In financial year 2010/11, the Supervisory Board performed its duties in accordance with the law and the Articles of Association. Its duties included, in particular, discussing and deciding on the Group’s strategic development, various technical issues and transactions requiring its approval, working on the committees, monitoring compliance with the German Corporate Governance Code, reviewing the financial statements of TUI AG and the Group and discussing and deciding on changes in the membership of the Company’s boards.
Cooperation between the Supervisory and the Executive Board
The Supervisory Board monitored and advised the Executive Board on the management of the Company and ascertained the lawfulness and proper conduct of management activities.
In written and verbal reports, the Executive Board provided us with regular, timely and comprehensive information encompassing all relevant facts about strategic development, planning, business performance and the position of the Group, including the risk scenario, risk management and compliance. Any deviations of business performance from the approved plans were presented, explained and discussed. Together with the Executive Board we discussed all key transactions of relevance to the Company, and in particular to the further development of the Group. The Supervisory Board was involved in all decisions of fundamental relevance to the Company. We adopted the resolutions required in accordance with the law and the Articles of Association.
Transactions requiring the approval of the Supervisory Board, or which were of fundamental importance, were comprehensively discussed with the Executive Board at Supervisory Board committee meetings prior to a decision being made. We were fully informed about specific and particularly urgent plans and projects arising between the regular meetings and, where necessary, submitted our approval in writing. As Chairman of the Supervisory Board, I was regularly informed about current business developments and key transactions in the Company between Supervisory Board meetings.
Supervisory Board and the committees
Tasks of the committees
The Supervisory Board has set up three committees to support its work: the Chairman’s Committee, the Audit Committee and the Nomination Committee. The committee members are shown in a separate list in the section on the Supervisory Board. The Chairman of the Supervisory Board chairs the Chairman’s Committee and the Nomination Committee.
The Chairman’s Committee prepares the resolutions and issues to be dealt with by the Supervisory Board. The Audit Committee supports the Supervisory Board in exercising its monitoring function. It discusses, in particular, accounting and reporting issues, the effectiveness of the internal control system, risk management, internal audit and compliance. The half-year and quarterly financial reports are discussed by the Audit Committee with the Executive Board and the auditors prior to publication.
The Nomination Committee suggests suitable candidates to the Supervisory Board for proposal to the Annual General Meeting or appointment by the local court.
In financial year 2010/11, five regular, one constituent and two extraordinary Supervisory Board meetings were held. Four resolutions were passed by written circulation procedure. The Chairman’s Committee met six times; the Audit Committee also held six meetings. The Nomination Committee met three times.
Prior to regular Supervisory Board meetings, the shareholder representatives on the Supervisory Board met five times, and the employees’ representatives five times in separate meetings. None of the Supervisory Board members attended fewer than half of the Supervisory Board meetings in financial year 2010/11. Average attendance was 95%.
Work of the Chairman’s Committee
In the period under review, the Chairman’s Committee held four regular and two extraordinary meetings. Its deliberations focused on preparing the subsequent plenary meetings. The Chairman’s Committee also regularly discussed matters relating to the Executive Board and Supervisory Board. They included contractual issues related to the extension of the appointment of Dr Michael Frenzel as CEO and Peter Long as member of the Executive Board of TUI AG. At an extraordinary meeting, the Executive Board informed the Chairman’s Committee about the status of the planned changes concerning Hapag-Lloyd.
Work of the Audit Committee
The Audit Committee met six times. All meetings were attended by auditor representatives, the CEO and other Executive Board members. The work of the committee focused on deliberating the annual financial statements of TUI AG, the consolidated financial statements, the consolidated management report, the interim reports and the restated consolidated financial statements for 2009 and 2008 (including the prior-year reference figures for 2007).
The auditor representatives presented detailed reports on the audits or reviews of the interim reports and the supplementary audit of the restated consolidated financial statements. At one of the meetings, the TUI AG management and the auditors informed the Audit Committee that errors had been identified in the financial statements of the TUI Travel Group for financial year 2009/10. Intensive discussions were held regarding the way to handle the errors and the measures that had been or remained to be taken in order to secure the adequacy and reliability of Group accounting. The Audit Committee also discussed an investment project in Italy.
The Audit Committee was, moreover, regularly informed about the planning and reporting systems. The agenda regularly included reports on the development of compliance activities in the Group. Further items were the report by Group Audit and the audit plan for financial year 2010/11. The committee was also informed about the risk situation, risk management and hedging transactions to protect against exposure to changes in exchange rates, interest rates and fuel prices. Moreover, the Audit Committee presented its recommendation to the Supervisory Board on the election of the auditors for financial year 2011/12.
Work of the Nomination Committee
The Nomination Committee held three meetings. Deliberations focused on preparing recommendations for the election of new Supervisory Board members at the Annual General Meeting on 9 February 2011.
