Declaration on corporate governance in accordance with Section 289a of the German Commercial Code (HGB)
Contents also in accordance with Clause 3.10 of the German Corporate Governance Code (Corporate Governance Report)
Declaration on corporate governance in accordance with Section 289a of the German Commercial Code (HGB)
Responsible corporate governance has always been of great importance at KWS SAAT SE. Since it was founded 160 years ago, our company’s successful development has been based on thinking long term and acting in terms of sustainability.
KWS complies almost fully with the code’s recommendations
The Executive Board and Supervisory Board once again examined in the year under review whether the company complies with the stipulations of the German Corporate Governance Code. As a result, the following declaration of compliance was issued to the effect that the company complies almost fully with the code’s recommendations; the declaration can also be found at www.kws.de/ir. It is printed in the 2015/2016 Annual Report as well.
Compliance declaration in accordance with section 161 AktG (German Stock Corporation Act)
The Executive Board and the Supervisory Board of KWS SAAT SE declare in compliance with Section 161 AktG (German Stock Corporation Act) that the company has complied with the recommendations of the German Corporate Governance Code in the version dated May 5, 2015, since the last compliance declaration in October 2015, and does now comply and will comply with them in the future, with the following exceptions.
In accordance with Clause 4.2.2 (2) Sentence 3 of the German Corporate Governance Code, the Supervisory Board shall consider the relationship between the compensation of the Executive Board and that of senior management and the workforce overall, particularly in terms of its development over time, whereby the Supervisory Board shall determine how senior managers and the relevant staff are to be differentiated. This recommendation is not complied with, since the compensation of the Executive Board, senior management and staff is based on variable criteria that defy rigid definition. These criteria include not only generally applicable yardsticks such as degree of responsibility, tasks, personal performance, expertise and the like for the Executive Board, but also the company’s economic situation, success and future prospects.
In accordance with Clause 5.4.1 (2) Sentence 1 of the German Corporate Governance Code, the Supervisory Board is to set a limit on the length of time members can serve on the Supervisory Board. This recommendation is not complied with, since in a business with a tradition of family ownership like KWS it would significantly restrict the rights of the family shareholders, who hold a majority stake in the company.
Clause 7.1.2 Sentence 4 of the German Corporate Governance Code states that the consolidated financial statements shall be publicly accessible within 90 days of the end of the fiscal year and interim reports within 45 days of the end of the reporting period. KWS SAAT SE publishes its consolidated financial statements and interim reports within the period of time defined in the regulations for the Prime Standard of the German Stock Exchange. The company’s seasonal course of business means that it cannot ensure compliance with the recommended periods in the German Corporate Governance Code.
Einbeck, October 2016
The Supervisory Board The Executive Board
Relevant corporate governance practices above and beyond requirements prescribed by law
The various regulations enshrined in national and international law and the recommendations drawn up by the Government Commission for the German Corporate Governance Code form the framework for corporate governance at KWS SAAT SE. We have also developed our own governance practices above and beyond the requirements prescribed by law. Many of them have been published in a portal on the subject and can be called up by our employees at all times. Worthy of particular note is our compliance culture, which is implemented and developed further at the KWS Group under the responsibility of a separate department, the Corporate Compliance Office.
KWS’ compliance regulations are binding on our employees in all markets worldwide in which we operate. They are geared toward the strictest legal regulations within our field of activity. The KWS Group’s "International Anti-Corruption Policy" prohibits corruption in the broadest sense, for example. It also applies in countries where the law does not proscribe bribery as an offense or where individual acts of bribery are not punishable. In this policy, we have also clearly defined the constraints that apply to gifts, donations, invitations and other benefits. The fundamental document relating to compliance work is the "Code of Business Ethics" (CoBE), which is binding on all employees of the KWS Group and which we also have published in a short version on our website at www.kws.de. In addition to statutory regulations, it specifies ethical standards in everyday business and what the response of the company is to misconduct.
