In this declaration, HHLA’s Executive Board and Supervisory Board provide details on the principles of corporate management in accordance with Section 289a of the German Commercial Code (HGB) and on the company’s corporate governance in line with Section 3.10 of the German Corporate Governance Code (hereafter “the Code” or “GCGC”). The following declaration includes in particular the declaration of compliance of the Executive Board and Supervisory Board, relevant practices of corporate management that go beyond the legal requirements, details regarding the composition and functions of the Executive Board, Supervisory Board and Supervisory Board committees as well as details regarding other material corporate governance structures.
Implementation of the Code
Corporate governance stands for the responsible management and control of a company aimed at creating sustainable value. The management and corporate culture of HHLA complies with legal regulations and – with only a few exceptions – the recommendations of the Code as well as the majority of the Code’s additional suggestions. HHLA’s Supervisory Board and Executive Board expressly support the Code and the objectives and purposes which it pursues. Responsible and transparent corporate management geared towards sustainable value has always been an essential foundation of HHLA’s commercial success.
The Executive Board and Supervisory Board once again took great care to ensure the Code’s standards were met in the 2015 financial year. They took into account the amendments to the Code of 5 May 2015 (published in the German Federal Gazette on 12 May 2015), submitted their annual declaration of compliance with the Code’s recommendations in December 2015 in accordance with Section 161 of the German Stock Corporation Act (AktG) and explained in detail the reasons for the few exceptions to its recommendations. The current declaration and the declarations of compliance relating to previous years can be viewed by shareholders and the public on HHLA’s website at www.hhla.de/corporategovernance.
Declaration of Compliance in Accordance with Section 161 of the German Stock Corporation Act (AktG)
The Executive and Supervisory Board submitted the following joint declaration of compliance in accordance with Section 161 of the German Stock Corporation Act (AktG) in December 2015:
The Executive Board and Supervisory Board of Hamburger Hafen und Logistik AG hereby state after due examination that in the period starting 17 December 2014 (the date on which the previous declaration of compliance was issued), HHLA complied and shall comply in the future with the recommendations of the German Corporate Governance Code (“the Code” or “GCGC”) in the version dated 24 June 2014 and – subsequent to its taking effect – the version dated 5 May 2015 with the following exceptions:
a) Section 4.2.3 of the GCGC specifies that in concluding Executive Board contracts, care is to be taken to ensure that payments made to an Executive Board member on premature termination of contract without serious cause or as a result of change of control do not exceed certain levels (severance payment caps) and that the severance payment cap in question is based on the total remuneration for the previous year and, where applicable, on the probable total compensation for the current financial year. Since the amendment of two Executive Board contracts in September 2015, there are currently still two active contracts of employment with compensation provisions stating that any Executive Board member whose contract is terminated early without good cause, or who loses their Executive Board seat due to a change of control or similar circumstances, does not receive compensation exceeding the remaining term of their contract. This arrangement only partially complies with the GCGC’s requirements. In the event that other contracts are amended or renewed, or new contracts drawn up, they should be amended to meet the requirements of Section 4.2.3 of the GCGC.
b) Section 4.2.2 (2) sentence 3 of the GCGC requires that the Supervisory Board, in determining the remuneration of the Executive Board, takes into account the relationship of the remuneration of the Executive Board to the remuneration of the upper levels of management and the staff in general, including its development over time. The Supervisory Board determines where to draw the line between the upper levels of management and the relevant staff for the sake of its comparison. Section 4.2.3 (2) sentence 6 of the GCGC requires that total remuneration for members of the Executive Board and the individual variable components of remuneration be capped. Furthermore, Section 4.2.3 (3) of the GCGC requires that the Supervisory Board takes into account the planned level of the benefits to be provided when making benefit commitments, also based on how long the Executive Board member has been on the Board, as well as the annual and long-term expense for the company. Since the amendment of two Executive Board contracts in September 2015, these provisions have not been fully implemented in the two other Executive Board contracts that are currently still running. The intention is to implement these recommendations of the Code when other existing Executive Board contracts are amended or renewed, or new contracts are being concluded.
