Corporate governance at Jungheinrich
In accordance with Item 3.10 of the current version of the German Corporate Governance Code of May 26, 2010, the Supervisory Board and the Board of Management hereby report on corporate governance at Jungheinrich:
The term ‘corporate governance’ designates transparent, good and responsible business management and control of a company, oriented towards increasing value over the long term. The Board of Management and the Supervisory Board of Jungheinrich AG currently align their activity to these principles and have also done so in the past.
The Code, which was most recently revised by the German Corporate Governance Government Commission in May 2010 is an important guideline for Jungheinrich’s efforts to ensure the sustainable, value-oriented management of the company, thereby increasing transparency both internally and externally. Investors, capital markets, business partners and the entire general public pay keen attention to this transparency. However, the company’s employees are also interested in this in the long run. To this end, Jungheinrich worked with Group executives the world over to develop its own mission statement, primarily emphasizing the importance of value-oriented corporate governance given that it is a family-owned company and has already introduced it to a great extent.
A major basic premise of corporate governance within the Jungheinrich Group is the clear distribution of tasks and responsibilities among the Board of Management, the Supervisory Board and the Annual General Meeting. The Board of Management runs and steers the company’s business independently and of its own authority, a task for which it receives advice from the Supervisory Board and which is monitored by the Supervisory Board by maintaining constant dialogue. The Annual General Meeting completes the distribution of power within the company as the third major pillar. Compliance, namely adherence to statutory regulations and corporate guidelines, was an important issue in 2010 as well. In response, Jungheinrich established structures back in 2008 through which the Board of Management constantly and comprehensively reports to the Supervisory Board and/or its Finance and Audit Committee. Further significant elements of corporate governance at Jungheinrich are proactive and transparent corporate communications as well as the responsible management of risks. Also of notable mention is the importance to Jungheinrich of the audit of our financial statements by an independent third party. The efficiency test regularly performed by the Supervisory Board, the most recent of which was conducted in the year being reviewed, is another principle of the company’s corporate governance. At Jungheinrich, corporate governance is in line with all statutory regulations and largely complies with the recommendations and suggestions of the German Corporate Governance Code.
The necessity of adaptations to changes in the law and new developments in corporate governance and control standards is subjected to regular reviews and decided on formally once a year.
Further information on the work done by the Supervisory Board and its committees and on the cooperation between the Supervisory Board and Board of Management can be found in the report of the Supervisory Board included in this annual report as well as in the corporate governance declaration, which has been published on our website (www.jungheinrich.com). Our internet presence also contains the company’s financial publications, documents relating to the Annual General Meeting, a financial calendar with key dates, ad-hoc releases, and other communications pursuant to the German Securities Trading Act primarily pertaining to reportable securities transactions, as well as press releases. Our website also features Jungheinrich AG’s current articles of association as well as details concerning the composition of the Board of Management and of the Supervisory Board.
In December 2010, the Board of Management and Supervisory Board of Jungheinrich AG issued their latest annual statement of compliance with the recommendations and suggestions of the ‘German Corporate Governance Code Government Commission’ pursuant to Sec. 161 of the German Stock Corporation Act. This declaration has been published on our website and reads as follows:
“The Board of Management and the Supervisory Board of Jungheinrich AG declare that, in line with this declaration, Jungheinrich AG is complying with the May 26, 2010 version of the recommendations of the ‘German Corporate Governance Code Government Commission’ at present, and complied with those of the June 18, 2009 version in the past.
The deviations follow and are commented below:
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The company‘s D&O insurance policy does not include a deductible for the members of the Supervisory
Board (Item 3.8 of the Code).
The D&O insurance policy is a group insurance policy for a large number of the Group‘s employees in Germany and abroad. Differentiating between employees and board members was deemed improper in the past. In view of the mandatory provisions of the German law on the appropriateness of management board compensation that entered into force on August 5, 2009, the insurance policy was supplemented by a deductible for the members of the Board of Management by the point in time set forth in said law. As the legislator expressly renounced mandating the introduction of a corresponding deductible for Supervisory Board members, the Supervisory Board sees no reason to deviate from its practice thus far. -
Jungheinrich AG‘s compensation system for members of its Board of Management will be adjusted for
employment contracts concluded from January 1, 2011 onwards and will then feature the compensation
components with a multi-year basis of assessment as required by law (Item 4.2.3 of the Code).
