Corporate Governance Report and Declaration On
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To our Shareholders Corporate Responsibility Management Report Risk Report Financial Statements Further Information 21 21 Corporate governance report and declaration on corporate governance pursuant to Art. 315d in conjunction with Art. 289f of the German Commercial Code (HGB) 27 Remuneration Report 40 Details pursuant to Art. 315 HGB 44 Non-Financial Report Corporate governance report and declaration on corporate governance pursuant to Art. 315d in conjunction with Art. 289f of the German Commercial Code (HGB) Commerzbank has always attached great importance to corporate ficient division of responsibilities within the Board of Manag- governance, in the sense of responsible and transparent manage- ing Directors. The Supervisory Board is informed of all chang- ment and control aimed at sustainable value creation. That is why es, and is thus included in the process. The rules of procedure we – the Board of Managing Directors and the Supervisory Board for the Board of Managing Directors and the specific respon- – expressly support the German Corporate Governance Code and sibilities of the various members of the Board of Managing y t i l the goals and objectives it pursues. Directors are published on Commerzbank AG’s website at i b i s n In accordance with section 3.10 of the German Corporate Gov- https://www.commerzbank.com. o p s e R ernance Code, we report below on corporate governance as prac- e t a r tised at Commerzbank AG. This report also includes the declara- • According to section 4.2.3 (2) sentence 6 of the Code, the total o p r o tion on corporate governance pursuant to Art. 315d in conjunction remuneration of the members of the Board of Managing Direc- C with Art. 289f of the German Commercial Code (HGB). tors and the upper limits on their variable remuneration com- ponents should be disclosed. The core elements of the Bank’s remuneration system are a fixed basic annual salary plus varia- Recommendations of the German Corporate ble remuneration with a uniform target amount. In respect of Governance Code variable remuneration, the Supervisory Board after the end of a financial year calculates a total goal achievement amount based Commerzbank AG and its subsidiaries that are required by law to on predefined goals. This total goal achievement amount is do so declare every year whether the recommendations of the capped at 1.4x fixed remuneration as calculated under the Re- Commission regarding conduct have been and are being com- muneration Ordinance for Institutions. Up to 50% of this plied with, and explain which individual recommendations are amount is paid in virtual Commerzbank shares, in respect of not being implemented and the reasons why. These declarations most of which a five-year retention period and a waiting period of compliance by the Board of Managing Directors and Supervi- of a further 12 months normally apply. At the end of the waiting sory Board are published on the websites of the individual com- period, the value of the virtual Commerzbank shares is paid out panies; Commerzbank AG’s declarations can be found at in cash, subject to various checks to ensure sustainability. https://www.commerzbank.com. There is also an archive of all Changes in the share price over this period do not affect the the declarations of compliance made since 2002. The latest dec- number of virtual shares granted and thus change the amount laration was made in November 2017. to be paid out, which has no upper limit. Under the concept Commerzbank AG complies with virtually all of the recommen- behind the remuneration system, the members of the Board of dations of the German Corporate Governance Code; it deviates Managing Directors are intended to bear the risk of the per- from them in only a few points: formance of the virtual shares after the calculation of the total goal achievement amount, as a long-term element of remunera- • Section 4.2.1 of the Code recommends that rules of procedure tion. It would not be appropriate to cap the scope for participat- should regulate the activities of the Board of Managing Direc- ing in positive share price performance, especially given that tors, including the allocation of responsibilities to its mem- no floor applies if the price should fall. bers. The Board of Managing Directors has adopted rules of procedure with the approval of the Supervisory Board. Howev- • In relation to the remuneration of the Board of Managing Direc- er, the Board of Managing Directors determines the allocation tors, section 4.2.3 (2) sentence 8 of the Code recommends that of duties among the individual Board members itself, outside there should be no subsequent changes to goals or the parame- the purview of the rules of procedure. This provides it with the ters for determining the variable remuneration components. requisite flexibility if changes