Corporate governance stands for the responsible leadership and supervision of companies in the service of long-term value creation. For the Management Board and Supervisory Board of Deutsche Wohnen SE, good corporate governance is a core element of company management; all areas of the company are guided by it. The management and control of the Deutsche Wohnen Group therefore not only consists of respecting the law, but also of following generally recognised standards and recommendations. We uphold values such as competence, transparency and sustainability. The following report includes the Corporate Governance Report and the Declaration on Corporate Governance for Deutsche Wohnen SE and the Deutsche Wohnen Group in accordance with sections 289 f, 315 d German Commercial Code [HGB].
1. Declaration by the Management Board and Supervisory Board of Deutsche Wohnen SE on the German Corporate Governance Code in accordance with section 161 Stock Corporation Act [Aktiengesetz − AktG]
The Management and Supervisory Boards of Deutsche Wohnen SE have thoroughly dealt with the issue of compliance with the standards set by the German Corporate Governance Code. In doing so, they have taken the Code dated 7 February 2017 into account, which was published in the Federal Gazette on 24 April 2017, and adopted the following declaration of compliance according to article 161 (1) of Germany’s Stock Corporation Act in December 2019.
Since the adoption of the last declaration of compliance in December 2018, Deutsche Wohnen SE has complied with the recommendations given by the Government Commission of the German Corporate Governance Code, with the following exceptions:
- The recommendation in clause 5.4.1 of the Code, which includes the definition of a regular limit of length of Supervisory Board membership and the consideration of this limit in proposals for election, was not complied with. The company believes that a fixed regular limit does not take individual factors justifying longer lengths of membership of individual Supervisory Board members into account.
In the future, Deutsche Wohnen SE will comply with the recommendations of the Government Commission of the German Corporate Governance Code (in the version of 7 February 2017) with the following exception:
- In deviation of the recommendation in clause 5.4.1 of the Code, no regular limit of length of Supervisory Board membership has been set and is therefore in this respect not taken into account in proposals for election. The company believes that a fixed regular limit does not take individual factors justifying longer lengths of membership of individual Supervisory Board members into account.
Berlin, in December 2019
Management Board Supervisory Board
The declaration of compliance is also available online at www.deutsche-wohnen.com/declaration-of-compliance.
2. Relevant disclosures on corporate governance practices
Deutsche Wohnen SE is based in Berlin and as a publicly listed European company (Societas Europaea, SE) is governed by the European SE Regulation and the German SE Implementation Act in addition to German stock corporation and capital market law and the provisions of its articles of association. With its decision-making bodies, the Management Board and Supervisory Board, the company has a two-tier management and supervisory structure. The Management Board leads the company and manages company business on its own responsibility. The Supervisory Board advises and monitors the Management Board and works closely with the Management Board in the interests of the company.
Shareholders of Deutsche Wohnen SE exercise their rights at the Annual General Meeting. The Annual General Meeting passes resolutions on all matters referred to it by law, particularly the allocation of profit, discharging members of the Management Board and Supervisory Board of responsibility, electing Supervisory Board members and auditors, amending the articles of association, fund raising activities, control agreements, changes of legal structure and the remuneration of the Supervisory Board. According to the Act Transposing the Second Shareholder Rights Directive (ARUG II) of 12 December 2019, the Annual General Meeting will pass non-binding resolutions for the first time in 2021 on approving the remuneration system for Management Board members proposed by the Supervisory Board and for the first time in 2022 on approving the remuneration report for the previous financial year. In accordance with section 87 para. 4 AktG as introduced by ARUG I, the Annual General Meeting can reduce the maximum remuneration set by the Supervisory Board at the application of shareholders accounting collectively for one-twentieth of share capital or an amount of EUR 500,000.
We pursue our commercial activities in line with Group standards that go beyond the requirements of legislation and the German Corporate Governance Code. Our activities are based on our corporate culture, whose main pillars are respect, diversity, openness and high quality. We believe that sustainable business activities will secure the future viability of the Deutsche Wohnen Group and also benefit our stakeholders.
