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Declaration on Corporate Governance

The Declaration on Corporate Governance (Sections 289f and 315d German Commercial Code) comprises the declaration of compliance, information on corporate governance practices and a description of the Board of Management and Supervisory Board procedures. Our aim is to present Dürr’s corporate governance principles as clearly and concisely as possible.

Declaration of compliance

The first draft of the German Corporate Governance Code was presented in February 2002. Since then the codex has been updated annually. The control committee German Corporate Governance, is responsible for formulating and further developing the code (www.corporate-governance-code.de).

The code is based on legal guidelines, above all from the German Stock Corporation Act (Aktiengesetz). It contains extensive recommendations for the cooperation of the Board of Management and Supervisory Board, for transparent communication with the capital market and for protecting the interests of shareholders.

The structures for the management and supervision of Dürr AG are as follows:

Shareholders and general meeting

Our shareholders exercise their rights at the general meeting. Dürr’s annual general meeting is held within the first five months of the fiscal year. The general meeting is presided over by the Chairman of the Supervisory Board. The general meeting resolves on all matters that are reserved for it by law (amendments to the articles of incorporation, the appropriation of net profit, capital measures, etc.).


Supervisory Board

The primary function of the Supervisory Board is to advise and supervise the Board of Management. Dürr AG’s Supervisory Board has equal employee and shareholder representation and currently consists of 12 members. Six members were elected by the shareholders at the general meeting and four members were elected by the employees. Two members were appointed by the IG-Metall trade union.

In the event of a tie in the voting, the Chairman of the Supervisory Board has the casting vote in the second ballot.

Elections by employees are held every five years to appoint their representatives to the Supervisory Board; the last regular elections took place in 2016. Shareholders elect their representatives to the Supervisory Board at least once every five years. If a member of the Supervisory Board resigns before the end of his/her term of office, a successor will be appointed by court if no elected substitute member is available. Supervisory Board members appointed by court must stand for election at the next annual general meeting (shareholder representatives) or at the next election date (employee representatives).

The Supervisory Board has approved a skills profile and objectives for its composition. This is to ensure that its members collectively fulfill the requirements for the proper performance of the Supervisory Board’s work. Among the skills needed are knowledge of the mechanical and plant engineering industry and our markets as well as knowledge in the fields of management, leadership, accounting, controlling, risk management, compliance and corporate governance. It is not necessary for every member to have the same level of knowledge in all fields; rather, the different skills should complement each other. At least one member must have expertise in financial accounting or auditing. The chairman of the Audit Committee must have specific knowledge in applying accounting principles and internal control procedures. Every Supervisory Board member must be familiar with the relevant legal standards, devote a sufficient amount of time and continue to expand his/her knowledge. In terms of diversity, members are expected to have diverse professional and international experience; there must be a minimum quota of 30% of both men and women on the Supervisory Board, according to Section 96 (2) of the German Stock Corporation Act (AktG). Dürr complies with this target. Further key points are an appropriate number of independent members, the avoidance of any conflicts of interest, a general age limit of 70 when being elected and a maximum term of office of 15 years. The Supervisory Board, in its current composition, fulfills the requirements of the skills profile. In September 2020, the skills profile was again reaffirmed by the Supervisory Board.

→ Compensation system for the Supervisory Board

 

Independence of the shareholder representatives on the Supervisory Board

On the shareholder side, the Supervisory Board includes what it considers to be an appropriate number of independent members, namely five. As a representative of the founding family, Prof. Dr. Dürr has been a member of the Supervisory Board for more than 12 years. The other shareholder representatives do not see any conflict with the skills profile (which sets a maximum limit of 15 years, but explicitly provides for exceptions due to the ownership structure) or the recommendations of the German Corporate Governance Code. It is understandable that the founding family would like to represent its interests via a single member of the Supervisory Board.

 

Self-evaluation of the Supervisory Board – Efficiency review

Every three years, the Supervisory Board conducts a review of its activities, the organization and procedure of the meetings, including their preparation, information provided by the Board of Management and other aspects, on the basis of a comprehensive questionnaire (with a total of 40 questions) (self-evaluation or efficiency review pursuant to Section 5.6 of the German Corporate Governance Code). The questionnaire is completed by each member of the Supervisory Board and the results are discussed anonymously in the plenary session. In the results, the Supervisory Board determines where changes in procedures should be made, or the Supervisory Board determines that no changes are required. The most recent review took place in the summer of 2018. At that time it was determined, among other things, that even more time should be spent on individual topics and on meetings of the Audit Committee, and new routines were created for providing information about transactions that have already been approved.

