Annual Report 2017

Overall requirements profiles for the composition of the Board of Management and the Supervisory Board

In terms of the composition of the Board of Management and the Supervisory Board, Daimler AG utilizes diversity concepts that focus on aspects such as age, gender, education and professional background. For this reason, the Company was required to describe these concepts in its declaration on corporate governance for the first time for financial year 2017, and to also explain the aims of the diversity concepts, the manner in which they are implemented and the results achieved with them in the financial year. The Supervisory Board has combined the diversity concepts with the requirements of the German law regulating equal participation of women and men in executive positions and the specific targets for the composition of executive management bodies as defined by the recommendations of the German Corporate Governance Code. These combined requirements are presented in the overall requirements profiles for the composition of the Board of Management and the Supervisory Board described below. The requirements profiles also serve as the basis for long-term succession planning.

Board of Management

The requirements profile for the Board of Management of Daimler AG aims at a Board of Management as diverse, mutually supportive and effective as possible. The Board of Management as a whole should possess the knowledge, skills and experience required for the proper execution of its tasks and be composed of members whose varied personal backgrounds and experiences embody the desired management philosophy. Decisions regarding appointments to the Board of Management are always governed by the Company’s interests under consideration of all circumstances in each individual case.

The requirements profile for the Board of Management includes in particular the following aspects, which are to be taken into account as far as possible when making decisions on appointments to the Board of Management:

  • The members of the Board of Management should have different educational and professional backgrounds, whereby at least two members should have a technical background. With Dr. Dieter Zetsche and Wilfried Porth, the Board of Management currently has two members who are engineers. Bodo Uebber is an industrial engineer. Since taking over as Head of Group Research & Mercedes-Benz Cars Development on January 1, 2017, Ola Källenius has sustainably displayed the expertise he acquired in various technical management positions throughout the Company.
  • In order to meet the requirements of the German law requiring equal participation of women and men in executive positions, the Supervisory Board defined on December 8, 2016, a target of 12.5 % for the proportion of women on the Board of Management, with a deadline of December 31, 2020. This means that of the eight current members of the Board of Management, at least one member must be a woman. The Board of Management currently has two female members, Renata Jungo Brüngger and Britta Seeger. This means the proportion of women on the Board of Management is currently 25 %.
  • In accordance with the recommendations of the German Corporate Governance Code, the Supervisory Board has set an age limit for members of the Board of Management. As a rule, 62 years of age serves as orientation for age-related discharge. When it set this age limit, the Supervisory Board deliberately decided in favor of a flexible rule allowing the required scope for the appropriate assessment of the circumstances of each individual case. Seven of the eight Board of Management members are younger than the age limit. Dr. Dieter Zetsche was older than the age limit when he began his current term of office in January 2017. The Supervisory Board nevertheless reappointed Dr. Zetsche as Chairman of the Board of Management in recognition of his being primarily responsible for the Company’s successful strategy and its implementation. This decision was taken in the best interest of the Company in that it enables the continuation of leadership at the top executive level that is needed to ensure the sustained success of the Company.
  • In addition, a sufficient generational mix among Board of Management members is to be taken into account in appointment decisions in the future, whereby if possible at least three members of the Board of Management should be 57 years of age or younger at the beginning of their respective term of office. Five members of the Board of Management — Renata Jungo Brüngger, Ola Källenius, Britta Seeger, Hubertus Troska and Bodo Uebber — currently meet this requirement.
  • The composition of the Board of Management should also take into account internationality in the sense of varied cultural backgrounds or international experience through assignments abroad lasting several years, whereby if possible at least one member of the Board of Management should come from a country other than Germany. Irrespective of the many years of international experience of a large majority of members of the Board of Management, this target is currently overachieved due to the international origins of Renata Jungo Brüngger and Ola Källenius.
  • The rules of procedure of the Board of Management stipulate that no member of the Board of Management is a member of more than three supervisory boards of listed companies outside the Daimler Group or of similar boards or committees at companies outside the Daimler Group that have comparable requirements. This stipulation has been met. The only listed company in which Hubertus Troska is a member of a supervisory board or similar board outside the Daimler Group is BAIC Motor Corporation Ltd. His other board memberships are at joint ventures that fall within his areas of responsibility.

The aspects described above are to be taken into consideration when making Board of Management appointments. On the basis of a target profile that takes into account specific qualification requirements and the above-mentioned criteria, the Presidential Committee creates a shortlist of available candidates whom it interviews. It then recommends a candidate to the Supervisory Board for its approval and includes an explanation of its recommendation. Decisions regarding appointments to the Board of Management are always governed by the Company’s interests under consideration of all circumstances in each individual case.

Supervisory Board

In accordance with applicable law, the Supervisory Board is to be composed so that its members together are familiar with the business sector in which the Company operates.

