Cooperation, composition and activities of the Managing Board and Supervisory Board
The management structure at HUGO BOSS is primarily derived from the requirements of corporate law. As a German stock corporation, HUGO BOSS AG has a dual management and control structure. The Managing Board is responsible for the Group’s strategy and management. The Supervisory Board advises the Managing Board and monitors its management activities.
Close cooperation between Managing Board and Supervisory Board
The Managing Board and Supervisory Board cooperate closely for the benefit of the Group. The common objective is to sustainably increase the enterprise value. The Managing Board regularly informs the Supervisory Board in a timely manner and in detail of issues of relevance for the Group concerning strategy, planning, business development, risk position, changes in the risk situation and compliance. Deviations from targets and budgets are explained to the Supervisory Board and its committees. The strategic alignment and further development of the Group are discussed and coordinated with the Supervisory Board.
No conflicts of interest in the year under review
When making decisions and in performing their duties for HUGO BOSS, members of the Managing Board and Supervisory Board are not permitted to pursue their personal interests or grant other persons unjustified advantages. No members of the Managing Board or the Supervisory Board reported any conflicts of interest in fiscal year 2017. The offices held by the Managing Board and Supervisory Board members in statutory supervisory boards or comparable oversight committees of commercial organizations in Germany and other countries are listed in the notes to the consolidated financial statements. No member of the Managing Board sits on more than three supervisory boards of listed companies that are not members of the Group. The same applies to members of the Supervisory Board who sit on the managing boards of other listed companies. Notes to the Consolidated Financial Statements, Related Parties
The Managing Board
The Managing Board of HUGO BOSS AG comprises the Chief Executive Officer and the members with equal rights, whose duties cover specific corporate functions. It had four members at the end of 2017.
The HUGO BOSS Group is managed by the Managing Board of the parent company HUGO BOSS AG, in which all of the Group management functions are bundled. The Managing Board’s core duties include corporate strategy, corporate finance, risk management, decisions on the collections and the management of the sales network. In addition, it is responsible for preparing the annual, consolidated and interim financial statements and for establishing and monitoring the risk management system.
The bylaws of the Managing Board govern the allocation of duties to its members as well as the procedures to be adopted for passing resolutions. In particular, they also define disclosure and reporting duties as well as those matters requiring the approval of the Supervisory Board.
Managing Board committed to diversity when filling management positions
The German Corporate Governance Code stipulates that the Managing Board must consider diversity when filling management positions in the Group and specifically that women must be adequately represented. The Managing Board is committed to this objective. It already monitors the diversity of the workforce and will continue to do so in future. The Managing Board set a target gender quota of at least 30% women in each of the two management levels below the Managing Board to be achieved by June 30, 2017. At that time, the target was slightly missed with a share of women of 28% at the first management level. This was due to a higher share of men among new hires than originally planned. Decisive for this development was solely the qualification of the respective applicants. The target at the second management level was clearly exceeded with a share of women of 45%. The Managing Board has now set a target gender quota of at least 30% women in each of the two management levels below the Managing Board to be achieved by December 31, 2021. Indeed, the company strives to keep the share of women on these two levels at least stable, but it also feels obligated to the principle to hire only those applicants with the most suitable qualification even if this results in a lower share of women. Employees
The Supervisory Board
In accordance with the German Corporate Governance Code, HUGO BOSS attaches key importance to the independence of the members of the Supervisory Board. The members of the Supervisory Board of HUGO BOSS have the knowledge, skills, and professional experience necessary for the respective committees. The Supervisory Board currently includes three women. Until Ms. Lersmacher resigned as an employee representative with effect from July 31, 2016, the gender quota pursuant to Sec. 96 (2) AktG had been fulfilled in overall terms, with a total of four women (including three employee representatives). In a resolution dated July 25, 2016, the employee representatives rejected aggregate fulfillment of this requirement, meaning that the 30% gender quota requirement must now be met separately by the shareholder representatives and the employee representatives. The two female employee representatives fulfill the gender quota on the employee representatives’ side. As a result of the aforementioned decision, the gender quota for the shareholder representatives is no longer fulfilled, as only one woman has been elected. It must be ensured that the gender quota is fulfilled on the shareholder representatives’ side at the next election. In accordance with No. 5.4.1 Sentence 9 of the German Corporate Governance Code, the following shareholder representatives sitting on the Supervisory Board are considered to be independent: Ms. Kirsten Kistermann-Christophe, Mr. Michel Perraudin, Mr. Axel Salzmann and Mr. Hermann Waldemer.