 

Supervisory Board: Deductible for D&O insurance

A D&O insurance policy has been in place for the members of the Supervisory Board, which – since January 1, 2018 – has provided for a deductible in the amount of 10% of the damage incurred, but up to a maximum of one and a half times the fixed annual compensation of the Supervisory Board member. Some Supervisory Board members have made use of the possibility to insure this deductible. Such a deductible insurance will always be at the insured’s own expense.

 

Board of Management

The Board of Management, as the executive body of Dürr AG, manages the company’s affairs and under the requirements of stock corporation law is committed to Dürr’s interests and bound by the principles of company policy. It reports regularly, promptly and comprehensively to the Supervisory Board about all essential issues of business development and corporate strategy, and about potential risks.

The compensation for the members of the Board of Management comprises performance-related and non-performance-related components.

→ Compensation system for the Board of Management

 

Board of Management succession planning

The Supervisory Board regularly discusses the long-term planning of the succession of the members of the Board of Management and in particular of the CEO. In doing so, it obtains advice and seeks proposals from the Personnel Committee, which discusses individual aspects in more detail. Proposals are generally considered in the absence of the Board of Management, but individual issues are discussed jointly with the Board of Management.

A further pillar of succession planning is the People Development Process, which is located in the Human Resources department. Within the framework of this process, high potentials are defined and developed so that candidates for internal succession are also available and proposed by the Board of Management.

 

Age limit for members of the Board of Management

By resolution dated December 16, 2015, the Supervisory Board set an age limit for all current and future members of the Board of Management. Accordingly, the Supervisory Board shall generally ensure when appointing and concluding service contracts that they end when the member reaches the age of 63.

 

Directors’ interests

Members of the Board of Management and the Supervisory Board (w/o Dürr family) hold less than 1% shares in Dürr AG. Details of the latest shareholder structure can be found → here.


Transparency

Dürr AG places great value on providing information uniformly, comprehensively and promptly. It reports on the company’s business situation and results in the annual report, at press conferences and conference calls, in the quarterly reports and in the six-month report.

Information is also published through press releases and ad-hoc announcements. All announcements, presentations and notices are available on our website under Investors/Media.

Dürr AG has to draw up an insider list if needed according to the market abuse regulation. The persons concerned will be informed about the statutory duties and penalties.


Accounting and audit

The consolidated financial statements have been prepared in accordance with IFRS standards since the 2003 fiscal year. After preparation by the Board of Management the consolidated financial statements are audited by the external auditor and are adopted by the Supervisory Board. The consolidated financial statements are published within 90 days after the end of the fiscal year.

It has been agreed with the external auditor that the Chairman of the Supervisory Board or the Chairman of the Audit Committee will be informed immediately about any grounds for exclusion or exemption and any inaccuracies in the declaration of compliance arising in the course of the audit. The external auditor reports to the Chairman of the Supervisory Board immediately about all issues and events arising in the course of the audit relevant for the Supervisory Board’s duties.


Performance indicators and control system

Dürr has defined value-oriented performance targets to back up its strategic goals. EBIT, operating cash flow, free cash flow and ROCE are the key performance benchmarks for the company and the divisions.

The auditing department of Dürr AG is responsible for internal audits. Within the divisions, the regular control function is performed primarily by the Controlling departments and by the named risk managers appointed. Our risk management process consists of nine steps. The most important step is the so-called risk inventory, for which the management of the respective operating units is responsible. Here, the individual risks are identified, are assigned to the 15 defined risk fields, and are evaluated. A risk is evaluated according to standard criteria with the aid of so-called risk structure spreadsheets. Factors assessed are the maximum possible loss, the probability of occurrence, and the effectiveness of possible counter measures. The end result of this review is the so-called net risk or actual risk potential. The aggregate of all the individual risk potentials represents the overall risk situation for the Group. This can then be segmented according to specific risks in the five divisions and according to aggregate risks at Group level.


Diversity/Diversity concept

The satisfaction of our employees is a top priority for us. Every employee has the right to be treated fairly, politely and respectfully. We do not tolerate discrimination or harassment at any of our locations. All forms of discrimination are strictly prohibited in the Dürr Group, be it on the grounds of gender, age, religion, illness, origin, skin color, sexual orientation or for other reasons. We ensure diversity when hiring staff at any level within the Group. We aim to give adequate consideration to women, including in managerial positions. As an international group, having a broad-minded and multifaceted perspective is a key factor to our economic success. We therefore promote collaboration – across national boundaries, between different generations, and by providing equal opportunities for men and women.