Our human resource strategy contains clearly defined stipulations relating to various aspects of labor and social standards. We have concretized these stipulations in our Human Resource Rules, Guidelines and Procedures. Key points include the prohibition or child labor and any form of forced or compulsory labor, equal opportunity for men and women, and the unequivocal commitment to extensive measures to promote occupational safety and health protection for our employees.
Description of the working practices of the Executive Board and the Supervisory Board and the composition and working practices of their committees
KWS SAAT SE has a system of dual management with a transparent and effective separation of management of the company and supervision of that management between the Executive Board and the Supervisory Board, a Supervisory Board that is made up of shareholder and employee representatives, and rights of codetermination and control by shareholders at the Annual Shareholders’ Meeting. Both bodies have strictly separated competencies and different members. While the Executive Board is responsible for managing the company, the Supervisory Board supervises and advises the Executive Board.
KWS SAAT SE’s Executive Board and Supervisory Board work together constructively in a spirit of mutual trust. Both bodies are committed to the common goal of generating sustainable and long-term growth on the basis of the established corporate philosophy. There is constant close contact between the Chairman of the Supervisory Board and the Chief Executive Officer and individual members of the Executive Board. There are also monthly meetings between the Chairman of the Supervisory Board and the Executive Board as a whole. Among other subjects, the company’s current business development, its strategy, occurrences of special importance and risk management are discussed intensively at these meetings.
Working practices of the Executive Board
The Executive Board is jointly responsible for conducting the company’s business in accordance with the law, the company’s Articles of Association and the bylaws, with the goal of increasing the company’s value lastingly and achieving the defined corporate objectives. It observes the recommendations of the German Corporate Governance Code and reports on deviations from it.
The Executive Board’s task areas are divided into divisions, documented in writing in the distribution-of-business plan and published on the homepage at www.kws.de. The individual members are directly
responsible for the divisions assigned to them; this does not affect the fact that they have joint responsibility for managing the company’s business. The Executive Board decides in its entirety on significant matters relating to the company. These are specified in the Executive Board’s bylaws, which can also be viewed on the homepage.
The Executive Board develops the company’s strategic orientation, coordinates it with the Supervisory Board and ensures that it is implemented. It coordinates and controls the company’s main activities and decides on how resources are distributed. It defines the guidelines and principles of the corporate policy and is responsible for ensuring compliance with them and with statutory regulations.
The Executive Board convenes every week (for half a day) or every two weeks (for a whole day). These meetings are used to adopt resolutions by the Executive Board as a whole as well as to reach mutual agreement and provide information on all important events at the individual divisions. Any member of the Executive Board can ask for a meeting of the body to be convened. According to the bylaws, necessary resolutions must be adopted unanimously or, after prior discussion, by the majority of the votes.
The Chief Executive Officer, who is appointed by the Supervisory Board, represents the Executive Board and the company publicly in matters of principle. He is responsible for organizing the Executive Board meetings and for monitoring implementation of the resolutions adopted by the Executive Board.
The Executive Board provides the Chairman of the Supervisory Board with regular, prompt and extensive information on all questions of relevance to the company relating to planning, the business performance, the risk situation, risk management and compliance at the company.
As in the previous year, the Executive Board did not form any committees in the year under review. No conflicts of interest on the part of individual members were reported to the Supervisory Board in the past fiscal year. At the end of fiscal 2015/2016, the Executive Board comprised four persons and had the same composition as the previous year.
Working practices and composition of the Supervisory Board
The Supervisory Board is tasked with regularly advising and monitoring the Executive Board in its management of the company. The Supervisory Board is involved in decisions of fundamental importance for the company at an early stage. Significant business transactions and fundamental decisions on KWS SAAT SE’s further development require the Supervisory Board’s approval. A simple majority is sufficient to adopt such resolutions. The Supervisory Board still consists of six members.
The Supervisory Board appoints a Chief Executive Officer, who coordinates the work of the Executive Board. It also endeavors to ensure a consistent orientation in management of the company and can demand information on individual matters from the Executive Board’s members at any time.