are needed, thus ensuring an ef- Under the German Stock Corporation Act, the Supervisory 22 Commerzbank Annual Report 2017 Board should agree the possibility of restricting the variable maintain the established practice at Commerzbank AG of in- remuneration of the Board of Managing Directors in exception- volving both employee and shareholder representatives in the al circumstances. It is entitled under this legislation to adjust selection of candidates for the Board of Managing Directors, the goals and other parameters for determining variable remu- two members of the Commerzbank AG Supervisory Board’s neration components in exceptional circumstances, to reasona- Nomination Committee are employee representatives. bly neutralise any positive or negative repercussions on the achievability of the goals; the cap on variable remuneration • Section 5.4.1 (2) sentence 2 of the Code recommends that the must be observed in all cases. Supervisory Board should set concrete objectives regarding its composition which, while taking into consideration the specific • Section 4.2.3 (3) of the Code recommends that in the case of situation at the company, take into account the international pension commitments to members of the Board of Managing activities of the company, potential conflicts of interest, the Directors, the Supervisory Board should define the intended number of independent members of the Supervisory Board benefit level – based on the length of their term of office – and pursuant to section 5.4.2 of the Code, a specified age limit for the annual and long-term expense for the company arising members of the Supervisory Board, a specified fixed limit on therefrom. Pension provision for the Board of Managing Direc- length of service on the Supervisory Board and diversity. The y t i l tors is a contribution-based benefit scheme that does not speci- Supervisory Board of Commerzbank AG regularly sets specific i b i s n fy a particular level of benefits. Instead, each member of the targets for its composition, taking into account the criteria o p s e Board of Managing Directors has an entitlement to an annual listed in section 5.4.1 (2) sentence 2. However, it has not set a R e t a r pension module, the amount of which is determined as a fixed limit on the normal length of service on the Supervisory Board. o p r o percentage of that individual’s basic annual salary. This gives The Supervisory Board takes the view that continued service C the Supervisory Board a clear picture of the annual and long- frequently has to be decided in respect of the individual mem- term expense for the company, including the impact of actuari- ber: setting a fixed limit would result in an inappropriate re- al effects on pension provisions. The fact that a particular bene- striction. Differing lengths of service among the individual fit level is not defined, combined with the switch to a contribu- members of the Supervisory Board can also offer advantages in tion-based scheme, is in line with what is now common terms of diversity. business practice. • Section 4.2.5 sentence 5 and 6 of the Code requires some of Suggestions of the German Corporate the information on board remuneration in the Remuneration Governance Code Report to be provided in standardised tables. However, the model tables in the Code do not take account of the require- Commerzbank AG also largely complies with the suggestions of ments of the Remuneration Ordinance for Institutions and are the German Corporate Governance Code, deviating from them in therefore not as suitable for financial institutions such as only a few points: Commerzbank AG. As a result, Commerzbank AG has decided not to implement this recommendation in its Remuneration • In a deviation from section 2.3.2, the proxy can only be reached Report 2017. Commerzbank AG has created its own tables up to the day prior to the Annual General Meeting. However, which provide clear and transparent information on its board shareholders present or represented at the Annual General remuneration system. Commerzbank AG has decided not to use Meeting are able to give their proxy instructions at the meeting the model tables in the Code alongside the tables created by it itself as well. or required under accounting rules, because this would un- dermine the clarity and comprehensibility of the Remuneration • In section 2.3.3, it is suggested that the Annual General Meet- Report it is aiming for. ing be broadcast in its entirety on the internet. Commerzbank AG broadcasts the speeches of the Chairman of the Supervisory • Section 5.3.3 of the Code recommends that the Supervisory Board and the Chairman of the Board of Managing Directors, Board establish a nomination committee made up exclusively but not the general debate. This liberates shareholders to dis- of shareholder representatives. Under Art. 25d (11) sentence 2 cuss matters freely with the management, without a wide-scale no.