Report and declaration on corporate governance
(part of the Management Report)
The principles of responsible and sustainable corporate governance determine the actions of the management and controlling bodies of Aurubis AG. In this declaration, the Executive Board reports – also on behalf of the Supervisory Board – in accordance with Section 3.10 of the German Corporate Governance Code and in accordance with Section 289a (1) German Commercial Code (HGB) about corporate governance.
Declaration of Conformity and reporting on corporate governance
In accordance with Section 161 German Stock Corporation Act (AktG), the Executive Board and Supervisory Board of a company listed in Germany are obliged to issue an annual declaration to the effect that the recommendations of the “Government Commission on the German Corporate Governance Code” published by the German Federal Ministry of Justice in the official section of the electronic Federal Gazette (Bundesanzeiger) were, and continue to be, complied with, or to list the recommendations that were not followed or which are not being followed currently, and to explain why.
The Executive Board and the Supervisory Board have dealt on several occasions in fiscal year 2015/16 with the topic of corporate governance, and jointly issued the updated Declaration of Conformity in accordance with Section 161 German Stock Corporation Act (AktG) on November 4, 2016. The declaration has been made permanently accessible to the public on the Aurubis AG website in the Investor Relations/Corporate Governance section. All Declarations of Conformity from the past five years are also permanently accessible to the public there.
Text of the Declaration of Conformity
“The Executive Board and Supervisory Board of Aurubis AG declare that the recommendations of the ‘Government Commission on the German Corporate Governance Code’ in the version dated May 5, 2015 have been applied since October 1, 2015 and will be applied with the following exceptions:
- Contracts concluded with new Executive Board members do not include a severance pay cap amounting to maximum two years’ compensation in the event of premature termination of the contract without good cause, including in the form of (modified) ‘connection clauses’. The first contracts of newly appointed Executive Board members only have a term of three years, and so a severance pay cap for Executive Board members would not make sense. Furthermore, in many related cases a severance pay cap would not be legally enforceable for Executive Board members. If there is neither good cause for revoking the appointment in terms of Section 84 (3) sentence 1 German Stock Corporation Act (AktG) nor good cause for terminating the employment contract without notice in terms of Section 626 German Civil Code, the service contract with the respective Executive Board member can only be terminated by mutual consent. In this case, the Executive Board member is not obliged to agree to a severance pay cap in terms of the code recommendation. (Modified) connection clauses that tie termination of the Executive Board employment contract to the revocation of the appointment for good cause, and which provide for a corresponding severance pay cap for this case cannot be unilaterally enforced by the Supervisory Board against the will of the Executive Board member concerned (deviation from code Section 4.2.3 paragraph 4).
- When proposing candidates at the Annual General Meeting, the Supervisory Board has focused and will continue to focus on the professional and personal qualifications of the candidates within the framework of the applicable legal regulations, in particular with respect to the German Gender Equality Act. It is naturally very relevant that the Company’s international activities, potential conflicts of interest, the number of independent Supervisory Board members established by the Supervisory Board and diversity are taken into account. In doing so, it is neither necessary to establish a regulatory limit for the length of membership in the Supervisory Board nor to specify concrete objectives and publish them in the corporate governance report (deviation from Code Section 5.4.1 paragraphs 2 and 3).
Hamburg, November 4, 2016
For the Executive Board
Jürgen Schachler Dr. Stefan Boel
Prof. Dr.-Ing. Heinz Jörg Fuhrmann
Working procedures of the Executive Board and Supervisory Board
Aurubis AG is a company subject to German law, on which the German Corporate Governance Code is also based. A basic principle of German stock corporation law is the dual management system, enacted in the two bodies of the Executive Board and Supervisory Board, strictly separated in terms of personnel between the Executive Board as the board of management, and the Supervisory Board as the monitoring organ, and each provided with independent responsibilities. The Executive Board and Supervisory Board of Aurubis AG work together closely and in a spirit of trust in the governance and supervision of the Company for the benefit of the Company.
The Executive Board
The Executive Board runs the Company on its own responsibility without instructions from third parties in accordance with the law, the Articles of Association and the Executive Board’s rules of procedure, taking into account the resolutions passed at the Annual General Meeting. The Executive Board represents the Company in dealings with third parties.