KWS’ Supervisory Board has the following objectives: With regard to KWS’ international business activity, the German Corporate Governance Code calls for the Supervisory Board to have an adequate number of members with international experience. All the shareholder representatives elected to the present board by the Annual Shareholders’ Meeting hold responsible functions at or posts on management bodies of internationally operating family-run companies. Moreover, the Supervisory Board should have what it deems to be a reasonable number of independent members. In this respect, the Supervisory Board aims to ensure that half of its shareholder representatives are independent within the meaning of the German Corporate Governance Code. The board meets that objective. KWS SAAT SE’s Supervisory Board has appointed the Chairman of the Audit Committee, Hubertus von Baumbach, as a financial expert within the meaning of the German Corporate Governance Code. The composition of the Supervisory Board is such that its members overall have the knowledge, skills and professional experience required so that it can discharge its duties properly. Only candidates who are not 72 or above should be proposed to the Annual
Shareholders’ Meeting for election to the Supervisory Board. Aspects that are to be taken into account here also include independence and diversity.
At least two meetings of the Supervisory Board are held every calendar half-year. Any member of the Supervisory Board or Executive Board can convene the Supervisory Board immediately, stating the purpose and reasons. The Supervisory Board convened for a total of five meetings in the year under review. Information on the focal topics at the individual meetings can be found on pages 5 to 9 of the 2015/2016 Annual Report. Every member of the Supervisory Board must disclose conflicts of interest to the Supervisory Board immediately. Conflicts of interest that have arisen are reported to the Annual Shareholders’ Meeting. Conflicts of interest on the part of individual members were not reported to the Supervisory Board or, if they involve the Chairman, to the Deputy Chairman of the Supervisory Board in the past fiscal year. There were no Supervisory Board elections scheduled to be held at the Annual Shareholders’ Meeting in December 2015 and so there were no changes in the Supervisory Board’s composition compared to the previous year.
Supervisory Board committees
In the year under review, the Supervisory Board still had three committees, which – where permissible under the law – discharge the tasks entrusted to them in the name of and on behalf of the Supervisory Board as a whole. They are the Committee for Executive Board Affairs, the Audit Committee and the Nominating Committee. The Chairman of each committee reports to the Supervisory Board on its discussions and resolutions. The current composition of the committees can be found on pages 7 of the 2015/2016 Annual Report and has not changed over the previous year.
The Committee for Executive Board Affairs prepares the decisions of the Supervisory Board as a whole relating to the conclusion, extension, modification and termination of contracts of employment between the company and the members of the Executive Board. Its tasks also include drawing up a proposal on the structure of the compensation system for the Executive Board, as well as regularly reviewing and setting the total compensation for the individual members of the Executive Board. In addition, the committee also decides on the legal arrangements between the company and Executive Board members who have left it, approves contracts of KWS SAAT SE or its subsidiaries with Supervisory Board members in accordance with Section 114 AktG (German Stock Corporation Act) and approves loans to members of the Executive Board and Supervisory Board in accordance with Sections 89 and 115 AktG (German Stock Corporation Act).