Code of Conduct
Deutsche Wohnen has drawn up a Code of Conduct to implement the values, principles and rules of responsible corporate governance in day-to-day business and supplement the statutory regulations. It applies to all the staff across the Deutsche Wohnen Group. The Code of Conduct is reviewed regularly and is continuously developed.
As landlords and parties to transactions of all kinds, Deutsche Wohnen SE and its Group companies are dependent on gaining and maintaining the trust of customers, purchasers and business partners. For Deutsche Wohnen SE, its Management Board and Supervisory Board and employees this means that compliance is not only adherence to the law and the articles of association, but also compliance with internal instructions and commitments, in order to put the values, principles and rules of responsible corporate governance into practice on a daily basis. It is vital that the Code of Conduct of Deutsche Wohnen is embedded in its organisational structure, because Deutsche Wohnen depends on the responsibility and initiative of its managers and employees to fulfil its tasks.
Compliance with statutory provisions, the standards of the German Corporate Governance Code and the Code of Conduct is an important principle for Deutsche Wohnen. Employees are encouraged to notify the company of any infringements. For this purpose we have set up a whistle-blower system for employees and business partners, which can also be used anonymously if desired. All the business segments and processes at Deutsche Wohnen are subject to regular reviews of compliance risks.
Expectations of our business partners
The Code of Conduct for Business Partners of Deutsche Wohnen SE is based on the Code of Conduct for our employees. Deutsche Wohnen aims to gain and keep the trust of its customers, employees and business partners by acting socially and responsibly. Our working relationships with business partners are based on partnership and mutual respect. The Code defines standards for our business partners in terms of compliance with legislation, integrity and ethical benchmarks. We respect human rights and are convinced that it is our social responsibility to establish business relationships on the basis of human rights and internationally acknowledged labour and environmental standards. The principles and minimum standards described in our Code of Conduct for Business Partners are therefore based on the applicable conventions of the International Labour Organisation (ILO) and the UN Guiding Principles on Business and Human Rights. Deutsche Wohnen expects its business partners to comply with the principles and rules defined in the Code of Conduct and to ensure that their own business partners, subcontractors and service providers do the same.
Risk and opportunity management
Responsible risk and opportunity management of the operating segments is a core task of the Management Board, managers and all employees, and is also an expression of good corporate governance. It aims to identify risks early, limit them and exploit any business opportunities that may arise from them.
The risk management process at Deutsche Wohnen SE begins with risk identification by the operating management together with the central risk manager. The relevant individual risks are identified and measured in terms of the maximum loss, probability of occurrence and effectiveness of potential measures to avert them. This review results in an assessment of the risk potential, risk measurement and subsequent management. Elements of risk management are refined continuously to adapt them to changes in the external environment.
For the Management Board itself the key risk management tool is the regular reports it receives from the operating departments (in the form of the risk inventory). In addition, the risk manager or the head of the respective operating department informs the Management Board immediately if risks or changes arise unexpectedly. Risks may arise that are beyond the control of the Management Board. For this reason, even a functioning risk management system cannot ensure completely that all risks are ruled out. There can always be developments that differ from the Management Board’s plans.
Deutsche Wohnen attaches great important to informing shareholders and the interested public consistently, comprehensively, promptly and simultaneously about its economic situation and new events. Shareholders and third parties are informed in particular by means of the annual report, the interim reports and announcements, the sustainability report, and at face-to-face meetings and conference calls for analysts.
Important current news is also published in press releases, corporate news and ad hoc announcements. All this information is made available on the website of Deutsche Wohnen, which also offers extensive information about the company and the Deutsche Wohnen share.
The members of the Management Board and the Supervisory Board of Deutsche Wohnen SE as well as related parties are obliged by article 19 Regulation (EU) No. 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (Market Abuse Ordinance), to disclose transactions involving shares or debt instruments of Deutsche Wohnen SE or related derivatives and financial instruments, insofar as the total amount of transactions made by the member or related parties within a calendar year amounted or exceeded EUR 5,000 (from 1 January 2020 onwards: EUR 20,000). The transactions reported to Deutsche Wohnen SE in the 2019 financial year have been properly published and are available on the company's website at www.deutsche-wohnen.com/directors-dealings-en.
