Report of the Supervisory Board
During the year under review the Supervisory Board carried out its supervisory functions in accordance with the legal requirements, the company’s Articles of Association and its bylaws. It extensively advised and supervised the Management Board in the management of the company as well as the management of its business operations. The Management Board informed the Supervisory Board regularly, without delay and comprehensively, especially about all issues regarding corporate planning, and the business, strategic and financial development of Deutsche Bahn AG (DB AG) and its subsidiary companies. All business issues of fundamental importance were discussed in plenary meetings and the relevant Supervisory Board committees based on reports prepared by the Management Board. Significant deviations in the actual business development were pointed out by the Management Board and examined by the Supervisory Board. The Chairman of the Supervisory Board remained in close contact with the Chairman of the Management Board and was kept regularly informed about Deutsche Bahn Group’s (DB Group) current business developments, pending business decisions and risk management. The Supervisory Board was involved in all decisions of fundamental importance for DB AG. No member of the Supervisory Board attended fewer than half of the meetings of the Supervisory Board.
MEETINGS OF THE SUPERVISORY BOARD
The Supervisory Board was newly constituted in March 2010 at the end of its previous term. During the year under review the Supervisory Board met for its constituent meeting as well as four regular meetings and one extraordinary meeting. In three cases, resolutions were adopted on the basis of written procedures. The meetings of the Supervisory Board were prepared by meetings of the Executive Committee, the Personnel Committee and the Audit and Compliance Committee.
The focal points of discussions in the plenary meetings were the development of DB Group’s revenues, results and employment situation, as well as significant capital expenditure, participation and divestment projects. Furthermore, the Supervisory Board also considered DB Group’s strategy as well as the strategies pursued by the individual divisions. In addition, the Supervisory Board dealt intensively with the technical deficiencies affecting the ICE fleet and the S-Bahn (metro) vehicles in Berlin, which had major operational and financial repercussions on the rail passenger transport business. Moreover, during the year under review the Supervisory Board repeatedly requested reports on the weather-related disturbances in rail transport operations that took place, as well as the measures taken to preclude them. In many of its meetings the Supervisory Board also dealt with the status of the major Stuttgart 21 Project. The main purpose of the extraordinary meeting of the Supervisory Board held in April 2010 was to deliberate the takeover offer for Arriva Plc (Arriva), Sunderland/Great Britain, for which the Supervisory Board gave its consent. The progress of the acquisition process as well as the integration of Arriva into DB Group were discussed during the subsequent meetings of the Supervisory Board. Due to the legal requirements imposed by anti-trust law, the Supervisory Board consented to the divestment of Arriva’s activities in Germany in December 2010.
In December 2010 the Supervisory Board took DB Group’s mid-term plan covering 2011 to 2015 under consideration, and consented to DB Group’s budget for the 2011 financial year and its capital expenditure plans.
There were no conflicts of interest reported involving members of the Management Board and Supervisory Board which had to be disclosed to the Supervisory Board.
MEETINGS OF THE SUPERVISORY BOARD COMMITTEES
The Supervisory Board has established four permanent committees to facilitate its work and increase its efficiency. The Executive Committee of the Supervisory Board met six times during the year under review and was in continual contact with the Management Board regarding all fundamental business policy issues. This was also the method used to prepare various key issues, in particular, for the Board’s meetings.
During the year under review the Audit and Compliance Committee held four meetings and one telephone conference, and primarily dealt with the quarterly financial statements, the six-month financial statements and the related review results, as well as the six-month review of major capital expenditure projects.
Additional focal points were the 2010 forecast and DB Group’s mid-term plan covering the period 2011 to 2015. The Audit and Compliance Committee kept itself informed about the operational difficulties experienced by the S-Bahn (metro) Berlin, the technical deficiencies in the ICE fleet, as well as the progress and development of costs associated with the major Stuttgart 21 project. Furthermore, the Audit and Compliance Committee also considered issues pertaining to accounting and risk management, the further development of corporate governance due to the passage of the Public Corporate Governance Code and the Accounting Law Modernization Act, and the resulting changes to the rules of procedure for the Audit and Compliance Committee. The Audit and Compliance Committee also kept itself informed about the business development of acquisitions, the issuing of the audit mandate to the auditor, as well as the results of the internal audit and compliance-related investigations.
The Chairman of the Audit and Compliance Committee maintained regular contact with the CFO and the auditor, and regularly and extensively reported to the plenary meeting regarding the Committee’s work.
During the year under review the Personnel Committee met three times to prepare personnel decisions for the Supervisory Board, and in particular prepared a peer group comparison as an addition to the Long-Term Incentive Plan for the Management Board. Moreover, on behalf of the Supervisory Board the Personnel Committee prepared the target agreements for the members of the Management Board for the 2011 financial year.
