The actions of TUI AG’s management and oversight bodies are determined by the principles of good and responsible corporate governance. In this chapter, the Executive Board – also acting on behalf of the Supervisory Board – provides its report on corporate governance in the Company pursuant to sub-section 3.10 of the German Corporate Governance Code and section 289a (1) of the German Commercial Code (HGB).
Declaration of Compliance
TUI has consistently based its corporate governance on the recommendations and suggestions in the German Corporate Governance Code. The most recent version of the Code is dated 26 May 2010. The Executive Board and the Supervisory Board discussed corporate governance issues several times in financial year 2010/11 and jointly submitted the declaration of compliance for 2011 in November 2011, pursuant to section 161 of the German Stock Corporation Act. The declaration was made permanently accessible to the general public on TUI AG’s website.
Wording of the declaration of compliance
“In accordance with section 161 of the German Stock Corporation Act, the Executive Board and Supervisory Board hereby declare:
The recommendations of the Government Commission on the German Corporate Governance Code in the version of 26 May 2010, as published by the Federal Ministry of Justice in the official section of the electronic Federal Gazette on 2 July 2010, were and are being fully observed with one exception (recommendation of the Code in numeral 5.4.1 paragraph 3):
The amended proposal of the Supervisory Board for the Annual General Meeting on 9 February 2011 concerning elections to the Supervisory Board did not fully meet the objective for the future composition of the Supervisory Board (female members of the Supervisory Board) set out in the Annual Report 2009/10 and the invitation to the Annual General Meeting of 30 December 2010. The deviation from the goal was required in the interests of the Company in order to facilitate a more constructive relationship between all major shareholder groups, which was given priority over the composition target for the Supervisory Board.
The Company continues to work towards meeting the objective of achieving an appropriate participation of women in the Supervisory Board.”
Corporate Governance Report
Functioning of the Executive and Supervisory Boards
TUI AG is a company under German law, which also forms the basis for the German Corporate Governance Code. One of the fundamental principles of German stock corporation law is the dual management system involving two bodies, the Executive Board in charge of managing the company and the Supervisory Board in charge of monitoring the company. TUI AG’s Executive Board and Supervisory Board cooperate closely and in a spirit of trust in managing and overseeing the Company, with strict separation between the two bodies in terms of their membership and competences. Both bodies are obliged to ensure the continued existence of the Company and sustainable creation of added value in harmony with the principles of the social market economy.
TUI AG’s Executive Board comprises four members. The Executive Board is responsible for managing the Company’s business operations in the interest of the Company with a view to achieving sustainable added value. The allocation of duties and responsibilities to the individual board members is presented in a separate table.
Since February 2011, the Supervisory Board consists of 16 members. It advises and oversees the Executive Board in the management of the Company. It is involved in strategic and planning decisions and all decisions of fundamental importance to the Company. In accordance with the terms of reference, decisions taken by the Executive Board on major transactions such as the annual budget, major acquisitions or divestments require the approval of the Supervisory Board. The Chairman of the Supervisory Board coordinates the work in the Supervisory Board, chairs its meetings and represents the concerns of the body externally. He also chairs the Chairman’s Committee and the Nomination Committee.
The Executive Board provides the Supervisory Board with comprehensive up-to-date information at regular meetings and in writing about the budget, the development of business and the situation of the Group, including risk management and compliance. An extraordinary Supervisory Board meeting may be convened if required when events of particular relevance occur. The Supervisory Board has adopted terms of reference governing its work. In the run-up to the Supervisory Board meetings, the representatives of shareholders and employees meet separately.
TUI AG has taken out a D&O insurance policy with an appropriate deductible for all members of the Executive Board and Supervisory Board. The deductible amounts to 10% of the loss up to the amount of one and a half times the fixed annual compensation.
Composition and reduction in size of the Supervisory Board
The term of office of all Supervisory Board members ended upon the close of the Annual General Meeting on 9 February 2011; the new five-year term of office started as of then. In accordance with the resolution of the Annual General Meeting on 17 February 2010, the size of the Supervisory Board was reduced from 20 to 16 members with the beginning of the new term of office.
Pursuant to section 8 of the Terms of Reference for the Supervisory Board of TUI AG, and in line with the recommendations of the German Corporate Governance Code, the composition of the Supervisory Board is to ensure that its members jointly have the knowledge, skills and technical experience required for the proper implementation of their tasks. The goals concerning the composition of the Supervisory Board include, in particular, comprehensive industry knowledge, internationality, diversity and an appropriate participation of women. Specific goals for the future composition of the Supervisory Board are the membership of four female members and four members with international experience. The current composition of the Supervisory Board does not fully meet the specific goals since the Supervisory Board does not include four women. A deviation from this specific goal was required in order to facilitate a more constructive relationship than in the past between all major shareholder groups and the management, on the basis of an amended list of candidates standing in the elections as shareholder representatives. In the interests of the Company, this goal was given priority over the previously announced composition target for the Supervisory Board.