c) According to Section 7.1.2 of the Code, half-yearly and any quarterly financial reports are to be discussed by the Executive Board with the Supervisory Board or its Audit Committee prior to publication. HHLA does not comply with this recommendation because
compiling such reports on the basis of individual segment reporting for the A and S divisions takes more time than for companies with only one type of share. As a result, an effective prior discussion by the Supervisory Board or its Audit Committee cannot be assured at present. In order to increase the level of detail and frequency with which the company’s reports are examined, the half-yearly financial report and the interim management report were also reviewed by the auditors this year. It is intended that this will continue in the future.
Hamburg, 9 December 2015
Hamburger Hafen und Logistik Aktiengesellschaft
The Executive Board
The Supervisory Board
Function of the Executive Board and the Supervisory Board
Division of Responsibilities between the Executive Board and the Supervisory Board
In accordance with the stipulations of German stock corporation law, HHLA has a dual system of management with an Executive Board and a Supervisory Board as management bodies, both of which have their own defined areas of competence. This system is characterised by having separate personnel to carry out the management and supervision functions: the Executive Board manages the company on its own responsibility, while the Supervisory Board monitors the Executive Board and discusses relevant matters with it. Simultaneous membership of both bodies is not permissible. HHLA’s Executive Board and Supervisory Board work closely together for the company’s benefit in an atmosphere of mutual trust.
Composition and Function of the Executive Board
The Executive Board manages the company’s business under the joint responsibility of its members. It determines the company’s goals, its fundamental strategic orientation and Group policy and organisation. These tasks include, in particular, steering the Group and managing its financing, developing a personnel strategy, appointing and developing managers and representing the company before the capital markets and the general public. It is also responsible for appropriate risk management and controlling within the company.
HHLA’s Executive Board currently consists of four members.
In accordance with Article 8 of the articles of association, the Executive Board must consist of at least two members. The Executive Board’s members are appointed by the Supervisory Board. The Executive Board assumes management responsibility as a collegial body. Regardless of the overall responsibility to manage the company, the individual members of the Executive Board also bear responsibility for the departments assigned to them by Executive Board resolutions. The schedule of responsibilities states which Executive Board members are responsible for which departments.
The Executive Board provides the Supervisory Board with regular, timely and comprehensive information on all matters that are relevant for the Group. These include, in particular, the intended business policy, corporate profitability, the course of business and the position of the company, planning, the current risk position, risk management and compliance. The Executive Board must notify the Chairman of the Supervisory Board without undue delay of any important events of fundamental significance for the assessment of the position and development or the management of the Group, also between meetings. These include operational malfunctions and illegal actions which disadvantage the company, for example. Certain actions and transactions of fundamental importance by the Executive Board require the approval of the Supervisory Board in accordance with the Executive Board’s rules of procedure.
Conflicts of interests concerning members of the Executive Board must be immediately disclosed to the Supervisory Board. Other members of the Executive Board must also be informed. Executive Board members may only take on other duties, especially supervisory board posts at companies outside the Group, with the approval of the Supervisory Board. Transactions of material importance between Group companies and members of the Executive Board and parties and companies related to them also require the approval of the Supervisory Board. All such transactions must be performed on an arm’s length basis. There were no transactions of this nature in the reporting period. There were also no conflicts of interest in the year under review.
The Executive Board’s work is outlined in more detail in the rules of procedure compiled by the Supervisory Board for the Executive Board. The rules of procedure for the Executive Board were last amended on 11 September 2015. The rules state that decisions on fundamental organisational questions, business policy and corporate planning are to be made by the Executive Board as a whole. The rules also state that decisions and transactions of considerable importance for the company must be discussed and decided upon together and that certain transactions of fundamental importance require the prior approval of the Supervisory Board.
The company has taken out D&O insurance for the members of the Executive Board that meets the requirements of Section 93 (2) sentence 3 of the German Stock Corporation Act (AktG).
