Declaration regarding corporate management
KUKA Aktiengesellschaft treats Corporate Governance as a system for managing and monitoring the company. This includes the business policies and guidelines as well as internal and external regulatory and monitoring mechanisms. Effective and transparent Corporate Governance encourages our shareholders, employees and business partners, as well as the public, to have confidence in the management and supervision of the company. At KUKA Aktiengesellschaft, corporate management and supervision is structured as follows:
Shareholders and Annual General Meeting
Our shareholders exercise their rights at the Annual General Meeting. The Annual General Meeting is held during the first six months of the financial year. The chairperson of the Supervisory Board chairs the Annual General Meeting. The shareholders at the Annual General Meeting decide on all tasks assigned to them, as required by law.
Our goal is to make the shareholders’ participation in the Annual General Meeting as easy as possible. All documentation required for participation is published in advance on the Internet. Proxies may be appointed by shareholders to exercise their voting rights at the Annual General Meeting in accordance with their instructions.
KUKA Aktiengesellschaft’s Supervisory Board consists of twelve members as per the Articles of Association, of which six represent the shareholders and six the employees. The Supervisory Board chairperson is elected from the supervisory committee. The Supervisory Board currently has no chairman. The Deputy Chairman of the Supervisory Board is Mr. Michael Leppek1.
The employee representatives were elected to the Supervisory Board on April 18, 2013. The members of the Supervisory Board representing the shareholders were elected by the Annual General Meeting on June 5, 2013.
The term of office of the Supervisory Board members representing the employees and the members representing the shareholders ends upon adjournment of the Annual General Meeting in 2018. The same applies to substitute members and other successors in office of employees and shareholders who subsequently join the Supervisory Board.This is because section 10 para. 4 sent. 1 of the Articles of Association stipulates that where a Supervisory Board member leaves office early, the term of office of the new Supervisory Board member runs only for the remaining term of office of the retiring member.
This specifically relates to two employee representatives who were appointed to the Supervisory Board by orders of the Augsburg Local Court dated September 10, 2013 and June 1, 2016.
Furthermore, three members of the Supervisory Board representing the shareholders were appointed to the Supervisory Board by orders of the Augsburg Local Court dated February 8, 2017. Two seats of the shareholders' representatives on the Supervisory Board are currently still vacant; In accordance with section 104 of the German Stock Corporation Act (AktG), the Management Board of the company will make corresponding requests for the court appointment of two other members of the Supervisory Board2.
The Supervisory Board appoints the members of the Executive Board. It supervises and advises the Executive Board regarding the company’s management. Supervisory Board approval is required for key Executive Board decisions. The Supervisory Board meets at least four times per year and also meets without the entire Executive Board or individual Executive Board members as necessary. The Supervisory Board formed six committees from among its members, which prepare and supplement its work. These are:
(i) the Mediation Committe as per section 27 para. 3 of the German Act on Company Co-determination (MitbestG)
(ii) the Personnel Committee
(iii) the Audit Committee
(iv) the Nomination Committee
(v) the Strategy and Development Committee, and
(vi) the Technology and Production Committee
The Supervisory Board adopts the financial statements and approves the consolidated financial statements.
Furthermore, pursuant to section 111 para. 5 of the German Stock Corporation Act (AktG), the Supervisory Board has set target figures for the percentage of women on the Supervisory Board and the Executive Board. Against the background of current terms of office and in view of the status quo, the target percentage of women on the Supervisory Board has been set at 8.33%, to be reached by June 30, 2017 at the latest; this target has already been reached. Against the background of current terms of office which run to 2020 and in view of the status quo, the target percentage of women on the Executive Board has been set at 0%, to be reached by June 30, 2017 at the latest; this target has already been reached.
The Executive Board is responsible for managing the company. It has two members. The Executive Board reports to the Supervisory Board regularly, in a timely manner and comprehensively regarding all relevant issues related to business development, planning, financing and business performance. KUKA Aktiengesellschaft maintains a Directors & Officers liability insurance (D&O insurance) for all members of the Executive and Supervisory Boards. The deductible for members of the Executive Board amounts to 10% of damages or one-and-ahalf times their fixed annual remuneration, as per statutory requirements. For Supervisory Board members, the D&O insurance does not contain any deductible.
Percentage of women first and second management level
Furthermore, pursuant to section 76 para. 4 of the Stock Corporation Act, the Executive Board has determined that the target percentage of women for the two management levels below the Executive Board must be reached by June 30, 2017 at the latest (“target date”). The target percentage of women has been set at 15% for the first management level below the Executive Board and at 20% for the second management level below the Executive Board. As at December 31, 2016 the percentage of women was 17.6% at the first management level and 20% at the second management level. As a result, the targets set for the first two management levels have been reached regarding the proportion of women at the time of the decision making.