When required to do so, Deutsche Wohnen SE maintains insider lists in accordance with article 18 EU Market Abuse Regulation. The people on the insider lists were and are notified of their statutory responsibilities and the penalties under the regulation.
Deutsche Wohnen compiles the dates of important recurring events and publications in a financial calendar, publishes the calendar on its website and updates it as necessary.
Accounting and audit
The consolidated financial statements, the consolidated interim financial statements and the interim Group announcements of Deutsche Wohnen SE are prepared in accordance with IFRS as applicable in the European Union. After being prepared by the Management Board the consolidated financial statements are examined by the auditors and the Audit Committee of the Supervisory Board and approved by the Supervisory Board after review. The company aims to publish the consolidated financial statements within 90 days of its financial year-end, in accordance with the German Corporate Governance Code. Interim announcements and the interim financial report are discussed with the Management Board by the Audit Committee of the Supervisory Board before publication.
The Annual General Meeting 2019 elected KPMG AG Wirtschaftsprüfungsgesellschaft (KPMG) as auditors for the financial year 2020. The audits by KPMG follow German auditing standards, the auditing principles defined by the German Institute of Auditors and the International Standards on Auditing. The Chair of the Supervisory Board and the Chair of the Audit Committee are notified without delay by the auditor of any grounds for its exclusion or exemption and of any misstatements in the declaration of compliance that become known in the course of the audit. The auditor reports all matters and events of importance for the work of the Supervisory Board that become known in the course of the audit to the Chairs of the Supervisory Board and the Audit Committee without delay and is obliged to notify the Supervisory Board promptly about any reasons for its exclusion or any grounds for bias.
3. Management Board
The Management Board of Deutsche Wohnen SE consists of at least two members. The Supervisory Board appoints the members of the Management Board and determines the total number of its members. The Supervisory Board may nominate a member of the Management Board as Chief Executive Officer or Spokesperson of the Board.
The Management Board of Deutsche Wohnen SE currently consists of four members. The Chief Executive Officer (CEO), Michael Zahn, is responsible for the strategy of the Deutsche Wohnen Group. He manages the functions Strategy, Asset Management, M&A/Disposals, Corporate Communication, Human Resources, Marketing, IT, Procurement and Nursing & Assisted Living.
Philip Grosse is Chief Financial Officer (CFO) and is responsible for Corporate Finance & Treasury, Accounting, Tax, Risk Management, Investor Relations, Sustainability Management/CSR Reporting, Legal/Compliance and Controlling.
Henrik Thomsen is Chief Development Officer (CDO) and responsible for Property Developments & Technical Maintenance, Technology Investments and Neighbourhood Development.
Lars Urbansky is Chief Operating Officer (COO) and is responsible for Property Management, Rent Development and Customer Service.
The Management Board manages the company under its own responsibility, develops the company strategy, agrees it with the Supervisory Board and ensures that it is put into practice. It is obliged to act in the company’s best interest and create sustainable value.
The Management Board is responsible for the company’s interim financial reports, the financial statements of Deutsche Wohnen SE, the consolidated financial statements, and the combined management report for the company and the Group, including the non-financial Group statement.
To ensure that the risks of business are handled responsibly, the Management Board has set up an internal control system and measures appropriate to the company’s risk position, in particular a compliance management system, risk management system and risk controlling. It ensures compliance with statutory provisions and internal policies and encourages compliance by Group companies.
The members of the Management Board are jointly responsible for managing the company. The Management Board has no committees. The division of responsibilities within the Management Board is defined by the members in a formal document. The CEO coordinates the work of the Management Board. The Supervisory Board has adopted rules of procedure for the Management Board. Among other things they include rules on meetings and resolutions and on cooperation with the Supervisory Board. The rules of procedure also include a list of transactions requiring approval.
