Corporate Governance Report
We are committed to the principles of good corporate governance and continually strive to strengthen and sustain the trust that national and international investors, business partners, employees and the public have placed in us. Accordingly, our Executive and Supervisory Boards regularly evaluate the latest national and inter national standards in responsible, transparent and efficient company management with the objective of enhancing corporate governance at adidas and creating sustainable value. In this report, we outline our corporate governance activities in the year under review, which focused on the adoption of new Rules of Procedure for both Boards, an efficiency review of the Supervisory Board and the implementation of its results as well as on the examination of the updated German Corporate Governance Code.
Dual Board Structure: Executive and Supervisory Boards
In accordance with the German Stock Corporation Act
(Aktiengesetz), adidas-Salomon AG has a dual board structure
consisting of an Executive Board with management functions
and a Supervisory Board with control functions. These
two Boards are strictly separated in terms of membership and
competencies. Our Executive Board is currently composed of
four members (see Executive Board). Our Supervisory Board
comprises six members representing the shareholders and
six members representing the employees as required by the
German Co-Determination Act (Mitbestimmungsgesetz) (see
Supervisory Board).
Efficiency through Supervisory Board Committees
In order to perform its tasks as efficiently as possible, our
Supervisory Board has formed the following committees:
The Steering Committee, which consists of the Supervisory
Board Chairman and his two deputies, discusses major
issues, prepares resolutions and may in special urgent cases
take resolutions in lieu of the Supervisory Board.
The co-determined General Committee comprises four
members and in particular is responsible for the preparation
of the Supervisory Board resolutions on the employment
of Executive Board members, decides on the contents of the
relevant employment agreements and determines the structure
and level of the Executive Board compensation.
The co-determined Audit Committee with four members
deals primarily with accounting and risk management issues,
discusses the quarterly results and prepares the Supervisory
Board resolutions on the annual financial statements and
consolidated financial statements as well as the agreement
with the auditor.
The four-member Mediation Committee formed in accordance
with § 27 section 3 of the German Co-Determination
Act submits proposals 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.
Furthermore, the co-determined "Reebok Corporate
Actions" Committee was established ad hoc with four members
for the purpose of discussing and resolving on the
capital increase carried out in connection with the Reebok
acquisition.
A summary of the committees' activities in 2005 can be found in the Supervisory Board Report. An overview of the individual committee members is given in the Supervisory Board Overview.
Close Cooperation between Executive and
Supervisory Boards
Our Executive and Supervisory Boards cooperate with each
other closely and on a basis of mutual trust in the best interest
of the Group. Our Executive Board develops the Group's
strategic orientation, coordinates it with the Supervisory
Board and ensures its implementation. It informs the Supervisory
Board frequently, expeditiously and comprehensively
on the Group's strategy, planning, business development,
risk assessment and risk management. In particular, the
Chairmen of our Executive and Supervisory Boards maintain
frequent contact. For certain business transactions and measures
such as engaging in or giving up major fields of activity,
the acquisition or disposal of substantial corporate holdings
and the approval of the budget and capital expenditure and
financial plan, the Executive Board must obtain the Supervisory
Board's prior consent. For particularly urgent matters,
the Supervisory Board can also take resolutions by way of a
written circular vote.
New Rules of Procedure Adopted
In May 2005, our Supervisory Board adopted new Rules of
Procedure that align with the German Corporate Governance
Code. They contain a comprehensive list of transactions for
which the Executive Board must obtain prior approval from the
Supervisory Board as well as principles for the Supervisory
Board members' independence, experience and expert knowledge.
In August 2005, the Rules of Procedure for the Executive
Board were also updated to better reflect the Corporate
Governance Code and the current requirements in German
legislation. Both Rules of Procedure can be viewed online at
www.adidas-Group.com.
Efficiency Review Conducted
In 2005, our Supervisory Board carried out an efficiency review
of its activities by means of detailed questionnaires and
individual interviews conducted by an external consultant. The
main topics were the preparation, frequency, procedure and
agenda of Supervisory Board meetings, the activities of the
Supervisory Board committees as well as the quality, quantity
and timeliness of the information provided by the Executive
Board. The results were then discussed with the Executive
Board. The scope and timeframe of the documents and information
communicated by the Executive Board were identified
as areas for potential improvement. The Executive Board's
proposals on how to optimize these items were implemented
immediately. In all other respects, the organization of meetings
as well as the Supervisory Board's activities were rated
as positive and efficient. It is planned to carry out an efficiency
review every two years.
Proactive Communication Efforts
We are committed to a proactive information strategy to promote
transparency for the benefit of all stakeholders. In accordance
with the principles of fair disclosure, we make new
information immediately available to institutional investors,
private shareholders, financial analysts and the public in both
English and German. For this purpose, we use the Internet as
our main communication platform (www.adidas-Group.com).
With our financial reports, analyst and press conferences,
ad-hoc releases, press releases and Annual General Meeting
information, all interested parties have the possibility to
form an up-to-date and authentic opinion about our Group.
We also provide a financial calendar with all important dates
and events on our website, in all quarterly reports as well as
in this Annual Report (see Inside Back Cover).
Directors' Dealings
According to § 15a of the German Securities Trading Act
(Wertpapierhandelsgesetz), Executive and Supervisory Board
members as well as other key executives are required to disclose
purchase or sale transactions with adidas-Salomon AG
shares and related financial instruments (Directors' Dealings).
In 2005, we received and published Directors' Dealings
notifications on such transactions with adidas-Salomon AG
shares (ISIN DE0005003404) as stated in the adjacent table.
