First established in 2000 and updated several times since, the principles of Corporate Governance in effect at DOUGLAS HOLDING AG – like the requirements, recommendations and proposals for responsible corporate governance specified in the German Corporate Governance Code – form a constituent component of the Group’s corporate culture.
The Corporate Governance principles adopted by DOUGLAS HOLDING AG help to ensure that the DOUGLAS Group is managed and controlled in a responsible manner which is designed to create value. Corporate Governance generates transparency and openness, respect for the interests of shareowners, fairness to customers and employees and efficient and trusting cooperation between the Executive and Supervisory Boards, with the goal of producing a sustained increase in value within the DOUGLAS Group. Compliance with the applicable versions of the DOUGLAS Principles of Corporate Governance and the German Corporate Governance Code is monitored by a compliance officer specially appointed by the Supervisory Board.
Implementation of Code Recommendations
The changes made to the German Corporate Governance Code on May 26, 2010 from the Federal Commission of the German Corporate Governance Code have been implemented by DOUGLAS HOLDING AG except for the postal ballot.
In the composition of the Executive Board, the Supervisory Board already provided in the past for a proper consideration of female executives early on with the first time appointment of a female executive on the Executive Board back in 2000. The same holds true for the Supervisory Board, in which women have been represented for decades. In addition, due care is taken that the members possess the required knowledge, skills and professional experience needed for the proper performance of their duties. This also applies to next year’s election of four representatives from the shareholder side. The proposed candidates possess special knowledge, skills and experience in areas of great importance to the specialty retail business of DOUGLAS HOLDING AG. This spectrum extends from international marketing expertise to subjects such as real estate management and capital market experience.
The aim is to assist the Executive Board as best as possible in its responsibilities and challenges with know-how, experience and advice. This applies in particular to issues arising from new developments, which cannot be drawn on personal experience.
During the 2009/10 fiscal year, the Executive and Supervisory Boards of DOUGLAS HOLDING AG again demonstrated full compliance with the recommendations and proposals of the most recent version of the German Corporate Governance Code (DCGK) except for the three items listed below:
1. The DOUGLAS HOLDING AG is refraining from the option of postal voting at the 2011 Annual Shareholders’ Meeting (No. 2.3.3. DCGK Code). Given the high attendance at the Annual Shareholders’ Meeting and the shareholder structure, the additional costs to be incurred would be disproportionate to the expected voting turnout by postal vote. Also, the postal vote does not offer any perceived added value to the shareholders in the personal exercise of their rights against the written proxy offered by the DOUGLAS HOLDING AG up to the date of the Annual Shareholders’ Meeting. Instead the DOUGLAS HOLDING AG is investing in an electronic voting system that facilitates the casting of votes at the Annual Shareholders’ Meeting and shall provide for a faster determination of the voting results.
2. Although the DOUGLAS HOLDING AG’s fiscal year ends on September 30, the publication of its consolidated financial statements does not take place prior to the close of that calendar year (12/31), but rather in January of the following year. This ensures greater attention from investors and better visibility with shareholders and the media than might be expected from publication at the end of December (No. 7.1.2. sent. 4, DCGK Code). Next year, DOUGLAS HOLDING AG will release a Trading Statement a few days after the close of the financial year, as it has done in the past.
3. In line with the statutory provisions, DOUGLAS HOLDING AG discloses the shares in DOUGLAS HOLDING AG held by the members of the Executive and Supervisory Boards to the extent that the shareholding exceeds or falls short of the relevant reporting limits prescribed by Section 21 of the German Securities Trading Act (WpHG). It also publishes details of all transactions of DOUGLAS HOLDING shares that involve the above individuals. To protect their privacy, no further details of the Executive and Supervisory Board members’ shareholdings are disclosed (No. 6.6. para. 2, DCGK Code).