The Supervisory Board currently includes three women; eight members of the Supervisory have extensive international experience. The Supervisory Board also pools comprehensive knowledge of the industry. Due to the different career paths of its members, the composition of the Supervisory Board also reflects strong diversity in terms of relevant experience and skills.
In accordance with the recommendations of the German Corporate Governance Code, the eight shareholder representatives were individually elected for five-year terms of office in the elections to the Supervisory Board at the Annual General Meeting on 9 February 2011. The eight employee representatives were elected on 13 January 2011.
At the date of the election, the Supervisory Board members should not normally be older than 68 years of age. The members should not be members of boards or have consultative functions in major competitors of the Company. The Supervisory Board does not comprise any former Executive Board members of TUI AG. It includes a sufficient number of independent members not involved in any commercial or personal relationship with the Company or its Executive Board.
Committees of the Supervisory Board
The Supervisory Board has established three committees from among its members: the Chairman’s Committee, the Audit Committee and the Nomination Committee, which prepare and complement its work. There is no plan at present to establish any further committees.
The Chairman’s Committee and Audit Committee have six members each, with an equal number of shareholder and employee representatives. The Chairman’s Committee prepares the issues and resolutions to be discussed at the Supervisory Board meetings. It also prepares the appointment of Executive Board members, including the terms and conditions of service contracts and remuneration. The Audit Committee’s task is to support the Supervisory Board in exercising its oversight function. The Chairman of the Audit Committee is an independent financial expert and has particular knowledge and experience in the application of accounting principles and internal control methods from his own professional practice. The Nomination Committee consists exclusively of shareholder representatives, in accordance with the German Corporate Governance Code. Its task is to suggest suitable candidates to the Supervisory Board for its proposal to the Annual General Meeting.
Executive and Supervisory Board members are obliged to act in TUI AG’s best interests. In the completed financial year, there were no conflicts of interest requiring immediate disclosure to the Supervisory Board. None of the Executive Board members of TUI AG sat on more than three supervisory boards of listed non-Group companies or supervisory bodies of companies with similar requirements.
Shareholders and Annual General Meeting
TUI AG shareholders exercise their co-determination and monitoring rights at the Annual General Meeting, which takes place at least once a year. The AGM takes decisions on all statutory matters, and these are binding on all shareholders and the Company. For voting on resolutions, each share confers one vote.
All shareholders registering in due time are entitled to participate in the AGM. Shareholders who are not able to attend the AGM in person are entitled to have their voting rights exercised by a bank, a shareholder association, one of the representatives provided by TUI AG and acting on the shareholders’ behalf in accordance with their instructions, or some other proxy of their own choosing. Shareholders also have the opportunity of voting online in the run-up to the AGM or authorising the representative provided by TUI AG via the web. Furthermore, in the completed financial year, shareholders were offered the opportunity for the first time to register to receive the documents for the AGM in electronic format.
The invitation to the AGM and the reports and information required for voting are published in accordance with the provisions of the German Stock Corporation Act and provided in German and English on TUI AG’s website. During the AGM, the presentations by the Chairman of the Supervisory Board and the Executive Board can be followed live over the internet.
Risk management
Good corporate governance entails the responsible handling of commercial risks. The Executive Board of TUI AG and the management of the TUI Group use comprehensive general and company-specific reporting and monitoring systems to identify, assess and manage these risks. These systems are continually developed, adjusted to match changes in overall conditions and reviewed by the auditors. The Executive Board regularly informs the Supervisory Board about existing risks and changes to these risks. The Audit Committee deals in particular with monitoring the accounting process, including reporting, the effectiveness of the internal control and risk management systems and the internal auditing system, compliance and audit of the annual financial statements.
More detailed information about risk management in the TUI Group is presented in the Risk Report. It also contains the report on the accounting-related internal control and risk management system required in accordance with the German Accounting Law Modernisation Act (BilMoG).
Transparency
TUI provides immediate, regular and up-to-date information about the Group’s economic situation and new developments to capital market participants and the interested public. The annual report, the half-year financial report and the interim reports for the quarters are published within the applicable time frames. The Company publishes press releases and ad hoc announcements, if required, on topical events and any new developments. All information is published simultaneously in German and English and is available by appropriate electronic media. Moreover, the Company website at www.tui-group.com provides comprehensive information on the TUI Group and the TUI share.
The scheduled dates for the main regular events and publications – such as the AGM, annual report and interim reports – are set out in a financial calendar. The calendar is published well in advance and made permanently accessible to the public on TUI AG’s website.
Directors’ dealings
The Company was informed of notifiable purchase and sale transactions of TUI AG shares or related financial instruments by one Supervisory Board member and no Executive Board members regarding the financial year 2010/11.
In no case, the number of shares in TUI AG directly or indirectly held by members of the Executive Board and Supervisory Board exceeded the limit fixed for individually notifiable share ownership of 1% at the end of the financial year 2010/11.
