Corporate Governance Report
The Executive Board and Supervisory Board report in accordance with Section 3.10 of the German Corporate Governance Code on corporate governance at the DMG MORI SEIKI group. The Executive Board and Supervisory Board of DMG MORI SEIKI AKTIENGESELLSCHAFT act in accordance with good corporate governance. This is reflected in a responsible and transparent corporate management and corporate control. Good corporate governance is an essential element of strategic thinking and acting at all levels of the group. The DMG MORI SEIKI group has been following the recommendations of the German Corporate Governance Code for years.
In November 2014 the Executive Board and Supervisory Board once again issued a declaration of conformity that confirmed without reservation compliance with all recommendations of the “Government Commission on the German Corporate Governance Code“ in the version of 24 June 2014 and its publication in the electronic Federal Gazette (Bundesanzeiger) on 30 September 2014. The Executive Board and Supervisory Board likewise confirm that the recommendations will also be complied wth in the future.
The current declaration of conformity and the corporate governance report are permanently accessible at our website www.dmgmoriseiki.com, as are the declarations of conformity of previous years.
Insurance for members of the Supervisory Board and of the Executive Board at the DMG MORI SEIKI group
At the DMG MORI SEIKI group D&O insurance (directors‘ and officers‘ liability insurance) and legal protection insurance have been taken out for all members of the Supervisory Board, the Executive Board and managing directors. The D&O insurance contains the excess provided for in the Code and in the pertinent statutory provisions, respectively.
Responsible Management of Opportunities and Risks
For us, part of good corporate governance is the comprehensive and systematic management of opportunities and risks within corporate management. This serves to identify and evaluate such opportunities and risks at an early stage.
Within the opportunities management system of the DMG MORI SEIKI GROUP, we focus our attention in particular on material individual opportunities, overall economic and industry-specific opportunities as well as on corporate strategic and performance-related opportunities.
Our risk management system includes an early risk identification system, an internal control system (ICS), and the central insurance management.
Forward-looking, our early risk identification system enables us to record and control the potential risks of future developments in the DMG MORI SEIKI GROUP. The recorded, assessed and controlled risks in question are circumstances which contain an inherent element of potential risk due to the prevailing environmental situation, and which are recorded, assessed and controlled in an adequate manner.
Our early risk identification system consists of five basic elements: the company-specific manual on risk management, the central DMG MORI SEIKI AKTIENGESELLSCHAFT risk management officer, decentralised risk management officers in each group company, area-specific risk management systems, which assess and prioritise individual risks, and the risk reporting system on corporate level and for each individual company with the accompanying ad hoc reporting system for material risks.
The early risk identification system at the DMG MORI SEIKI GROUP is structured in such a way that significant risks are systematically identified, assessed, aggregated, monitored and notified.
Risks in individual company divisions will be identified once per quarter according to prescribed risk areas. All potential risks thus recorded are analysed and assessed according to quantitative variables; hereby measures to reduce risks are also taken into account. Any risk which threat the continuation of business is reported immediately, also outside of the periodic reporting.
To be able to present the overall risk situation of the group, we determine the individual local and central risks as well as the group effects. Possible maximum loads from identified and assessed risks for the group are simulated using quantitative methods (Monte Carlo simulation).
The Executive Board and the Supervisory Board are informed regularly about the current risk situation of the group and that of the individual business units. They discuss the causes of the current risk position and the corresponding measures taken in-depth.
The early risk identification system set up by the Executive Board pursuant to Section 91(2) German Stock Corporation Act (AktG) is examined by the auditors, is continuously being further developed within the group and is adapted to suit changing circumstances on an ongoing basis.
The existing internal control system of the DMG MORI SEIKI GROUP serves to minimise or eliminate controllable risks in day-to-day business processes. Based on an analysis and documentation of basic business processes, which is updated annually, controllable risks are registered and eliminated or minimised to an acceptable level by arranging the organisational structure and workflow management accordingly, and by implementing suitable control measures. This is supported by existing internal guidelines and instructions as part of the ICS. The effectiveness of the ICS is judged by annual self-assessments. A report on the results of the self-assessments is given to the Executive Board and the Supervisory Board.
