co-determination Act): it makes proposals to the Supervisory Board on the appointment of members of the Board of Management in those cases in which the required majority of two-thirds of the votes of the Supervisory Board members is not reached. The committee did not meet in the past financial year.
The Nomination Committee presents the shareholder representatives of the Supervisory Board with recommendations for shareholder candidates for election to the Supervisory Board at the Annual General Meeting.
The Strategy Committee prepares for the Supervisory Board’s strategy discussions and for resolutions on corporate acquisitions and disposals requiring approval by the plenary meeting of the Supervisory Board. It also regularly discusses the competitive position of the enterprise as a whole and of the individual divisions.
Further information about the work of the Supervisory Board and its committees in financial year 2016 is contained in the Report of the Supervisory Board. Details of the members of the Supervisory Board and the composition of the Supervisory Board committees can be found in the sections on the members of the Supervisory Board, Committees of the Supervisory Board and Mandates.
Under the Gesetz für die gleichberechtigte Teilhabe von Frauen und Männern an Führungspositionen in der Privatwirtschaft und im öffentlichen Dienst (German Act on Equal Gender Representation in Executive Positions in the Public and Private Sectors), the Supervisory Board of Deutsche Post AG is required to meet the statutory gender quota of 30 %. It is also obliged to set a target quota for the number of women on the Board of Management, whilst the Board of Management is required to set a target quota for women in the top two executive levels below the Board of Management. Deutsche Post AG exceeds the target for the statutory quota for the Supervisory Board, as eight women (40 %) are members of the Supervisory Board. The Supervisory Board has set a target quota of 1 : 7 for the number of women on the Board of Management until the end of the Annual General Meeting in 2018, and of 2 : 8 until the end of the AGM in 2021. The deadline for achieving the first target (1 : 7) is 30 June 2017.
The Board of Management had set target quotas for increasing the proportion of women at the two levels immediately below the Board of Management together with a deadline, 31 December 2016. The target of 19 % for tier 1 executives was almost met, at 18.4 %, while the target for tier 2 executives of 23 % was clearly exceeded, at 28.4 %. The fact that the target for tier 1 executives was narrowly missed is due to organisational and structural measures impacting the executives involved, which resulted in the figure being undershot by a notional 0.6 percentage points. The Board of Management has set new target quotas for increasing the number of women in management positions of 20 % for tier 1 executives and 30 % for tier 2 executives in the period from 1 January 2017 to 31 December 2019. The two executive tiers are defined on the basis of their reporting lines: tier 1 comprises executives belonging to the N-1 reporting line, while tier 2 consists of executives from the N-2 reporting line.
The Supervisory Board has set itself the following targets for its own composition:
- Proposals by the Supervisory Board to the Annual General Meeting for candidates to be elected as Supervisory Board members must be made purely in the interests of the company. Subject to this requirement, the Supervisory Board aims to ensure that independent Supervisory Board members as defined in number 5.4.2 of the German Corporate Governance Code account for at least 75 % of the Supervisory Board and that at least 30 % of the Supervisory Board members are women.
- The company’s international activities are already adequately reflected in the composition of the Supervisory Board. The Supervisory Board aims to maintain this and its future proposals to the Annual General Meeting will therefore consider candidates whose origins, education or professional experience equip them with particular international knowledge and experience.
- Conflicts of interest affecting Supervisory Board members are an obstacle to providing independent and efficient advice to, and supervision of, the Board of Management. The Supervisory Board will decide how to deal with potential or actual conflicts of interest on a case-by-case basis, in accordance with the law and giving due consideration to the German Corporate Governance Code.
- In accordance with the age limit adopted by the Supervisory Board and laid down in the rules of procedure for the Supervisory Board, proposals for the election of Supervisory Board members must ensure that their term of office ends no later than the close of the next Annual General Meeting to be held after the Supervisory Board member reaches the age of 72. As a general rule, Supervisory Board members should not serve more than three full terms of office.
The current Supervisory Board meets these targets. The professional careers of Ingrid Deltenre and Nikolaus von Bomhard – both of whom were elected to the Supervisory Board for the first time by the 2016 Annual General Meeting – have given them extensive international experience of managing medium-sized and large organisations. With the election of Ingrid Deltenre, the proportion of women on the Supervisory Board increased to 40 %. This means that we currently exceed the 30 % target quota for women on the Supervisory Board, which is in line with the statutory requirements. The number of independent members of the Supervisory Board also currently exceeds the target. All Supervisory Board members are independent members as defined by the German Corporate Governance Code. In light of the European Commission’s recommendation on the independence of non-executive or supervisory directors and the wide-ranging protection against summary dismissal and ban on discrimination contained in the Betriebsverfassungsgesetz (German Works Constitution Act) and Mitbestimmungsgesetz (German Co-Determination Act), being an employee of the company is not inconsistent with the requirement for independence as defined by the Code. The largest shareholder in the company, KfW Bankengruppe, currently holds approximately 21 % of the shares in Deutsche Post AG. There are therefore no controlling shareholders as defined in the Code with whom relationships might exist that could call into question the Supervisory Board’s independence. In line with the international nature of the company’s business, a large number of Supervisory Board members have extensive international experience. All current appointment periods for the members of the Supervisory Board elected by the Annual General Meeting reflect the age limit that has been set and the limit on the number of terms that can be served.
The members of the Supervisory Board and of its Finance and Audit Committee are also familiar in the aggregate with the sector in which the company operates. In particular the Chairman of the Supervisory Board, Wulf von Schimmelmann, and the Chairman of the Finance and Audit Committee, Stefan Schulte, as well as a number of shareholder representatives have specific knowledge of the sector due to their current or past membership of the boards of management and/or supervisory boards of companies in the sector, or relevant research activities. The employee representatives on the Supervisory Board also have extensive sector-specific experience.