Composition and Function of the Supervisory Board
The Supervisory Board oversees the Executive Board’s management of the company, advises it on company management, and is involved in fundamental and important decisions. Decisions and transactions of fundamental importance require the approval of the Supervisory Board in accordance with the Executive Board’s rules of procedure. The Supervisory Board also decides on the composition of the Executive Board. The examination and approval of the Annual Financial Statements is another of the Supervisory Board’s main tasks.
The composition of the Supervisory Board is based on the company’s articles of association as well as Sections 95 and 96 of the German Stock Corporation Act (AktG) and Section 7 of the German Co-Determination Act (MitbestG): The Supervisory Board consists of six shareholder representatives elected by the Annual General Meeting and six employee representatives elected in accordance with the German Co-Determination Act (MitbestG). Unless the Annual General Meeting specifies a shorter period of office, Supervisory Board members are elected for a period ending with the Annual General Meeting which passes a resolution discharging the Board for the fourth financial year following the start of its term of office. The financial year in which the term of office begins is not included.
The Supervisory Board carries out its work both in full council and in individual committees. The work done by the committees is aimed at increasing the efficiency of work done by the Supervisory Board. The Supervisory Board has adopted its own rules of procedure, which also outline the committees’ responsibilities. In order to fulfil its duties as efficiently as possible, the Supervisory Board has currently constituted the following six committees: the Finance Committee, the Audit Committee, the Personnel Committee, the Nomination Committee, the Arbitration Committee and the Real Estate Committee. The chairpersons of the committees provide the Supervisory Board with regular reports on the work of their respective committees.
- The Finance Committee prepares Supervisory Board meetings and resolutions of major financial importance, such as resolutions to be adopted concerning significant borrowing and lending, guarantees for third-party liabilities, financial investments and other financial transactions. It also deals with planning and investment issues, such as the budget and medium-term planning.
- The Audit Committee monitors accounting processes and the audit of financial statements, including the independence of the auditor and the additional services provided by the auditors. The committee prepares the Supervisory Board’s resolution proposal to the Annual General Meeting on the election of the auditor and, after the auditor has been elected by the Annual General Meeting, awards the audit assignment for the Consolidated Financial Statements and the
- Annual Financial Statements of the Parent Company. It also deals with the fee agreements and determines which areas the audits should focus on. In addition, it concerns itself with the effectiveness of the internal accounting control system, the risk management system, the internal audit system and the compliance management system.
- The Personnel Committee prepares the personnel decisions to be taken by the Supervisory Board, ensures together with the Executive Board that a long-term succession plan is in place and takes account of diversity considerations in the Executive Board’s composition. It prepares the Supervisory Board resolution specifying the remuneration of the Executive Board and the examination of the remuneration system for the Executive Board and handles the Executive Board contracts, provided the German Stock Corporation Act (AktG) does not require the full council of the Supervisory Board to handle these responsibilities.
- The Personnel Committee also fulfils the role of Nomination Committee – consisting solely of shareholders’ representatives when performing this role – in compliance with the Code. In line with the criteria stipulated in Section 96 (2) of the German Stock Corporation Act (AktG) and Section 5.4.1 of the GCGC, it proposes suitable candidates to the Supervisory Board for its suggestions to the Annual General Meeting for the shareholder representatives on the Supervisory Board. During its deliberations, the Nomination Committee also ensures that the candidate is able to devote the necessary amount of time to the role.
- The Arbitration Committee was constituted for the purposes laid down in Section 31 (3) of the German Co-Determination Act (MitbestG). Its task is to make proposals for appointing members of the Executive Board if the statutory majority of two thirds of the Supervisory Board members’ votes is not reached after the first round of voting.
