|
|
 |
Corporate Governance Report 2008
(Excerpt from the >> Annual Report 2008)
Our actions have always been determined by the principles of responsible management and company control. Good and transparent corporate governance provides for responsible, value-oriented performance and supervisory functions of the company. It is an important condition in order to maintain and strengthen the confidence placed in adidas AG by our shareholders, financial markets, business partners, employees as well as the public. Key parameters of our corporate governance activities in 2008 were the further development of the good relationship with our shareholders, efficient cooperation between the Executive Board and the Supervisory Board as well as the responsible handling of risks and opportunities and statutory and Group-internal regulations. We consider corporate governance as a continuing process and will also continue to follow future developments attentively.
Dual Board System
In accordance with statutory provisions, adidas AG has a dual board system, which assigns management functions to the Executive Board and supervisory functions to the Supervisory Board. These two boards are strictly separated in terms of membership as well as competencies.
Management by the Executive Board
Our Executive Board consists of four members. It is responsible for managing the company, developing the Group’s strategic orientation, agreeing this with the Supervisory Board and ensuring its implementation. In doing so, it is bound to the company’s interests and obliged to achieve a sustainable increase in company value. Its Rules of Procedure regulate the specified scope of work of the Board, especially the responsibility of the Executive Board members for particular business units, the matters reserved to the Executive Board as a whole and the modalities for resolutions. The Rules of Procedure for the Executive Board can be found on our corporate website at www.adidas-Group.com.
Supervision and Consulting by the Supervisory Board
In accordance with the German Co-Determination Act (Mitbestimmungsgesetz – MitbestG), our Supervisory Board consists of six shareholder representatives and six employee representatives. The Supervisory Board oversees and advises the Executive Board in terms of management. Fundamental business decisions require approval by the Supervisory Board. In very urgent cases, the Supervisory Board can also pass a resolution by way of written circular vote. In addition, it appoints the members of the Executive Board.
The term of office of the current Supervisory Board expires with the end of the Annual General Meeting on May 7, 2009, which will resolve upon the ratification of the actions of the Supervisory Board for the financial year 2008. Pursuant to MitbestG regulations, the election of the employee representatives will be held already in March 2009, whereas the shareholder representatives will be individually elected at the Annual General Meeting in 2009.
Increased Efficiency ensured by Supervisory Board Committees
In order to perform its tasks in a most efficient manner, our Supervisory Board has formed five permanent expert committees. The chairmen of these committees report regularly to the entire Supervisory Board.
 |
|
The Steering Committee, which consists of the Supervisory Board Chairman and his two deputies, discusses major issues, prepares resolutions and is authorised in particularly urgent cases to pass resolutions on behalf of the Supervisory Board.
|
 |
|
|
The co-determined General Committee, with four members, is responsible in particular for the preparation of Supervisory Board resolutions regarding the appointment of Executive Board members. Since November 2008, the Supervisory Board as a whole has been responsible for resolving upon the Executive Board compensation system including all integral contractual elements, upon proposal by the General Committee, as well as for its regular review.
|
|
|
|
The co-determined Audit Committee, which also comprises four members, deals primarily with accounting, risk management and compliance issues. It discusses the efficiency of the internal control system as well as the risk management system and is regularly informed on the work undertaken by Internal Audit. In addition, it assesses and supervises the auditor’s independence and determines audit priorities. The Audit Committee examines the consolidated financial statements and the adidas AG annual financial statements including the Management Reports. It also prepares the respective Supervisory Board resolutions as well as the agreement with the auditor. Furthermore, it deals with the quarterly and half-year financial reports. The exact tasks of the Audit Committee are regulated by the Rules of Procedure, which were resolved upon by the entire Supervisory Board in the year under review.
|
|
|
|
The co-determined four-member Mediation Committee, formed in accordance with § 27 section 3 MitbestG, is responsible for submitting a proposal to the Supervisory Board regarding the appointment or dismissal of Executive Board members if the two-thirds Supervisory Board majority required for an appointment or dismissal is not achieved in the preceding resolution.
|
|
|
|
The Nomination Committee, newly formed in 2008, comprises three members. It is the only Supervisory Board committee consisting exclusively of shareholder representatives. It submits recommendations to the Supervisory Board for the proposal of suitable candidates to the Annual General Meeting. When drawing up proposals for the election to the Supervisory Board, care is taken to ensure that candidates, chosen on an international level, have the required knowledge, abilities and professional experience.
|
|
In addition, the co-determined ”Strategic Equity Investment Committee” with four members was established ad hoc in 2008 in connection with the examination of two company acquisitions.
The activities of the Supervisory Board and its committees in 2008 are described in detail in the Supervisory Board Report.