To minimise or eliminate risks, the DMG MORI SEIKI GROUP also deploys central insurance management. This determines the group-wide insurance strategy, and is responsible for the operational implementation.
Cooperation between the Executive Board and Supervisory Board
The Executive Board and Supervisory Board work closely together in the interests of the company. The Executive Board agrees the strategic direction of the company with the Supervisory Board and informs the latter regularly, timely and comprehensively of all issues of relevance to the company relating to strategy, business development, the risk position, risk management and compliance. Any deviations in the course of business from the established plans and targets of the group are discussed and the reasons therefor given. The Executive Board forwards the half-year and quarterly reports to the Finance and Audit Committee and discusses the reports in detail with the Finance and Audit Committee before their publication.
The articles of association and the rules of procedure provide for the right of consent of the Supervisory Board to a wide range of business transactions proposed by the Executive Board.
The remuneration of both the members of the Supervisory Board and of the Executive Board is presented in detail in the remuneration report as part of the management report of the consolidated financial statements of DMG MORI SEIKI AKTIENGESELLSCHAFT.
Objectives in the Composition of the Supervisory Board
Pursuant to Section 5.4.1 of the Corporate Governance Code, the Supervisory Board has agreed a self-imposed obligation to the effect that nominations for the future composition of the Supervisory Board should be aligned with the interests of the company and that in this respect the following objectives should be observed:
- The composition of the Supervisory Board with members on the owners' side with experience of management or managing internationally-operating companies should be maintained at the level as at present.
- Employees from significant areas within the DMG MORI SEIKI group should be taken into consideration for the employees' side.
- Knowledge of the group and of the most important markets for the group, as well as of technical relations and the management of technologies should be taken into account. The same applies for special knowledge and experience in applying accounting principles as well as of internal control mechanisms and compliance processes.
- The current female ratio should be increased from one female member at present to four female members by the re-elections to the Supervisory Board in 2018, whereby every effort should be made to achieve equal proportions of females on the owners' and employees' sides. This corresponds to current legal regulations, which apply from 2016.
- The independence of more than 50% of the Supervisory Board members should be retained; conflicts of interest should be avoided and an upper age limit of 70 years at the time of election to the Supervisory Board should be complied with.
The Supervisory Board reiterates its commitment to the afore-mentioned objectives and views the new composition of the Supervisory Board following the 111th Annual General Meeting as a significant step in their implementation.
Avoiding Conflicts of Interest
Members of the Executive Board and Supervisory Board are obliged to act in the interests of the company. In making decisions and in connection with their functions, the members of the Executive Board and of the Advisory Board may not pursue any personal interests or business opportunities that the company is entitled to, nor may they grant any unjustified benefits to any other person. Any conflicts of interest that arise out of these or any other situations must be notified to the Supervisory Board without delay and must be assessed and, as necessary, authorised by the Supervisory Board. The Supervisory Board reports to the Annual General Meeting on any conflicts of interest and on how they are dealt with.
Shareholders and Annual General Meeting
Our shareholders exercise their rights at the annual general meeting. The Annual General Meeting passes resolutions, inter alia, on the appropriation of profits, on the approval of the actions of the Supervisory Board and Executive Board, as well as on the election of the annual auditor or any changes to the articles of association. Shareholders may exercise their voting right in person. Shareholders who are unable to attend the annual general meeting personally are given the opportunity of exercising their voting right by proxy through an authorised person of their choice or by transfer of proxy to a representative of the group who will act as per their instructions.
In addition, it is possible to obtain information about the annual general meeting timely via the Internet. All documents and information are made available to shareholders in good time on our website.
We strive to ensure that our corporate communication offers the best possible transparency and relevance for all stakeholders, such as shareholders, capital lenders, business partners and employees, as well as for the general public.