Accounting and annual audit
Since 2004, the annual financial statements of KUKA Group have been prepared in accordance with the International Accounting Standards (IAS) and the International Financial Reporting Standards (IFRS) as adopted by the European Union. An independent auditor elected at the Annual General Meeting audits the annual financial statements and the consolidated financial statements. At the recommendation of the Supervisory Board, shareholders at the 2016 Annual General Meeting chose KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin, as auditor for the annual financial statements and Group auditor for fiscal 2016 as well as for a potential review of the midyear report for fiscal 2016. The midyear report for fiscal 2016 was reviewed by the auditor based on the aforementioned resolution.
In accordance with the provisions of the Corporate Governance Code, the Supervisory Board’s Audit Committee reviewed the independence of the auditor, commissioned the auditor to carry out the audit, determined the key audit points and agreed on the fee.
It has been agreed with the independent auditor that the independent auditor will immediately report to the Supervisory Board any material findings or occurrences related to the Supervisory Board’s work that arise in the course of auditing the financial statements. Finally, it has also been agreed with the independent auditor that the independent auditor will inform the Supervisory Board and/or note in the audit report any finding of facts during the performance of the audit, indicating that the declarations issued by the Executive Board and the Supervisory Board with respect to the Code are in any way incorrect. As stipulated in the audit contract, the auditor reviewed the interim report as of June 30, 2016.
KUKA Aktiengesellschaft assigns a high priority to providing consistent, comprehensive and timely information. KUKA Aktiengesellschaft uses the Annual Report, the financial results press conference, the quarterly reports and the midyear report to report on business performance and results.
The scheduled dates of key recurring events and publications, such as the Annual General Meeting, the Annual Report and the interim reports, are summarized in a financial calendar. The calendar is published well in advance and is always available on KUKA Aktiengesellschaft’s website.
In addition, the company provides information by way of press releases and ad hoc announcements as required by law. All announcements and press releases can be viewed at www.kuka.com.
KUKA Aktiengesellschaft has prepared an insider directory as per statutory requirements. The affected individuals have been informed of their legal obligations and potential sanctions.
Declarations of compliance in accordance with section 161 AktG - Declaration of Compliance 2017
The declarations of compliance of the Executive Board and the Supervisory Board that have been issued for every financial year starting in 2002, have in each case been made available on the company’s website at www.kuka.com.
The identical declarations of the Executive Board dated February 8, 2017 and the Supervisory Board dated February 8, 2017 in accordance with section 161 para. 1 sent. 1 of the German Stock Corporation Act (AktG) and the German Corporate Governance Code (GCGC) read as follows:
“Since issuing the latest declarations of compliance of the Executive Board (January 18, 2016) and of the Supervisory Board (February 8, 2016), KUKA Aktiengesellschaft has complied withthe recommendations of the Government Commission on the German Corporate Governance Code as on May 5, 2015, which were published in the Bundesanzeiger (German Federal Gazette) dated June 12, 2015, with the exception of the divergences mentioned in today’s declarations of compliance; KUKA AG will continue to comply with these recommendations with the following deviations:
1. KUKA Aktiengesellschaft does not follow the recommendation for the Supervisory Board outlined in section 3.8 para. 3 of the GCGC. The Group D&O insurance policy does not provide for a deductible for members of the Supervisory Board. In KUKA Aktiengesellschaft’s view, Supervisory Board members do not require a deductible to ensure that they properly fulfill their monitoring role.
2. KUKA Aktiengesellschaft does not at present follow the recommendation for the Executive Board outlined in section 4.2.3 para. 2 sent. 6 of the GCGC. The reason is that currently one phantom share program that is part of the variable compensation of the Executive Board, is not restricted to certain maximum amounts. In addition to the maximum limits on the fixed remuneration and variable bonus, the employment contracts of the Executive Board members now also stipulate a maximum limit for phantom shares issued from 2015 onwards and payable from 2018 onwards. This is linked to a corresponding cap on the total remuneration. Retroactively capping total compensation (for overall salaries and variable payment components) would constitute a change in the terms of the contract, which cannot be unilaterally implemented by the Supervisory Board. Furthermore, it does not appear appropriate given the expected cooperation based on mutual trust between the Supervisory and Executive Boards (which is in fact expected by the GCGC).
KUKA Aktiengesellschaft adheres to almost all the other suggestions contained in the Code."
1 This declaration regarding Corporate Management reflects the status as of February 8, 2017 (date of resolution of the Supervisory Board). The Augsburg Local Court appointed Dr. Andy Gu as a member of the Supervisory Board by resolution dated February 8, 2017 (served on February 10, 2017). Dr. Andy Gu was elected Chairman of the Supervisory Board at an extraordinary meeting of the Supervi- sory Board on February 13, 2017.
2 This declaration regarding Corporate Management reflects the status as of February 8, 2017 (date of resolution of the Supervisory Board). The Augsburg Local Court appointed Mr. Paul Fang and Mr. Alexander Tan to be members of the Supervisory Board by order of February 22, 2017 (served on February 24, 2017).