None of the current members of the Supervisory Board have previously held a Managing Board position within the Group. There were also no advisory or other service agreements in place between members of the Supervisory Board and the Group in the reporting year.
Target gender quota not yet achieved on the Managing Board
On September 23, 2015, the Supervisory Board acting under Sec. 111 (5) AktG defined a target for the proportion of women on the Managing Board, which was to be achieved by June 30, 2017. This target has not been reached. With the appointment of Mr. Hake, succession planning for the Managing Board responsibility for distribution was implemented. The prerequisite for the appointment to the position of Chief Brand Officer was long-standing experience in creative and menswear areas. This resulted in a limited selection of candidates, with Mr. Wilts proving to be the ideal candidate on account of his experience. Several candidates were considered in the selection process for the appointment of the Chief Financial Officer, which the Supervisory Board undertook following preparations by the Personnel Committee in 2017. However, the newly appointed Managing Board member was ultimately selected on account of his professional qualifications. The Supervisory Board is still pursuing the target of having at least one woman sitting on the Managing Board of the Company. This should be achieved by no later than December 31, 2021.
Supervisory Board has defined specific goals for its composition as well as that of the Managing Board
In accordance with the recommendation in No. 5.4.1 Sentence 8 of the German Corporate Governance Code, the Supervisory Board adopted a profile of required skills and defined specific goals for its own composition at its meeting on December 7, 2017. Thus, at least two members of the Supervisory Board should have an international background. At the same time, no member may be exposed to any conflicts of interest. Furthermore, no member of the Supervisory Board should be older than 69 years on the date on which he or she is elected. In addition, the Supervisory Board has defined a specific target as regards the number of “independent” members of the Supervisory Board as defined in the German Corporate Governance Code. Accordingly, of the twelve members of the Supervisory Board, at least eight members, including the six employee representatives, should be independent. The Supervisory Board has not defined any maximum period of office for its members. HUGO BOSS believes that a predefined maximum period of office is not appropriate as it is keen to benefit from the experience of the long-standing members of the Supervisory Board.
The following further rules pertaining to the composition of the Supervisory Board were also adopted and simultaneously seek to implement a concept for increasing diversity (diversity concept):
- The Supervisory Board should have at least two members with an international background (i.e. persons who possess experience gained outside Germany due to current or past activities and/or hold non-German citizenship).
- The Supervisory Board should have at least one member holding expertise in branding, supply chain and/or national or international sales matters.
- The Supervisory Board should have at least two members who are currently or formerly executives of another company.
- The Supervisory Board should have at least four members possessing extensive knowledge and experience of the Company itself.
- Aside from the employee representatives, the Supervisory Board should have at least three members who are independent and two who have expertise in the areas of accounting or auditing.
The Supervisory Board has adopted bylaws which among other things govern its duties and responsibilities as well as the procedures for convening, preparing and chairing meetings and for passing resolutions. In addition, the bylaws stipulate equal representation in the composition of all Committees.
1. Audit Committee
The Audit Committee is composed of at least four members who are elected by the Supervisory Board. The total number of members of the Audit Committee is determined by the Supervisory Board and must always be even. In accordance with the German Corporate Governance Code, the Committee must have at least one independent member. The Audit Committee is responsible for monitoring the financial reporting process, the effectiveness of the systems of internal control, risk management and internal auditing, and the audit of the annual financial statements. It has the following main duties:
- To perform a preliminary audit of the annual financial statements and the consolidated financial statements, the combined management report of HUGO BOSS AG and the Group and the profit appropriation proposal, to discuss the audit report with the external auditor and to prepare the Supervisory Board’s decision on the approval of the annual financial statements and the consolidated financial statements;
- To examine the quarterly reports (interim reports and quarterly statements) and discuss them with the Managing Board;
- To prepare the Supervisory Board’s proposal to the Annual Shareholders’ Meeting concerning the appointment of an external auditor and, in particular, to satisfy itself of the external auditor’s independence and to examine the additional services which are provided;
- To engage the external auditor and to sign the corresponding fee agreement for the audit of the annual financial statements and the consolidated financial statements following consultation with the Managing Board on the basis of the resolution passed at the Annual Shareholders’ Meeting, including the determination of the key audit points and the auditor’s reporting duties towards the Supervisory Board;
- To satisfy itself that the statutory provisions and internal company policies have been complied with (“compliance”).
