Declaration on Corporate Governance

DECLARATION ON CORPORATE GOVERNANCE ACCORDING TO SECTIONS 289f AND 315d COMMERCIAL CODE (HGB)

The management of LUDWIG BECK AG, a public company listed on the German stock exchange, and the LUDWIG BECK Group (hereinafter collectively referred to as  (“LUDWIG BECK”) is primarily determined by the German Stock Corporation Act (AktG) and, in addition thereto, the rules set forth in the German Corporate Governance Code as amended from time to time.

I. Executive Board and Supervisory Board procedures

Pursuant to statutory provisions, LUDWIG BECK AG is subject to the so-called “dual governance system” which is marked by strict separation in terms of membership of the Executive Board as managing body and the Supervisory Board as monitoring body. The Executive Board and the Supervisory Board cooperate closely in the interest of the company.

1. Executive Board

The Executive Board as managing body of LUDWIG BECK is obligated to serve the interests of the company. It coordinates the principles of business policy and corporate strategy, sets the budgets and distributes resources. The Executive Board prepares and publishes quarterly and semi-annual reports as well as annual financial statements for the group and the company and is responsible for filling important positions in the enterprise. Furthermore, the Executive Board informs the Supervisory Board of all relevant aspects of planning, business development, risk situation and risk management in a regular, timely and comprehensive manner. Business developments deviating from previously set plans and targets are commented and justified in detail.

a) Members of the Executive Board

The Executive Board of LUDWIG BECK consists of two members. It has no chairman or spokesman. The Supervisory Board is of the opinion that this best reflects the equitable, reliable and close cooperation of the two members of the Executive Board.

b) Mode of operation

The Executive Board carries out its activities in compliance with statutory provisions, the German Corporate Governance Code (unless deviations from its recommendations have been explicitly set forth as evident from the declaration pursuant to Section 161 of the German Stock Corporation Act (AktG)), the Articles of Association, its Rules of Procedure and the relevant employment contracts.

The principles of cooperation between the members of the Executive Board as well as with the Supervisory Board are summarized in the Rules of Procedure for the Executive Board. The members of the Executive Board cooperate on a peer basis and keep each other constantly informed about their activities and material business transactions. Generally, they conduct the company’s business together and coordinate management measures. Where prior coordination is not possible, the respective other member of the Executive Board is to be notified of the relevant management measure forthwith. Significant management measures require a consenting prior resolution of the Executive Board. Furthermore, the Rules of Procedure specify certain transactions and measures of the Executive Board which are subject to the prior consent of the Supervisory Board.

The Executive Board informs the Supervisory Board of all relevant aspects of strategy, planning, business development as well as all transactions which may be of considerable importance for the profitability or liquidity of the company in a regular, timely and comprehensive manner. As regards certain important measures the Executive Board is obligated to report to the Supervisory Board’s Management and Personnel Committee in advance. The Supervisory Board may at any time request the Executive Board to submit additional reports on the company’s affairs, the company’s legal and business relationships with affiliated companies as well as on business transactions relating to these companies that could have a material effect on the company's position.

Each member of the Executive Board is entitled and, upon the Supervisory Board’s request, obligated to attend meetings of the Supervisory Board, save where personal matters of any of the Executive Board members are dealt with. Together with the Supervisory Board, the Executive Board is to ensure long-term succession planning for the Executive Board.

Each member of the Executive Board shall disclose conflicts of interest to the Supervisory Board forthwith, and shall also inform the Executive Board accordingly. In the reporting year, the members of the Executive Board of LUDWIG BECK AG were not involved in any conflicts of interest.

2. Supervisory Board

The Supervisory Board advises the Executive Board in managing the company and monitors its activities.

