Report of the Supervisory Board
Close cooperation between the Board of Management and the Supervisory Board
In 2009, the Supervisory Board once again constantly monitored the governance of the Company and fulfilled its function as adviser and supervisor to the Board of Management on major decisions. In addition to strategic issues, the key areas of focus in the year under review were the changes in the Board of Management and the reorganisation of the Board of Management’s responsibilities and the company’s ongoing business performance, particularly in view of the prevailing economic environment. Critical aspects in this respect were the cost-cutting programmes and securing the necessary levels of liquidity.
The Board of Management ensured that it provided the Supervisory Board with comprehensive, regular and timely information at all times. The Board of Management informed the Supervisory Board, both orally and in writing, about the company’s business performance, risk position and risk management, all relevant aspects of strategic planning and any transactions requiring the consent of the Supervisory Board. Outside the meetings, the Board of Management regularly informed the members of the Supervisory Board in writing about important events. Furthermore, the chairman of the Board of Management remained in constant contact with the Supervisory Board chairman and kept him comprehensively informed in a timely manner about all major transactions and decisions that needed to be made. The Supervisory Board adopted all resolutions required by law and by the Company’s Statutes based on the reports and draft resolutions submitted by the Board of Management.
Nine Supervisory Board meetings
Seven scheduled and two extraordinary Supervisory Board meetings were held in 2009. No member of the Supervisory Board was absent for more than half of the meetings.
The economic environment as a subject of deliberations
The lengthy discussions and deliberations between the Board of Management and the Supervisory Board focussed on the current operating situation and risk position and, more particularly, the action to be taken as part of the MOVE restructuring project and in other areas in response to the sharp decline in unit sales and earnings caused by the global financial and economic crisis.
A large part of the deliberations was also taken up by the various options regarding the exhaust aftertreatment business and the joint-venture contract signed with Bosch and Eberspächer in December 2009.
In addition to which, extensive discussions took place about the current status of the DEUTZ (Dalian) Engine Co., Ltd. joint venture in China and further strategic options in the Asian business.
The Supervisory Board also examined the company’s strategic planning, financing and capital expenditure, etc.
Personnel
The Supervisory Board decided on the following personnel-related issues after the details had been prepared by the Human Resources Committee: Mr Huebser’s and Mr Meyer’s contracts were terminated with effect from 31 March 2009. Dr Margarete Haase was appointed to the Board of Management and as Human Resources Director with effect from 1 April 2009.
The Supervisory Board would like to thank Mr Huebser and Mr Meyer for their valuable contributions.
Reorganisation of Board of Management responsibilities
At its meeting on 24 July 2009, the Supervisory Board held detailed discussions about the reorganisation of the Board of Management’s responsibilities, which it approved. The existing matrix organisation was replaced with a linear organisation. Dr Leube, Chairman of the Board of Management, assumed responsibility for the Asia region and the DEUTZ (Dalian) Engine Co., Ltd joint venture, in addition to Sales and Service, Corporate Management and Internal Audit. Dr Haase is responsible for Finance, Human Resources and Investor Relations, while Mr Biondi heads up Procurement, Logistics, Production and R&D.
Corporate governance: Declaration of compliance with few exceptions; change in rules of procedure
The Supervisory Board gave thorough consideration to the German Corporate Governance Code as amended on 6 June 2008 and 18 June 2009 and, together with the Board of Management, issued a declaration of compliance pursuant to section 161 of the German Stock Corporation Act (AktG). Since December 2009 the declaration of compliance for the year under review has been available in the ‘Investors/Corporate Governance’ section of the Company’s website at www.deutz.com, where it can be downloaded. In 2009, the members of the Supervisory Board also discussed the efficiency of their own activities. The overall findings were positive.
In addition, the Supervisory Board changed the rules of procedure for the Supervisory Board, the Audit Committee of the Supervisory Board and the Board of Management; the changes mainly relate to the implementation of amendments to the Accounting Law Reform Act (BilMoG) and the Act on the Appropriateness of Management Board Remuneration (VorstAG) and to new recommendations in the German Corporate Governance Code.
- Lars-Göran Moberg,
Chairman
Efficient committee work
The Supervisory Board has created four committees to enable it to perform its duties effectively. These committees specialise in preparing various topics and resolutions for the full Supervisory Board. The composition of the Supervisory Board and its committees, as well as the further mandates held by its members, are shown separately on Supervisory Board to Supervisory Board Commitees.
The Human Resources Committee makes preparations to enable the Supervisory Board to decide about the appointment of members of the Board of Management, the content, conclusion and amendment of service contracts signed with members of the Board of Management appointed by the Supervisory Board, including remuneration as specified in their service contracts, and all issues between members of the Board of Management and the Company arising in this connection. The committee met twelve times in the year under review and its meetings focussed primarily on the changes to the Board of Management listed above (under the heading Personnel), the reorganisation of Board of Management responsibilities, Board of Management remuneration issues and long-term incentive plans.
The work of the Audit Committee in the year under review focussed on the single-entity and consolidated financial statements for 2008 and the corresponding auditors’ reports, the condensed consolidated financial statements for the six months to 30 June 2009 and their review by the auditors, the interim reports for the periods ended 31 March and 30 September 2009, the discussion of the audit engagement for the year ended 31 December 2009, and risk management. The Audit Committee met on four occasions in 2009. The auditors attended three meetings of this committee.
