The recognized standards stipulated in the German Corporate Governance Code in the version dated May 13, 2013 form the basis for Bertelsmann’s guidelines on good and responsible corporate management and governance.
Bertelsmann’s legal form is that of a Kommanditgesellschaft auf Aktien (KGaA) [partnership limited by shares]. The statutory bodies of the KGaA are the General Meeting, the Supervisory Board and the general partner. The general partner serves as the management and representative body of the KGaA. In the case of Bertelsmann, this is Bertelsmann Management SE, a European stock corporation (Societas Europaea) represented by its Executive Board. Bertelsmann SE & Co. KGaA and Bertelsmann Management SE each have their own Supervisory Boards. The members of the Executive Board of Bertelsmann Management SE are appointed and monitored by the Supervisory Board of Bertelsmann Management SE (dual leadership structure). The Supervisory Board of Bertelsmann Management SE & Co. KGaA supervises the management of the business by Bertelsmann Management SE. The duties and responsibilities of the individual bodies are clearly defined in each case and are strictly separated from each other. The Bertelsmann boards are obliged to secure the continuity of the company and to enhance the enterprise value in the long term through responsible and sustainable corporate management.
Corporate Management: Transparent Structures and Clear Decision-Making Processes
The general partner, Bertelsmann Management SE, represented by its Executive Board, is responsible for independently managing the company. The duties consist of determining the corporate objectives, the strategic direction of the Group, Group management, management training, as well as corporate planning and financing. The Executive Board provides the respective Supervisory Boards with regular, prompt and comprehensive reports on all matters that are relevant to business development and strategy implementation, planning, financial and earnings position, as well as risk situation and risk management. It ensures compliance with the provisions of law and corporate guidelines within the Group. The Executive Board Chairman coordinates the cooperation between the Executive Board and the Supervisory Boards and has regular consultation meetings with the chairmen of the two Supervisory Boards.
In addition, the Executive Board has established the Group Management Committee (GMC), which advises on important corporate strategy and development matters as well as other issues that affect the Group as a whole. This Committee, currently comprising 15 members, is composed of all members of the Executive Board and executives representing key businesses, countries, regions and selected Group-wide functions.
The Supervisory Board of Bertelsmann SE & Co. KGaA supervises the management of the business by the general partner and uses its extensive information and control rights for this purpose. In addition, the Supervisory Boards advise the Executive Board on strategic matters and significant business operations. The Executive and Supervisory Boards work in close cooperation and are therefore able to reconcile the demands of effective corporate governance with the need for rapid decision-making. Fundamental matters of corporate strategy and their implementation are discussed openly and coordinated in joint sessions. Any significant measures to be taken by the Executive Board are subject to the approval of the Supervisory Board. The Bertelsmann SE & Co. KGaA and Bertelsmann Management SE shareholders exercise their rights and vote at the respective General Meetings. The General Meetings vote on matters such as amendments to the articles of association and the appropriation of net income, and elect members to the respective Supervisory Board. The members of the Executive and Supervisory Boards are obliged to serve the company’s best interests in their work. For some time, the delegation of tasks to committees of experts has been an integral component of the Supervisory Board’s work at Bertelsmann. It serves to increase the monitoring efficiency and advisory expertise of the Supervisory Boards. The Supervisory Board of Bertelsmann Management SE has formed a Personnel Committee, and the Supervisory Board of Bertelsmann SE & Co. KGaA has formed an Audit and Finance Committee and a Working Group of Employee and Management Representatives. The Personnel Committee also performs the tasks of a nomination committee, in which capacity it recommends to the Supervisory Board of Bertelsmann Management SE suitable candidates for endorsement at the General Meeting. The Audit and Finance Committee of the Supervisory Board of Bertelsmann SE & Co. KGaA is also regularly involved in the accounting process and monitors the effectiveness of the internal control system, risk management system and internal auditing system. It also monitors the compliance architecture within the Group. These committees prepare the topics to be addressed during the plenary meetings of the Supervisory Boards. The chairperson of the committees then report to the plenary meetings on the work performed. The Supervisory Boards’ decision-making powers have been transferred to the committees to the extent permitted by law. The breadth and range of responsibilities and tasks delegated to these committees is continuously reviewed through various evaluation processes. The appropriate size of the Supervisory Boards and the experience and professional expertise of their members, who are drawn from a broad range of industries and areas of activity, are key factors in Bertelsmann’s effectiveness and independence.