Diversity is one of the five basic values of our leadership model. These values are used to measure and assess the leadership behavior of all our managers.

At the Dürr Group we offer a number of different training courses and seminars with a focus on intercultural diversity. In addition, many international training events support our open-minded approach to diversity. As part of our 'social budget', we provide funds for the continuous improvement of working conditions. The employee representatives and the Board of Management discuss this on a regular basis. We promote equal opportunities through various working time models, which meet the individual needs of our employees. In addition, we promote internal communication through presentations and workshops on topics such as equal opportunities, religion, zeitgeist and lifestyle, which are also the subject of controversial debate in our society.

The Supervisory Board supports the Group’s diversity strategy. When selecting members for the Board of Management, criteria such as technical and social skills, international experience and character traits are of prime importance. The gender, nationality or entry age of a candidate does not constitute a decisive factor. When filling the positions on the Board of Management, emphasis is also placed on a balanced age structure, bearing in mind that the age limit is 63. The minimum educational requirement is a university degree or equivalent qualification. The members of the Board of Management should have long-term experience in comparable positions and sectors relevant to Dürr. The Supervisory Board believes that the current members of the Board of Management meet the criteria described above.


Act on Equal Participation of Women and Men in Executive Positions in the private and public sectors

On May 1, 2015, the Act on Equal Participation of Women and Men in Executive Positions came into force in Germany. Its most important provisions are also reflected in the Corporate Governance Code. Companies that are listed on the stock exchange or are subject to co-determination are required to set themselves targets for women’s quotas on their management boards and their two most senior management levels below management board level, and to publish these independently defined targets along with a deadline for their achievement.

We have fulfilled these legal requirements as detailed below:

  • Since the 2016 elections, the Supervisory Board of Dürr AG has had four female members. This corresponds to a women’s quota of 33%, which fulfills the 30% minimum quota required by law.
  • The percentage of women on Dürr AG’s Board of Management is 0%. The Supervisory Board is strictly guided by the profile of skills when selecting members for the Board of Management. Gender is not crucial for the appointment to the Board of Management, but the qualification and the personality of the candidates are. The current members of the Board of Management have long-term service contracts; there are no plans to expand the Board of Management. This means, as things stand today, no further appointment to the Board of Management is planned, and the percentage of women is therefore also not anticipated to increase before June 30, 2022.
  • At the first senior management level below Dürr AG’s Board of Management, the women’s quota is 0%; at the second senior management level below the Board of Management, it was 13% as of December 31, 2020. The targets have been set at 0% for the first senior management level below the Board of Management and at 20% for the second level. The date by which both targets must be achieved is June 30, 2022.

 

Declarations on corporate governance by other Group companies pursuant to Section 289f (4) of the German Commercial Code (HGB)

Apart from Dürr AG, Dürr Systems AG is also obliged to set targets for the women’s quota and deadlines for their achievement, according to Sections 76 (4) and 111 (5) of the German Stock Corporation Act (AktG).

Declaration by Dürr Systems AG pursuant to Section 289f (4) of the German Commercial Code

  • The Supervisory Board of Dürr Systems AG does not have any female members; the target has been set at 0%.
  • The percentage of women on the Board of Management of Dürr Systems AG is 0%; the target has been set at 0%.
  • At the two most senior management levels of Dürr Systems AG, the women’s quota is 6.1% at the first management level and 8.9% at the second management level (December 31, 2020). The targets are 3.1% for level 1 and 6.1% for level 2.
  • The date by which all targets must be achieved is June 30, 2022.

→ Risk management

Working procedures of the Board of Management and Supervisory Board

The Chairman of Dürr AG’s Board of Management conducts the operating business, together with two other members of the Board of Management. The functions allocated to the Chief Financial Officer are defined in the schedule of responsibilities and include finance, taxation, legal affairs and investor relations. The heads of the five divisions report to the Board of Management and have global responsibility for the results of their respective division.

At the divisional level, steering functions are performed by the Dürr Management Board. This board consists of the Board of Management, the heads of the respective divisions and their controllers. At Group level, the Senior Executive Group (including the managing directors of the operating companies) and the broader Senior Management Group constitute the international management teams.

