Corporate Governance Report

In December 2011, 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 since the last Declaration of Conformity in December 2010 and that Deutsche Post AG intends to comply with all recommendations of the Code as amended on 26 May 2010 in the future.”

We also implemented the suggestions set forth in the code, with one exception: the Annual General Meeting (AGM) 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 2011 we carried out another employee opinion survey, in which 80% of our employees took part. We are proud that, on the whole, our employees are satisfied with their working conditions. The results will be carefully analysed at all levels and intensively discussed since they indicate where we can make improvements.

In addition, we regularly collect data on how satisfied customers are with our services. The Kundenmonitor independent market study in 2011 indicated that 95% of private customers surveyed in Germany were satisfied with the Deutsche Post mail and retail outlet service.

Our corporate responsibility rests on the competencies of the company and the experience of our employees. We want to lead the way in innovative and sustainable logistics solutions. Pursuant to our motto “living responsibility”, we focus on three areas: GoGreen (environmental protection), GoHelp (disaster management) and GoTeach (promoting education). We are the first global logistics provider to set itself a quantitative carbon efficiency target. We had set ourselves the goal of improving carbon efficiency in our own processes by 10% by 2012 but managed to exceed this target in 2011. To support the programme we have developed our own controlling solution. Carbon emissions are managed and reported by means of defined indicators. In recognition of this, Deutsche Post DHL received the first Green Controlling Prize to be awarded by the Péter Horváth Foundation and the Internationaler Controller Verein (international controllers’ association). The Group was again confirmed by leading indices as a member on the strength of its commitment to corporate responsibility.

Within the framework of the GoHelp programme, we apply our expertise towards helping people in disaster areas quickly. In this context, our Disaster Response Teams were deployed in New Zealand and El Salvador. In addition, we provided disaster-prevention training to the managers of the international airports in Nepal, Bangladesh and Indonesia.

With our GoTeach programme, we take action worldwide to improve education and promote fair opportunities for education. We concluded partnerships with organisations that supply university graduates to work as temporary schoolteachers in underprivileged areas, implemented a scholarship programme for the children of our employees and initiated a partnership with the child-aid organisation SOS Children’s Villages.

As part of our commitment to social responsibility, we encouraged our employees to get involved in Global Volunteer Day for the first time in 2011. More than 50,000 of our employees volunteered to help children, young people and the elderly. In addition, we used the Living Responsibility Fund to support our employees’ voluntary commitment in local projects.

Deutsche Post DHL has developed a Code of Conduct that has been applicable in all regions and in all divisions since mid-2006. The Code of Conduct lays down guidelines for day-to-day workplace conduct for some 470,000 employees. Our principles are respect, tolerance, honesty, openness, integrity towards employees and customers and 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 to the company’s continued success. Our global health policy, a multitude of measures to promote health and the numerous awards we have won are a reflection of the high esteem that our exemplary company health management system has enjoyed for years. In 2011, for the second year in a row, we won the Corporate Health Award in the transport/logistics category granted under the auspices of the German Federal Ministry of Labour and Social Affairs.

In 2011 Deutsche Post DHL won the first ever German Diversity Award in the Most Diverse Employer category. Concerning the promotion of women to executive positions, in October 2011 Deutsche Post DHL undertook to ensure that women occupied 25% to 30% of all upper and middle managerial positions for which there was a vacancy. To achieve this objective, we have already implemented targeted development actions and will supplement our catalogue of measures.

The Supervisory Board discussed in detail the Group’s diversity strategy, with 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 guidance 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 them 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. Important compliance management activities include the process to identify possible compliance risks, the evaluation of business partners with regard to compliance, the procedures for reporting potential breaches of laws or guidelines, policy management and the development and implementation of training and communication measures.

The Chief Compliance Officer is supported by the Global Compliance Office, which establishes compliance management standards on a Group-wide scale and supports the corresponding activities of the divisions.

In 2011, pursuant to Deutsche Post DHL’s continuous review and development of the compliance management system, the position of Divisional Compliance Officer was created in all of the four operating divisions. These officers report to the board member responsible for the divisions concerned. The Divisional Compliance Officer supplies input for the Chief Compliance Officer’s report to the Group’s Board of Management, with information on compliance cases and how they are dealt with as well as advances in the development of compliance organisation and processes. The Chief Compliance Officer is also advised by the Compliance Committee, which is composed of members from the divisions and representatives of certain corporate departments such as Internal Audit and Controlling.

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 Personnel, 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 his 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 based on the calendar year, with special meetings being held whenever particular developments or measures need to be discussed or decided quickly. In financial year 2011, the Supervisory Board met for four plenary meetings, 18 committee meetings and a 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 a sufficient number of independent members.

Executive committees prepare 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 MAIL Steering 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 and the respective board members of the divisions are represented on the committees. In addition, the Board Member for Personnel is a member of the MAIL Steering Committee. 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 MAIL Steering 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 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 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), Wolfgang Abel (Deputy Chair), 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.

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 on 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 2011 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 2010, the Supervisory Board determined specific goals with regard to its composition:

1. Nominations put forward by the Supervisory Board for the election of Supervisory Board members at the AGM should focus solely on the good of the company. In this context, the Supervisory Board is aiming to increase the proportion of women on the full Supervisory Board from the current 25% to 30% by 2015.
   
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 at 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 decided 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 the term of office is intended to end, at the latest, at the close of the duly convened AGM following the member’s 72nd birthday.

The current composition of the Supervisory Board meets the abovementioned targets. Prof. Dr-Ing. Katja Windt, who was elected by the 2011 AGM, is an established logisitcs specialist and has an excellent reputation, also in other industries. Her election brought the proportion of women on the Supervisory Board to 30%. The company’s international operations are adequately taken into account. Swiss-born Thomas Kunz, recently elected at the 2011 AGM, possesses extensive knowledge and experience gained in his many years as a member of the top management team within the French Danone group.

Specific details of stock option plans and similar share-based incentive schemes offered by the company, insofar as they concern the Board of Management, are given in the remuneration report.

Senior executives of the Group take part in a global Share Matching Scheme. Within the framework of this plan, executives of grades B to D of our Role Classification System (RCS) must invest 15%, and may invest up to 50%, of their annual variable remuneration in Deutsche Post stock at the current share price. Executives of grades E and F may invest up to 50% of their annual variable remuneration. After a four-year holding period and a corresponding period of affiliation with the Group, the executives receive one bonus share for every Deutsche Post share purchased and continuously held under the plan.

In addition, selected executives receive stock appreciation rights (SAR s) in annual tranches as a long-term remuneration component. Apart from the fact that they do not need to make a personal investment, the structure of this remuneration element corresponds to that described in the remuneration report for the Board of Management.