The Mediation Committee, which was established in accordance with Article 27, Para. 3 of the Codetermination Act (MitbestG), did not have to meet during the year under review.
During the year under review the Management Board and Supervisory Board again considered the further development of Corporate Governance. With the Cabinet resolution of July 1, 2009, the Federal Government adopted the German Public Corporate Governance Code. The German Public Corporate Governance Code contains the essential provisions of existing laws regarding the management and supervision of unlisted companies in which the Federal Republic of Germany holds a majority stake, as well as internationally and nationally recognized standards of good and responsible management. The Supervisory Board was intensively engaged in implementing the Public Corporate Governance Code within DB Group and took the necessary related decisions.
Furthermore, the passage of the Accounting Law Modernization Act (BilMoG) in May 2009 redefined the main emphasis of audit committee work as described in the German Stock Corporation Act (AktG). Therefore, the rules of procedure for the Supervisory Board’s Audit and Compliance Committee were clarified to the extent that, as part of its supervisory function, the Audit and Compliance Committee will also regularly inform itself about the effectiveness and appropriateness of the risk management and the internal control systems in accordance with the requirements stated in Article 107, Para. 3 (2) of the AktG. The DB AG Supervisory Board consented to the revision of the rules of procedure for the Audit and Compliance Committee.
ANNUAL FINANCIAL STATEMENTS
The annual financial statements and the management report of DB AG prepared by the Management Board as well as the consolidated financial statements and Group management report for the period ending December 31, 2010 were audited by the auditor elected by the Annual General Meeting, Pricewaterhouse-Coopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft (PwC), Berlin, and received the auditor’s unqualified certification. In addition, the auditor also audited the risk management system as part of the annual audit and did not raise any objections.
The auditor’s report was the subject of the Audit and Compliance Committee meeting held on March 28, 2011 and was also extensively discussed during the Supervisory Board’s financial statements meeting on March 30, 2011 that took place in the presence of the auditor who signed the auditor’s report. The auditor reported on the fundamental results of the audit and was available to answer questions. The Supervisory Board concurred with the results of the audit.
The Supervisory Board examined DB AG’s annual financial statements and management report, as well as the consolidated financial statements and the Group management report for the year under review, as well as the proposed allocation of profits, and did not express any reservations. The annual financial statements of DB AG for the 2010 financial year were approved, and are thus adopted.
The auditor also audited the report prepared by the Management Board concerning relations with affiliated companies. The auditor has issued an unqualified auditor’s certificate, and reported on the result of the audit.
The Supervisory Board examined this report, and did not express any reservations regarding the closing statement of the Management Board included in the report and the results of the audit by the auditor.
CHANGES IN DB AG’S SUPERVISORY BOARD AND THE MANAGEMENT BOARD
Professor Dr. Dr. Utz-Hellmuth Felcht was elected Chairman of the Supervisory Board on March 24, 2010. He succeeds Dr. Werner Müller whose mandate ended on this date due to the expiration of his term of office.
The term of office of the following members of the DB AG Supervisory Board ended on March 24, 2010: shareholder representatives Mr. Georg Brunnhuber and Mr. Niels-Lund Chrestensen; employee representatives Mr. Jörg Hartkorn and Ms. Heike Moll. New members elected to the Supervisory Board effective March 24, 2010 were: Mr. Patrick Döring and Professor Dr. Knut Löschke were elected as shareholder representatives. On March 11, 2010 Messrs. Mario Reiß and Wolfgang Joosten were newly elected to the Supervisory Board as employee representatives.
Dr. Walther Otremba, who resigned his mandate as member of the Supervisory Board effective March 8, 2010, was succeeded by State Secretary Dr. Hans Bernhard Beus, who was seconded to the Supervisory Board effective March 9, 2010.
Effective March 31, 2010 Mr. Diethelm Sack resigned his mandate as member of the DB AG Management Board, where he was the Chief Financial Officer. He was succeeded effective April 1, 2010 by Dr. Richard Lutz. Effective March 31, 2010 Mr. Stefan Garber also resigned his mandate as member of the DB AG Management Board, where he was the head of the Infrastructure division. He was succeeded on April 1, 2010 by Dr. Volker Kefer who will serve for the remainder of his existing term. Dr. Kefer had already served as the provisional head of the Infrastructure division since December 9, 2009. Dr. Kefer is also responsible for the Rail Technology and Services Division.
At this point, the Supervisory Board would also like to thank the former members of the Management Board and Supervisory Board for their committed and constructive support on behalf of the company.
The Supervisory Board thanks the Management Board, all employees as well as the DB AG employees’ representatives and its affiliated companies for their dedicated efforts during the year under review.
Berlin, March 2011
For the Supervisory Board
Professor Dr. Dr. Utz-Hellmuth Felcht
Chairman of the Supervisory Board
of Deutsche Bahn AG
Last modified: 27.06.2011