a) Composition of the Supervisory Board

In accordance with the Law governing One Third Participation, the Supervisory Board of LUDWIG BECK is composed of Supervisory Board members representing the shareholders and members representing the employees, whereas one third of the members of the Supervisory Board are recruited from the workforce. The Board consists of six members. Upon conclusion of the Annual General Meeting on May 15, 2018 the terms of office of all members of the Supervisory Board ended, i. e. of Dr. Steffen Stremme (Chairman), Mr. Hans Rudolf Wöhrl (Vice Chairman), Mrs. Clarissa Käfer and Mrs. Edda Kraft as well as of the employee representatives Mr. Philip Hassler and Mr. Michael Neumaier, so that it was necessary to hold new elections. The Annual General Meeting reelected Dr. Stremme (Businessman, Erlangen, concurrently a member of the Supervisory Board of BU-Holding AG, Nuremberg, of the Members’ Council of GfK e.V., Nuremberg, of the Advisory Board of Commerzbank AG, Nuremberg and of the Advisory Board of menzerna polishing compounds GmbH & Co. KG, Ötigheim) and Mrs. Käfer (Lawyer and Tax Consultant, Munich, concurrently a member of the Board of Trustees of Bayerische Sportstiftung, Munich, of the Supervisory Board of Käfer AG, Munich, of the Supervisory Board of Münchner Bank eG, Munich and of the Advisory Board of Stadtfeuerwehrverband München e.V, Munich), and elected Mrs. Sandra Pabst (Managing Director of INTRO-Verwaltungs GmbH, Reichenschwand, Nuremberg, concurrently a member of the Supervisory Board of AURUM-Project AG, Reichenschwand and Curameo AG, Reichenschwand) and Dr. Bruno Sälzer (Businessman, Grünwald, concurrently a member of the Supervisory Board of Deichmann SE, Essen, of the Board of Directors der Lacoste Holding NG, Paris and of the Board of Directors (Chairman) of Amer Sports Corp., Helsinki) as shareholder representatives to the Supervisory Board. Mrs. Kraft and Mr. Wöhrl retired from the Supervisory Board. Dr. Moritz Freiherr von Hutten zum Stolzenberg (Lawyer, Munich, concurrently a member of the Supervisory Board of Rudolf Wöhrl SE, Reichenschwand, of the Advisory Board of montratec GmbH, Niedereschach and a substitute member of the Supervisory Board of TETRIS Grundbesitz GmbH & Co. KG, Reichenschwand) was elected as a substitute member for all Supervisory Board members elected by the Annual General meeting. Mr. Michael Neumaier was reelected and Mr. Jochen Vöcker was elected for the first time as employee representatives to the Supervisory Board. Their terms of office began with the conclusion of the Annual General Meeting on May 15, 2018. The Supervisory reelected Dr. Stremme as Chairman and elected Mrs. Pabst as Vice Chairwoman of the Supervisory Board.

b) Mode of operation

The Supervisory Board carries out its activities in compliance with statutory provisions, the German Corporate Governance Code (unless deviations from its recommendations have been explicitly set forth as evident from the declaration pursuant to Section 161 of the German Stock Corporation Act (AktG)), the Articles of Association and its Rules of Procedure.

The Articles of Association and the Rules of Procedure for the Supervisory Board govern the internal organization and the resolution procedure to be followed by the Supervisory Board. The Supervisory Board elects a Chairman and a Vice Chairman from among its midst. The Chairman of the Supervisory Board coordinates the Supervisory Board’s activities and chairs its meetings. The Chairman keeps in contact with the Executive Board on a regular basis and deliberates the company’s strategy, business development and risk management with the Executive Board. The Chairman is responsible for representing the Supervisory Board vis-à-vis third parties.

The Supervisory Board is to meet at least twice every half a calendar year. The meetings of the Supervisory Board are convened by the Chairman of the Supervisory Board observing a notice period of two weeks which period may by shortened in urgent cases. The items on the agenda shall be communicated simultaneously with the invitation to the meeting. The Supervisory Board has a quorum if all members have been duly invited, and at least two thirds of the members participate in the passing of resolutions. Resolutions of the Supervisory Board are passed with a simple majority of the votes cast unless mandatory provisions of law or the Articles of Association provide otherwise. If any vote results in a tie, the Chairman’s vote, or, in absence of the Chairman, the Vice Chairman’s vote shall be decisive. Resolutions of the Supervisory Board may also be passed outside the meetings by circulation procedure if so proposed by the Chairman.

The Supervisory Board appoints the members of the company’s Executive Board. It monitors and advises the Executive Board in conducting the company’s business in compliance with statutory provisions and the Articles of Association. The Supervisory Board is involved in all decisions of fundamental importance to LUDWIG BECK AG and the Group. According to the Executive Board’s Rules of Procedure, significant management measures require the Supervisory Board’s consent. The members of the Supervisory Board protect the confidentiality of the information disclosed to them in connection with the performance of their duties.

