German Corporate Governance Code

5. Supervisory Board

5.1 Tasks and Responsibilities
5.1.1 The task of the Supervisory Board is to regularly advise and supervise the Management Board in its management of the company. It must be involved in all decisions of fundamental importance to the company.
5.1.2 The Supervisory Board appoints and dismisses the members of the Management Board. When appointing Management Board members, the Supervisory Board shall take diversity into account. The Supervisory Board determines targets for the share of female Management Board members. Together with the Management Board, it shall ensure that there is long-term succession planning. The Supervisory Board is free to delegate to committees the preparations for appointing Management Board members and the elaboration of the conditions in the employment contracts, including remuneration.

For first-time appointments, the maximum permissible appointment period of five years should not be applied as a rule. Any re-appointment prior to one year before the end of an appointment period at the same time as termination of the current appointment shall only happen if special circumstances apply. The Supervisory Board shall specify an age limit for the members of the Management Board.
5.1.3 The Supervisory Board shall adopt its own rules of procedure.
5.2. Duties and Authorities of the Supervisory Board Chair
  The Supervisory Board Chair is elected by the Supervisory Board from among its members. The Chair coordinates the activities of the Supervisory Board, chairs its meetings and saveguards the matters of the Supervisory Board externally.

The Supervisory Board Chair should be available – within reasonable limits – to discuss Supervisory Board-related issues with investors.

Between meetings, the Supervisory Board Chair shall be in regular contact with the Management Board, in particular the Management Board Chair or Spokesperson, in order to discuss with them issues of strategy, planning, business development, the risk situation, risk management and compliance of the company. The Management Board Chair or Spokesperson informs the Supervisory Board Chair without undue delay of major events that are of material importance for the assessment of the company’s status and performance, and for the management of the company. The Supervisory Board Chair subsequently informs the Supervisory Board and, if required, shall convene an extraordinary Supervisory Board meeting.
5.3 Establishment of Committees
5.3.1 Depending on the specific circumstances of the company and the number of Supervisory Board members, the Supervisory Board shall form committees of members with relevant specialist expertise. The committee Chairs report regularly to the Supervisory Board on the work of their committees.
5.3.2 The Supervisory Board shall establish an Audit Committee that – provided no other committee has been entrusted with this work – addresses in particular the monitoring of the accounting, the accounting process, the effectiveness of the internal control system, the risk management system, the internal audit system, the audit and compliance.

The Audit Committee submits to the Supervisory Board a reasoned recommendation for the appointment of the auditor, which comprises at least two candidates if the audit engagement is put out to tender. The Audit Committee monitors the auditor’s independence and concerns itself with the additional services rendered by the auditor, the issuance of the audit engagement, the determination of the key audit areas and the fee agreement.The Chair of the Audit Committee shall have specific knowledge and experience in applying accounting principles and internal control procedures.

The Chair shall be independent and shall not be a former member of the Management Board of the corporation whose term of office ended less than two years ago. The Chair of the Supervisory Board shall not chair the audit committee.
5.3.3 The Supervisory Board shall form a Nomination Committee, composed exclusively of shareholder representatives, which proposes suitable candidates to the Supervisory Board for its recommendations to the General Meeting.
5.4 Composition and Remuneration
5.4.1 The composition of the Supervisory Board has to ensure that its members collectively have the knowledge, skills, and professional expertise required to properly perform all duties.

The Supervisory Board shall determine concrete objectives regarding its composition, and shall prepare a profile of skills and expertise for the entire Board. Within the company-specific situation the composition of the Supervisory Board shall reflect appropriately the international activities of the company, potential conflicts of interest, the number of independent Supervisory Board members within the meaning of number 5.4.2, an age limit and a regular limit to Supervisory Board members’ term of office, both to be specified, as well as diversity. The specific requirements of the co-determination acts (Mitbestimmungsgesetze) in regard of the elected employee representatives have to be taken into account.

In listed corporations subject to the Co-determinaton Act, the Co-determination Act for the Coal, Iron and Steel Industry (Montan-Mitbestimmungsgesetz) or the Act Supplementing the Codetermination Act for the Coal, Iron and Steel Industry (Mitbestimmungsergänzungsgesetz), the Supervisory Board comprises at least 30% women and at least 30% men.* In other corporations subject to the Gender Equality Act (Gleichstellungsgesetz), the Supervisory Board determines targets for the share of female members.

Proposals by the Supervisory Board to the General Meeting shall take these targets into account, while simultaneously aiming at fulfilling the overall profile of required skills and expertise of the Supervisory Board. The implementation status shall be published in the Corporate Governance Report. This report shall also provide information about what the Supervisory Board regards as the appropriate number of independent Supervisory Board members representing shareholders, and the names of these members.

