For Deutsche Wohnen SE, good corporate governance is a central component of managing the company. To us this means responsible management and control of the company directed towards long-term value creation.
The Management Board and the Supervisory Board of Deutsche Wohnen SE are committed to good corporate governance; this is the guiding principle for all divisions of our company. The management and control of the Deutsche Wohnen Group is therefore not only determined by the compliance with laws, but moreover also by the substantial compliance with generally acknowledged standards and recommendations. Our focus is on values such as competence, transparency, and sustainability.
In accordance with section 3.10 of the German Corporate Governance Code, the Management Board and the Supervisory Board report together on the corporate governance of Deutsche Wohnen SE. In the following, we describe the principles of the management and control structures as well as the essential rights of our shareholders.
Corporate governance stands for the management and control of companies in a way that is responsible and geared to creating value over the long term. The corporate governance and corporate culture of the Deutsche Wohnen Group comply with statutory requirements and – with one exception – the additional recommendations of the German Corporate Governance Code. The Management Board and Supervisory Board of Deutsche Wohnen SE feel obligated to pursue good corporate governance; all areas of business are orientated towards this purpose.
Declaration of compliance
The Management Board and Supervisory Board again dealt in detail with the company’s compliance with the standards of the German Corporate Governance Code in financial year 2018. They considered the Code as amended on 7 February 2017 and published in the German Federal Gazette (Bundesanzeiger) on 24 April 2017, issuing their statement for the financial year 2018 in compliance with the Code’s recommendations and commenting on one instance of non-compliance in December 2018, in accordance with section 161 German Stock Corporation Act (Aktiengesetz – AktG). The statement is available to shareholders and all interested parties on our website.
General management structure comprising three executive bodies
Deutsche Wohnen SE, as a publicly listed European company (Societas Europaea, SE), has its registered office in Berlin and is subject to not only German corporate and capital market law but also to the European SE Implementation Act, the German SE Implementation Act and the provisions of its own Articles of Association. With its two executive bodies, the Management Board and Supervisory Board, the company has a two-tier management and supervisory structure. Above them is the Annual General Meeting, at which the company shareholders are involved in fundamental decisions affecting the company. Together these three executive bodies are bound to act in the best interests of shareholders and for the benefit of the company.
Management Board acts in the interests of the company
The Management Board leads the company and manages company business on its own responsibility. It is obliged to act in the company’s best interest and create sustainable value. The members of the Management Board are appointed by the Supervisory Board. In accordance with section 8 para. 2 of the Articles of Association, in conjunction with article 46 SE Regulation, the members of the Management Board are appointed for a maximum of five years and may be reappointed for periods of five years. The Supervisory Board has set the statutory retirement age as the age limit for Management Board members. In July 2017 the target for the proportion of women in the Management Board was set at zero for the target period ending on 30 June 2022, given that the Management Board had no female members at the time, the contracts for the current members ran until after the target date and there was no desire to expand the Management Board simply because the law had been amended. Management Board members are chosen particularly on the basis of the knowledge, skills and professional experience necessary for performing the Management Board’s duties.
In financial year 2018 the Management Board had three members, of whom one was chairman. The work of the Management Board is governed by Rules of Procedure, which provide among other things for duties to be divided along functional lines.
The Management Board develops the strategic direction of the company, agrees upon this with the Supervisory Board and ensures its implementation. It is also responsible for appropriate risk management and risk controlling in the company and for reporting regularly, promptly and fully to the Supervisory Board. The approval of the Supervisory Board is required for certain transactions and decisions made by the Management Board.
The members of the Management Board must disclose any conflicts of interest to the Supervisory Board and to their Management Board colleagues without delay. Material transactions between Management Board members, other related parties and the company must be approved by the Supervisory Board, as must any secondary employment outside the company.
D&O group insurance has been taken out for the members of the Management Board and Supervisory Board, with an excess in line with the requirements of section 93 para. 2 of the German Stock Corporation Act (Aktiengesetz – AktG) in conjunction with article 51 SE Regulation.
Supervisory Board advises and monitors the Management Board
The Supervisory Board consists of six members. All members are elected as shareholder representatives at the Annual General Meeting. Their period of office is five years, in accordance with the statutory provisions and the Articles of Association. Supervisory Board members are particularly elected on the basis of their knowledge, skills and professional experience required for the performance of their duties. At the same time, in accordance with the defined competence profile, consideration is given to their independence, diversity in terms of different professional backgrounds and sufficient gender diversity. The target for the proportion of women members has been set at 16.67% for the target period ending on 30 June 2022. The current membership of the Supervisory Board meets this target. Only individuals who have not reached the age of 73 years at the time of their appointment may be put forward for election to the company’s Supervisory Board. Every Supervisory Board member ensures that they can commit the time necessary to perform their Supervisory Board duties properly. The Supervisory Board believes all its members to be independent and that its members meet the targets for its composition described above.