Each member of the Supervisory Board is obligated to disclose conflicts of interest to the Supervisory Board, in particular conflicts arising in connection with consultations or executive functions with customers, suppliers, creditors or other business partners. In case of major conflicts of interest of a not only temporary nature, the member of the Supervisory Board concerned has to resign from the Board. In the reporting year, the members of the Supervisory Board of LUDWIG BECK AG were not involved in any conflicts of interest.

Mrs. Clarissa Käfer has the required expertise in the areas of financial reporting and auditing and therefore qualifies as financial expert within the meaning of Section 100 par. 5 of the German Joint Stock Corporation Act (AktG). All members of the Supervisory Board are familiar with the sector the company operates in.

c) Supervisory Board Committees

The principles of cooperation of the members of the Supervisory Board are set forth in the Rules of Procedure for the Supervisory Board in particular. Among other, they provide for the formation of committees. The Supervisory Board has two committees at present, the Audit Committee and the Personnel and Management Committee:

aa) The Audit Committee

Tasks of the Audit Committee primarily concern financial reporting and audit issues as well as the monitoring of accounting, the financial reporting process, the efficiency of the internal control system, risk management and the internal revision and audit system.

Upon conclusion of the Annual General Meeting on May 15, 2018, members of the Audit Committee were Mrs. Clarissa Käfer, Chairwomen of the Committee (Lawyer and Tax consultant, Munich; concurrently a member of the Board of Trustees of Bayrische Sportstiftung, Munich, chairwomen of the Supervisory Board of Käfer AG, Munich, a member of the Supervisory Board of Münchner Bank eG, Munich and of the Advisory Board of Stadtfeuerwehrverband München e.V., Munich), Dr. Steffen Stremme (Businessman, Erlangen; concurrently a member of the Supervisory Board of BU-Holding AG, Nuremberg, of the Members’ Council of GfK e.V., Nuremberg, of the Advisory Board of Commerzbank AG, Nuremberg, and of the Advisory Board of menzerna polishing compounds GmbH & Co. KG, Oetigheim) and Mrs. Edda Kraft (Businesswoman, Leipzig, concurrently a member of the Supervisory Board of the Medienboard Berlin-Brandenburg, Potsdam, and of the Advisory Board of Sabine Christiansen Kinderstiftung, Berlin). Dr. Bruno Sälzer (Businessman, Grünwald, concurrently a member of the Supervisory Board of Deichmann SE, Essen, of the Board of Directors der Lacoste Holding NG, Paris and of the Board of Directors (Chairman) of Amer Sports Corp., Helsinki) was elected to the Audit Committee to replace Mrs. Kraft who had retired from the Supervisory Board. Since then, the Audit Committee has been composed of Mrs. Käfer (Chairwoman), Dr. Stremme and Dr. Sälzer. In the 2018 fiscal year, the Audit Committee held three meeting, on March 20, on May 15 and on July 11. One member of the Audit Committee is a financial expert within the meaning of Section 100 par. 5 of the German Joint Stock Corporation Act (AktG), and all members are familiar with the sector the company operates in.

bb) The Personnel and Management Committee

Upon conclusion of the Annual General Meeting on May 15, 2018, the Personnel and Management Committee was composed of Dr. Steffen Stremme (Chairman) and Mr. Hans Rudolf Wöhrl (a member of the Supervisory Board of NÜRNBERGER Allgemeine Versicherungs-AG, Nuremberg, of AURUM-Project AG, Reichenschwand, and of TETRIS Grundbesitz GmbH & Co. KG, Reichenschwand), as well as Mrs. Clarissa Käfer. Mrs. Sandra Pabst (Managing Director of INTRO-Verwaltungs GmbH, Reichenschwand, Nuremberg, concurrently a member of the Supervisory Board of AURUM-Project AG, Reichenschwand) was elected to the Personnel and Management Committee as the successor of retired Mr. Wöhrl. Since then, the Personnel and Management Committee has been composed of Dr. Stremme (Chairman), Mrs. Käfer and Mrs. Pabst. The committee mainly deals with personnel matters of the Executive Board. In 2018, the Committee held two meetings, one by telephone on February 5, 2018 and one on November 29, 2018.

d) Further details

Committee chairmen regularly report to the Supervisory Board on the committees’ work. The majority of committee members are independent. More detailed information on committee members and the specifics of the work performed by the Supervisory Board and its committees can be found in the latest Supervisory Board Report on page 9 et seq. of the Annual Report.