- As HHLA is divided into the two subgroups Port Logistics (A division) and Real Estate (S division), a Real Estate Committee was constituted for the latter. This committee receives all Executive Board reports on behalf of the Supervisory Board and is involved in discussing all affairs that relate to the Real Estate subgroup. It also decides on whether to grant Supervisory Board approval for all legal transactions which require such approval and all other matters which affect the Real Estate subgroup, either primarily or in their entirety. In addition, the Real Estate Committee is responsible for examining and preparing the Supervisory Board’s decision on the adoption of the Annual Financial Statements and the approval of the Consolidated Financial Statements, insofar as these relate to the affairs of the Real Estate subgroup. It is also responsible for preparing the Supervisory Board’s decision on appropriating the distributable profit of the Real Estate division based on the Executive Board’s proposal.
Further information on the Supervisory Board and Supervisory Board committees, as well as the Supervisory Board’s cooperation with the Executive Board in the reporting period, can be found in the. More information on the composition of the Executive Board, the Supervisory Board and Supervisory Board committees can be found in .
Regulations on preventing and dealing with conflicts of interest are laid out in the Supervisory Board’s rules of procedure,. The Supervisory Board provides information on conflicts of interest and their treatment in its report to the Annual General Meeting. No former members of HHLA’s Executive Board sit on the Supervisory Board.
The company has arranged for D&O insurance for the members of the Supervisory Board that complies with Section 3.8 of the Code.
Objectives of the Supervisory Board
The HHLA Supervisory Board must always be composed in such a way that its members have the necessary knowledge, skills and industry expertise to fulfil their responsibilities properly. In addition, Section 5.4.1 of the Code calls for concrete objectives to be defined regarding the Supervisory Board’s composition. Whilst considering the specifics of the enterprise, these should take into account the international activities of the company, potential conflicts of interest, the number of independent Supervisory Board members within the meaning of Section 5.4.2, an age limit to be specified and a regular limit of length of membership to be specified for the members of the Supervisory Board as well as diversity.
HHLA’s Supervisory Board adopted the corresponding targets at its meeting on 7 December 2012 and last updated the targets in a meeting on 9 December 2015 in line with the recommendations made in Section 5.4.1 of the Code. The following objectives have been defined for the composition of the Supervisory Board:
- Diversity should be taken into account in the composition of the Supervisory Board. Diversity in the Supervisory Board is – inter alia – reflected by shareholder representatives with different career paths and fields of activity who can draw on a wide range of different experiences (such as industry experience). With regard to the appropriate inclusion of women on the Supervisory Board, the company continues to pursue the medium-term goal – beyond the legal requirements – of increasing the proportion of female shareholder representatives to at least 40 %.
- International orientation also plays a role when appointing members to the Supervisory Board. Due to HHLA’s business model, the company’s operations have a predominantly regional and local focus, which means that it is currently not of paramount importance that members have extensive relevant experience of managing international companies. However, some of the members of the company’s Supervisory Board are in possession of such experience. This will remain a target in the future.
- Regarding an age limit for members of the Supervisory Board, the rules of procedure of HHLA’s Supervisory Board (Section 7 (1) sentence 3) stipulate that only candidates who are under the age of 70 at the time of election may stand for election or re-election as members of the company’s Supervisory Board.
- According to Section 7 (1) sentence 5 of the rules of procedure, membership of the Supervisory Board should not exceed three terms of office.
- Regulations on how to prevent and deal with potential conflicts of interest can be found under Section 7 (2) and (3) of the Supervisory Board’s rules of procedure. These stipulate that members of the Supervisory Board may not hold a seat on an executive body of any organisation in direct competition with the company, nor fulfil an advisory role for such organisations. Moreover, Supervisory Board members that are on the executive board of a listed company may not serve on the supervisory boards of more than three listed companies (including HHLA) or on supervisory board committees at third-party companies with similar duties. Each member of the Supervisory Board is obliged to disclose any conflicts of interest to the Supervisory Board as a whole, especially conflicts which may arise as a result of an advisory role or seat on an executive body involving customers, suppliers, creditors or other third parties. If a member of the Supervisory Board has significant conflicts of interest which are not merely temporary, this should result in the termination of his/her period of office. The Supervisory Board gives notification of any conflicts of interest which arise and how they are being handled in its report to the Annual General Meeting.
