DOUGLAS HOLDING AG’s principles of corporate governance, which were first established in 2000 and updated several times since, along with the requirements, recommendations, and suggestions for responsible corporate governance specified in the German Corporate Governance Code [DCGK], are an integral part of the Group’s corporate culture.
The corporate governance principles of DOUGLAS HOLDING AG with the objective of creating value are a vital component of the conscientious management and supervisory system of the DOUGLAS Group. Corporate governance emphasizes transparency and openness, respect for the interests of shareholders, fairness to customers and employees, and efficient collaboration built on trust between the Executive and Supervisory Boards with the goal of producing a sustainable increase in the value of the DOUGLAS Group. Compliance with the current applicable versions of the DOUGLAS principles of corporate governance and the German Corporate Governance Code [DCGK] is monitored by a corporate governance officer appointed by the Supervisory Board.
With regard to the composition of the Executive Board, the Supervisory Board has moved towards inclusion of female executives on the Executive Board with the first woman appointed to the Board in 2000. The same holds true for the Supervisory Board, where women have served for decades. Moreover, close attention is paid to ensure that the members possess the necessary knowledge, skills, and professional experience to properly perform the duties that are so crucial for a specialty retail business such as DOUGLAS HOLDING AG. These capabilities range from international marketing expertise to real estate management and capital market experience. The objective is to provide the Executive Board with the best possible expertise, experience, and advice to deal with its challenging responsibilities. This applies in particular to issues arising from new developments where one cannot draw on prior personal experience.
During the 2010/11 fiscal year, the Executive and Supervisory Boards of DOUGLAS HOLDING AG again followed the recommendations and suggestions of the German Corporate Governance Code [DCGK] with the sole exception of two of the recommendations:
1. Although the DOUGLAS HOLDING AG’s fiscal year ends on September 30, its consolidated financial statements are not published 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 increased public awareness than could be achieved by publication at the end of December (German Corporate Governance Code, No. 7.1.2. sentence 4). Each year, DOUGLAS HOLDING AG releases a trading statement a few days after the close of the fiscal year.
2. Pursuant to statutory provisions, DOUGLAS HOLDING AG discloses the DOUGLAS HOLDING AG shares held by the members of the Executive and Supervisory Boards to the extent that the shareholding exceeds or falls short of the statutory reporting limits stipulated in Section 21 of the German Securities Trading Act [WpHG] as well as all transactions of DOUGLAS HOLDING shares involving these members. To protect their privacy, no further details of the Executive and Supervisory Board members’ shareholdings are disclosed (German Corporate Governance Code, No. 6.6. (2)).
In accordance with the most current version of the German Corporate Governance Code [DCGK] dated May 26, 2010, and pursuant to Section 161 of the German Stock Corporation Act [AktG], the Executive and Supervisory Boards of DOUGLAS HOLDING AG have issued a declaration of compliance that can be found online at www.douglas-holding.com/de/cg.
Remuneration of the Executive Board
The remuneration system for Executive Board members was resolved by the plenary Supervisory Board. The amount of the remuneration of DOUGLAS HOLDING AG Executive Board members is proposed by the Supervisory Board’s Executive Committee and defined by the plenary Supervisory Board. In the 2010/11 fiscal year, a total of EUR 3,173,900 was paid to the members of the Executive Board for performing their duties at DOUGLAS HOLDING AG and its subsidiaries, with non-performance related income totaling EUR 1,350,800, while performance related income came to EUR 1,823,100. The variable pay of all Executive Board members consists of quantitative and qualitative components and is limited to a percentage of the base salary that is clearly defined individually. Remuneration paid on the basis of quantitative criteria is based on the weighted result from ordinary business activities of the DOUGLAS Group less a 10 percent virtual return on the Group’s equity capital. As far as the division directors are concerned, remuneration paid on the basis of quantitative criteria is similarly based on the results of the individual divisions. Pay on the basis of qualitative criteria is based on an individual performance evaluation of the respective members by the Executive Board. The remuneration structure is designed to promote sustainable corporate development.
There are no stock option programs for Executive Board members. A D & O insurance for the Executive and Supervisory Boards with a reasonable deductible was first taken out in the 2007/08 fiscal year. Since July 2010, the deductible has conformed to statutory provisions.
Further details regarding remuneration paid to the Executive Board members, including pensions and provisions for pensions, are disclosed at www.douglas-holding.com/en/cg. A breakdown by Executive Board members can be found on page 167 of the Notes to the consolidated financial statements.
Remuneration of the Supervisory Board
The remuneration of the Supervisory Board is determined by the Annual Shareholders’ Meeting and is governed by Section 14 of the Articles of Incorporation of DOUGLAS HOLDING AG. It contains a fixed as well as a variable performance-related component that is tied to earnings per share. The time spent chairing and performing committee work is appropriately reflected in the remuneration. In the 2010/11 fiscal year, a total of EUR 794,700 was paid to the members of the Supervisory Board, with fixed remuneration totaling EUR 618,900, while variable remuneration came to EUR 175,800. The individual remuneration of the members of the Supervisory Board can be found in the Notes to the consolidated financial statements on page 168 of this Annual Report.
No conflicts of interest
No conflicts of interest, which must be disclosed without delay to the Supervisory Board, were reported by the members of the Executive and Supervisory Boards. The Supervisory Board believes that it has an adequate number of independent members. Within the scope of the regular efficiency audit, the Supervisory Board determined that its work is organized efficiently and cooperation between the Executive and Supervisory Boards is excellent.
During the 2010/11 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 [WpHG] with regard to transactions involving DOUGLAS shares. This also applies to transactions with derivatives. Securities transactions (directors’ dealings) can be found in the Notes to the consolidated financial statements on page 168 of this Annual Report.
Independence of the auditor
Prior to commencing the audit of the annual financial statements for the 2010/11 fiscal year, the Supervisory Board obtained a statement from the auditor, Susat & Partner, to the effect that there were no business, financial, personal, or other ties between the auditor, members of its executive bodies, and its audit managers, on one hand, and the company and the members of its executive bodies, on the other, which could constitute grounds to doubt the auditor’s independence. The statement also includes the confirmation that no significant consulting services were rendered by Susat & Partner during the year under review or agreed for the 2011/12 fiscal year.