The Supervisory Board advises and monitors the Management Board regularly on the leadership and management of the company within the framework defined by law, the Articles of Association and the rules of procedure. It works closely with the Management Board for the benefit of the company and is involved in decisions of fundamental importance for the company.
The Supervisory Board has Rules of Procedure; its work is carried out in plenary session and in committees. Committee work is intended to increase the efficiency of the Supervisory Board. The committee chairpersons report regularly to the Supervisory Board on the work of their committee. Three committees are currently in place:
Important decisions are made at the Annual General Meeting
As provided for in the Articles of Association, shareholders exercise their rights at the Annual General Meeting, more particularly their voting rights. Each share is entitled to one vote.
The ordinary Annual General Meeting takes place annually within the first six months of the financial year in accordance with section 13 para. 2 of the Articles of Association and article 54 para. 1, sentence 1 SE Regulation. The agenda for the Annual General Meeting and the reports and documents required for the Annual General Meeting are published on the website of Deutsche Wohnen SE.
Fundamental resolutions are passed by Annual General Meetings; these include resolutions on the use of profits, discharging members of the Management Board and Supervisory Board of liability, electing Supervisory Board members and auditors, amending the Articles of Association and altering the amount of capital. The Annual General Meeting offers the Management Board and the Supervisory Board a good opportunity for direct contact with shareholders and to consult with them on the further development of the company.
In order to make it easier for its shareholders to exercise their rights personally, Deutsche Wohnen SE provides its shareholders with a proxy to act on their instructions, who can also be reached during the Annual General Meeting. Explanations on issuing instructions beforehand are provided in the invitation to the Annual General Meeting. In addition, shareholders are entitled to appoint their own proxy to represent them at the Annual General Meeting.
Remuneration of the Management Board
The remuneration system for the Management Board is discussed, reviewed and revised at regular intervals in the plenary session of the Supervisory Board.
The contracts with the Management Board members of Deutsche Wohnen SE have fixed and variable components. Variable remuneration for all Management Board members is aligned with the provisions of section 87 para. 1, sentence 3 German Stock Corporation [Aktiengesetz – AktG]. It is dependent on achieving the company’s financial targets and is largely based on performance over several years. Management Board members are only entitled to the variable remuneration if the company performs correspondingly well. This aligns the remuneration structure with the company’s sustainable development and optimises the incentive and risk character of the variable remuneration.
The full remuneration report of Deutsche Wohnen SE for the financial year 2018 is shown in the Management report and on the company’s homepage.
Remuneration of the Supervisory Board
Supervisory Board remuneration was defined by the Annual General Meeting in section 10 para. 7 of the Articles of Association. It states that Supervisory Board members receive a fixed annual remuneration of EUR 75,000. The Chairman of the Supervisory Board receives three times this amount and the Deputy Chairman one-and-a-half times this amount. In addition, every Supervisory Board member receives a lump-sum payment of EUR 15,000 per financial year for membership of the Audit Committee; the Chairman of the Audit Committee receives twice this amount. A lump-sum payment of EUR 5,000 per member and committee is paid for each financial year for membership of other Supervisory Board committees; the committee Chairman receives twice this amount. The total of all lump-sum payments, plus remuneration for membership of Supervisory Boards and similar Boards of Group companies may not exceed EUR 300,000 (excluding VAT) per Supervisory Board member and calendar year. Out-of-pocket expenses are reimbursed. In addition, the company may at its expense include the members of the Supervisory Board in the D&O group insurance for executive bodies and managers and has done so. An excess has been agreed for the Supervisory Board members in accordance with the requirements of section 93 para. 2 German Stock Corporation Act [Aktiengesetz – AktG] in conjunction with article 51 SE Regulation.
Supervisory Board members are not paid a performance-related fee. The remuneration paid to individual Supervisory Board members is shown in the remuneration report.
Directors’ Dealings and shareholdings subject to mandatory disclosure
The members of the Management Board and Supervisory Board of Deutsche Wohnen SE and closely related parties are obliged by article 19 Market Abuse Regulation (MAR) to disclose without delay transactions involving shares or securities of Deutsche Wohnen SE or derivatives and financial instruments based on them, as soon as a total volume of EUR 5,000 has been reached within one calendar year. The company publishes these transactions immediately after they have been reported to it. In financial year 2018 the following transactions of this type were reported to Deutsche Wohnen SE: sale of 42,721 shares and receipt of 66,332 shares by Chief Executive Officer Michael Zahn in the course of exercising share options under the company’s stock option programme; sale of 14,099 shares and receipt of 22,995 shares by Management Board member Lars Wittan, also as part of this programme; receipt of 221 shares from the share dividend and purchase of 4,500 shares by Management Board member Philip Grosse. These notifications were published on the homepage.