No member of the Management Board holds 1% or more of issued shares in Deutsche Wohnen SE. A detailed list of shares held by the members of the Management Board and information regarding the remuneration of the members of the Management Board can be found in the remuneration report (www.deutsche-wohnen.com/remuneration-report).
4. Supervisory Board and its committees
The Supervisory Board of Deutsche Wohnen SE currently consists of six members. All six members are elected by shareholders at the Annual General Meeting. In accordance with the provisions of law and the articles of association, their term of office is generally five years.
The Supervisory Board is composed in such a way that its members, taken as a whole, have the necessary knowledge, skills and professional experience, especially of capital markets and the German property market, required to carry out their tasks properly. The requirements for the composition of the Supervisory Board, which include a competence profile and a diversity concept, are described under 6. below.
The CVs of the individual members of the Supervisory Board can be found online at www.deutsche-wohnen.com/board.
The Supervisory Board monitors and advises the Management Board on the management of the company and agrees on corporate strategy and its implementation with the Management Board. The Management Board informs the Supervisory Board regularly, promptly and fully about all matters of relevance to the company, particularly the strategy, company planning, business performance, profitability, the risk position, and risk and compliance management. It investigates any differences between the course of business and the planning or agreed targets and provides the reasons for them. The Supervisory Board regularly discusses business performance, planning, strategy and implementation with the Management Board. The articles of association and the Supervisory Board have defined transactions of fundamental importance for the company that requires approval.
The Supervisory Board adopts the financial statements of Deutsche Wohnen SE and approves the consolidated financial statements and combined management report of Deutsche Wohnen SE and the Group, taking the findings of the preliminary review by the Audit Committee and the audit report by the public auditors into account. The Supervisory Board also reviews the non-financial Group statement. It passes a resolution on the Management Board’s proposal for use of distributable profit and the Supervisory Board’s report to the Annual General Meeting, and on the proposals for resolution tabled by the Supervisory Board or the Management at the Annual General Meeting.
It is the Supervisory Board’s responsibility to appoint and dismiss members of the Management Board. The Supervisory Board pays attention to the diversity of the Management Board and to long-term succession planning developed jointly with the Management Board. The requirements for the composition of the Management Board, which include a competence profile and a diversity concept, are described under 6. below.
The Supervisory Board also adopts a remuneration system for the members of the Management Board and sets the concrete remuneration for the individual Management Board members on this basis. It defines the targets for the variable remuneration of individual Management Board members and ensures that total remuneration is reasonable.
Further information about the remuneration of the Management Board can be found in the remuneration report, available online at www.deutsche-wohnen.com/remuneration-report.
The Supervisory Board has established the following committees to make its work more efficient. The committees prepare certain types of transaction and resolutions for the Supervisory Board. The chairs of the respective committees report regularly to the Supervisory Board on the committee meetings. Committee members are chosen primarily on the basis of their professional experience.
The Supervisory Board currently has the following three committees:
- Executive and Nomination Committee
The Executive and Nomination Committee is responsible for continuous consultation with the Management Board and advising the Management Board on an ongoing basis. It also prepares the Supervisory Board meeting to the extent that this is expedient given the scope and importance of the agenda items. In accordance with relevant resolutions by the plenary session, this committee is responsible for drafting and signing the contracts with the Management Board members. To the extent permitted, it is also responsible for advising on and passing resolutions on urgent matters. This committee suggests suitable people to the Supervisory Board for its election proposals to the Annual General Meeting.