Accounting and auditing
TUI AG prepares its consolidated financial statements and consolidated interim financial statements in accordance with the provisions of the International Financial Reporting Standards (IFRS) as applicable in the European Union. The annual financial statements of TUI AG are prepared in accordance with the German Commercial Code (HGB). The consolidated financial statements are prepared by the Executive Board, audited by the auditors and reviewed by the Supervisory Board. The interim reports and the half-year financial report are discussed between the Audit Committee and the Executive Board prior to publication. The consolidated financial statements and the financial statements of TUI AG were audited by PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Hanover, the auditors elected by the 2011 AGM. The audit was based on German auditing rules, taking account of the generally accepted auditing standards issued by the German Auditors’ Institute as well as the International Standards on Auditing. It also covered risk management and compliance with reporting requirements concerning corporate governance pursuant to section 161 of the German Stock Corporation Act.
In addition, a contractual agreement was concluded with the auditors to the effect that the auditors will immediately inform the Supervisory Board of any grounds for disqualification or partiality, as well as of all findings and events of importance arising during the performance of the audit. There were no grounds to provide such information in the framework of the audit of financial year 2010/11. The condensed consolidated interim financial statements and the consolidated interim management reports as at 31 December 2010, 31 March 2011 and 30 June 2011 were examined by the auditors.
Compliance – Basis for entrepreneurial action
In the completed financial year, TUI’s corporate governance activities focused on compliance. Sustainable entrepreneurial action and management is an indispensable part of TUI’s corporate culture. TUI’s Compliance Management System contributes to the achievement of the vision of sustainable economic, ecological and social activities and management.
Code of Conduct and Compliance Rules
Compliance with legal provisions is the cardinal principle and a key component of TUI’s corporate values. Policies and internal rules have been adopted to set out how to implement and comply with legal requirements. TUI’s published Code of Conduct has been drawn up for the entire Group. It is intended to set out guiding principles for each Group employee to follow, i.e. the managing directors, management, executives and all Group employees. The Code of Conduct sets minimum standards. It aims to assist our employees in mastering the ethical and legal challenges arising in their everyday work and provide orientation in conflict situations. In addition, a Group Compliance Policy has been adopted, setting out the goals and tasks of TUI’s Compliance Management System.
In the period under review, the existing compliance rules were expanded to include a Group Policy providing binding rules for dealing with gifts and benefits in business transactions. TUI AG has thus created a uniform framework, which also conforms to international customs, for the Group companies and their requirements. This reaffirms the commitment not to tolerate unfair practices, as enshrined in the Code of Conduct. The expansion of the compliance rules was bolstered by reviewing applicable Group policies and checking them for any changes that may be required in the light of compliance aspects. Wherever optimisation requirements were identified, amendments were incorporated and then communicated.
Compliance Structure
The TUI Group, a global player, employs more than 70,000 people from different countries and cultures. Compliance is a key priority in our Group. In the period under review, the Compliance structure was further developed and expanded so as to include our Sectors. Many Group companies appointed their own compliance officers. Their responsibilities include the following tasks, supported by our central Compliance Office:
- Raising awareness for Compliance,
- Achieving the goals of the Code of Conduct and the Compliance rules,
- Implementing training schemes,
- Advising managers and employees,
- Securing the required exchange of information,
- Providing regular reports.
Compliance Management System
In order to meet the increasingly complex expectations and requirements and minimise the potential repercussions of any breach of rules, TUI’s Compliance Management System brings together a variety of internal measures and processes. In the period under review, it focused on building Compliance structures along with the underlying Compliance rules, establishing further communication measures and placing Compliance reporting on a broader footing. Key Compliance issues were identified following comprehensive analyses carried out in the previous financial year. As a result, preventative measures can be constructed in line with the Compliance strategy to protect the TUI Group and its employees from risks.
Compliance training
TUI has devised multi-level training for managers and employees, in the form of both face-to-face teaching and an e-learning programme devoted to Compliance and the Code of Conduct. Numerous courses were held in the period under review to convey the corporate values expressed in the Code of Conduct. The training tools were expanded to include the Compliance Compass brochure, enabling employees who do not have access to e-learning to improve their understanding of Compliance. This preventative approach is expected to establish competence in handling routine and conflict situations throughout the TUI Group.
Whistleblower system
As TUI’s Code of Conduct constitutes the basis of our activities, any infringements of this Code will be rigorously investigated in the interests of all stakeholders and the Company. Our top priority is to ensure confidentiality and handle information discreetly. Apart from reporting compliance infringements to supervisors, compliance officers or the Compliance Office, employees can also report infringements anonymously via the in-house TUI SpeakUp Line, which operates worldwide. Since the financial year under review, whistleblowers have been able to submit their information over the phone or using a web-based option. Any incidents reported are analysed by an evaluation committee specifically set up for that purpose, and any necessary action is then taken. In business areas operating internationally, this includes the rigorous prosecution of misconduct in accordance with the relevant national provisions.