Deliberations in the Supervisory Board
The Executive Board’s reports and discussions at Supervisory Board meetings regularly focused on the latest turnover, earnings and employment in the Group, as well as its financial situation and structural development. The work of the Chairman’s Committee, Audit Committee and Nomination Committee was regularly presented at the Supervisory Board meetings.
At our meeting on 26 October 2010, our agenda included the corporate budget for financial year 2010/11 and the forecast accounts for 2011/12 and 2012/13. Deliberations also focused on corporate governance issues. The declaration of compliance with the German Corporate Governance Code for 2010 was adopted in accordance with section 161 of the German Stock Corporation Act.
The meeting on 13 December 2010 focused on reporting and discussing the annual financial statements as per 30 September 2010 and a comparison between target and actual figures for 2009/10. We obtained detailed information about the corrections made to the annual consolidated financial statements as per 30 September 2009 and 31 December 2008 (including the prior-year reference numbers for 2007), which had already been discussed by the Audit Committee. The Supervisory Board approved all consolidated financial statements. The Supervisory Board also discussed the effects of the corrections of the prior-year statements on the remuneration of the Executive Board and Supervisory Board of TUI AG at this December meeting. The discussions about the current and restated annual financial statements were also attended by representatives of the auditors, who were available to answer questions.
Under the agenda item “Executive Board matters”, we reviewed the appropriateness of Executive Board remuneration and pensions. At that meeting, the value of the reference indicator for the annual performance bonus for 2009/10 was established and the reference indicator for 2010/11 was determined.
The agenda for that meeting also included the adoption of a resolution on the agenda for the 2011 Annual General Meeting. We adopted resolutions relating, inter alia, to the appropriation of retained earnings, ratification of the acts of management of the Executive Board and Supervisory Board, election of shareholder representatives to the Supervisory Board as well as capital measures.
The meeting on 8 February 2011 mainly served to prepare for the forthcoming ordinary Annual General Meeting, to be held the next day. In the framework of its regular reporting, the Executive Board informed the Supervisory Board about the current financial year. Upon the close of the Annual General Meeting on 9 February 2011, the Supervisory Board held its constituent meeting, electing the chair and the committee members.
An extraordinary Supervisory Board meeting was held on 3 March 2011. At that meeting, a resolution was adopted on the issue of a convertible bond by TUI AG. Furthermore, TUI AG’s sale of a 11.3% stake in Hapag-Lloyd to the Hamburg-based consortium was resolved. The Supervisory Board also discussed the transfer of the activities of TUI Travel’s Adventure Division to a joint venture to be established with the Australian Intrepid Group.
On 11 May 2011, the Supervisory Board heard the regular reports on the activities of the committees and was then comprehensively informed by the Executive Board about developments in the current financial year. The Supervisory Board resolved to issue employee shares. The plenary meeting also resolved, in the light of its new composition, to carry out another efficiency review in 2012.
The Supervisory Board held an extraordinary meeting on 27 June 2011. The agenda included the interim report on the process of strategic development for the Group and the extension of the contracts for Dr Michael Frenzel and Peter Long.
The Supervisory Board met for a two-day meeting on 6 and 7 September 2011. In the plenary meeting, we conducted a detailed discussion with the Executive Board about fundamental aspects of the strategic development of the tourism group. In this context, the Executive Board presented a report on the position and initiatives of the existing tourism operations and outlined the TUI Group’s medium- and long-term goals. Apart from the regular reports from the Supervisory Board’s committees, the agenda also included a report on the current financial year by the Executive Board as well as the motion that TUI Cruises should build a new ship. This motion was carried. We were subsequently informed about progress on developing the compliance structure.
After the cut-off date for the financial year, the Supervisory Board met again on 26 October 2011, mainly in order to discuss the budget for 2011/12 and the forecast accounts for 2012/13 and 2013/14. It also adopted the declaration of compliance for 2011.
Corporate Governance
At the meeting on 26 October 2011, the Executive Board and Supervisory Board also discussed an update of the declaration of compliance with the German Corporate Governance Code pursuant to section 161 of the German Stock Corporation Act. The updated joint declaration of compliance was made permanently accessible to the public on TUI AG’s website in November 2011. Accordingly, TUI AG complies with all recommendations of the German Corporate Governance Code in its currently applicable version dated 26 May 2010, with the exception of the fact announced on 31 January 2011 (amended proposal for the elections to the Supervisory Board held on 9 February 2011). TUI AG also fully complies with the additional suggestions contained in the Code. In accordance with section 3.10 of the Code and also on behalf of the Supervisory Board, the Executive Board reports about corporate governance in a separate chapter.
Since the Supervisory Board was newly constituted in February 2011, we resolved to carry out the next efficiency review of the Supervisory Board in 2012.