The company had already decided to adopt a compensation system for its boards consisting of fixed and variable components in the past. The variable elements were linked to the company‘s performance. Due to new statutory regulations, the variable pay components of service agreements newly entered into with members of the Board of Management will be supplemented by components with a longer-term orientation. -
The Supervisory Board pays attention to diversity with respect to the composition of the Board of Management.
However, appropriate female representation does not take centre stage (Item 5.1.2 of the Code).
Naturally, women are given consideration equal to male candidates by the Supervisory Board when staffing positions on the Board of Management. However, the individual’s professional and personal suitability with respect to the position on the Board of Management in question are the focal point. -
The compensation of the members of the Board of Management and Supervisory Board is not itemized
or broken down by member in the compensation report, which is part of the corporate governance
report, or in the notes to the consolidated financial statements (Items 4.2.4 and 5.4.6 of the Code).
The company is not implementing the Code‘s recommendation to present the emoluments of the members of the Board of Management or Supervisory Board in itemized or individualized form. These corporate bodies are boards, which makes disclosure by board member irrelevant. Furthermore, the company believes that the correlation between the disadvantages associated with such disclosure and the benefits this may have for investors is unreasonable—also as regards each of the board members‘ right to privacy. After all, per its resolution dated June 13, 2006, the Annual General Meeting waived the obligation of the members of the Board of Management to provide individualized disclosure over a period of five years. -
A nomination committee for proposing suitable Supervisory Board candidates to the Annual General
Meeting has not been established (Item 5.3.3 of the Code).
In light of the nature of a family-owned company, the company believes that such a committee is dispensable. Two Supervisory Board members are seconded by the registered shareholders, and the candidates for the four remaining shareholder representatives, which are proposed to the Annual General Meeting, are chosen in close coordination with the holders of ordinary shares. -
The Supervisory Board has not yet stated any specific goals with respect to its composition (Item 5.4.1 of
the Code).
Over the course of 2011, the Supervisory Board will debate whether the Code’s recommendation can be followed appropriately given the company’s background. -
The company renounces the determination of an age limit for Supervisory Board members (Item 5.4.1 of
the Code).
An age limit can lead to rigid rules, which may counteract the company‘s goal of staffing the Supervisory Board with extremely experienced individuals. Therefore, increased flexibility when making decisions on a case-by-case basis has been given preference. -
In 2010, the consolidated financial statements could not yet be made available to the public within the
recommended 90-day time limit after the end of the fiscal year. However, we will manage to do this
with respect to the consolidated financial statements for the 2010 financial year, which will be published
in 2011 (Item 7.1.2 of the Code).
Whereas the recommended time limit of 45 days from the end of each reporting period has already been adhered to for interim reports in the past, it will not be possible to do so for the consolidated financial statements until the requisite systems have been upgraded in 2011, owing to the reduction in the intervals between the individual foreign-company financial statements.
Hamburg, December 2010”
The company‘s Annual General Meeting affords all of Jungheinrich AG‘s shareholders the opportunity to exercise their rights. Holders of ordinary shares exercise their voting rights there in person, by personal proxy, or by a proxy appointed by the company. Holders of preferred shares are given ample opportunity to discuss the business trend with the Board of Management and the Supervisory Board and to ask questions concerning it.
The company continues to believe that markets will grow in principle. Significant attention is paid to associated risks—a task performed by our risk management system, among others. Details are included in the Group management report.
Shareholders, investors, analysts and the general public are promptly and equally informed of developments in compliance with statutory regulations. To this end, Jungheinrich makes increasing use of the possibilities provided by the internet, focussing above all on the company’s homepage.
In line with good, established standards, another agreement was reached with the auditor of the financial statements for fiscal 2010, whereby the Chairman of the Supervisory Board was to be immediately informed of any grounds substantiating preclusion or prejudice becoming apparent during its audit. However, no such notification was necessary. The auditor of the financial statements is also obliged to instantaneously report on all findings and events material to the Supervisory Board fulfilling its tasks identified by the auditor when performing the audits. This notification requirement also applies to all deviations from the statements issued by the Board of Management and Supervisory Board concerning the German Corporate Governance Code discovered when auditing the financial statements.
As a rule, once a year, the Board of Management and Supervisory Board discuss whether Jungheinrich AG’s corporate governance practices comply with the basic principles of the German Corporate Governance Code. These consultations focus on compliance with, and deviations from, the Code’s recommendations and suggestions. The Finance and Audit Committee does the preparatory work for the resolutions passed by the Supervisory Board.