Summarised corporate governance declaration in accordance with Section 315d of the German Commercial Code in conjunction with Section 289f of the German Commercial Code
As a listed European Company (SE) domiciled in Germany, the corporate governance of innogy SE (‘innogy’) is primarily determined by Regulation (EC) No. 2157/2001 of the Council of 8 October 2001 on the Statute for a European Company (SE) (‘SE Regulation’), the German Act on the Implementation of the SE Regulation, the Agreement on the Participation of Employees in innogy SE of 20 December 2016, the German Stock Corporation Act, and the Articles of Incorporation of innogy, as well as by the regulations of the most recent version of the German Corporate Governance Code.
Pursuant to Article 38 of the SE Regulation in connection with Article 6 of the Articles of Incorporation, innogy uses a so-called ‘two-tier management system’. This system is characterised by the strict separation of personnel between the Executive Board as the management organ and the Supervisory Board as the supervisory organ. The Executive Board and the Supervisory Board work together closely in the interests of the company.
The Executive Board is responsible for managing the company with the goal of creating value over the long term. The principle of collective responsibility is applied, meaning that the members of the Executive Board are jointly responsible for the management of the company as a whole. They formulate the corporate strategy and ensure its execution, in coordination with the Supervisory Board. The fundamental aspects of the Executive Board’s work are summarised in Rules of Procedure of the Executive Board. In particular, these Rules govern the responsibility of the individual members of the Board, the matters reserved for the Board as a whole, the passage of resolutions, necessary voting majorities and the rights and obligations of the Chair of the Executive Board. The Executive Board of innogy currently has three members. Additional information on the members of the Executive Board, in particular on the responsibilities of their positions can be found here.
The Executive Board notifies the Supervisory Board regularly, punctually and comprehensively in respect of all material aspects of the development of business, significant business events and the current earnings and risk situation as well as the risk management of the innogy Group. Any deviations of business from previously prepared plans and targets are explained and justified. Furthermore, the Executive Board regularly reports on the subject of compliance, i.e. measures to comply with legal regulations and internal company directives, which is also a responsibility of the Executive Board.
The Supervisory Board advises the Executive Board in managing the company and monitors its activities. It appoints and dismisses the members of the Executive Board, decides on the compensation system for the Executive Board members and determines their individual overall compensation. It is involved in all decisions which are of fundamental importance for innogy. The Supervisory Board of innogy has 20 members, who are appointed by the Annual General Meeting. Of the 20 members, ten members are appointed pursuant to the binding proposal of the employees. The fundamental aspects of the Supervisory Board’s work are governed by Rules of Procedure of the Supervisory Board. Amongst other things, these Rules provide for the formation of committees. The Supervisory Board of innogy currently has four committees: the Executive and Personnel Affairs Committee, the Audit Committee, the Related Party Transactions Committee and the Nomination Committee. The responsibilities of the Committees and their composition are specified in Article 10 et seq. of Rules of Procedure of the Supervisory Board. Information on the members of the committees can be found here. The chairs of the committees regularly inform the Supervisory Board on the work of the committees. Additional information on the specific work of the Supervisory Board and its committees can be found in the current version of the Supervisory Board Report.
Finally, the Articles of Incorporation of innogy (Article 10) and the Rules of Procedure of the Supervisory Board (Article 8) include a catalogue of transactions, for which the Executive Board requires Supervisory Board approval.
innogy considers responsible, transparent corporate governance to be the foundation for the company’s long-term success. Our guiding principles are set out in the most recent version of the German Corporate Governance Code (GCGC), which was introduced in 2002. After an orderly audit, on 11 December 2019 the Executive Board and the Supervisory Board of innogy issued the following Declaration of Compliance pursuant to Section 161 of the German Stock Corporation Act:
innogy SE complied with the recommendations of the ‘German Corporate Governance Code Commission’ publicised by the German Federal Ministry of Justice and Consumer Protection in the official section of the German Federal Gazette (Bundesanzeiger) dated 24 April 2017 since submitting its last statement of compliance on 11 December 2018, with the subsequent exception.
The recommendation in Section 7.1.2 Sentence 3 of the German Corporate Governance Code was not complied with as a one-off, in that the Group quarterly statement for the third quarter of 2019 was not published within the recommended term of 45 days after the reporting period had ended, but was instead published later on 28 November 2019. This was for the following reason: innogy SE obtained a new majority shareholder in the form of E.ON SE on 18 September 2019, which communicated that publication would be postponed to 29 November 2019 due to the additional work involved in the initial consolidation. In order to mitigate the risk of incidents after the innogy balance sheet date, which would have to be disclosed within the E.ON Group as they could result in inconsistent reporting, innogy SE decided to schedule the publication date of innogy SE as close as possible to the publication date of E.ON SE.
innogy SE updated the statement of compliance dated 11 December 2018 on 10 October 2019 with regard to the aforementioned deviation.
In the future, innogy SE will return to complying with all recommendations of the Code in the version publicised on 24 April 2017.
On 22 June 2017 the Supervisory Board of innogy set a target of 25% for the female quota in the Executive Board starting from 1 July 2017. This target is to be reached by 30 June 2022. For the same period, starting from 28 June 2017 the Executive Board set a target of 25% for the first management level and 20% for the second management level below the Executive Board. The management levels are determined by reporting chains.
innogy’s Supervisory Board complies with the legal gender quota of at least 30%.
