Corporate Governance Report
The Executive Board and Supervisory Board report in accordance with Section 3.10 of the German Corporate Governance Code on corporate governance at the DMG MORI group.
The Executive Board and Supervisory Board of DMG MORI AKTIENGESELLSCHAFT always act in accordance with good corporate governance. This is reflected in a responsible and transparent corporate management and corporate control. Good corporate governance is an essential element of strategic thinking and acting at all levels of the group. The DMG MORI group has been following the recommendations of the German Corporate Governance Code for years.
In November 2015, the Executive Board and Supervisory Board once again issued a declaration of conformity that confirmed without reservation compliance with all recommendations of the “Government Commission on the German Corporate Governance Code” in the version of 5 May 2015 and its publication in the electronic Federal Gazette (Bundesanzeiger) on 12 June 2015. The Executive Board and Supervisory Board likewise confirm that the recommendations of the “Government Commission on the German Corporate Governance Code” will also be complied with in the future.
The current declaration of conformity and the corporate governance report are permanently accessible at our website www.dmgmori.com, as are the declarations of conformity of previous years.
Insurance for members of the Supervisory Board and of the Executive Board at the DMG MORI group
At the DMG MORI group D&O insurance (directors‘ and officers‘ liability insurance) and legal protection insurance have been taken out for members of the Supervisory Board, all the Executive Board members and managing directors. The D&O insurance contains the excess provided for in the Code and in the pertinent statutory provisions, respectively.
Responsible Management of Opportunities and Risks
For us, part of good corporate governance is the comprehensive and systematic management of opportunities and risks within corporate management. This serves to identify, evaluate and control such opportunities and risks at an early stage.
Within the opportunities management system of the DMG MORI group, we focus our attention in particular on material individual opportunities in the sales area, overall economic and industry-specific opportunities as well as on corporate strategic and performance-related opportunities. Our risk management system includes an early risk identification system, an internal control system (ICS), and the central insurance management.
Forward-looking, our early risk identification system enables us to record and control the potential risks of future developments in the DMG MORI group. The recorded, assessed and controlled risks in question are circumstances which contain an inherent element of potential risk due to the prevailing environmental situation, and which are recorded, assessed and controlled in an adequate manner.
Our early risk identification system consists of five basic elements: the companyspecific manual on risk management, the central DMG MORI AKTIENGESELLSCHAFT risk management officer, decentralised risk management officers in each group company, area-specific risk management systems, which assess and prioritise individual risks, and the risk reporting system on corporate level and for each individual company with the accompanying ad hoc reporting system for material risks.
The early risk identification system at the DMG MORI group is structured in such a way that significant risks are systematically identified, assessed, aggregated, monitored and notified.
Risks in individual company divisions will be identified once per quarter according to prescribed risk areas. All potential risks thus recorded are analysed and assessed according to quantitative variables; hereby measures to reduce risks are also taken into account. Any risk which threat the continuation of business is reported immediately, also outside of the periodic reporting.
To be able to present the overall risk situation of the group, we determine the individual local and central risks as well as the group effects. Possible maximum loads from identified and assessed risks for the group are simulated using quantitative methods (Monte Carlo simulation).
The Executive Board and the Supervisory Board are informed regularly about the current risk situation of the group and that of the individual business units. They discuss the causes of the current risk position and the corresponding measures taken in-depth.
The early risk identification system set up by the Executive Board pursuant to Section 91(2) German Stock Corporation Act (AktG) is examined by the auditors, is continuously being further developed within the group and is adapted to suit changing circumstances on an ongoing basis.
The existing internal control system of the DMG MORI group serves to minimise or eliminate controllable risks in day-to-day business processes. Based on an analysis and documentation of basic business processes, which is updated annually, controllable risks are registered and eliminated or minimised to an acceptable level by arranging the organisational structure and workflow management accordingly, and by implementing suitable control measures. This is supported by existing internal guidelines and instructions as part of the ICS. The effectiveness of the ICS is judged by annual self-assessments. A report on the results of the self-assessments is given to the Executive Board and the Supervisory Board. The ICS of DMG MORI AKTIENGESELLSCHAFT is structured in accordance with the requirements of the German Stock Companies Act as well as the necessary requirememts of the “Japanese Financial Instruments and Exchange Act” (J-SOX / Naibutousei).