In conformity with the current version of the German Corporate Governance Code as of May 26, 2010, the Executive and Supervisory Boards of DOUGLAS HOLDING AG have issued a declaration of compliance pursuant to Section 161 of the German Stock Corporation Law (AktG). This is published under www.douglas-holding.com/en/cg.
Executive Board remuneration
The remuneration system for Executive Board members is resolved by the entire Supervisory Board. The remuneration amount of DOUGLAS HOLDING AG Executive Board members is proposed by the Supervisory Board’s Executive Committee and determined by the entire Supervisory Board. In the 2009/10 fiscal year, a total of 2,821.2 thousand EUR was paid to the members of the Executive Board for their work rendered on behalf of DOUGLAS HOLDING AG and its subsidiaries. Of this amount, 1,326.1 thousand EUR comprised of non-performance related and 1,495.1 thousand EUR performance-related income. The variable components for compensation to all Executive Board members (except for the Chief Human Resources Officer) are based on the result from ordinary business activities of the DOUGLAS Group less a 10 percent virtual accrual of the Group’s equity. The variable component of the Chief Human Resources Officer’s remuneration depends 50 percent on the result from ordinary business activities and 50 percent on individually agreed target arrangements. The remuneration structure is in line with a sustainable business development. Variable remuneration is not based on the result of a respective fiscal year, but is weighted for an average of the results recorded for the past three fiscal years. The variable remuneration is also limited, because it cannot exceed a clearly defined percentage in base salary. With respect to the other Division heads, the variable components are based on the net results of the respective division in a comparative form.
There are no stock option programs for Executive Board members. A D&O insurance policy with an appropriate self-deductible portion was entered into for the Executive and Supervisory Boards for the first time in fiscal year 2007/08. The self-deductible portion has corresponded to the statutory requirements in effect since July 1, 2010.
Further details regarding the remuneration paid to the Executive Board members – including pensions and pension provisions – are published under www.douglas-holding.com/en/cg; a breakdown by member is shown in the Notes accompanying the consolidated financial statements on page 167 of this Annual Report.
Supervisory Board remuneration
The remuneration of the Supervisory Board is determined by the Annual Shareholders’ Meeting and governed by Section 14 of the statutes of DOUGLAS HOLDING AG. Such remuneration contains a fixed as well as a variable, performance-oriented component that is keyed to the earnings per share. The time spent chairing and attending committee meetings is accorded due consideration. The members of the DOUGLAS HOLDING AG Supervisory Board were paid a total of 811.2 thousand EUR during the 2009/10 fiscal year. Of this sum, 608.2 thousand EUR comprised fixed components and 203.0 thousand EUR variable components. A breakdown by member is shown in the Notes accompanying the consolidated financial statements on page 168 of this Annual Report.
No conflict of interest
No conflicts of interest subject to the Supervisory Board’s immediate notification were reported by the members of the Executive and Supervisory Boards. In the estimation of the DOUGLAS HOLDING AG Supervisory Board, the number of independent members in its ranks is sufficient. The efficiency examination – performed at intervals – confirmed that the Supervisory Board is efficiently organized and the collaboration between the Executive and Supervisory Boards functions quite well.
During the 2009/10 fiscal year, the members of the Executive and Supervisory Boards as well as the senior management of the DOUGLAS Group complied with the applicable reporting requirements of the German Securities Trading Act in respect to trading involving DOUGLAS shares. This also applies to the trading of derivatives. Security trading information can be found in the Notes accompanying the consolidated financial statements on page 168 of this Annual Report.
Independence of Auditors
Prior to commencing the audit of the consolidated financial report for the fiscal year 2009/10, the Supervisory Board obtained confirmation from the auditors, Susat & Partner, to the effect that there were no business, financial, personal or other ties between the auditors, members of their executive bodies or the audit directors on the one hand and the company and the members of its executive bodies on the other which might constitute grounds to doubt the auditors’ independence. It was further confirmed that no consulting services of significance were rendered by Susat & Partner during the year under review or agreed for the fiscal year 2010/11.