The Arbitration Committee set up pursuant to section 27 (3) of the German Codetermination Act (MitbestG) is responsible for the activities described in section 31 (3) of the Act. It did not need to be convened during the year under review.
The Nominations Committee is tasked with proposing to the Supervisory Board suitable candidates as shareholders representatives on the Supervisory Board. The Nominations Committee met on one occasion in 2009. At this meeting on 10 July 2009, the committee discussed a successor for Dr Vita who resigned from the Supervisory Board with effect from 31 July 2009.
The entire Supervisory Board was informed of the outcome of all discussions in the committees.
Single-entity and consolidated financial statements audited in detail
The single-entity annual financial statements of DEUTZ AG prepared by the Board of Management in accordance with the German Commercial Code (HGB), the consolidated annual financial statements prepared in accordance with International Financial Reporting Standards (IFRS) and the respective management reports (in each case for the year ended 31 December 2009) were audited by Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft, Düsseldorf, Germany, the auditors appointed by the Annual General Meeting on 30 April 2009. The auditors issued unqualified opinions. They also audited the report on relationships with subsidiaries (dependency report) prepared by the Board of Management pursuant to section 312 of the German Stock Corporation Act (AktG).
The single-entity annual financial statements of DEUTZ AG, the consolidated annual financial statements, the respective management reports, the dependency report, the proposed appropriation of profits, and the auditors’ reports were made available to all Supervisory Board members and were examined by the Supervisory Board. The auditors explained their audit findings in detail to the Audit Committee meetings held on 2 March 2010 and on 10 March 2010 and to the Supervisory Board meetings held on 11 March 2010 and on 12 March 2010 and answered any supplementary questions raised.
The Supervisory Board noted with approval the findings of the auditors’ reports on DEUTZ AG and the DEUTZ Group. The conclusive findings of the Supervisory Board’s own audit have not led to any reservations about either the single-entity annual financial statements or the consolidated annual financial statements, and the Supervisory Board has therefore approved them. The annual financial statements have thus been adopted.
No reservations about the dependency report
The auditors endorsed the dependency report submitted by the Board of Management pursuant to section 312 of the German Stock Corporation Act (AktG) for the 2009 financial year and issued the following opinion:
“Having conducted our audit and assessment in accordance with the terms of our engagement, we hereby confirm that
- the actual disclosures in the report are accurate
- in the legal transactions mentioned in the report, payments made by the Company were not unreasonably high,
- in the activities listed in the report, there is no reason that would give rise to a materially different assessment from that of the Board of Management.”
Having conducted its own audit of the dependency report, the Supervisory Board has no reservations. Furthermore, it agrees with the findings of the audit of the dependency report conducted by the auditors. The conclusive findings of the Supervisory Board’s audit have not led to any reservations about the statements made by the Board of Management at the end of the dependency report.
Composition of the Supervisory Board
The following changes to the Supervisory Board and its committees took place in the year under review:
At an extraordinary meeting on 18 May 2009, Dr Vita resigned as chairman of the Supervisory Board with immediate effect, and stepped down from the Supervisory Board with effect from 31 July 2009. At the same meeting, the Supervisory Board elected Mr Lars-Göran Moberg to succeed Dr Vita as its chairman. At the request of the Board of Management, and as recommended by the Nominations Committee, the local court in Cologne appointed Dr Michael Lichtenauer to succeed Dr Vita as a member of the Supervisory Board with effect from 10 August 2009 until the 2010 Annual General Meeting.
In view of his planned retirement, Mr Helmut Müller resigned his post as representative of the Senior Staff Committee with effect from the end of the Annual General Meeting on 30 April 2009. Mr Müller was replaced by Dr Herbert Vossel, Head of Legal and Patents at DEUTZ AG, who had been elected as a substitute for Mr Müller on 9 April 2008 when the employee representatives on the Supervisory Board were elected.
The Supervisory Board would like to thank Dr Vita and Mr Müller for their outstanding work and valuable contribution.
After his election as chairman of the Supervisory Board, Mr Moberg replaced Dr Vita as chairman of the Human Resources Committee, chairman of the Arbitration Committee, chairman of the Nominations Committee and member of the audit committee.
Conflicts of interest and consultancy agreements
The Supervisory Board members Massimo Bordi and Dr Francesco Carozza are subject to a conflict of interest because of their functions in companies in the SAME DEUTZ-FAHR Group, which are also major customers of DEUTZ AG. The chairman of the Supervisory Board reviews each individual case to establish whether this conflict of interest restricts the opportunity for the involvement of Massimo Bordi and/or Francesco Carozza in the work of the Supervisory Board. The consultancy agreement between Mr Moberg and DEUTZ AG, under which Mr Moberg advised the company about customer-specific issues, was terminated by mutual agreement with effect from 15 June 2009 because of Mr Moberg’s appointment as chairman of the Supervisory Board.
The Supervisory Board would like to express its thanks and appreciation to all employees in Germany and abroad, to the elected employee representatives and to the Board of Management for their valuable efforts and the considerable dedication they have shown in 2009.
Cologne, March 2010
The Supervisory Board
Lars-Göran Moberg
Chairman