As of 31 December 2018 Ms Kretschmer held 3,153 shares in Deutsche Wohnen SE. The other Supervisory Board members held no shares in Deutsche Wohnen SE as of 31 December 2018. The Chief Executive Officer Michael Zahn held 50,000 shares as of 31 December 2018 and two related parties held a total of 4,000 shares. The Management Board member Lars Wittan held 20,000 shares and the Management Board member Philip Grosse held 15,721 shares as of 31 December 2018.
This means that as of 31 December 2018 the individuals mentioned above held roughly 0.026% of the 357.0 million shares issued by the company.
Compliance with legal provisions and the standards of the German Corporate Governance Code is an important principle for Deutsche Wohnen SE, as is the fair treatment of business partners and competitors. The Group Compliance Officer is responsible for ensuring that this is the case. He keeps the company’s insider register and informs managers, employees and business partners about the relevant legal framework and the consequences of breaching insider dealing rules. In addition, the Compliance Officer acts as the central contact for questions and reports of suspicious circumstances. The company has also set up a whistleblowing system that enables staff and business partners of the Deutsche Wohnen Group to report indications of potentially serious breaches of rules and regulations to an external lawyer. This can take place anonymously if desired; the whistleblowers are protected by the lawyer’s obligation to maintain professional secrecy.
All the business segments and processes at Deutsche Wohnen are subject to regular reviews with regard to compliance risks.
Our Code of Conduct, which defines and requires lawful conduct, is applicable and binding for all employees of the company. Every new employee is given this code on joining the company and undertakes to respect it. Managers also make their employees aware of key compliance risks. Employees are trained in the principles of compliance by means of online courses. The course includes a final test, for which a certificate is issued if passed, and is mandatory for all employees.
In particular, our employees are not entitled to accept gratuities in exchange for the promise of a possible business transaction. Unlawful attempts to influence business partners by offering preferential treatment, gifts or other benefits are also prohibited by the Code of Conduct.
Appropriate management of risks and opportunities
The responsible handling of risks and opportunities is fundamental for Deutsche Wohnen SE. It is ensured by means of a wide-ranging opportunities and risk management system that identifies and monitors the key opportunities and risks. This system is refined continuously and adapted to changing circumstances.
Detailed information is available in the Management Report: the risk management and the strategic opportunities for Deutsche Wohnen SE are described in the report on risks and opportunities, and information about consolidated financial reporting can be found in the notes to the consolidated financial statements.
Committed to transparency
As part of Investor Relations activities, all events which are important for shareholders, investors and analysts are published at the beginning of the year in a financial calendar for the upcoming financial year. The financial calendar is updated continuously and can also be viewed on the company’s website.
The company informs shareholders, analysts and journalists according to uniform criteria. The information is transparent and consistent for all capital market participants. Ad hoc announcements and press releases, presentations of press conferences, analyst meetings and roadshows as well as financial reports are immediately published on our websites.
Insider information (ad hoc publicity), notification about voting rights and securities transactions by members of the Management Board and Supervisory Board and related parties (directors’ dealings) are announced without delay by Deutsche Wohnen SE in accordance with legal provisions.
The accounting for the Deutsche Wohnen Group is carried out on the basis of International Financial Reporting Standards (IFRS) as applicable in the European Union. The annual financial statements of Deutsche Wohnen SE are prepared in accordance with German law, particularly the German Commercial Code (Handelsgesetzbuch – HGB).
KPMG AG Wirtschaftsprüfungsgesellschaft (KPMG) was appointed to audit the annual financial statement and the consolidated financial statement at the Annual General Meeting 2018. Beforehand, KPMG AG Wirtschaftsprüfungsgesellschaft (KPMG) had confirmed that there were no commercial, financial, personal or other relations between the auditor, its executive bodies and senior auditors on the one hand and the company and the members of its executive bodies on the other that could justify any doubts about its independence. The financial statement and the consolidated financial statements for the financial year 2018 were audited by KPMG in Berlin, with Mr René Drotleff as the auditor responsible, and received an unqualified audit certificate. Mr René Drotleff has audited the company since financial year 2016 as the responsible auditor at KPMG.
Deutsche Wohnen SE complied with the publication deadlines recommended in the German Corporate Governance Code of 90 days after the close of the financial year for the consolidated financial statements and 45 days after the close of the reporting period for interim reports in 2018.
Additional information about the activities of the Supervisory Board and its committees regarding its working relationship with the Management Board can be found in the Supervisory Board report.
Berlin, March 2019
Supervisory Board Management Board