With regard to the members of the supervisory organ, on 16 August 2016 the Supervisory Board adopted a list of requirements (competency profile) in line with the recommendations of the GCGC, which is designed to ensure an orderly selection process using objective aptitude criteria for the selection and court appointment of new Supervisory Board members of the company. The list of requirements also includes targets for diversity in staffing the Supervisory Board (Diversity Strategy of the Supervisory Board). In this regard, the following aspects are especially relevant:
- Taking account of the company’s specific situation, due regard should be paid to diversity when proposing candidates.
- As stipulated by law and the GCGC, it must be ensured that the Supervisory Board provides professional monitoring and advice. The objective is that, for every aspect of Supervisory Board activity, there be at least one expert Supervisory Board member who is available as a contact so that, on the whole, the Supervisory Board possesses the know-how and experience required.
- A balanced composition of the body is to be ensured by broad representation of the following specialised knowledge in particular:
– adequate professional knowledge of the energy sector;
– management experience from activities in the private sector or political sphere, in company management or as a member of a supervisory board or comparable body;
– international experience, for example through supervisory board members of different nationalities or individuals who have worked abroad for a long period of time;
– adequate professional knowledge in employee-related subjects, including issues of corporate co-determination.
- At least one independent member of the Supervisory Board must have professional knowledge in the fields of accounting or auditing. The Chair of the Audit Committee should have specialised knowledge and experience in the application of accounting principles and internal controlling procedures.
- Furthermore, when proposing candidates, care should be taken to ensure that a sufficient number of them do not serve on the Supervisory Board for more than 15 years. This does not affect the legal validity of the election of employee representatives. Furthermore, the Supervisory Board decided that candidates may also be nominated if their tenure has exceeded the limit in cases where this helps to safeguard valuable experience gained from working on the Supervisory Board of innogy or to achieve other diversity goals.
- More than two former members of the Executive Board should not serve on the Supervisory Board.
The list of requirements is supplemented by Article 2, Paragraph 1 of the Rules of Procedure of the Supervisory Board, which stipulates that the tenure of Supervisory Board members may not extend beyond the end of the Annual General Meeting following their reaching the age of 72.
The selection of candidates for shareholder representatives on the Supervisory Board occurs with a vote by the Nomination Committee submitted to the Supervisory Board, which then presents a corresponding proposal to the Annual General Meeting. In the course of selecting the employee representatives on the Supervisory Board, the responsible nominating bodies should also take the criteria into consideration.
The current composition of the Supervisory Board fulfils all of the diversity targets for this body, with the following exception. Mr. Oppenhoff is a member of the Supervisory Board although he has already reached the above age limit. In the opinion of the Supervisory Board, the experience and reputation that Mr. Oppenhoff contributes to the activities of the Supervisory Board outweigh the advantages associated with the age limit. The Supervisory Board of innogy also complies with the legal gender quota of at least 30%.
The Supervisory Board has also adopted a list of requirements for members of the Executive Board, in which the criteria for the selection of new Executive Board members are described. Taking account of the company’s specific situation, due regard should also be paid to diversity when proposing candidates. Specifically, the following staffing targets are relevant in terms of diversity (Diversity Strategy of the Executive Board):
- As stipulated by law and the GCGC, qualified, responsible corporate management in the interests of the company with the goal of long-term value creation is to be ensured, taking into consideration the interests of the shareholders, the company’s employees and other groups interacting with the company (stakeholders). For every aspect of the Executive Board’s activities, the objective is that there be at least one Executive Board member with specialised competency, so that, on the whole, the Executive Board possesses the required know-how and experience.
- Each member of the Executive Board should have the specialised and broad-based professional expertise which is necessary for the position the member holds and is important for the company’s business activities. In particular, this includes specialised knowledge of various fields and levels of energy policy.
- Above and beyond this, another goal is to ensure the adequate representation of women (cf. target quota).
- The international experience of the Executive Board should be continued and reinforced through the selection of individuals with many years of international work and Board members of different nationalities.
A resolution of the Supervisory Board also stipulates that members of the Executive Board should not be appointed after the month in which they reach the age of 63.
New Executive Board members are appointed by a resolution of the Supervisory Board, based on the recommendation of the Executive and Personnel Affairs Committee.
The present composition of the Executive Board meets all of the current diversity goals. The 25% target ratio of females on the Executive Board is to be reached by 30 June 2022 (see above). Presently, no members of the Executive Board are female.
innogy is conscious of its role in society and its responsibility vis-à-vis customers and business partners, as well as its shareholders and employees. The innogy Code of Conduct sets out principles which are closely aligned with those of the Global Compact of the United Nations and forms the basis for responsible, law-abiding action by the company. The Code of Conduct is the foundation for innogy’s business activities and applies throughout the innogy Group, equally in all sectors and countries. Supported by its own groupwide compliance organisation, innogy works to ensure that its employees and bodies comply with its Code of Conduct and specific regulations: Uniform implementation of the groupwide principles set forth in the innogy Code of Conduct, particularly those related to the prevention of corruption, is promoted by Compliance Officers at all of innogy’s companies. Generally speaking, there is pooled responsibility for innogy’s subsidiaries in each country outside of Germany. One of the key responsibilities of the compliance organisation is to raise the awareness of employees and corporate bodies for compliance-related issues using face-to-face training and Web-based programmes, and to highlight relevant risk factors. This organisation is also responsible for compliance consulting and monitoring the processing of compliance violations. An external contact partner is also available to take reports of violation of the Code of Conduct from employees or external third parties.
Essen, February 2020
The Executive Board