Responsible Cooperation between Executive Board and Supervisory Board
Our Executive Board and Supervisory Board exercise good corporate governance through responsible and transparent management and control of the Group and the shared goal to enhance company value. The Executive Board informs the Supervisory Board frequently, expeditiously and comprehensively on the Group’s strategy, planning, business development and risk management as well as fundamental compliance issues. The Chairmen of our Executive Board and Supervisory Board also maintain frequent contact between meetings. For certain business transactions and measures, the Executive Board must obtain the Supervisory Board’s prior consent. This includes, for example, entering or exiting major fields of activity and acquiring or divesting substantial corporate holdings. Furthermore, the Executive Board must obtain the Supervisory Board's approval for the budget including the annual capital expenditure and financial plan.
Compliance in the adidas Group
For us, compliance stands for the conformity of our actions with statutory provisions and regulations as well as ethical and moral principles to which our company is subject or to which we have committed ourselves voluntarily. With the Code of Conduct and our Global Policy Manual, we have established guidelines in order to support us in achieving this goal. They are regularly reviewed and enhanced and contain in particular regulations for law-compliant dealings with business partners and third parties in order to avoid conflicts of interest, regulations relating to the handling of data and information as well as regulations regarding environmental protection and safety. In this context, Internal Audit examines the internal controls of the Group’s subsidiaries in accordance with a schedule agreed upon with the Executive Board. The Supervisory Board is informed regularly on the activities of Internal Audit. Furthermore, the insider committee, which consists of representatives of various business units, reviews particular issues with regard to ad hoc relevance and hence enables lawful handling of insider information within the company. All persons who work for the company and who have access to insider information as a result of their function are added to an insider list after having been instructed on their obligations deriving from insider law. In addition, our Code of Conduct regulates the handling of complaints and notifications regarding possible compliance infringements, which can be reported via a whistleblower hotline as well as to the local Compliance Officer.
Transparency Creates Trust
It is our goal to provide all institutional investors, private shareholders, financial analysts, employees and the interested public with the same information at the same time, in both English and German, by regular, open and up-to-date communication, and to thus create the greatest possible transparency. As an always up-to-date publication platform, we primarily use our website www.adidas-Group.com for this purpose. There we publish all press releases and ad hoc announcements, financial reports, information on our analyst conferences and press conferences on financial results, our Annual General Meeting and our financial calendar. Throughout Europe, we publish, inter alia, notifications on Directors’ Dealings, on changes in the percentage of voting rights as well as all corporate information subject to disclosure requirements. Through our Investor Relations activities, we are also in close contact with our shareholders.
Annual General Meeting and Services for Shareholders
The Annual General Meeting is a platform for dialogue between our shareholders and the Executive Board and Supervisory Board. It is also the forum for shareholders to exercise their voting rights. All shareholders are informed quickly, comprehensively and effectively, prior to and during the Annual General Meeting. On our website www.adidas-Group.com we publish all documents and information on the Annual General Meeting, such as the current Annual Report and the Agenda. We facilitate the exercise of voting rights for our shareholders by enabling them to authorise a proxy of their choice or a proxy appointed by the company. The proxy is bound to the shareholders’ instructions, which can be given prior to or during the Annual General Meeting until the end of the general debate also via electronic media (8.7% of the stock capital voted via the Internet in 2008). Proxy solicitation carried out prior to the Annual General Meeting and our Internet service have led to yet another considerable increase in the attendance rate. In 2008, 53% of the capital with voting rights was present at the Annual General Meeting. This is an increase of 9 percentage points compared to the previous year.
All shareholders can follow the Annual General Meeting live and in full length online, as included in the suggestion of the German Corporate Governance Code. In addition, we are available for answering questions of our shareholders by phone or electronically. At our next Annual General Meeting, taking place on May 7, 2009 in Fuerth (Bavaria), we will again provide our shareholders with the best possible service.
Directors' Dealings in 2008
Pursuant to § 15a of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG) Executive Board and Supervisory Board members, other key executives as well as persons in close relationship with them are obliged to disclose the purchase or sale of adidas AG shares or related financial instruments (Directors‘ Dealings) if the value of the transactions in the financial year reaches or exceeds € 5,000. In 2008, we received six Directors’ Dealings notifications relating to adidas AG shares (ISIN DE0005003404), which were published at www.adidas-Group.com/directors_dealings.