The requirements profile for the Supervisory Board of Daimler AG aims at a Supervisory Board as diverse and mutually supportive as possible. The Supervisory Board as a whole must understand the Company’s business model and also possess the knowledge, skills and experience needed to properly execute its task of supervising and advising the Board of Management, in particular specialized knowledge in the areas of finance, accounting, annual audits, risk management, methods of internal control and compliance. The members of the Supervisory Board should complement one another with regard to their specialist knowledge and professional experience in such a manner as to ensure that the Supervisory Board can utilize the most broadly based wealth of experience and specific expertise possible when making decisions. The Supervisory Board also views the diversity of its members in terms of age, gender, internationality and other personal attributes as an important foundation for effective cooperation. The foundation for Supervisory Board decisions regarding election proposals to the Shareholders’ Meeting is always the Company’s interests under consideration of all circumstances in each individual case.

On the basis of the further development of the existing catalog of criteria for selecting Supervisory Board candidates, and with consideration of the targets that have already been defined for the Supervisory Board’s composition, the requirements profile for the Supervisory Board includes the following aspects in particular:

  • The members of the Supervisory Board should have different educational and professional backgrounds. At least five members should have completed a vocational technical training or education program or possess specific technological knowledge in fields such as information technology (including digitization), chemistry, mechanical engineering or electrical engineering. Decisions related to the composition of the Supervisory Board should also take into account the fact that it may be necessary to obtain new skills and knowledge in order to be able to address product and market developments. Irrespective of the specific knowledge acquired by many members of the Supervisory Board in the above-mentioned areas, Dr. Jürgen Hambrecht, Dr. Bernd Pischets­rieder and Dr. Frank Weber (two shareholder representatives and one employee representative) have related university degrees, while another five employee representatives have completed vocational training in the above-mentioned fields or similar areas.
  • The gender composition of the Supervisory Board meets the requirements of Germany’s law on the equal participation of women and men in executive positions, which stipulates that at least 30 % of the members of the Supervisory Board must be women and at least 30 % must be men. This quota has been binding for all new appointments since January 1, 2016. The Supervisory Board currently has three women who represent shareholders and two women who represent employees. The proportion of women is thus 30 % among the shareholder representatives and 20 % among the employee representatives. The next election of employee representatives to the Supervisory Board will take place in 2018.
  • The rules of procedure of the Supervisory Board stipulate that candidates for election who are to hold the position for a full term of office should generally not be over the age of 72 at the time of the election. In specifying this age limit, the Supervisory Board has intentionally refrained from stipulating a strict upper age limit and instead decided in favor of a flexible general limit that leaves the scope to appropriately assess each individual case, keeps the range of potential Supervisory Board candidates sufficiently broad and allows reelection. In deciding to propose Dr. Manfred Bischoff for reelection as a shareholder representative on the Supervisory Board to the Shareholders’ Meeting in 2016, it used this scope after careful consideration and proper assessment. All other members of the Supervisory Board and the candidates Sari Baldauf, Dr. Jürgen Hambrecht and Marie Wieck to be proposed for election at the 2018 Shareholders’ Meeting had not or will have not reached the age limit at the time of their election.
  • A sufficient generational mix among Supervisory Board members is now also to be taken into account in appointment decisions. In the future, at least eight members of the Supervisory Board should be 62 years of age or younger at the time of their election or reelection. Among the current members of the Supervisory Board, all except Petrae Heynicke, Dr. Manfred Bischoff, Dr. Clemens Börsig, Dr. Jürgen Hambrecht and Dr. Bernd Pischetsrieder (i.e. 15 members) were 62 or younger at the time they were elected to their current term.
  • In order to ensure sufficient internationality, for example by means of many years of international experience, the Supervisory Board has set a target of a proportion of at least 30 % of international members representing the shareholders, and the resulting proportion of at least 15 % of the entire Supervisory Board. Irrespective of the many years of international experience of a large majority of the shareholder representatives on the Supervisory Board, this target is currently significantly overachieved with 30 % for the entire Supervisory Board due to the international origins of Bader Al Saad, Sari Baldauf, Petraea Heynike, Andrea Jung and Dr. Paul Achleitner on the shareholders’ side (50 %) and Valter Sanches on the employees’ side.
  • At least half of the members of the Supervisory Board representing the shareholders should have, neither an advisory nor a board function for a customer, supplier, creditor, or other third party, nor a business or personal relationship to the company or its boards ​whose specific design could cause a conflict of interests.

Under the premise that the performance of Supervisory Board duties as an employee representative does not by itself constitute a potential conflict of interest as defined by the German Corporate Governance Code, the requirements described here shall also be met by at least 15 members of the Supervisory Board in the future.

As described in the Report of the Supervisory Board, there were individual cases concerning three Supervisory Board members in particular situations during the reporting period where there might have been the appearance of a potential conflict of interest at the time a Board of Management report was submitted to the Supervisory Board. The Supervisory Board members in question in these cases refrained from being present during the presentation of a Board of Management report regarding the issue that might have been affected by a potential conflict of interest.

As a result, in the case of at least half of the shareholder representatives on the Supervisory Board and at least 15 members of the entire Supervisory Board, there were no indications of a potential conflict of interest during the reporting period based on the premise described above. No actual instances of conflicts of interest were reported during financial year 2017.

