Corporate Governance Report

In December 2012, the Board of Management and the Supervisory Board again submitted an unqualified Declaration of Conformity pursuant to section 161 of the Aktiengesetz (AktG – German Stock Corporation Act), which reads as follows:

“The Board of Management and the Supervisory Board of Deutsche Post AG declare that the recommendations made by the Government Commission on the German Corporate Governance Code, as amended on 26 May 2010, have been complied with, also since the last Declaration of Conformity in December 2011, and that Deutsche Post AG intends to comply with all recommendations of the Code, as amended on 15 May 2012 in the future.

We also implemented the suggestions set forth in the code, with one exception: the Annual General Meeting will only be broadcast on the internet until the start of the general debate.

With the guiding principle of “respect and results”, we set our corporate governance the daily challenge of achieving first-class results whilst adhering to our sense of responsibility for the needs of our employees and customers. As a globally operating company and corporate citizen, we bear great responsibility for the environment and for living conditions in the regions in which we operate. This is a responsibility that we take seriously.

In 2012 we carried out another employee opinion survey throughout the Group, in which 80% of our employees again took part. We are proud that our employees are satisfied with their working conditions and that the results of the survey continue to show improvements in all key indicators for the fourth consecutive year.

In addition, independent consumer studies have again proven how satisfied customers are with our services. In Germany, the survey of private customers carried out by the Kundenmonitor Deutschland independent market study showed 96% (previous year: 95%) of those surveyed to be satisfied with Deutsche Post’s mail service and that 92% (previous year: 90%) were satisfied with our retail outlet service.

Corporate responsibility is a key component of our corporate strategy. In these efforts we concentrate above all on environmental protection and a commitment to social responsibility. Our commitment was again recognised by leading sustainability indices in the reporting year.

Deutsche Post DHL has developed a Code of Conduct that has been applicable in all regions and in all divisions since the middle of 2006. The Code of Conduct lays down guidelines for day-to-day workplace conduct for some 475,000 employees. Our principles are respect, tolerance, honesty, openness, integrity towards employees and customers, and the willingness as a company to assume social responsibility. The Code of Conduct also sets out our commitment to the health and well-being of our employees as well as equal opportunities and diversity.

We consider the health and safety of our employees to be prerequisites for performance and motivation and a key factor in the company’s continued success. Targeted initiatives and activities are implemented to improve our employees’ health. Each year we recognise exemplary health initiatives with our Corporate Health Award.

As part of our work to promote equality, we have committed ourselves to filling 25% to 30% of all management positions becoming vacant with women. The proportion of women in upper and middle managerial positions around the world has risen slightly to 18.5% (previous year: 17.6%), a positive trend we intend to accelerate. The Supervisory Board supports the Group’s diversity strategy, with a particular focus on the objective of increasing the number of women on the Board of Management. It sees the efforts for greater diversity as being part of long-term succession planning, for which the Supervisory Board and Board of Management are jointly responsible. In the opinion of the Supervisory Board, the targeted increase in the number of women in executive positions is necessary to ensure that, overall, more suitable female candidates are available for vacant positions on the Board of Management. This will allow the Supervisory Board to give more consideration to women when appointing members to the Board of Management. The international composition of the Board of Management already strongly reflects the global activity of the company.

The Code of Conduct is underpinned by two guidelines. The anti-corruption policy gives clear instructions on how to handle gifts, benefits and offers of hospitality. Improper payments (bribery) are prohibited. The competition compliance policy gives specific guidelines on the prohibition of agreements with competitors. The code of conduct for suppliers is included in all new procurement contracts and has been added to existing long-term framework agreements. It obliges suppliers to adhere to ethical and ecological standards. A ban on child and forced labour is in place. Salaries and working times must comply with national laws and regulations.

At Deutsche Post DHL, the Chief Compliance Officer is responsible for the compliance management system and reports directly to the Chief Financial Officer. The Chief Compliance Officer is supported by the Global Compliance Office, which establishes compliance management standards on a Group-wide basis and supports the corresponding activities of the divisions. Each of the four operating divisions has a Compliance Officer, who regularly presents a report to the divisional Board of Management member. These reports are incorporated into the Chief Compliance Officer’s reports to the Board of Management and to the Finance and Audit Committee of the Supervisory Board.