Shareholders and potential investors can obtain information at any time on the current situation of the company from the Internet. Any interested party may subscribe to an electronic newsletter on our website, which reports the latest news from the group. Press releases, business and quarterly reports, as well as a detailed financial calendar in both German and English are published on our website.
The DMG MORI SEIKI group has drawn up a code of conduct that is applicable worldwide in all group companies and for all employees and, inter alia, governs their behaviour towards third parties. This code of conduct is set out more specifically in the compliance guidelines in the areas of anti-corruption, competition law behaviour, export controls and dealing with insider information.
Our compliance management system, which we introduced in 2008, has been expanded considerably in the reporting period. Alongside the Chief Compliance Officer, who reports directly to the chairman of the Executive Board, local compliance officers have been appointed at the plants or for the regions, respectively. The compliance officers ensure that the measures are implemented and thus support the Chief Compliance Officer in his duties. Beyond this, our compliance work is supported by the Compliance Committee. The Committee is composed of experts from the audit, legal, risk management, internal control system, personnel, IT, purchasing and sales departments; the Committee acts as an advisor to the Chief Compliance Officer. All employees have the possibility to address questions relating to compliance to their local compliance officer or to the Chief Compliance Officer or central compliance management, respectively. In addition, we have set up a compliance helpdesk, which employees may contact by email.
A further key aspect of our compliance activities in the reporting period was an extensive training initiative, which our managers worldwide attended personally to receive intensive training from the Chief Compliance Officer. In the role of disseminators, our management staff are required to pass this knowledge on to their staff. In addition, in the reporting period we drew up an online training concept.
In order to establish our compliance programme for 2015, we have carried out a dedicated analysis of all compliance risks, both centrally and locally, at the group units. We will align our compliance measures with the risks identified. In this respect the emphasis in 2015 will be placed on the topics of anti-corruption, antitrust law and export controls.
Financial Accounting and Annual Audit
We have again agreed with the annual auditors, KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin, for this reporting period that the chairman of the Supervisory Board and the chairman of the Finance and Audit Committee be informed without delay of any grounds for exclusion or bias that may arise during the audit insofar as these cannot be eliminated. In addition, the auditors shall also immediately report any findings and events that arise during the audit of the financial statements and consolidated financial statements that have a significant bearing on the work of the Supervisory Board. Moreover, the auditor will inform the Supervisory Board or note in the audit report if, when conducting the audit, any facts are discovered that are inconsistent with the declaration of conformity issued by the Executive Board and Supervisory Board under the corporate governance code.
Share Ownership of the Executive Board and Supervisory Board Members
The following members of the Supervisory Board and Executive Board are direct or indirect shareholders in DMG MORI SEIKI AKTIENGESELLSCHAFT:
- The Supervisory Board member Dr Masahiko Mori, as the majority shareholder in DMG MORI SEIKI COMPANY LIMITED (Nagoya, Japan), which holds 24.3 per cent of the share capital of DMG MORI SEIKI AKTIENGESELLSCHAFT, is indirectly a shareholder of DMG MORI SEIKI AKTIENGESELLSCHAFT.
- The Executive Board member Christian Thönes holds 1,080 no par value shares in DMG MORI SEIKI AKTIENGESELLSCHAFT as at 31 December 2014.
Pursuant to Section 15a of the German Securities Trading Act (WpHG), members of the Supervisory Board and Executive Board, or other persons subject to reporting requirements, must disclose any purchase or disposal of shares, as well as any related rights of purchase or disposal, such as options or rights that are directly dependent upon the quoted share price of the company.
Suggestions of the German Corporate Governance Code
The DMG MORI SEIKI group also complies with the suggestions of the Code to a large extent. Deviations arise at present in the area of the annual general meeting. The Code suggests that it should be possible to contact the proxy exercising the shareholder’s voting rights as instructed by the shareholder during the annual general meeting. As before, for organisational reasons, we have not provided for the complete transmission of the annual general meeting over the internet.
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