Directors' Dealings in 20051)
| Date/Place | Name | Position | Type of transaction |
Number of items |
Price in € |
Transaction volume in € |
|---|---|---|---|---|---|---|
| May 5, 2005 Frankfurt/Main |
Christian Tourres | Supervisory Board member | Sale | 20,000 | 130.085 | 2,601,700 |
| June 13, 2005 Frankfurt/Main |
Christian Tourres | Supervisory Board member | Sale | 20,000 | 140.00 | 2,800,000 |
| August 3, 2005 Frankfurt/Main |
Christian Tourres | Supervisory Board member | Sale | 100,000 | 155.396 | 15,539,600 |
| August 4, 2005 Frankfurt/Main |
Christian Tourres | Supervisory Board member | Sale | 20,000 | 161.20 | 3,224,000 |
| August 4, 2005 Frankfurt/Main |
Fritz Kammerer | Supervisory Board member | Sale | 100 | 157.32 | 15,732 |
| August 22, 2005 Frankfurt/Main |
Christian Tourres | Supervisory Board member | Purchase | 20,000 | 145.00 | 2,900,000 |
| December 1, 2005 Frankfurt/Main |
Christian Tourres | Supervisory Board member | Sale | 20,000 | 150.469 | 3,009,380 |
| December 19, 2005 Frankfurt/Main |
Christian Tourres | Supervisory Board member | Sale | 4,825 | 160.00 | 772,000 |
| December 20, 2005 Frankfurt/Main |
Christian Tourres | Supervisory Board member | Sale | 15,175 | 160.00 | 2,428,000 |
| December 20, 2005 Frankfurt/Main |
Christian Tourres | Supervisory Board member | Sale | 20,000 | 160.00 | 3,200,000 |
| 1) Information about notifi cations of share purchases and sales through the exercise of option rights within the scope of the Management Share Option Plan (MSOP), which no longer require reporting pursuant to the effective Issuer Guidelines of the German Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht) and which we published until August 29, 2005, as well as the above overview can be found at www.adidas-Group.com/directors_dealings. |
Share Ownership of Executive and Supervisory Boards
We report the ownership of shares and related financial
instruments by Executive Board and Supervisory Board
members only if it exceeds the threshold of 5% of the adidas-
Salomon AG shares issued (see our 2006 Declaration of
Compliance). In 2005, we received no such notifications.
Annual General Meeting Participation Facilitated
Due to the very broad and international nature of our shareholder
structure (see Our Share), we put considerable efforts
into facilitating access to information and corporate events.
We hence offer all national and international share holders
who register for the Annual General Meeting but cannot
attend in person the well-proven service of transferring their
voting rights to proxies appointed by the Company. The binding
voting instructions can be submitted to the proxies in
writing or via the Internet until the end of the general debate
of the Annual General Meeting. We also provide a publicly
available live webcast of the entire Annual General Meeting
on our website (www.adidas-Group.com) in both English and
German. We will continue these services for our next Annual
General Meeting, which will take place on May 11, 2006, in
Fürth, Germany.
Compliance with Additional Recommendations of
German Corporate Governance Code
Our Executive and Supervisory Boards regularly reviewed all
aspects of good corporate governance and issued an updated
Declaration of Compliance in accordance with § 161 of the
German Stock Corporation Act on February 9, 2006. As part
of our ongoing efforts to increase transparency, we disclose
the individual compensation of our Executive Board members
in 2005 as well as the individual compensation paid to
Supervisory Board members providing advisory and consultancy
work in 2005. As a result, we comply with two additional
recommendations of the current Corporate Governance Code.
We also comply without exception with all new recommendations
introduced in 2005 as well as with the majority of the
Code's non-binding suggestions. A summary of our current
Declaration of Compliance is given in the following while the
full text is published on our website at www.adidas-Group.
com/corporate_governance together with all past Declarations
of Compliance.
adidas-Salomon AG has been and will be in compliance with all recommendations of the German Corporate Governance Code dated June 2, 2005, with the following exceptions:
The D&O liability insurance for our Executive and
Supervisory Board members does not include a deductible
as this is not common outside Germany. Furthermore, we
believe that it is not appropriate for our Group insurance
policy, which covers a large number of high-level executives
in Germany and abroad, to differentiate between Executive
and Supervisory Board members and other executives.
The structure and level of the Executive Board compensation
is reviewed and determined by the Supervisory Board's
General Committee as this system has proven successful. The
General Committee informs the Supervisory Board plenum
on the respective results.
The stock options granted to the Executive Board within
the scope of the Management Share Option Plan (MSOP) do
not provide a possibility of limitation (cap) for extraordinary,
unforeseen developments as all stock options had already
been granted before this recommendation of the Corporate
Governance Code was introduced in May 2003. However,
should we decide to initiate a new stock option plan in the
future, we will comply with this recommendation.
We do not specify an age limit for Supervisory Board
members as we believe that this would narrow the rights of
our shareholders and employees to elect their representatives
to the Supervisory Board.
Our Supervisory Board compensation does not include
a variable component linked to the Group's performance in
order to ensure the independent supervision required. As
the work of the Supervisory Board and its committees has
been successful in the past, we believe there is no necessity
for additional compensation for membership in a Supervisory
Board committee.
We report the number of shares or related financial
instruments held by individual Executive and Supervisory
Board members if it directly or indirectly exceeds 5% of the
shares issued by adidas-Salomon AG. If the entire ownership
of all Executive and Supervisory Board members exceeds 5%,
the entire ownership is reported separately for the Executive
Board and the Supervisory Board, provided we have received
the according notifications. § 21 of the German Securities
Trading Act (Wertpapierhandelsgesetz) specifies a threshold
of 5% for the disclosure of shareholdings subject to reporting.
We also regard this threshold as appropriate for adidas-Salomon AG.
More Information about Corporate Governance
All documents related to corporate governance at adidas-
Salomon AG are available on our website at www.adidas-
Group.com/corporate_governance.