Directors' Dealings in 2008
|
|
|
|
|
|
|
|
 |
| March 7 |
Herbert Hainer |
Executive
Board |
Purchase |
2,500 |
40.00 |
100,000.00 |
 |
| May 8 |
Christian Tourres |
Supervisory
Board |
Sale |
100,000 |
44.08611 |
4,408,611.00 |
|
| Aug. 25 |
Fritz Kammerer |
Supervisory
Board |
Purchase |
256 |
38.97 |
9,976.32 |
|
| Nov. 10 |
Robin J. Stalker |
Executive
Board |
Purchase |
3,600 |
28.43 |
102,348.00 |
|
| Nov. 13 |
Herbert Hainer |
Executive
Board |
Purchase |
4,000 |
24.92 |
99,680.00 |
|
| Dec. 23 |
Fritz Kammerer |
Supervisory
Board |
Purchase |
190 |
26.18 |
4,974.20 |
|
|
Share Ownership of the Executive Board and Supervisory Board
All members of our Executive Board and Supervisory Board have decided to disclose their direct and indirect ownership of shares in adidas AG for the first time. Hence, we comply with a further recommendation of the German Corporate Governance Code.
At the end of the financial year 2008, the entire number of shares held by the members of the Executive Board of adidas AG amounted to less then 1% of the shares issued by the company.
At the same time, the members of the Supervisory Board owned 2.38% of the shares issued by the company.
Accounting and Annual Audit
The annual consolidated financial statements and the interim financial reports of the adidas Group are prepared by the Executive Board in accordance with the principles of the International Financial Reporting Standards (IFRS). The statutory annual financial statements of adidas AG relevant for the distribution of dividends are prepared in accordance with the provisions of the German Commercial Code (Handelsgesetzbuch - HGB). The annual accounts are audited and adopted by the Supervisory Board.
KPMG AG Wirtschaftsprüfungsgesellschaft (formerly: KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft), Frankfurt am Main, was appointed as auditor for the consolidated financial statements and the adidas AG annual financial statements for 2008 by the Annual General Meeting after the Supervisory Board had confirmed the independence of the auditor.
Recommendations and Suggestions of the German Corporate Governance Code Fulfilled to a Large Extent
In the year under review, the Executive Board and Supervisory Board were informed regularly by our Corporate Governance Officer on the latest corporate governance developments and devoted particular attention to fulfilling the provisions of the German Corporate Governance Code (Code), especially the latest provisions of June 6, 2008. As a result of these consultations, the Executive Board and Supervisory Board issued an updated Declaration of Compliance on February 11, 2009, pursuant to § 161 of the German Stock Corporation Act (Aktiengesetz - AktG). The exact wording together with all past Declarations of Compliance can be found at and downloaded from www.adidas-Group.com/corporate_governance.
Until August 8, 2008, the Declaration refers to the Code as amended on June 14, 2007 and subsequently to the Code as currently applicable. All recommendations of the Code have been and are fulfilled to a large extent. We deviate from the recommendations with regard to a few points only:
|
|
Section 3.8 of the Code recommends including an appropriate deductible in the directors’ and officers’ (D&O) liability insurance concluded by the company for the Executive Board and Supervisory Board. The D&O liability insurance policy for our Executive Board and Supervisory Board members does not provide for a deductible as this is not common practice outside of Germany. In addition, it is a group insurance for a large number of executives in Germany and abroad for which a differentiation between Executive Board and Supervisory Board members and other executives does not seem appropriate.
|
|
|
|
Section 4.2.3 of the Code recommends that a severance payment cap for the premature termination of the contract without serious cause be agreed when concluding the employment contracts with the Executive Board. The contracts that are currently to be newly concluded do not provide for a formal severance payment cap due to the three-year term of the contract. We believe that the contract term agreed already offers sufficient protection from inappropriate severance payments.
|
|
|
|
Section 5.4.1 of the Code recommends setting an age limit for Supervisory Board members. We do not set an age limit for Supervisory Board members as this is, in our opinion, an unnecessary limitation of the rights of our shareholders and employees when electing their representatives to the Supervisory Board.
|
|
|
|
Section 5.4.6 of the Code recommends that Supervisory Board members receive performance-oriented compensation in addition to their fixed compensation. The members of our Supervisory Board do not receive any performance-oriented compensation in order to allow for the independent supervisory functions of the Supervisory Board.
|
|
Our Executive Board and Supervisory Board have decided to comment not only on the deviations from the recommendations of the Code but, in addition, also on the non-binding suggestions. At present, adidas AG complies with the suggestions of the Code with one exception: Pursuant to section 3.6 of the Code, Supervisory Board meetings should be prepared separately by the Supervisory Board members representing the shareholders and by those representing the employees. The members of our Supervisory Board do not meet for such preparation meetings as standard practice but only if required.
More Information on Corporate Governance
All adidas AG corporate governance documents are available on our website at www.adidas-Group.com/corporate_governance.
 back to top
|
|