To minimise or eliminate risks, the DMG MORI group also deploys central insurance management. This determines the group-wide insurance strategy, and is responsible for the operational implementation.
Cooperation between the Executive Board and Supervisory Board
The Executive Board and Supervisory Board work closely together in the interests of the company. The Executive Board agrees the strategic direction of the company with the Supervisory Board and informs the latter regularly, timely and comprehensively of all issues of relevance to the company relating to strategy, business development, the risk position, risk management and compliance. Any deviations in the course of business from the established plans and targets of the group are discussed and the reasons therefore given. The Executive Board forwards the half-year and quarterly reports to the Finance and Audit Committee and discusses the reports in detail with the Finance and Audit Committee before their publication.
The articles of association and the rules of procedure provide for the right of consent of the Supervisory Board to a wide range of business transactions proposed by the Executive Board.
The remuneration of both the members of the Supervisory Board and of the Executive Board is presented in detail in the remuneration report as part of the management report of the consolidated financial statements of DMG MORI AKTIENGESELLSCHAFT.
Objectives in the Composition of the Supervisory Board
In its meeting on 22 September 2015, the Supervisory Board passed a resolution on the following voluntary commitment pursuant to Section 5.4.1 DCGK (German Corporate Governance Code):
- The Supervisory Board should be staffed with the same number of owners’ representatives with experience in managing or governing companies with global operations;
- Employees from key DMG MORI sectors should be taken into consideration as employee representatives;
- Knowledge about DMG MORI and key markets for DMG MORI, as well as knowledge about technical contexts and technology management should be taken into consideration;
- Specialist knowledge and experience in the use of accounting principles, internal monitoring procedures and compliance processes should be taken into consideration;
- At least two male and two female Supervisory Board members should be elected for both the owners' and the employees' sides, as soon as possible, but no later than the election of the new Supervisory Board in 2018;
- At least 50% of all Supervisory Board members should be independent; • Conflicts of interest should be avoided;
- An upper age limited of 70 years at the time of election to the Supervisory Board should be observed;
- Nominations for future staffing of the Supervisory Board should also look, in particular, to the interests of the company, while observing the objectives mentioned above.
A resolution was also passed on a maximum limit of five terms of office.
Avoiding Conflicts of Interest
Members of the Executive Board and Supervisory Board are obliged to act in the interests of the company. In making decisions and in connection with their functions, the members of the Executive Board and of the Supervisory Board may not pursue any personal interests or business opportunities that the company is entitled to, nor may they grant any unjustified benefits to any other person. Any conflicts of interest that arise out of these or any other situations must be notified to the Supervisory Board without delay and must be assessed and, as necessary, authorised by the Supervisory Board. The Supervisory Board reports to the Annual General Meeting on any conflicts of interest and on how they are dealt with.
Shareholders and Annual General Meeting
Our shareholders exercise their rights at the Annual General Meeting. The Annual General Meeting passes resolutions, inter alia, on the appropriation of profits, on the approval of the actions of the Supervisory Board and Executive Board, as well as on the election of the annual auditor or any changes to the articles of association. Shareholders may exercise their voting right in person. Shareholders who are unable to attend the Annual General Meeting personally are given the opportunity of exercising their voting right by proxy through an authorised person of their choice or by transfer of proxy to a representative of the group who will act as per their instruction.
In addition, it is possible to obtain information about the Annual General Meeting timely via the Internet. All documents and information are made available to shareholders in good time on our website.
We strive to ensure that our corporate communication offers the best possible transparency and relevance for all stakeholders, such as shareholders, capital lenders, business partners and employees, as well as for the general public.
Shareholders and potential investors can obtain information at any time on the current situation of the company from the Internet. Any interested party may subscribe to an electronic newsletter on our website, which reports the latest news from the group. Press releases, business and quarterly reports, as well as a detailed financial calendar in both German and English are published on our website.
We are aware of our responsibility towards our business partners, shareholders and employees, as well as to the environment and to society. We therefore specifically undertake to uphold clear principles and values. In particular, this includes observing and upholding legal requirements and regulatory standards as well as voluntary commitments and our own internal guidelines. Our compliance management system is designed to safeguard our principles and values.
The code of conduct of the DMG MORI group is applicable worldwide in all group companies and applies to all employees and, inter alia, governs their behaviour towards third parties. This code of conduct is set out more specifically in the compliance guidelines inter alia in the areas of anti-corruption, competition law behaviour, export controls and dealing with insider information.