Pursuant to Article 6 of Dürr AG’s Articles of Incorporation the Supervisory Board appoints the members of the Board of Management. The Supervisory Board determines the number of members of the Board of Management (at least two according to the Articles of Incorporation) and whether it has a chairman, appoints them and resolves whether deputy members or a deputy chairman are appointed. In its deliberations, the Supervisory Board also pays attention to diversity and strives in particular to give appropriate consideration to the representation of women. The Supervisory Board has set the age limit for members of the Board of Management at 63; this may be deviated from in justified exceptional cases. The Supervisory Board issues → rules of procedure for the Board of Management which includes a catalog of business matters requiring its approval and a schedule of responsibilities. Finally, the Supervisory Board issues own → rules of procedure. The → skills profile created by the Supervisory Board on December 13, 2017, along with the objectives for its composition contained therein, are reviewed annually by the Supervisory Board and amended where necessary. All the competences listed in the skills profile are fulfilled by at least one member of the Supervisory Board. It is planned to discuss whether new areas of competence such as sustainability need to be added as part of the next regular review. The age limit on the Supervisory Board has been set at 70; this may be deviated from in justified exceptional cases.

Since 2021, the Board of Management has consisted of three members. Responsibilities are allocated between these members based on the schedule of responsibilities. The members of the Board of Management attend the meetings of the Supervisory Board if the chairperson of the meeting so determines. Members of the Board of Management may be invited to attend committee meetings at the instigation of the committee chairperson concerned. The Board of Management reports on the individual agenda items and proposed resolutions, and answers questions raised by individual Supervisory Board Members.

The members of the Supervisory Board receive a written invitation and an overview of all items on the agenda, two weeks before each meeting. One week before the meeting, the Supervisory Board finally receives reports and information on the individual items as well as detailed written documentation to the motions on which resolutions are to be passed.

Before the Supervisory Board’s plenary meeting, preliminary talks are held separately with the employee representatives and the shareholder representatives, at which the members of the Board of Management explain the details and answer questions.

The Supervisory Board can take particularly urgent resolutions by written circulation. This possibility is used relatively rarely.

Each year the Supervisory Board Chairman explains the activities of the Supervisory Board and its committees in its report to the shareholders within the annual report and at the annual general meeting. The Chairman of the Supervisory Board meets with relevant investors, upon their request, to discuss issues relating to the Supervisory Board. If any discussions have been held, the Supervisory Board Chairman informs the Board of Management and the shareholders in the Supervisory Board report.

The Supervisory Board Chairman meets regularly with the Board of Management and discusses current issues with it. Between these meetings the Board of Management keeps the Supervisory Board Chairman informed of current developments orally and in writing.

Dürr’s Supervisory Board has formed four committees which handle the preparations for certain types of business and the resolutions thereon, and supervise their implementation.

→ Members of the Supervisory Board and its committees

→ Report of the Supervisory Board 2020 (2.0 MB)

Disclosures pursuant to Sections 289a (1) and 315a (1) of the German Commercial Code (HGB)
Structure of subscribed capital Dürr AG’s subscribed capital is divided into 69,202,080 bearer common shares with full voting rights. The rights and obligations associated with the shares are regulated in the German Stock Corporation Act. In September 2020, Dürr AG issued an unsubordinated, unsecured convertible bond with a volume of €150 million, maturing on January 15, 2026. Under certain conditions, this convertible bond can be converted into 4,383,401 new no-par value ordinary Dürr AG shares.
Restrictions on voting rights/transfer of shares and related agreements The Board of Management is not aware of any agreements by shareholders of Dürr AG which contain restrictions relating to voting rights or the transfer of shares. Legal voting right limitations exist, for example, pursuant to Section 44 (1) (breach of disclosure obligations) of the German Securities Trading Act as well as Section 71b (rights arising from own shares) and Section 136 (1) (voting right exclusion in the case of certain conflicts of interest) of the German Stock Corporation Act.
Shareholdings that exceed 10% Heinz Dürr GmbH, Berlin, holds 25.5% of Dürr AG’s capital stock (as of December 31, 2020).
Shares conferring special rights There are no shares in Dürr AG that confer special rights.
Voting right control of any employee stock ownership plan where the control rights are not directly exercised There are no employee stock ownership plans where the control rights are not directly exercised by the employees.
Rules governing the appointment and replacement of members of the Board of Management The applicable statutory rules are set out in Sections 84 and 85 of the German Stock Corporation Act and in Section 31 of the German Co-determination Act. Dürr AG’s articles of incorporation do not contain any provisions that diverge from the statutory rules. Article 6 (1) of the articles of incorporation additionally states that the Board of Management consists of at least two members and that the appointment of deputy members of the Board of Management is admissible. Article 6 (2) states that the Supervisory Board may appoint one member of the Board of Management to be the Chair of the Board of Management and another member of the Board of Management to be the Deputy Chair.
Rules governing amendment of the articles of incorporation Any changes in the articles of incorporation are made by resolution at the annual general meeting. Unless otherwise mandatorily specified in the German Stock Corporation Act, the resolution is passed in accordance with Article 20 (1) of the articles of incorporation by a simple majority of the votes cast and – where a majority of the capital stock represented in the voting is required – by a simple majority of the capital stock represented in the voting. In accordance with Article 14 (4) of the articles of incorporation, the Supervisory Board is given the power to enact changes in the articles of incorporation which relate only to the wording. Pursuant to Article 4 (4) and Article 5 of the articles of incorporation, the Supervisory Board is authorized upon utilization of the conditional or authorized capital to amend the wording of the articles of incorporation to reflect the extent of the utilization.
Powers of the Board of Management to issue or buy back shares Information on this point may be found in Item 27 in the notes to the consolidated financial statements.
Agreements in the event of a change of control following a takeover bid Bond: According to Section 7 of the terms of our corporate bond, the bondholders have the right to demand early redemption of their bond by Dürr AG in the case of a redemption event. The redemption amount in that case will be 100% of the face value plus accrued and unpaid interest up to the redemption date. A redemption event occurs if a change of control and a rating event take place cumulatively. A change of control means in this regard (a) that a person or group of people acting in concert has become the legal or economic owner of more than 50% of the voting rights in Dürr AG, or (b) that we intend to sell or otherwise dispose of all or almost all of the assets of Dürr AG to third parties (with the exception of a subsidiary of Dürr AG). The following cases constitute a rating event:
The bond has no rating, and no rating agency awards an investment grade rating for the bond within 90 days of the occurrence of the change of control.
The bond has a rating at the time of the change of control, and at the end of a 90-day period after the change of control this rating does not represent an investment grade rating or has been withdrawn.
Such covenants are customary practice and are included in comparable form in the terms of the bonds of other issuers. They serve to protect the interests of the bondholders.