As the management body, the Executive Board runs the Company’s business on its own responsibility with the aim of achieving long-term added value in the Company’s interests while taking the needs of all stakeholders into account. The principle of overall responsibility applies, i.e. the members of the Executive Board collectively bear responsibility for the management of the entire Company. They work together in a spirit of cooperation and continuously communicate with one another about important measures and occurrences in their areas of responsibility. The overall responsibility of all Executive Board members notwithstanding, the individual members of the Executive Board oversee the areas of responsibility assigned to them in the Executive Board resolutions on their own responsibility. The principles of the collaboration between Aurubis AG’s Executive Board members are stated in the rules of procedure for the Executive Board issued by the Supervisory Board. These regulate, in particular, the allocation of responsibilities between individual Executive Board members, matters reserved for the full Executive Board, the passing of resolutions, i.e. the required majority for resolutions, and the rights and obligations of the Chief Executive Officer.
Certain Executive Board decisions of particular importance require the approval of the Supervisory Board. These decisions are stipulated in a catalogue. For example, the Supervisory Board makes decisions about investments in other companies if the measure is of great significance for the Group, as well as about substantial capital expenditure measures.
The Executive Board of Aurubis AG consisted of two or three members during the fiscal year. Pursuant to Section 105 (2) German Stock Corporation Act (AktG), Dr. Bernd Drouven was dispatched from the Supervisory Board to the Executive Board of Aurubis AG and was appointed Executive Board Chairman until October 31, 2015. Dr. Drouven also oversaw Business Unit Primary Copper. Mr. Jürgen Schachler has been Executive Board Chairman since July 1, 2016 and oversees Business Unit Primary Copper as well. In the interim period between November 1, 2015 and the start of Mr. Schachler’s term, Aurubis was led by Mr. Erwin Faust, Executive Board Spokesman, and Dr. Stefan Boel. Starting July 1, 2016, Mr. Erwin Faust resumed his full-time role as Chief Financial Officer, with Dr. Stefan Boel responsible for Business Unit Copper Products. Mr. Erwin Faust has been on sick leave since November 1, 2016 and is expected to return to the Company in the second quarter of 2017. For this reason, with the Supervisory Board resolution of November 24, 2016, Mr. Faust was released from his duties and obligations as CFO of Aurubis AG by mutual agreement. Mr. Jürgen Schachler and Dr. Stefan Boel have assumed Mr. Faust’s responsibilities for the time being.
The Executive Board keeps the Supervisory Board informed promptly and comprehensively, through written and verbal reports as well as in the scheduled meetings, about the strategy, planning, business development, important business transactions and the Group’s risk situation, including risk management and compliance, i.e. the measures taken to comply with legal requirements and internal corporate guidelines. The Executive Board undertakes detailed discussions regarding any business performance deviations from previously prepared budgets and targets, and provides reasons for them.
The Executive Board takes diversity into account when filling management positions in the Company. Due to the German law on equal participation of women and men in management positions in the private and public sectors from May 2015, certain companies in Germany are obligated for the first time to establish targets for the quota of women in the Supervisory Board, the Executive Board and the next two management levels and to determine the deadline by which the respective quotas should be achieved. The companies concerned were required to establish their targets, including the implementation deadlines, by September 30, 2015. The first implementation deadline is not permitted to extend past June 30, 2017. The next time an implementation deadline is set, the period can extend to five years. The law includes one exception, for the quota of women in the Supervisory Boards of exchange-listed companies that are also subject to co-determination, such as Aurubis AG: these boards must include a legal minimum of 30 % women and 30 % men for new members taking up open Supervisory Board mandates starting January 1, 2016.
On August 17, 2015 the Executive Board set targets for the proportion of women in the two management levels below the Executive Board for the first time and established an implementation deadline of June 30, 2017. The target for the relatively short period until June 30, 2017 is 20 % for each level. Currently, the proportion of women is 19 % for the first management level, follwing 20 % in the previous year, and 20 % for the second management level, previously 17.4 %.
The Supervisory Board
The Supervisory Board advises and monitors the Executive Board in the management of the Company. It appoints and rescinds the contracts of Executive Board members, decides on the compensation system for Executive Board members and specifies their respective total compensation. In the process, the Supervisory Board takes the relationship between Executive Board compensation and the compensation of the upper management level and the relevant workforce, in addition to the Company’s market position, into account. It also defines the target pension level for Executive Board members. The Personnel Committee submits corresponding suggestions to the Supervisory Board. The Supervisory Board established an age limit for the election of Supervisory Board members. The Supervisory Board did not place a limit on the length of membership in the Supervisory Board.
The Supervisory Board is included in strategy and planning as well as all aspects of major significance for the Company. The Supervisory Board has defined rights of veto in favor of the Supervisory Board for transactions of fundamental importance, in particular those that would significantly change the Company’s net assets, financial position and results of operations. In the case of important events, an extraordinary Supervisory Board meeting is convened if deemed necessary. The Chairman of the Supervisory Board coordinates the work within the Supervisory Board, chairs their meetings and attends to the affairs of the Supervisory Board externally. The Supervisory Board meets without the Executive Board as necessary.