Our compliance management system, which we introduced in 2008, has been further expanded, also this year. Alongside the Chief Compliance Officer, who reports directly to the chairman of the Executive Board, local compliance officers have been appointed at the plants or at the regions, respectively. The local compliance officers ensure that the measures are implemented and thus support the Chief Compliance Officer in his duties. Beyond this, our compliance work is supported by the Compliance Committee. The Committee is composed of experts from the audit, legal, risk management, internal control system, personnel, it, purchasing and sales departments; the Committee acts as an advisor to the Chief Compliance Officer. All employees have the possibility to address questions relating to compliance to their local compliance officer or to the Chief Compliance Officer or central compliance management, respectively. In addition, we have set up a compliance helpdesk, which employees may contact by email. In order to ensure that our compliance management system is adjusted to the present conditions at all group companies at all times, regular meetings and functions tests are conducted at the group affiliates.
Our senior executives regularly attend training sessions organised by the Chief Compliance Officer. Our senior executives are then expected to act as multipliers, passing their knowledge on to their employees. Moreover, online training courses are conducted for all employees. In order to establish our compliance programme, we have carried out a dedicated analysis of all compliance risks, both centrally and locally, at the group units. We align our compliance measures with the identified risks and review the processing of further compliance topics.
In the reporting year, we have successfully subjected our compliance management system to an extensive test of effectiveness.
Statutory Gender Quota / Diversity Requirements
Based on the act on equal participation of women and men in executive management roles in the public and private sectors of 24 April 2015, the Supervisory Board is required to define quotas for the percentage of women on the Executive Board. Moreover, the Executive Board is responsible for defining quotas for the percentage of women in management positions below Executive Board level. Executive Board and Supervisory Board have fulfilled this obligation:
- Considering this legal framework, the Supervisory Board passed a resolution on 22 September 2015 specifying that a quota of 20% for the Executive Board of DMG MORI AKTIENGESELLSCHAFT should be occupied by female members of staff by 30 June 2017.
- As a result of flat hierarchies, at DMG MORI AKTIENGESELLSCHAFT only one management level exists below that of the Executive Board. The target quota set by the Executive Board on 09 September 2015 for this management level was 6% for women. This target figure should be achieved by 30 June 2017.
Financial Accounting and Annual Audit
We have again agreed with the annual auditors, KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin, for this reporting period that the chairman of the Supervisory Board and the chairman of the Finance and Audit Committee have to be informed without delay of any grounds for exclusion or bias that may arise during the audit insofar as these cannot be eliminated. In addition, the auditor shall also immediately report any findings and events that arise during the audit of the financial statements and consolidated financial statements that have a significant bearing on the work of the Supervisory Board. Moreover, the auditor will inform the Supervisory Board or note in the audit report if, when conducting the audit, any facts are discovered that are inconsistent with the declaration of conformity issued by the Executive Board and Supervisory Board under the Corporate Governance Code.
Share Ownership of the Executive Board and Supervisory Board Members
Only one member of the Supervisory Board is an indirect shareholder in DMG MORI AKTIENGESELLSCHAFT. The Supervisory Board member Dr.-Ing. Masahiko Mori holds shares in DMG MORI COMPANY LIMITED (Nagoya, Japan). The DMG MORI COMPANY LIMITED holds, directly and indirectly 60.67 per cent of the share capital of DMG MORI AKTIENGESELLSCHAFT (as at 31 December 2015). Hence, Dr.-Ing. Masahiko Mori is indirectly a shareholder of DMG MORI AKTIENGESELLSCHAFT.
Pursuant to Section 15a of the German Securities Trading Law (WpHG), members of the Supervisory Board or Executive Board, and other individuals subject to reporting requirements, must notify both the company and the Federal Financial Supervisory Authority (BaFin) whenever they buy or sell company shares or other company securities. The company is then legally required to publish such notification without delay. According notifications made by DMG MORI AKTIENGESELLSCHAFT can be viewed on the company website at all times.
Suggestions of the German Corporate Governance Codex
The DMG MORI group also complies with the suggestions of the German Corporate Governance Codex to a large extent. Deviations arise at present in the area of the Annual General Meeting. The Code suggests that it should be possible to contact the proxy exercising the shareholder’s voting rights as instructed by the shareholder during the Annual General Meeting. For organisational reasons, no provision has been made to livestream the entire Annual General Meeting.
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