- Beyond the regulations listed in the rules of procedure regarding the prevention and treatment of potential conflicts of interest, the Supervisory Board should include at least two independent members from among the company’s shareholders. In the view of the Supervisory Board, this currently corresponds to the structure of equity investments, business sectors and, by extension, HHLA’s specific situation. However, it is the opinion of the Supervisory Board that employee representatives should not automatically be considered independent either. It is important to consider the specific circumstances in each case. The Supervisory Board must have at least one member who is independent as defined by Section 100 (5) of the German Stock Corporation Act (AktG) and who has expertise in the fields of accounting or the auditing of financial statements.
As far as the implementation status is concerned, the current composition of the Supervisory Board largely fulfils the specified targets. The Supervisory Board comprises members with different career paths and a wide range of experience. The age limit was not exceeded by any member at the time of their election. No member has served more than three terms of office on the Supervisory Board. In addition to Prof. Dr. Peer Witten, Chairman of the Supervisory Board and long-serving former member of the Executive Board of the Otto Group, the Supervisory Board includes a further independent member in Dr. Norbert Kloppenburg, Chairman of the Audit Committee, who also has expert knowledge and experience in the fields of accounting, auditing and internal controlling processes.
Shareholders and Annual General Meeting
Shareholders exercise their rights, in particular their voting rights, at the Annual General Meeting. The Annual General Meeting is held in Hamburg, another major German city or the seat of a German stock exchange to which the company’s shares have been admitted for trading, within the first eight months of each financial year. Each share entitles its holder to one vote at the Annual General Meeting. There are no shares with multiple voting rights, no preference shares and no caps on voting rights.
Shareholders may exercise their voting rights at the Annual General Meeting in person, by appointing a representative of their choice or by giving voting instructions to a proxy designated by the company. The articles of association also authorise the Executive Board to allow shareholders to cast their vote in writing or by means of electronic communication (postal vote). The invitation to the Annual General Meeting includes explanations of the participation conditions, the voting procedure (including proxy voting) and the rights of shareholders. In addition, the company has a telephone hotline for shareholders’ questions. The reports and documents required by law for the Annual General Meeting, including the Annual Report, are published on the company’s website at www.hhla.de/agm together with the agenda. Information on attendance at the Annual General Meeting and the voting results can likewise be found on the company’s website after the Annual General Meeting.
German Act on the Equal Participation of Women and Men in Leadership Positions
The German legislation on the equal participation of women and men in leadership positions in the private and public sectors requires that the Supervisory Board of HHLA, as a listed and equally co-determined company, has a minimum of 30 % of each gender. The gender quota for the Supervisory Board applies to positions on the Supervisory Board that become vacant from 1 January 2016. The Supervisory Board is also obliged to set a target quota for women on the Executive Board and a deadline for achieving this target. The Executive Board is obliged to set target quotas for women in the two management levels below the Executive Board and deadlines for achieving these targets. The first target quotas for women on the Executive Board and women in the two management levels below the Executive Board were to be set by 30 September 2015, and the deadline for achieving these targets was 30 June 2017 at the latest.
According to Section 289a (2) (4) of the German Commercial Code (HGB) the corporate management declaration must state whether the target quotas set by the Supervisory Board for the Executive Board and the Executive Board for the two management levels below the Executive Board were achieved in the period under review and, if not, what the reasons for not achieving the quotas were.
At its meeting on 11 September 2015, the Supervisory Board set a quota of 25 % for women on the Executive Board (status as of 31 December 2015: 0 %). The deadline for achieving this target is 30 June 2017.
The Executive Board has set a target quota for women in the first management level below the Executive Board of 25 % (status as of 31 December 2015: 15 %) and 30 % for the second management level (status as of 31 December 2015: 21 %). The deadline for achieving these targets is 30 June 2017.
The gender quota for the Supervisory Board only applies to new members as of 1 January 2016, and thus only to new members joining after the end of the period under review. At present, there are two female shareholder representatives on the Supervisory Board. Consequently, the proportion of women on the Supervisory Board as a whole is around 16.7 %, and approximately 33.3 % for the shareholder representatives.