The Supervisory Board has defined rules of procedure for its work. The representatives of the shareholders and the employees generally meet separately to prepare for the meetings.
Composition of the Supervisory Board
The Supervisory Board of Aurubis AG formed on the basis of co-determination has twelve members in accordance with the Articles of Association, of which six are elected by the shareholders and six by the employees in accordance with the German Law on Co-determination (MitbestG). The periods of office are identical. In accordance with the recommendations of the German Corporate Governance Code, the shareholders’ representatives were elected individually to the Supervisory Board in the last election at the Annual General Meeting on February 28, 2013. Dr. Drouven’s Supervisory Board mandate was put on hold during the period from November 1, 2014 to October 31, 2015, during which he was dispatched to the Executive Board.
The Supervisory Board has not specified any concrete objectives regarding its composition. When proposing candidates at the Annual General Meeting, the Supervisory Board will continue, in the future, to orient itself to the statutory provisions while focusing on the professional and personal qualifications of the candidates within the framework of the applicable legal regulations, in particular with respect to the German Gender Equality Act. It is naturally very relevant that the Company’s international activities, potential conflicts of interest, length of membership in the Supervisory Board, age limit for Supervisory Board members, number of independent Supervisory Board members in terms of Section 5.4.2 of the German Corporate Governance Code and diversity are all taken into account.
Dr. Bernd Drouven, a former member of the Aurubis AG Executive Board, is now a member of the Supervisory Board. His appointment as an Executive Board member ended less than two years ago. Dr. Bernd Drouven was elected to the Aurubis AG Supervisory Board pursuant to Section 100 (2) sentence 1 No. 4 German Stock Corporation Act (AktG) at the recommendation of Salzgitter Mannesmann GmbH. In the Supervisory Board’s analysis, the Supervisory Board has a suitable number of independent members who do not have a personal or professional relationship with the Company, its Supervisory Board or Executive Board, a controlling shareholder or someone connected with an associated company, which could be cause for a significant conflict of interest that is not merely temporary. The Supervisory Board’s term of office amounts to five years; the current term of office ends at the close of the Annual General Meeting during which the resolution regarding the exoneration of the Supervisory Board members is passed for fiscal year 2016/17.
Pursant to Section 96 (2) German Stock Corporation Act (AktG), the Supervisory Board of an exchange-listed stock corporation that is also subject to co-determination, such as Aurubis AG, must include a minimum of 30 % women and a minimum of 30 % men. These minimum quotas apply to new members taking up open Supervisory Board mandates starting January 1, 2016. The quotas are therefore expected to be taken into consideration for the first time in the election of new Supervisory Board members at the Annual General Meeting during which the resolution regarding the exoneration of the Supervisory Board members is passed for fiscal year 2016/17.
Pursuant to the German law on equal participation of women and men in management positions in the private and public sectors from May 2015, on September 11, 2015 the Supervisory Board established a target of 0 % for the quota of women in the Aurubis AG Executive Board and an implementation deadline of June 30, 2017 since at that time no new appointments were expected.
Supervisory Board committees
The Supervisory Board has formed five long-term committees in order to complement the work of the Supervisory Board and enable its members to prepare work for it: the Personnel Committee, the Audit Committee, the Nomination Committee, the Conciliation Committee and the Technology Committee. Some of the committees’ tasks as well as their composition and work are specified in the rules of procedure of the Supervisory Board.
The six-member Personnel Committee has equal numbers of representatives for the shareholders and employees. For the duration of Dr. Drouven’s dispatch to the Executive Board, his Personnel Committee mandate was put on hold in addition to his Supervisory Board mandate. The Personnel Committee therefore temporarily had only five members until October 31, 2015. It concerns itself with the structure and level of compensation paid to all members of the Executive Board, the preparation of Executive Board contracts and the selection of qualified candidates for Executive Board positions in the preparation of the necessary Supervisory Board resolutions. The chairman of the Personnel Committee is the chairman of the Supervisory Board.
The four-member Audit Committee with equal representation has the primary task of monitoring accounting and accounting processes, the effectiveness of the internal control system and the internal auditing system, the annual audit and especially the independence of the auditors, the additional services performed by auditors, the appointment of auditors, the focuses of the audit and the agreement of the fee as well as compliance. The Audit Committee Chairman during the reporting year, Dr. Ernst J. Wortberg, is an independent financial expert whose business career has provided him with special expertise and experience in the application of accounting principles and internal control procedures. He is not a former member of the Company’s Executive Board whose appointment ended less than two years ago.