With regard to the recommendation in Section 5.4.1 par. 2 of the German Corporate Governance Code the Supervisory Board adopted specific targets for its composition and prepared a competence profile for the plenary committee. The current state of implementation is set out in the Corporate Governance Report on the corporate homepage.

II. Gender quota and determination of target figures for the proportion of women in Supervisory Board, Executive Board and leadership positions

Gender quota

The “Law on Equal Participation of Women and Men in Leadership Positions in the Private and Public Sector” of April 24, 2015, has obligated listed and codetermined companies to specify certain targets for the proportion of women in the two executive tiers below the Executive Board level and on the Supervisory Board.

In order to meet these legal requirements, the Supervisory Board and the Executive Board of LUDWIG BECK AG made the following decisions:

a) Target figure for the Supervisory Board

For the period commencing on July 1, 2017, the Supervisory Board, being aware of the fact that is has no influence on the election of the employee representatives, specified a 25 % target for the proportion of women on the side of shareholder representatives. The deadline for achieving this target was set at June 30, 2022. At the time, the target was specified the quota of women on the plenary Supervisory Board was 33.33 % and among shareholder representatives 50 %.

b) Target figure for the Executive Board

For the period commencing on July 1, 2017, the Supervisory Board specified a 0 % target for the proportion of women on the Executive Board. The deadline for achieving this target was set at June 30, 2022. At the time, the target was specified the quota of women on the Executive Board was 0 %. The Supervisory Board still maintains that any expansion of the Executive Board is unnecessary, and sees no reason to reshuffle the Executive Board. Against this background, the Supervisory Board doesn’t consider a higher proportion of women on the Executive Board expedient, and attaches importance to upholding professional qualification and expertise as the crucial criteria for the election of the Executive Board members.

c) Target figure for the first and second executive level below the Executive Board

At its meeting on May 24, 2017, the Executive Board had set a 28% target figure for the first executive level below the Executive Board to be achieved within five years. At the time this target figure was specified, the proportion of women on the first executive level below the Executive Board was 38 %.

At its meeting on May 24, 2017, the Executive Board set a 50 % target figure for the second executive level below the Executive Board to be reached within five years. At the time the new target figure was specified, the proportion of women at the second executive level below the Executive Board had been 67%.

III. Declaration of Conformity according to § 161 of the German Joint Stock Corporation Act (AktG)

The term Corporate Governance stands for responsible corporate management and control aimed at sustained value creation. LUDWIG BECK feels committed to these values and, since April 2003, has complied with the recommendations set forth in the German Corporate Governance Code, first adopted in 2002, without major reservations. Therefore, after dutiful examination, the Executive Board and Supervisory Board of LUDWIG BECK issued the following recent Declaration of Conformity in accordance with Section 161 German Joint Stock Corporation Act (AktG) on November 23, 2018:

“Declaration regarding the Corporate Governance Codex according to 161 German Joint Stock Corporation Act (AktG)

The following declaration refers to the recommendations of the German Corporate Governance Code (“Code”) as amended on February 7, 2017, which was made public in the German Federal Gazette on April 24, 2017 and corrected on May 19, 2017. The Executive Board and the Supervisory Board of LUDWIG BECK am Rathauseck – Textilhaus Feldmeier Aktiengesellschaft declare in accordance with section 161 Joint Stock Corporation Act (AktG) that they have conformed and will conform to the recommendations of the Government Commission for the German Corporate Governance Code, published in the official section of the German Federal Gazette by the Federal Ministry of Justice, with the following exceptions:

1. The recommendation in Clause 4.1.3 sentence 3 of the Code, applicable as of April 24, 2017, according to which employees shall be given the opportunity to report, in a protected manner, suspected breaches of the law within the company (establishment of a whistleblower hotline) is not complied with. The Executive Board and the Supervisory Board are of the opinion that the company has a well-functioning compliance management system in place and see no need for setting up a whistleblower hotline. Furthermore, it cannot be excluded that the establishment of a whistleblower hotline might burden the excellent work atmosphere and encourage a culture of denunciation.

2. The Executive Board of the Company has no chairman or spokesman (Code Clause 4.2.1 sentence 1). The Supervisory Board is of the opinion that this best reflects the close cooperation of the two members of the Executive Board, which is based on equality and trust.