Members: Matthias Hünlein (Chair), Jürgen Fenk, Dr Andreas Kretschmer
- Audit Committee
The Audit Committee is responsible for the preliminary review of documentation for the annual financial statements and consolidated financial statements and for preparing the adoption or approval of these and the Management Board’s proposal for the use of profits. It discusses the quarterly reports and interim financial reports before they are published. The Audit Committee also prepares the Supervisory Board's proposal to the Annual General Meeting for the election of the auditor and makes a corresponding recommendation to the Supervisory Board after examining the required independence of the proposed auditor. After the resolution has been passed by the Annual General Meeting, the audit committee issues the audit mandate to the auditor and determines the focus of the audit, which includes prior approval of the additional services to be performed by the auditor. The members of the Audit Committee are competent in matters of financial reporting and auditing and its composition meets all the requirements for independence defined in the recommendations of the German Corporate Governance Code.
Members: Dr Florian Stetter (Chair), Jürgen Fenk, Matthias Hünlein
- Capital Markets and Acquisition Committee
The Capital Market and Acquisition Committee discusses with the Management Board potential targets and terms for acquisitions or disposals of land or shareholdings and prepares the corresponding Supervisory Board resolutions. It is authorised by the Supervisory Board to approve certain transactions. Furthermore, the committee discusses important capital market matters, the performance of the share price and the company’s shareholder structure.
Members: Dr Andreas Kretschmer (Chair), Matthias Hünlein, Tina Kleingarn
Further information about the work of the Supervisory Board and its committees can be found in the Supervisory Board report, available at www.deutsche-wohnen.com/report-supervisory-board.
The Supervisory Board has adopted rules of procedure. These rules of procedure define the main elements of the work of the Supervisory Board and its committees.
The Management Board regularly attends the meetings of the Supervisory Board. It reports in writing and orally on the individual agenda items and proposals for resolution and answers questions from the Supervisory Board members. In addition, the Management Board is in regular contact with the Chair of the Supervisory Board. Their discussions cover current affairs and developments.
Proposals for resolution and documents on the agenda items are sent to the Supervisory Board members in good time before each meeting. Resolutions can be passed outside meetings in individual cases by order of the Chair. Use is occasionally made of this option in urgent cases. The Chair of the Supervisory Board has a casting vote. The same applies to resolutions by the Supervisory Board committees.
The Chair of the Supervisory Board comments on the work of the Supervisory Board and its committees every year in the Supervisory Board report published in the annual report of Deutsche Wohnen, and in person at the Annual General Meeting.
The Supervisory Board members assess their own work in regular discussions within the Supervisory Board, using the criteria organisational structure, working methods, competence and performance. In 2019 neither the Management Board nor the Supervisory Board saw the need for specific changes. Training or refresher courses for skills and knowledge are not organised collectively, but are rather the responsibility of each Board member.
No member of the Supervisory Board holds 1% or more of issued shares in Deutsche Wohnen SE. Information about the remuneration of the Supervisory Board can be found in the remuneration report (www.deutsche-wohnen.com/remuneration-reportt).
5. Requirements of section 76 para. 4 AktG and section 111 para. 5 AktG
In accordance with the Act for Equal Participation by Women and Men in Leadership Positions in the Private and Public Sectors, the Supervisory Board of a publicly listed company, which is not subject to the Co-determination Act, must define a target for the percentage of women in the Supervisory Board and Management Board. The Management Board of such a company must in turn define targets for the percentage of women on the two management levels below the Management Board. If the percentage of women at the time the Management Board and Supervisory Board define the targets is below 30%, these targets may not be lower than the current percentage. When the targets are defined, a deadline for achieving them must also be set, which may not be longer than five years.
For the target period up to 30 June 2022 the percentage of women on the Supervisory Board has been set at 16.67%. As of the reporting date, this target was met.
The target for the proportion of women members of the Management Board has been set at zero for the target period ending 30 June 2020. As of the reporting date, this target was met.
For the target period ending 30 June 2020 the Management Board has defined a target of 20 % for the first management level below the Management Board and a target of 30 % for the second management level below the Management Board. As of the reporting date the percentage of women met these targets.
6. Composition of Management Board and Supervisory Board (diversity concept)
Deutsche Wohnen has a diversity concept for the composition of the Management Board and Supervisory Board, which is described below. The diversity concept and the competence profile are key elements of the requirements for the composition of the Management Board and Supervisory Board. It meets the statutory requirements and the recommendations of the German Corporate Governance Code.