Audit of the annual financial statements of TUI AG and the Group
PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Hanover, were appointed auditors by resolution of the Annual General Meeting held on 9 February 2011 and were commissioned with reviewing the half-year financial report and the quarterly financial reports for financial year 2010/11. The audit covered the annual financial statements of TUI AG as at 30 September 2011, submitted by the Executive Board and prepared in accordance with the provisions of the German Commercial Code (HGB), as well as the joint management report of TUI AG and the TUI Group, and the consolidated financial statements for the 2010/11 financial year prepared in accordance with the provisions of the International Financial Reporting Standards (IFRS) and complemented by the commercial-law provisions additionally required pursuant to section 315a sub-section 1 of the German Commercial Code. The auditors issued their unqualified audit certificate for the annual financial statements of TUI AG and the consolidated financial statements. The condensed consolidated interim financial statements and the consolidated interim management reports as per 31 December 2010, 31 March 2011 and 30 June 2011 were examined by the auditors.
The annual financial statements, the management report and the auditors’ reports were submitted to all members of the Supervisory Board. They were discussed at the Audit Committee meeting of 9 December 2011 and the Supervisory Board meeting of 13 December 2011, at which representatives of the auditors were present and were available to answer questions. On the basis of its own review of the annual financial statements of TUI AG and the Group, the joint management report as per 30 September 2011 and the results of the audit, the Supervisory Board approved the annual financial statements prepared by TUI AG, which were thereby adopted, the consolidated financial statements and the consolidated management report.
Executive Board, Supervisory Board and committee membership
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. During the new term of office, the Supervisory Board is composed of eight shareholder and eight employee representatives.
The following Supervisory Board members were elected as shareholder representatives at the Annual General Meeting on 9 February 2011:
- Anass Houir Alami, Chief Executive, Caisse de Dépot et de Gestion (CDG), Rabat/Morocco
- Prof. Dr Edgar Ernst, President of Deutsche Prüfstelle für Rechnungslegung e. V., Bonn/Germany
- Roberto López Abad, ex. Chief Executive of Caja de Ahorros del Mediterráneo, Alicante/Spain
- Prof. Dr Klaus Mangold, Chairman of the Supervisory Board of Rothschild GmbH, Stuttgart/Germany
- Mikhail Noskov, CFO of Sever Group, Moscow/Russia
- Carmen Riu Güell, Entrepreneur, Playa de Palma/Spain
- Christian Strenger, member of supervisory boards, Frankfurt/Germany
- Vladimir Yakushev, Managing Partner of SGCM Ltd., Moscow/Russia
The following Supervisory Board members were elected as employee representatives on 13 January 2011:
- Arnd Dunse, Head of Group Controlling of TUI AG, Bad Nenndorf/Germany
- Petra Gerstenkorn, member of the Federal Executive of ver.di - Vereinte Dienstleistungsgewerkschaft, Berlin/Germany
- Frank Jakobi, Travel Agent, Hamburg/Germany
- Ingo Kronsfoth, National Negotiator, Aviation Sector of ver.di, Berlin/Germany
- Christian Kuhn, Travel Agent, Hanover/Germany
- Hans-Dieter Rüster, Aircraft Engineer, Langenhagen/Germany
- Anette Strempel, Travel Agent, Hemmingen/Germany
- Ortwin Strubelt, Travel Agent, Hamburg/Germany
The constituent meeting on 9 February 2011 elected the Chairman of the Supervisory Board and the committee members. Professor Dr Klaus Mangold was elected as Chairman of the Supervisory Board; Petra Gerstenkorn was elected as deputy chairwoman.
The Supervisory Board also elected the members of the committees. The Chairman’s Committee is composed of Professor Dr Klaus Mangold (Chairman), Petra Gerstenkorn (deputy chairwoman), Carmen Riu Güell, Vladimir Yakushev, Frank Jakobi and Hans-Dieter Rüster. The Nomination Committee comprises Professor Dr Klaus Mangold (Chairman), Carmen Riu Güell and Vladimir Yakushev. The members of the Audit Committee are Professor Dr Edgar Ernst (Chairman), Arnd Dunse, Ingo Kronsfoth, Professor Dr Klaus Mangold, Christian Strenger and Ortwin Strubelt.
The Supervisory Board thanks the retiring Chairman and members of the Supervisory Board for their constructive cooperation and commitment to the Company.
At its meeting on 27 June 2011, the Supervisory Board of TUI AG resolved to extend the contract of Dr Michael Frenzel, CEO of TUI AG, set to expire in March 2012, by two years to March 2014. The Supervisory Board also extended the contract of Peter Long, set to expire in August 2011, until August 2014. Peter Long has been head of Tourism in TUI AG since 2007 and holds the function of Chief Executive Officer of TUI Travel PLC.
The Supervisory Board
Hanover, 13 December 2011
Prof. Dr. Klaus Mangold
Chairman