3. In deviation from the recommendation in Clause 4.2.3 par. 2 sentence 3 of the Code, applicable as of April 24, 2017, the multiple-year assessment basis for determining the variable remuneration components to be granted to the members of the Supervisory Board which has been applied for many years is not generally future-oriented. In the view of the Supervisory Board the long-standing remuneration system has proven its worth. Furthermore, in order to safeguard existing standards, the existing contracts should not be interfered with, and the consistency of the employment contracts of the two members of the Executive Board should be preserved.

4. The Supervisory Board has not formed a nomination committee (Code Clause 5.3.3). The Supervisory Board is of the opinion that election proposals to the General Meeting for members of the Supervisory Board should be worked out in a plenary sitting of the manageable six-member body.

5. The Executive Board doesn’t reason “interim financial information” with the Supervisory Board or its audit committee prior to their publication (Code Clause 7.1.2 sentence 2). The Supervisory Board and the Executive Board are in regular close contact on the basis of a monthly reporting system. Therefore, a separate discussion on Semi-annual Reports or other interim financial information prior to their publication is dispensable.

Munich, November 23, 2018“

Previous, no longer current declarations of conformity of LUDWIG BECK can be found here: (https://kaufhaus.ludwigbeck.de/en/company/investor-relations/corporate-governance/declaration-of-compliance).

IV. Information on corporate governance practices

In the course of its business in sales markets, LUDWIG BECK is exposed to a wide variety of risks as are involved in any business operation. These may affect assets, finances and earnings. The company has established modern controlling instruments in order to detect, monitor and communicate such risks. These instruments ensure that the decision-makers always receive information about the development of such risks in time to launch suitable counter-measures, with the aim of steadily and sustainably increasing the value of the business. Responsibilities are clearly defined within the organization. The tools are subject to ongoing optimization in order to sufficiently accommodate structural changes.

More information about the risk management of LUDWIG BECK can be found here:

(https://kaufhaus.ludwigbeck.de/en/company/investor-relations/corporate-governance/further-information).

V. Diversity concept

LUDWIG BECK does not pursue a diversity concept within the meaning of section 289f par. 2 No. 6, 315d Commercial Code (HGB). As regards the composition of the Supervisory Board, diversity aspects have already been integrated into the competence profile for the plenary committee prepared by the Supervisory Board, the specific targets for the composition of the Supervisory Board and the target figures set for the proportion of women on the Supervisory Board. According to the Supervisory Board’s estimation a more extensive diversity concept for the composition of the Supervisory Board is dispensable.

The same basically applies to the composition of the Executive Board and the managements of the subsidiaries. According to the opinion of the Supervisory Board, the composition of the Executive Board, unchanged for many years, has well proven its worth. Therefore, there is no intention to extend or reshuffle the Executive Board. In light of this, LUDWIG BECK currently does not pursue any diversity concept regarding the composition of the Executive Board of LUDWIG BECK AG and the company’s subsidiaries.

Positive, dedicated actions integrated into an efficient organizational system providing for all necessary tools to respond to market changes in a fast and flexible manner form the basis of business success and are standard for the staff. The company intends to remain a permanently attractive investment for shareholders. Trust in the reliability and efficiency of the Group and its subsidiaries is indispensable for entrepreneurial success and continuous competitiveness.

Customers take center stage for LUDWIG BECK, when it comes to long-term oriented and trustful business activities. A high level of proactivity, the readiness to adjust to changes as well as commitment and proficiency of the workforce are essential to the company’s success. Executives act as role models. They communicate attentively and pose high demands on employees, and they give motivating impulses and convey trust. Their way of cooperation is respectful of individuality, and stimulates diversity of opinion. Decisions are implemented in a consequent and goal-oriented manner.

This is done in an atmosphere of mutual acceptance and appreciation. The extraordinary loyalty of employees to LUDWIG BECK is the greatest proof of this corporate culture of role model behavior. The mostly unusual length of service of employees motivates and encourages LUDWIG BECK to continue pursuing a personnel policy based on promoting and demanding. Without content and loyal employees there will be no content and loyal customers.    

Munich, March 28, 2019

LUDWIG BECK AG

The Executive Board
sgd. Dieter Münch
sgd. Christian Greiner

The Supervisory Board
sgd. Dr. Steffen Stremme (Chairman)
sgd. Sandra Pabst (Vice Chairwoman)
sgd. Clarissa Käfer
sgd. Dr. Bruno Sälzer
sgd. Michael Neumaier
sgd. Jochen Vöcker

  

 

Contact

Investor Relations/Financial PR

esVedra consulting GmbH
Metis Tarta
+49 89 206021-210