Diversity concept and succession planning for the Management Board
The diversity concept aims to ensure that the composition of the Management Board is aligned with the specific situation of the company and is as diverse and complementary as possible. The Management Board as a whole should have the necessary knowledge, skills and professional experience for the proper performance of its duties. The Supervisory Board decides on who to appoint to a specific Management Board position based on the company’s interests and taking all the relevant circumstances into account. In doing so the Supervisory Board also considers the following aspects:
- In addition to the necessary specific knowledge and skills, as well as the management and leadership experience for the respective task, the Management Board members should cover as broad a range as possible of knowledge and experience, as well as educational and professional backgrounds,
- The Management Board as a whole should have long-standing experience of the German property market and the capital markets,
- The aim is for different age groups to be represented on the Management Board. The Supervisory Board makes sure that the age limit defined for Management Board members is applied, which is the same as the statutory retirement age.
The current members of the Management Board met these criteria in 2019. Proposals for any new Management Board members are drafted to implement this concept.
In 2019 there were the following changes in the Management Board of Deutsche Wohnen: Lars Wittan left the Management Board. Lars Urbansky and Henrik Thomsen were appointed to the Management Board.
Diversity concept for the Supervisory Board
The diversity concept for the composition of the Supervisory Board is based on the company-specific targets for its composition and its competence profile, which have been defined in accordance with the recommendations of the German Corporate Governance Code.
These targets consider potential conflicts of interests, the defined age limit for Supervisory Board members and the appropriate participation of women. The aim is also that the Supervisory Board should be composed in such a way that its members have the necessary knowledge, skills and professional experience, especially of capital markets and the German property market, required to carry out their tasks properly and are independent. At least one member of the Supervisory Board must also have expertise in financial reporting or auditing and the members as a whole must be familiar with the sector in which the company operates. 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.
In 2019 the Supervisory Board met all the targets for its composition and the requirements of its competence profile. Any proposals for new Supervisory Board members are drafted on the basis of this concept.
After careful review, the Supervisory Board has come to the opinion that all the Supervisory Board members are to be considered as independent members of the Supervisory Board. The following considerations were taken into account in forming this opinion: despite the fact that some of them, namely Matthias Hünlein, Dr. Andreas Kretschmer and Dr. Florian Stetter, have been on the Supervisory Board for more than 12 years, they are to be considered as independent of the company and the Management Board, since they have no personal or business relationship with the company or the Management Board members that constitutes a material and not merely temporary conflict of interests. Length of tenure is only one of four indicators in the German Corporate Governance Code as amended on 16 December 2019 to be taken into account when judging the independence of Supervisory Board members and is not definitive on its own. In the opinion of the Supervisory Board, all the relevant circumstances must be taken into account as a whole when judging the independence of a Supervisory Board member. The other three indicators for the independence of a Supervisory Board member explicitly mentioned in the GCGC as amended on 16 December 2019 are in relation to the specified members of the Supervisory Board Matthias Hünlein, Dr Andreas Kretschmer, and Dr Florian Stetter are not met. Those indicators are namely whether the Supervisory Board member or a close family member
- was a member of the Management Board in the two years before their appointment,
- currently has or had a material business relationship with the company or a company dependent on it, either directly or as a shareholder or a responsible officer of an external company,
- is a close family member of a Management Board member.
It is in the interests of the company to use the long-standing experience of the aforementioned members on the Supervisory Board of Deutsche Wohnen SE. The Supervisory Board is convinced that the automatic departure of a Supervisory Board member after a period of office of twelve years, regardless of the situation of the specific Supervisory Board members and the respective composition of the Supervisory Board, would not improve the work of the Supervisory Board or make it more professional. In the opinion of the Supervisory Board it may in individual cases be in the interests of the company, with regard to continuity and the sustainable long-term direction of the company, for a person to be a Supervisory Board member for longer than twelve years.
Berlin, March 2020
Management Board Supervisory Board