One of the main functions of compliance management at Deutsche Post DHL is to implement a systematic process which allows for the identification of potential compliance risks, the evaluation of compliance matters relating to business partners, co-ordinated reporting of any breaches of law or guidelines, the central management of guidelines and the development and implementation of training and communication on compliance. In particular, 2012 saw the further development of guidelines governing the review process for business partners. These now form a compulsory part of our anti-corruption policy. In addition, steps were taken to improve Group-wide communication on compliance matters in order to remind employees of their relevance and brief them specifically on the code of conduct. This communication was supported by training courses.

As a German listed public limited company, Deutsche Post follows a dual management system. The Board of Management is responsible for the management of the company. It is appointed, overseen and advised by the Supervisory Board.

In addition to the board departments of the Chief Executive Officer (CEO), the CFO and the Board Member for Human Resources, the Board of Management also includes the operating board departments of MAIL, GLOBAL FORWARDING, FREIGHT, EXPRESS and SUPPLY CHAIN.

With the consent of the Supervisory Board, the Board of Management has established rules of procedure that lay down objectives for structure, management and co-operation within the Board of Management. Within this framework, each board member manages their department independently and informs the rest of the Board on key developments at regular intervals. The Board of Management as a whole decides on matters of particular significance for the company or the Group. In addition to tasks that it is prohibited by law from delegating, these include all decisions that must be presented to the Supervisory Board for approval. The entire Board of Management also decides on matters brought forth by one member of the Board of Management for decision by the Board of Management as a whole.

In making their decisions, the members of the Board of Management may not pursue personal interests or exploit business opportunities due to the company for their own benefit. They are required to disclose any conflicts of interest to the Supervisory Board without delay.

The Supervisory Board advises and oversees the Board of Management and appoints the members of the Board of Management. It has established rules of procedure that include the fundamental principles of its internal structure, a catalogue of Board of Management transactions requiring its approval and rules for the Supervisory Board committees. It meets at least twice every six months in a calendar year, with special meetings held whenever particular developments or measures need to be discussed or decided quickly. In financial year 2012, the Supervisory Board met for seven plenary meetings, 19 committee meetings and one closed meeting, as described in the report of the Supervisory Board.

The Board of Management and the Supervisory Board are in regular contact regarding strategic measures, planning, business development, risk exposure and risk management as well as company compliance. The Board of Management informs the Supervisory Board promptly and comprehensively on all topics of significance.

All Supervisory Board decisions, particularly those concerning transactions that require its approval, are deliberated and discussed extensively in the relevant committees. At each plenary meeting, the Supervisory Board is informed in detail about the work and decisions of its committees.

In making their decisions, the members of the Supervisory Board may not pursue personal interests or exploit business opportunities due to the company for their own benefit. They are required to disclose any conflicts of interest to the Supervisory Board. Any significant conflicts of interest on the part of a Supervisory Board member that are not merely temporary in nature should lead to that member’s resignation from the Board. In the Supervisory Board’s estimation, the Supervisory Board contains an adequate number of independent members as defined by the German Corporate Governance Code.

Executive committees prepare the decisions to be made by the Board of Management as a whole and make decisions on matters assigned to them. Their duties include preparing or deciding on investments and transactions in the various divisions. The Deutsche Post Executive Committee is responsible for the MAIL division and the cross-divisional DHL Executive Committee is in charge of the EXPRESS, GLOBAL FORWARDING, FREIGHT and SUPPLY CHAIN divisions. The CEO, the CFO, the Board Member for Human Resources and the respective board members of the divisions are represented on the committees. Along with the relevant members of the Board of Management, the executive committees also include first-tier executives below the Board of Management level, in some cases on a permanent basis (those, for example, responsible for the operating business) and in some cases to assist with special topics. Procurement and Controlling are called in to consult on capital expenditure, for instance, and Corporate Finance, Corporate Development and Legal Services in the case of acquisitions. The DHL Executive Committee and the Deutsche Post Executive Committee each meet at least once a month.

Furthermore, business review meetings take place once per quarter. These meetings are part of the strategic performance dialogue between the divisions, the CEO and the CFO. They comprise discussions on strategic measures, operating topics and the budget situation of the divisions.

For the members of the Board of Management, see Board of Management and Mandates held by the Board of Management.

The Supervisory Board has formed five committees to ensure the efficient discharge of its duties; in particular, these committees prepare the resolutions of the plenary meetings of the Supervisory Board. Decisions on certain topics are delegated by the Supervisory Board to the individual committees for a final decision.