Diversity in Practice
At a global company like Bertelsmann, diversity should contribute to the Group’s long-term economic success. This is reflected in the Group’s management levels, among other areas. The Executive Board comprises three male and two female members. The 15-strong GMC has members from seven different countries, with female executives making up over 40 percent of the Committee. Furthermore, Bertelsmann aims to promote diversity at all levels of the company. Corresponding initiatives for strengthening diversity are being continuously expanded (see also section “Employees” in the Group Management Report). The diversity within the management positions is also reflected in the heterogeneous composition of the Supervisory Boards. Both Supervisory Boards are largely composed of professionally qualified and highly capable members with management experience, representing a broad range of backgrounds and lifestyles. Achieving diversity is an important consideration of the Supervisory Boards when nominating candidates for election by the General Meeting. The Supervisory Boards already have a significant proportion of female members. When nominating candidates for the Supervisory Boards, extensive consideration is always given to the aim of increasing the proportion of female members with suitable candidates; however, efforts to formally stipulate a binding female quota are not being undertaken. The same applies for stipulating the number of independent Supervisory Board members pursuant to the German Corporate Governance Code, as the Supervisory Board has always had what it considers to be a high proportion of independent members. Age limits for members of the Supervisory Board are regulated in the respective articles of association.
Closed Group of Shareholders
Three foundations (Bertelsmann Stiftung, Reinhard Mohn Stiftung and BVG-Stiftung) indirectly hold 80.9 percent of Bertelsmann SE & Co. KGaA shares, with the remaining 19.1 percent held indirectly by the Mohn family. Bertelsmann Verwaltungsgesellschaft (BVG) controls all voting rights at the Bertelsmann SE & Co. KGaA and Bertelsmann Management SE General Meetings. BVG is responsible for upholding the interests of the foundations participating in Bertelsmann and of the Mohn family as indirect Bertelsmann SE & Co. KGaA shareholders, ensuring the continuity and autonomy of the company’s management and preserving and cultivating Bertelsmann’s distinctive corporate culture. BVG is controlled by a steering committee composed of three representatives of the Mohn family and three additional members who are not members of the Mohn family. Bertelsmann SE & Co. KGaA is a capital-market-oriented company but is unlisted. Nevertheless, its corporate governance activities closely follow the recommendations of the German Corporate Governance Code in the version dated May 13, 2013, which are primarily aimed at listed companies and those with access to capital markets within the meaning of section 161, paragraph 1, clause 2 of the German Stock Corporation Act (Aktiengesetz). Exceptions relate primarily to those guidelines that, in the opinion of Bertelsmann SE & Co. KGaA, apply to publicly held enterprises with large numbers of shareholders or anonymous shareholders. The individual remuneration and incentives paid to the members of the Executive Board and Supervisory Boards are not made public, and accordingly no remuneration report is prepared.
Social responsibility and appropriate conduct toward employees, customers, business partners and public authorities are key elements of Bertelsmann’s value system. This means that Bertelsmann has always given the highest priority to the principle of adhering to statutory provisions and internal regulations on the prevention of legal risks and their consequences. The Executive Board has continuously developed and expanded Bertelsmann’s compliance structure and organization over time, including during financial year 2013. In particular, an update was made to the Code of Conduct originally introduced in 2008. The Code outlines binding minimum standards for responsible conduct within the company and raises awareness concerning potential legal risks. The Code also specifies contacts who can be consulted for advice, for reporting potential compliance violations in a secure and confidential manner, and for submitting suggestions for the improvement of compliance-related processes. Furthermore, the anti-corruption training and communication measures that were introduced during the previous year were continued in 2013. The Corporate Compliance Committee (CCC) established within the framework of the compliance organization holds regular meetings. The responsibilities of the CCC include monitoring the investigation of potential compliance violations and the measures taken. The CCC submitted the annual Compliance Report to the Executive Board and advised it on specific and general responses to violations and compliance-related developments. The Ethics & Compliance (E&C) department has operational responsibility for compliance activities in the Bertelsmann Group, such as conducting training sessions, reviewing the reports received through the various whistle-blowing channels and coordinating investigations. It is supported within the divisions by E&C representatives who are responsible for implementing the E&C program at all levels of the company. The Executive Board and CCC submitted the annual Compliance Report to the Supervisory Board. All the reports of compliance violations received were investigated, and appropriate actions were taken. The report also included suggestions for increasing the effectiveness of measures designed to ensure compliance.