The Nomination Committee did not meet during the reporting year.
The Nomination Committee only contains representatives for the shareholders in accordance with the German Corporate Governance Code. The Nomination Committee has the duty of proposing suitable candidates for election to the Supervisory Board at the Annual General Meeting.
The Conciliation Committee did not meet during the reporting year.
The Supervisory Board formed a Technology Committee on November 1, 2015. The four-member committee has equal numbers of representatives for the shareholders and employees. The Technology Committee’s duty is to strategically support and monitor the Executive Board in the implementation of significant capital expenditure projects. Dr. Drouven chairs this committee.
All the committees’ members are given in the list of Executive and Supervisory Boards in this Annual Report. The mandates of the Supervisory Board members in other legally formed Supervisory Boards and comparable German and foreign controlling bodies are included in the list of the Executive and Supervisory Boards in this Annual Report.
Avoiding conflicts of interest
The mandates of the Supervisory Board and Executive Board members in other legally formed Supervisory Boards and comparable German and foreign controlling bodies are included in the list of the Executive and Supervisory Boards in this Annual Report. No Executive Board member holds more than three Supervisory Board mandates at public limited companies that are not part of the Group, or in supervisory committees of non-Group companies with comparable requirements. Related parties are presented in the Notes to the Consolidated Financial Statements.
In transactions with Executive Board members, the Supervisory Board represents the Company. Significant transactions with parties related to an Executive Board member were and are only carried out with the agreement of the Supervisory Board.
In the last fiscal year no conflicts of interest occurred among Executive Board or Supervisory Board members that should have been disclosed to the Supervisory Board Chairman and the other Executive Board members. Nor were there any consulting or other service or work contracts between Supervisory Board members and the Company in the reporting year.
Retention in the D&O insurance
Aurubis AG has taken out D&O insurance (pecuniary loss/third-party indemnity) for the Executive Board and the Supervisory Board with a reasonable retention. Retention of 10 % of the damage or one and a half times the fixed annual compensation has been agreed.
Disclosures on relevant corporate governance practices
For Aurubis AG, the applicable legal regulations, in particular stock market law, the German Law on Co-determination (MitbestG), capital market law, the Articles of Association, the German Corporate Governance Code and the rules of procedure of the Supervisory Board and the Executive Board, provide the basis for the structure of management and controlling in the Company. Over and above the legal obligations, Aurubis has defined values and has derived a Code of Conduct from these, which regulates the framework of behavior and decisions and which provides guidance for corporate activities. The values and the Code of Conduct are published on the Company’s website. Each employee is briefed on these group-wide applicable values and the Code of Conduct as well as the corporate guidelines stemming from them. Mandatory instruction is given on special topics to (potentially) affected employees (e.g. antitrust law, anticorruption, environmental protection and occupational safety).
Shareholders and Annual General Meeting
The shareholders of Aurubis AG exercise their co-determination and supervisory rights at the Annual General Meeting, which occurs at least once a year. Resolutions are passed at the AGM on all matters defined by law that are binding for all shareholders and the Company. Each share grants the holder one vote in the AGM voting processes.
The participants of the Annual General Meeting elect the members of the Supervisory Board and pass a resolution regarding the exoneration of the members of the Executive Board and Supervisory Board. They decide on the utilization of the unappropriated earnings and on capital measures and give approval to company agreements. Furthermore, they make decisions about the compensation of the Supervisory Board and amendments to the Company’s Articles of Association. An Annual General Meeting is held once a year, in which the Executive Board and Supervisory Board give an account of the past fiscal year. The German Stock Corporation Act (AktG) stipulates that an extraordinary General Meeting can be convened in special cases.
Each shareholder who has registered in good time and can provide proof of his or her entitlement to participate in the Annual General Meeting and exercise his voting rights is entitled to attend the Annual General Meeting. Shareholders who cannot or do not wish to attend the Annual General Meeting in person may authorize a bank, a shareholders’ association, the proxies designated by Aurubis AG, who are bound to follow the shareholders’ instructions, or another person of their choice to exercise their voting rights. The shareholders also have the option of submitting their votes online before the Annual General Meeting. Aurubis AG will give further details in the invitation to the Annual General Meeting.
The invitation to the Annual General Meeting and the relevant reports and information for the resolutions are published in accordance with German stock corporation law and made available in English and German on the Aurubis AG website.
Controlling and risk management
It is also part of good corporate governance that the Company handles risks responsibly. As part of our value-oriented Group management, adequate risk management ensures that risks are identified early on and risk positions are minimized. Risk Management reports regularly to the Executive Board and the Supervisory Board’s Audit Committee. Compliance management was expanded across the Group in the fiscal year so as to comply with the requirements resulting from the relevant legal stipulations and the Code of Conduct. The Chief Compliance Officer reported regularly to the Executive Board and the Supervisory Board’s Audit Committee.