The Executive Committee’s duties include arranging the appointment of members of the Board of Management and the establishment of management board remuneration by the plenary meeting of the Supervisory Board. The current members of the Executive Committee are Wulf von Schimmelmann (Chair), Andrea Kocsis (Deputy Chair), Rolf Bauermeister, Werner Gatzer, Roland Oetker and Stefanie Weckesser.

The Finance and Audit Committee oversees the accounting process, the effectiveness of the internal control system, the risk management and internal auditing systems as well as the financial statement audit. It examines questions of compliance and discusses the half-yearly and quarterly financial reports with the Board of Management before they are published. Based on its own preliminary assessment, it makes proposals for the approval of the annual and consolidated financial statements by the Supervisory Board. The current members of the Finance and Audit Committee are Hero Brahms (Chair), Stephan Teuscher (Deputy Chair, appointed 11 December 2012), Werner Gatzer, Thomas Koczelnik, Stefan Schulte and Helga Thiel. The chairman of the Finance and Audit Committee, Hero Brahms, is a financial expert as defined by sections 100 (5) and 107 (4) of the AktG. Since 1982 he has been CFO at various companies, most recently at Linde AG, where he was responsible for balance sheets, taxation, business management, audits, corporate governance and finance.

The Personnel Committee discusses human resources principles for the Group. The Personnel Committee’s current members are Andrea Kocsis (Chair), Wulf von Schimmelmann (Deputy Chair), Thomas Koczelnik and Roland Oetker.

The Mediation Committee carries out the duties assigned to it pursuant to the Mitbestimmungsgesetz (MitbestG – German Co-determination Act). The current members of the Mediation Committee are Wulf von Schimmelmann (Chair), Andrea Kocsis (Deputy Chair), Rolf Bauermeister and Roland Oetker.

The Nomination Committee presents to the shareholder representatives of the Supervisory Board recommendations on the choice of members of the Supervisory Board by the AGM. In doing so, it takes into consideration the objectives adopted by the Supervisory Board concerning its composition. The current members of the Nomination Committee are Wulf von Schimmelmann (Chair), Werner Gatzer and Roland Oetker.

Information about the work of the Supervisory Board and its committees in financial year 2012 is also contained in the report of the Supervisory Board. You can find information about the members of the Supervisory Board and the composition of the Supervisory Board committees under the sections Supervisory Board and Mandates held by the Supervisory Board.

In December 2012, the Supervisory Board resolved to comply with the supplementary recommendation of the Government Commission on the German Corporate Governance Code with respect to the objectives for the composition of the Supervisory Board. This means that it will now also consider the number of independent members of the Supervisory Board when setting those objectives:

1. Nominations put forward by the Supervisory Board for the election of Supervisory Board members by the AGM should focus solely on the good of the company. In this context, the Supervisory Board is working towards a position where, by 2015, at least 75% of the members of the full Supervisory Board are independent, as defined in section 5.4.2 of the German Corporate Governance Code, and at least 30% are women.
   
2. The present composition of the Supervisory Board already adequately reflects the company’s international operations. The Supervisory Board aims to maintain this and to continue to consider candidates in future nominations for election by the AGM who, by virtue of their background, education or profession, possess special international knowledge and experience.
   
3. Conflicts of interest amongst members of the Supervisory Board stand in the way of the independent and effective guidance and supervision of the Board of Management. The Supervisory Board decides in each individual case, within the scope of the law and in accordance with the German Corporate Governance Code, how to deal with potential or arising conflicts of interest.
   
4. In accordance with the age limit set by the Supervisory Board and anchored in its rules of procedure, nominations for the election of Supervisory Board members will take into account the fact that a term of office is intended to end, at the latest, at the close of the duly convened AGM following the member’s 72^nd birthday.

The composition of the Supervisory Board remained largely unchanged during the reporting period and is in accordance with the above-mentioned targets. In particular, the current composition of the Supervisory Board in fact also exceeds the specific objective relating to the number of independent members. In respect of the other objectives, the Supervisory Board was able to maintain the satisfactory level which had already been achieved. There are six female members of the Supervisory Board, meaning that women currently make up 30% of its members. The company’s international operations are adequately taken into account. Numerous members possess special international knowledge and experience.