Disclosures on Corporate Management Practices
Compliance with corporate guidelines and the statutory provisions relevant to the company’s activities (hereinafter also referred to as “compliance”) is regarded as an essential part of corporate governance at HHLA. The management team in each corporate unit is therefore responsible for working to achieve compliance with the regulations that are relevant for their field of activity and area of responsibility. Workflows and processes must be structured in line with these regulations. The cornerstone of HHLA’s compliance management system is a code of conduct, which formulates overriding principles on topics with special relevance for compliance, such as conduct in the competitive environment, the prevention of corruption, discrimination and conflicts of interest, and how to deal with sensitive corporate information, especially insider information, www.hhla.de/compliance. The overall coordination of the compliance management system is performed by a Compliance Officer, who reports directly to the Executive Board and synchronises his or her activities closely with those of the Internal Audit and Risk Management departments. In the 2015 financial year, further extensive steps were taken to enhance HHLA’s compliance management system. These included stepping up preventive work, e.g. by updating and supplementing Group guidelines, systematically analysing compliance risks, and training staff at HHLA companies in Germany and abroad on the code of conduct and special issues, such as the prevention of corruption, conduct in the competitive environment and observing insider trading rules. The Audit Committee monitored the further development of the compliance management system in the reporting period by means of regular reports from the Executive Board and the Compliance Officer. In the reporting period, the system was audited in line with IDW PS 980 by Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Hamburg, which confirmed its effectiveness. Further improvements are constantly being made to the system.
Sustainability has been an integral part of HHLA’s business model since the company was established.
The HHLA Group’s risk management system is described in detail in the Risk and Opportunity Report, which forms part of the Group Management Report.
HHLA informs capital market participants and interested members of the general public comprehensively about the position of the Group and important company developments, particularly by means of its financial reporting (Annual Report and Interim Reports), press conferences for analysts and financial press conferences, dialogue with analysts and the press, press releases and ad hoc announcements as required, and its Annual General Meetings. As a permanently available and up-to-date communication medium, the website www.hhla.de provides all the relevant information in both German and English. In addition to comprehensive information about the HHLA Group and the HHLA share, it contains a financial calendar which provides an overview of the main events. Any enquiries over and above this from shareholders, investors and analysts should be addressed to the Investor Relations department.
Accounting and Auditing
HHLA prepares its Consolidated Financial Statements and its Interim Reports in accordance with International Financial Reporting Standards (IFRS). This Annual Report provides further information on IFRS in the Notes to the Consolidated Financial Statements.
The Separate Financial Statements of HHLA (parent company) are prepared in line with the accounting regulations of the German Commercial Code (HGB). The appropriation of profits is based solely on the Separate Financial Statements of the Parent Company.
Arrangements have been made with the auditor for the 2015 financial year – Ernst & Young GmbH, Wirtschaftsprüfungsgesellschaft, Hamburg – for the Chairman of the Audit Committee to be informed immediately of any possible grounds for exclusion or bias arising during the audit, insofar as these are not rectified without delay. The auditor should also report immediately on any findings or incidents arising from the audit of the financial statements which are of significance for the Supervisory Board’s remit. Furthermore, the auditor is to inform the Supervisory Board and/or record in its report if – when conducting the audit – it identifies facts which indicate that the declaration of compliance issued by the Executive Board and Supervisory Board as per Section 161 of the German Stock Corporation Act (AktG) is incorrect. The audit conducted includes an extended audit as stipulated under Section 53 of the German Budgetary Procedures Act (HGrG). This requires an audit and assessment of the propriety of the company’s management and its financial situation as part of the audit of the Annual Financial Statements.
In the 2015 financial year, the company did not receive any notifications regarding directors’ dealings with HHLA shares. As of 31 December 2015, the Executive Board and Supervisory Board as a whole did not possess more than 1 % of the shares issued by HHLA.
Payments for investments in property, plant and equipment, investment property and for investments in intangible assets.
International Financial Reporting Standards