Details of risk management at Aurubis AG are given in the risk report, which includes the mandatory report on the accounting-related internal control and risk management system issued in accordance with Section 289 (5), Section 315 (2) German Commercial Code (HGB).
Aurubis AG regularly informs capital market participants and the interested general public about the Group’s economic situation and new facts. The Annual Report, half-yearly reports and the quarterly interim reports are published within the stipulated periods. Press releases and, if necessary, ad hoc announcements provide information on current events and new developments. Information is made available in German and English and is published in printed form or via suitable electronic media. Meetings are arranged on a regular basis with analysts and institutional investors as part of our Investor Relations activities. Apart from an annual analysts’ conference, conference calls are also held for analysts, especially in connection with the publication of quarterly figures. We have also immediately made available to shareholders, on the Company website, any new matters that were disclosed to financial analysts and similar contacts.
The Company’s Articles of Association, the current Declaration of Conformity and the Declarations of Conformity from the past five years are likewise available on the website.
Furthermore, immediately after receipt of a relevant notification pursuant to Section 21 German Securities Trading Act (WpHG), the achieving, exceeding or falling below of 3, 5, 10, 15, 20, 25, 30, 50 or 75 % of the voting rights in the Company is published in an information system that is distributed throughout Europe.
The scheduled dates of the main recurring events and publications – such as the Annual General Meeting, the Annual Report, interim reports, press conferences on the annual financial statements and analyst conferences – are listed in a financial calendar. The calendar is published sufficiently in advance and made permanently available on the Aurubis AG website.
In accordance with Section 15a of the previous version of the German Securities Trading Act (WpHG) until July 2, 2016, and in accordance with Art. 19 of the European Market Abuse Regulation effective since July 3, 2016, members of the Executive and Supervisory Boards, certain employees in management positions and people closely associated with them have to disclose acquisitions and sales of Company shares and related financial instruments. This does not apply if the total transactions per person do not reach an amount of € 5,000 per calendar year.
One member of the Supervisory Board carried out share transactions from October 1, 2015 to September 30, 2016:
- Prof. Dr. Fritz Vahrenholt: purchased 1,000 no-par-value shares.
The following members of the Executive Board informed the Company that they had acquired or sold no-par-value shares in the Company in the period from October 1, 2015 to September 30, 2016:
- Mr. Erwin Faust: purchased 5,000 no-par-value shares,
- Dr. Stefan Boel: purchased 2,750 no-par value shares,
- Mr. Erwin Faust: sold 5,000 no-par-value shares.
The Executive Board and Supervisory Board held less than 1 % of the shares issued by the Company as at September 30, 2016.
Financial reporting and annual audit
Aurubis AG prepares its consolidated financial statements and the consolidated interim reports in accordance with International Financial Reporting Standards (IFRS) as they should be applied in the European Union. The financial statements of Aurubis AG are issued in compliance with the German Commercial Code (HGB) and the German Stock Corporation Act (AktG). The financial statements of Aurubis AG and the consolidated financial statements are compiled by the Executive Board and examined by the auditors and the Supervisory Board. Aurubis AG released a Combined Management Report for the AG and the Group for fiscal year 2015/16. The interim reports and the half-yearly financial reports are discussed by the Audit Committee and the Executive Board before publication.
The Company’s auditor was elected at the Annual General Meeting in compliance with the provisions of the German Stock Corporation Act (AktG). PricewaterhouseCoopers AG Wirtschaftsprüfungsgesellschaft, Hamburg, was appointed auditor of the 2015/16 consolidated financial statements and the 2015/16 German Commercial Code (HGB) financial statements of Aurubis AG. Before submitting the proposal for the election of the auditors, the Supervisory Board obtained the declaration of independence from PricewaterhouseCoopers AG Wirtschaftsprüfungsgesellschaft as specified by the German Corporate Governance Code. The audits were performed in accordance with German auditing regulations, taking into account the generally accepted standards for the audit of financial statements promulgated by the German Institute of Public Auditors; in addition, the International Standards on Auditing were also observed. The audits also covered risk management and compliance with reporting obligations on corporate governance in accordance with Section 161 German Stock Corporation Act (AktG).
Furthermore, it was also agreed with the auditors that they would inform the Supervisory Board without delay about any possible grounds for exclusion or lack of impartiality and about the main findings and incidents arising during the audit.
Hamburg, December 2016
The Executive Board
Dr. Stefan Boel