Good corporate governance makes a significant contribution towards increased transparency and ensures a higher level of confidence in the German capital market. We therefore expressly support the German Corporate Governance Code. At the same time, we would like to note here that the many similar initiatives on an international scale (the European Commission's plan of action, OECD Principles, etc.) leave behind an impression of overregulation. In our opinion, it would be more advisable to trust the self-regulating powers of the capital market.
Deutsche EuroShop complies with the German Corporate Governance Code, which was published in 2002 and extended in May 2003 with only a few exceptions. The declaration of conformity (see page 28) is published on our Web site (www.deutsche-euroshop.com/corpgov) and updated each time a change is made. At the Supervisory Board meeting in June 2004, the rules of procedure of the Executive Board and Supervisory Board were supplemented in particular in line with the recommendations of the Corporate Governance Code.
The rules of procedure prescribe the principle of independence for the members of the Supervisory Board. Some members of the Supervisory Board act as decision-makers in other companies, or did so in the past financial year. Deutsche EuroShop maintains normal direct or indirect business relationships with some of these companies. Arm's length conditions regarding the acquisition or sale of investments and the sourcing of services apply in these cases. In the case of transactions requiring approval involving companies for which members of the Supervisory Board work, the members concerned do not participate in the relevant votes. In our opinion, this policy ensures the independence of the Supervisory Board's decisions.
Supervisory Board members are elected for a term of office lasting five years. Four meetings are scheduled per year, and additional meetings are held as required. Rules of procedure govern the duties and working of the Supervisory Board and its committees – among other things, these cover independence, sufficient experience and expertise and the avoidance of conflicts of interest.
The Supervisory Board supervises and advises the Executive Board on its management of the Company's business activities. The Supervisory Board regularly discusses business developments and planning, as well as business strategy and its implementation. It monitors and reviews the quarterly reports and approves the annual and consolidated financial statements of Deutsche EuroShop AG after consideration of the auditors' reports and the results of the review by the Audit Committee. The Supervisory Board’s duties also include the appointment and the remuneration of the members of the Executive Board and the definition of their responsibilities. Significant decisions by the Executive Board – e.g. acquisitions, divestitures and financing – require the approval of the Supervisory Board.
The Executive Committee, to which the Chairman of the Supervisory Board, his deputy and another Supervisory Board member belong, has the task of discussing and, where appropriate, passing resolutions on urgent business matters. It is also responsible for concluding, amending and revoking the contracts of employment and pension agreements of the Executive Board. The Executive Committee reviews the Company's corporate governance principles and ensures their further development.
The Audit Committee comprises three Supervisory Board members. This Committee is responsible for issues relating to accounting, auditing and the preparation of the annual and consolidated financial statements of Deutsche EuroShop. Former members of the Company’s Executive Board and the Chairman of the Supervisory Board may not chair the Audit Committee, to avoid personal conflicts. The Audit Committee submits proposals on the adoption of the annual financial statements by the Supervisory Board based on the auditors' report. It addresses the Company's internal control system and risk management, as well as being responsible for the Company's business relations with the auditors. It issues the audit engagement to the auditors selected by the Annual General Meeting and decides on the focus of the audit and the remuneration of the auditors. This committee also monitors the independence, qualifications and efficiency of the auditors.
The annual Ordinary General Meeting generally takes place within the first six months following the end of the financial year. Each share has one vote in line with the principle of "one share, one vote". Shareholders whose names are entered in the share register and who have registered in due time are entitled to attend the Annual General Meeting. Shareholders are entitled to exercise their voting rights through proxies, who are bound to follow the shareholders' instructions. The Annual General Meeting is chaired by the Chairman of the Supervisory Board.
The Annual General Meeting resolves on all matters assigned to it by law. These include in particular the appropriation of the net profit, the formal approval of the actions of the Executive Board and the Supervisory Board and the appointment of the auditor. The resolutions are binding for all shareholders and the Company. Shareholders are entitled to submit countermotions to resolutions proposed by the Executive Board and Supervisory Board. Amendments to the Articles of Association and capital changes are resolved exclusively by the Annual General Meeting and implemented by the Executive Board with the consent of the Supervisory Board.
The Executive Board gives regular presentations to analysts and institutional investors as part of our investor relations activities. In addition to an annual analyst conference, we organise a conference call for analysts on the publication of each set of quarterly results; this is broadcast on the Internet, where it is available to everyone interested in the Company. We also provide financial and other information about the Deutsche EuroShop Group on our web site.
The Executive Board and the Supervisory Board resolved the following declaration of conformity on 30 November 2004 in accordance with section 161 of the Aktiengesetz.
Deutsche EuroShop's departures from the stipulations of the German Corporate Governance Code in financial year 2004 are listed below, along with the relevant section of the Code.
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Additional meetings held as required
Early warning system
First-time adoption of IASs