  • In order to ensure the independent advice to, and supervision of, the Board of Management by the Supervisory Board, the rules of procedure of the Supervisory Board stipulate that more than half of the members of the Supervisory Board representing the shareholders are to be independent as defined by the German Corporate Governance Code and that no person may be a member of the Supervisory Board who is a member of a board of, or advises, a significant competitor of the Daimler Group.

Under the premise that the performance of Supervisory Board duties as an employee representative does not by itself call into question the independence of such an employee representative as defined by the German Corporate Governance Code, at least 15 members of the Supervisory Board are also to be independent in the future. In addition, the Supervisory Board may not include more than two former members of the Board of Management of Daimler AG or anyone who is a member of a board of, or advises, a significant competitor of the Daimler Group.

Under the premise described above, there are, in the view of the Supervisory Board, at present no indications for any of the members of the Supervisory Board that relevant relationships or circumstances exist, in particular with the Company, members of the Board of Management or other Supervisory Board members, that could be construed as a substantial and permanent conflict of interest that would compromise their independence. No member of the Supervisory Board is a member of a board of, or advises, a significant competitor. With regard to Supervisory Board member Bader Al Saad, the Supervisory Board takes the view that his function as a member of the Executive Committee of the Board of Directors of Kuwait Investment Authority does not compromise his independence within the meaning of the German Corporate Governance Code. The German Corporate Governance Code does not contain a conclusive definition of independence but instead presents examples of circumstances that would call the independence of a Supervisory Board member into question. Within the meaning of the German Corporate Governance Code, a Supervisory Board member is to be considered non-independent if he or she has a personal or business relationship with the Company, its governing bodies, a controlling shareholder or a company affiliated with a controlling shareholder that may cause a substantial and not merely temporary conflict of interest. It is the responsibility of the Supervisory Board to evaluate the independence of its members on the basis of such criteria. The Kuwait Investment Authority is not a controlling shareholder of Daimler AG that could attain an effective majority at an Shareholders’ Meeting. No other discernible circumstances exist that might call into question the independence of Bader Al Saad.

The Chairman of the Supervisory Board, Dr. Manfred Bischoff, is a former member of the Board of Management.

  • The rules of procedure of the Supervisory Board also define a general time limit for Supervisory Board membership. As a result, only candidates who have not yet been members of the Supervisory Board for three full terms of office at the time of their election should generally be nominated for membership of the Supervisory Board for a full term of office. This general length of service on the Supervisory Board has not been exceeded by any current member, and the candidates Sari Baldauf, Dr. Jürgen Hambrecht and Marie Wieck nominated for election at the Shareholders’ Meeting in 2018 also meet this requirement.
  • Candidates for membership of the Supervisory Board and members of the Supervisory Board must have sufficient time available to perform their duties. They must also be willing and able to dedicate themselves to their tasks and participate in all courses of training and further training that might be necessary for the performance of their tasks. Prior to issuing its recommendations, the Supervisory Board determines whether the candidate in question will have sufficient time available to perform his or her duties on the Supervisory Board.
  • In order to ensure compliance with the associated recommendation in the German Corporate Governance Code, the rules of procedure already stipulate that no member of the Supervisory Board who is also a member of the board of management of a listed company may hold more than three memberships on supervisory boards of listed companies (including his or her membership of the Supervisory Board of Daimler AG) or on bodies of other companies with similar requirements outside of the group of his Board of Management membership. One member of the Supervisory Board is a member of the board of management of a listed company, but has not exceeded the maximum number of memberships.

In the case of Supervisory Board members who are not also members of the board of management of a listed company, the legal limit of membership of ten statutorily constituted supervisory boards applies, whereby chairmanship of a supervisory board counts double. In order to ensure that members of the Supervisory Board have sufficient time to fulfill their mandate, Supervisory Board members who are not also members of the board of management of a listed company shall in the future generally be permitted membership of a maximum of eight supervisory boards (including that of Daimler AG), whereby chairmanship of a supervisory board counts double. This maximum number was not exceeded by any member of the Supervisory Board during the reporting year.

Proposals by the Supervisory Board of candidates for election by the Shareholders’ Meeting as Supervisory Board members representing the shareholders of Daimler AG, for which the Nomination Committee makes recommendations, shall in the future take into consideration not only the requirements of applicable law, the Articles of Incorporation and the German Corporate Governance Code, but also the aspects described above and aim at fulfilling the overall requirements profile for the Supervisory Board as a whole. On the basis of a target profile that takes into account specific qualification requirements and the above-mentioned criteria, the Nomination Committee creates a shortlist of available candidates with whom it conducts structured discussions in which it also determines whether the candidate in question will have sufficient time available to perform his or her duties on the Supervisory Board with due care. The Nomination Committee then recommends a candidate to the Supervisory Board for its approval and includes an explanation of its recommendation. The foundation for Supervisory Board decisions regarding election proposals to the Shareholders’ Meeting is always the Company’s interests under consideration of all circumstances in each individual case.

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Shareholders and the Annual Shareholders Meeting
Law on the equal participation of women and men in executive positions