The Supervisory Board satisfied itself of the independence of the members of the Audit Committee representing the shareholders and of the Chairman of the Audit Committee, Hermann Waldemer.
2. Personnel Committee
The Personnel Committee is made up of the Chairman of the Supervisory Board and three other members elected by the Supervisory Board from its own number. Its composition ensures equal representation. It makes decisions on the service contracts of the Managing Board members and other contractual matters (including those relating to former Managing Board members and their surviving dependents) not related to the compensation of Managing Board members. Decisions concerning the compensation of Managing Board members (including former Managing Board members and their surviving dependents) as well as regular deliberation on and the review of the compensation system are the responsibility of the full Supervisory Board. However, the Personnel Committee submits proposals in preparation of decisions on these matters. In addition, the Personnel Committee makes decisions in accordance with Sec. 114 AktG (contracts with Supervisory Board members) and Sec. 115 AktG (loans to Supervisory Board members) as well as matters requiring the Supervisory Board’s consent in connection with senior executives (including the granting of loans to senior executives within the meaning of Sec. 89 (2) AktG). To the extent permitted by law, it represents the Company in transactions with Managing Board members (including former Managing Board members and their surviving dependents).
3. Working Committee
The Working Committee comprises the Chairman of the Supervisory Board and five other members whom the Supervisory Board elects from its own number. They assist and advise the Chairman of the Supervisory Board. In accordance with the statutory provisions, the Working Committee works closely with the Managing Board to prepare the meetings of the Supervisory Board. In particular, the Working Committee performs the monitoring duties between the meetings of the Supervisory Board. This does not prejudice the monitoring duties of the individual members of the Supervisory Board. The Working Committee makes decisions on transactions requiring consent in cases where the Supervisory Board has delegated its powers accordingly. To the extent permitted by law, the Working Committee may make decisions on urgent matters in lieu of the full Supervisory Board. In such cases, it must immediately notify the Supervisory Board in writing and report orally in detail at the next Supervisory Board meeting on the decision, the reasons for it and the need for the decision by the Working Committee.
4. Nomination Committee
The Nomination Committee has two members who are elected by the representatives of the shareholders on the Supervisory Board from their own number; accordingly, it is made up solely of shareholder representatives in accordance with the requirements set out in Sec. 5.3.3 of the GCGC. It is required to identify suitable candidates for the election of shareholder representatives to the Supervisory Board and to put their names forward to the Supervisory Board as its proposed nominees for election at the Annual Shareholders’ Meeting.
5. Mediation Committee
The Mediation Committee comprises the Chairman of the Supervisory Board, the Deputy Chairman of the Supervisory Board, one member elected by the employee representatives on the Supervisory Board and one elected by the shareholder representatives on the Supervisory Board, with a majority of the votes cast in both cases. Its sole purpose is to perform the duties referred to in Sec. 27 (3) and Sec. 31 (3) Sentence 1 Mitbestimmungsgesetz [Co-Determination Act]. Accordingly, the Mediation Committee submits proposals for the appointment of members of the Managing Board in cases in which a prior proposal has failed to achieve the necessary statutory majority.
Compensation of the Managing Board and Supervisory Board
The compensation report summarizes the principles underlying the overall compensation of the members of the Managing Board and Supervisory Board of HUGO BOSS AG. It also explains the structure and amount of compensation paid to members of the Managing Board. In addition, it describes the principles and the amount of compensation paid to the Supervisory Board. Compensation Report