The Audit Committee consists of the Chairman of the Supervisory Board and two other members of the Supervisory Board and convenes at least three times a year. The Chief Financial Officer and/or the Chief Executive Officer usually take part in the meetings and telephone conferences as well. Hubertus von Baumbach, who is the current Chairman of the Audit Committee and presided over it in the past fiscal year, fulfills the statutory requirements regarding independence and expertise in the fields of accounting and auditing of financial statements. The Audit Committee monitors the correctness of the company’s financial statements, as well as risk management and compliance. Its tasks also include submitting a proposal on appointment of the independent auditor to the Supervisory Board, defining the focal areas of the independent auditor’s audit, examining the independent auditor’s independence and qualifications, agreeing on its fee and awarding the audit assignment. The audit assignment was awarded to Deloitte Wirtschaftsprüfungsgesellschaft GmbH, Hanover, pursuant to the resolution adopted by the 2015 Annual Shareholders’ Meeting. Before the proposal on appointing the auditor was submitted to the Annual Shareholders’ Meeting, a statement of independence from the auditor was obtained in accordance with Clause 7.2.1 of the German Corporate Governance Code. It was agreed with the independent auditor that the Chairman of the Supervisory Board or the Audit Committee be informed immediately of possible reasons for excluding the auditor or for establishing a lack of impartiality that arise during the audit, unless these were remedied immediately. Moreover, the independent auditor reports immediately to the
Supervisory Board on all findings and occurrences that are of importance to the Supervisory Board and Audit Committee in discharging their duties and that arise in the course of its audit of the financial statements. A further task of the Audit Committee is to discuss the adequacy and proper functioning of the internal control system for financial reporting with the Executive Board. As part of preparation of the annual and consolidated financial statements, the Audit Committee is responsible for conducting a preliminary examination of the documents relating to the single-entity and consolidated financial statements and the Combined Management Report. The Audit Committee prepares the decisions of the Supervisory Board as a whole on approval of the annual financial statements of KWS SAAT SE and the consolidated financial statements of the KWS Group on the basis of the report by the independent auditor and draws up a proposed resolution by the Executive Board on the appropriation of profits. The Audit Committee also discusses the quarterly reports, the semiannual financial report and the accompanying press releases in direct dialogue with the Chief Financial Officer and the Chief Executive Officer.
The company’s Nominating Committee is composed of three members. It submits nominations for the elections of the shareholder representatives on the Supervisory Board. It proposes suitable candidates to the Supervisory Board as a whole for its nominations to the Annual Shareholders’ Meeting and obtains all the information required to assess the candidates’ suitability.
More details of the work of the Supervisory Board and its committees are presented in the Report of the Supervisory Board on pages 5 to 9 of the KWS Group’s 2015/2016 Annual Report.
KWS SAAT SE’s shareholders exercise their rights of codetermination and control at the Annual Shareholders’ Meeting, which is held at least once a year. The tasks of the Annual Shareholders’ Meeting are to elect four of the six members of the Supervisory Board – namely the shareholder representatives on the Supervisory Board – and to adopt resolutions on the ratification of the acts of the Executive Board and Supervisory Board, appropriation of the net retained profit, any capital measures, authorization to buy back shares, amendments to the Articles of Association and the appointment of the independent auditor. In principle, each share in KWS SAAT SE entitles its holder to one vote. Every shareholder has the right to participate in the Annual Shareholders’ Meeting, which is traditionally held at the company’s headquarters in Einbeck, to speak on the items on the agenda, submit countermotions and demand information on the Company’s affairs, provided this information is required to permit proper assessment of an item on the agenda. 82.7% of the voting rights were represented at the Annual Shareholders’ Meeting on December 17, 2015.
Information on the defined target figures and periods in accordance with Section 76 (4) and Section 111 (5) AktG (German Stock Corporation Act)
In June 2015, the Supervisory Board adopted resolutions on the ratio of women on the Supervisory Board and the Executive Board. The ratio of women among the shareholder representatives on the Supervisory Board is currently 25%; the two seats for the employee representatives are currently held by men. In accordance with Section 111 (5) AktG (German Stock Corporation Act), the Supervisory Board decided that the ratio of women on the Supervisory Board of KWS SAAT SE will remain at 16.6% within the statutory period for defining target figures for the ratio of women, namely by June 30, 2017, since no election to the Supervisory Board was envisaged within this statutory period. The ratio of women on the Executive Board of KWS SAAT SE is still to be 25% within the above period of time. No new appointments to posts on the Executive Board are planned within the statutory period of time.
In March 2015, the Executive Board also defined concrete target figures for the ratio of women in the two management tiers below KWS SAAT SE’s Executive Board in accordance with Section 76 (4) AktG (German Stock Corporation Act). The Executive Board has consequently set a target of achieving a ratio of 15% in management tier 1 and 10% in management tier 2 by June 30, 2017.