Schuldschein loan: In the event of a change of control, the lenders have the right, according to the terms of our Schuldschein loan agreement, to demand redemption of the Schuldschein loan. A change of control occurs if one person or a majority of people acting in concert holds more than 50% of the shares, can control more than 50% of the voting rights and/or the company’s course of business, and/or has the power to appoint more than 50% of the members of the Board of Management. The lender of the Schuldschein loan has the right to demand redemption within 30 days of the notification of the change of control by the borrower. Redemption shall be due by the next interest payment date.

Syndicated loan: According to the terms of our syndicated loan agreement, no additional cash drawings or applications for guarantees may be made in the event of a change of control. In addition, any lender can cancel the credit commitments it has made, which could result in the syndicated loan having to be repaid in part or even in full. The agent representing the interests of the banking syndicate must be informed about a change of control immediately after it becomes known. A change of control occurs if in total directly or indirectly, more than 50% of the voting rights in Dürr AG are held or controlled by one or more persons who have come to an accord on the exercising of voting rights or who collaborate in some other manner with the aim of achieving a lasting and substantial change in the business focus of Dürr AG.

Convertible bond: In the event of a takeover bid or a change of control, the terms of the convertible bond entitle the bondholder to exercise the conversion right at the adjusted conversion price (as defined in the terms of the convertible bond) within a certain period of time. A change of control occurs if an acquisition of control takes place or a mandatory offer is published in accordance with Section 35 (2) (1), Section 14 (2) (1) of the German Securities Acquisition and Takeover Act. An acquisition of control has occurred if one or several specific people acquire the direct or indirect, legal and/or economic ownership of common bearer shares (Section 29 (2), Section 30 of the German Securities Acquisition and Takeover Act) of Dürr AG which together grant 30% or more of the voting rights. Furthermore, in the event of an acquisition of control or a transferring merger (Section 2 or Section 122a of the German Reorganization Act), the bond can be terminated (early) by a bondholder in accordance with the terms defined in more detail in the terms of the convertible bond.
Agreements providing for compensation in the event of takeover bids In the financial year 2020, the service contract of one member of the Board of Management contained an arrangement that applies in the event of a takeover. In the event of a change of control, this arrangement offered an option for a defined period for the Board of Management member to terminate the contract himself with capitalization of all the contractual remuneration components and of the company pension as a severance payment. This severance payment was limited to a maximum of three fixed annual salaries (basic compensation); the severance payment relating to the short-term incentive and to the pension was limited to the current financial year at the time and the two subsequent financial years. In all cases, the severance payment was at most based on the remaining term of the Board member’s service contract. Any long-term-incentive components already granted would also have been included in the severance payment. Since January 1, 2021, there have been no agreements providing for compensation in the event of takeover bids.