When making its proposals to the General Meeting concerning the election of new members to the Supervisory Board, the Supervisory Board shall satisfy itself that the respective candidates are able to devote the expected amount of time required. The proposal for a candidate shall be accompanied by a curriculum vitae, providing information on the candidate’s relevant knowledge, skills and experience; it shall be supplemented by an overview of the candidate’s material activities in addition to the Supervisory Board mandate, and shall be updated annually for all Supervisory Board members and published on the company’s website.

In its election proposals to the General Meeting, the Supervisory Board shall disclose the personal and business relationships of every candidate with the company, the governing bodies of the corporation and any shareholders with a material interest in the corporation.

The disclosure recommendation is limited to information and circumstances that, in the appraisal of the Supervisory Board, an objectively judging shareholder would consider decisive for their election decision.

A material interest in the meaning of this recommendation refers to shareholders who directly or indirectly hold more than 10% of the voting shares of the corporation.
5.4.2 The Supervisory Board shall include what it considers to be an appropriate number of independent members, thereby taking into account the shareholder structure. Within the meaning of this recommendation, Supervisory Board members are to be considered non-independent in particular if they have a personal or business relationship with the corporation, its governing bodies, a controlling shareholder or a company affiliated with the controlling shareholder that may cause a substantial and not merely temporary conflict of interest. No more than two former members of the Management Board shall be members of the Supervisory Board. Members of the Supervisory Board shall not be members of governing bodies of, or exercise advisory functions at, significant competitors of the company.
5.4.3 Supervisory Board members shall be elected individually. Where an application is made for the appointment of a Supervisory Board member by the Court, the term of that member shall be limited until the next General Meeting. Proposed candidates for the Supervisory Board Chair shall be announced to the shareholders.
5.4.4 Management Board members may not become a member of the corporation's Supervisory Board before two years have lapsed since the end of their appointment, unless they were elected on the proposal of shareholders holding more than 25% of the corporation's voting rights. In the latter case, appointment as Chair of the Supervisory Board shall be an exception that has to be justified to the General Meeting.
5.4.5 Each Supervisory Board member must ensure that they have sufficient time available to discharge their duties. Members of the Management Board of a listed corporation shall not accept more than a total of three Supervisory Board mandates in non-group listed corporations or on supervisory bodies of non-group entities that make similar requirements.

The members of the Supervisory Board take responsibility for undertaking any training or professional development measures necessary to fulfil their duties. The corporation shall adequately support them in this regard.
5.4.6 The remuneration of Supervisory Board members is specified by resolution of the General Meeting or in the Articles of Association. The status as Chair or deputy Chair of the Supervisory Board, as well as Chair or membership of a committee, shall also be taken into consideration in this context.

The members of the Supervisory Board receive remuneration that is appropriate to their tasks and the status of the corporation. If members of the Supervisory Board are granted performance-related remuneration, it shall be linked to sustainable growth of the company.

The remuneration of Supervisory Board members shall be disclosed individually in the notes to the financial statements or the management report, classified by remuneration components. Payments made or benefits granted by the company to Supervisory Board members for personal services, particularly advisory or agency services, shall also be disclosed separately on an individual basis.
5.4.7 If, in any given financial year, any member of the Supervisory Board attended half or less than half of the meetings of the Supervisory Board or the committees of which they are a member, this fact shall be noted in the report of the Supervisory Board. Participation by telephone or video conference also counts as attendance, but this should not be the rule.
5.5 Conflicts of Interest
5.5.1 Every member of the Supervisory Board is bound to observe the company’s best interests. No member of the Supervisory Board may pursue personal interests in their decisions or exploit for themselves business opportunities to which the company is entitled.
5.5.2 Each member of the Supervisory Board shall inform the Supervisory Board of any conflicts of interest, particularly if they could arise as a result of an advisory or governing body function at clients, suppliers, lenders or other third parties.
5.5.3 In its report, the Supervisory Board shall inform the General Meeting of any conflicts of interest that have arisen and how they were addressed. Material conflicts of interest involving a member of the Supervisory Board that are not merely temporary shall result in the termination of that member’s Supervisory Board mandate.
5.5.4 Advisory and other service agreements or contracts for work between a member of the Supervisory Board and the corporation are subject to the Supervisory Board’s approval.
5.6 Efficiency Review
  The Supervisory Board shall review the efficiency of its activities on a regular basis.
  convenience translation

* With effect from 1 January 2016, the minimum share of 30 percent respectively for men and women members of the Supervisory Board must be observed in any new elections or delegations that become necessary for filling individual or several positions on a Supervisory Board (Law on Equal Participation of Men and Women in Private-Sector and Public-Sector Management Positions, Section 25 Subsection 1 EG-AktG (Introductory Law of the German Stock Corporation Act), German Federal Gazette I. 2015, 642, 656).