Corporate Governance Declaration

In this corporate governance declaration, we report, in accordance with No. 3.10 of the German Corporate Governance Code (DCGK) and Section 289a of the German Commercial Code (HGB) on the principles of management and corporate governance. The declaration contains the declaration of conformity, information on corporate governance practices, a description of how the Management Board and Supervisory Board work and key corporate governance structures. The declaration is also available to the public on our website at www.vonovia.de.

Fundamental Information

Corporate governance is the responsible management and supervision of a company. The Management Board and the Supervisory Board are committed to the principles of corporate governance. The principles are the basis for the sustainable success of the company and therefore guidelines for conduct in the company’s daily management and business.

Good corporate governance strengthens the trust of our shareholders, business associates, customers, employees and the general public in Vonovia SE. It increases the company’s transparency and strengthens our Group’s credibility. With balanced corporate governance, the Management Board and the Supervisory Board wish to safeguard Vonovia SE’s competitiveness, strengthen the trust of the capital market and the general public in the company and sustainably increase the company’s value.

As a major housing company, we are aware of the particular significance of our entrepreneurial actions for society at large. As a result, we are also committed to the main aims and principles of the corporate governance initiative of the German housing industry, which we have been a member of since November 14, 2003. The initiative supplements the corporate governance principles to include housing-specific aspects and is committed to even greater transparency, an improved image and a more competitive real estate sector.

Declaration of conformity with the German Corporate Governance Code by the Management Board and Supervisory Board in accordance with Section 161 of the German Stock Corporation Act (AktG):

In February 2017, the Management Board and the Supervisory Board declared compliance with the recommendations of the German Corporate Governance Code in accordance with Section 161 of the German Stock Corporation Act (AktG) and made the declaration publicly and permanently available on the company’s website (www.vonovia.de).

Standards of corporate governance

Corporate governance, acting in accordance with the principles of responsible management aimed at increasing the value of the business on a sustainable basis, is an essential requirement for the Vonovia Group, embracing all areas of the business. Our corporate culture is founded on transparent reporting and corporate communications, on corporate governance aimed at the interests of all stakeholders, fair and open dealings between the Management Board, the Supervisory Board and employees as well as on compliance with the law.

The Code of Conduct provides the ethical and legal framework within which we act and want to maintain a successful course for the company. The focus is on dealing fairly with each other but also in particular on dealing fairly with our tenants, suppliers, customers and investors. The Code of Conduct specifies how we assume our ethical and legal responsibility as a company and is the expression of our company values.

Information on the company’s governing constitution

The designation Vonovia comprises Vonovia SE and its Group companies. Vonovia is a European company (SE) in accordance with the German Stock Corporation Act (AktG), the SE Act and the SE Regulation. Its head office is in Düsseldorf. It has three governing bodies: the Annual General Meeting of Shareholders, the Supervisory Board and the Management Board. The duties and authorities of those bodies derive from the SE Regulation (SE-VO), the German Stock Corporation Act and the Articles of Association. Shareholders, as the owners of the company, exercise their rights at the Annual General Meeting.

According to the two-tier governance system, Vonovia SE has a Management Board and a Supervisory Board. In the two-tier governance system, the management of business and the monitoring of business are strictly separated from each other. The duties and responsibilities of these two bodies are clearly specified by law in the German Stock Corporation Act.

In accordance with the governing laws, in particular the SE Regulation and the German SE Employee Participation Act (SEBG), the Supervisory Board is only made up of representatives of the shareholders. The highest representative body of the employees is the Group works council. In addition, an SE works council has been formed.

The Management Board and Supervisory Board of a company listed in Germany are obliged by law (Section 161 of the German Stock Corporation Act) to report once a year whether the officially published and relevant recommendations issued by Government Commission German Corporate Governance Code, as valid at the date of the declaration, have been, and are being, complied with. Companies affected are also required to state which of the recommendations of the Code have not been, or will not be, applied and if not, why.

The Management Board reports in its declaration, also on behalf of the Supervisory Board, on important aspects of corporate governance pursuant to Section 289a of the German Commercial Code (HGB) and No. 3.10 of the German Corporate Governance Code (DCGK).

Annual General Meeting

The Annual General Meeting decides in particular on the appropriation of profit, the ratification of the acts of the members of the Management Board and of the Supervisory Board, the appointment of the external auditor, amendments to the Articles of Association as well as specific capital measures and elects the shareholders’ representatives to the Supervisory Board.

The Supervisory Board

The Supervisory Board appoints, supervises and advises the Management Board and is directly involved in decisions of fundamental importance to the company. The Supervisory Board performs its work in accordance with the legal provisions, the Articles of Association, its rules of procedure and its resolutions. It consists of nine members, who are each elected for terms of four financial years. The Supervisory Board continuously oversees the management and advises the Management Board.

The Supervisory Board shall include what it considers an adequate number of independent members. A Supervisory Board member is, in particular, not to be considered independent if he/she has personal or business relations with the company, its bodies, a controlling shareholder or a company associated with such a shareholder which may cause a substantial and not merely temporary conflict of interest.

The aforementioned rules are to be taken into account when making proposals to the shareholders at the Annual General Meeting for the elections of Supervisory Board members. Account is also to be taken of diversity. Proposed candidates for the Supervisory Board chair shall be announced to the shareholders.

The Supervisory Board examines and adopts the annual financial statements and the management report. It assesses and confirms the proposal for the appropriation of profit, as well as the consolidated financial statements and the combined management report, on the basis of the report prepared by the Audit Committee. The Supervisory Board reports in writing to the shareholders at the Annual General Meeting on the result of its examination.

The chairman of the Supervisory Board is an independent member. The same applies to the chairs of the committees which the Supervisory Board has set up (see p. 38 et seq.).

The chairman of the Supervisory Board chairs the meetings and coordinates communications. The members of the Supervisory Board have generally the same rights and obligations. Supervisory Board resolutions are above all passed in the Supervisory Board meetings but also, if necessary, using the written procedure or by other communication means. At least three meetings are held every half-year. In addition, if necessary and on the basis of the rules of procedure of the Supervisory Board, a meeting of the Supervisory Board or its committees can be convened at any time at the request of a member or the Management Board. In the 2014 financial year, the Supervisory Board had sixteen meetings, including telephone conferences.

The Supervisory Board must be composed in such a way that its members as a group have the knowledge, ability and specialist experience required to properly complete its tasks. Each Supervisory Board member shall ensure that he/she has enough time to carry out his/her mandate. As a rule, nominations for election to the Supervisory Board should only be for persons who have not yet reached the age of 75 at the time of the election.

At least one independent member of the Supervisory Board must have expertise in the fields of accounting or auditing (Section 100 (5) of the German Stock Corporation Act).

A Supervisory Board member, who is also a member of the Management Board of a listed company, shall, in addition to the Supervisory Board mandate in the company, not accept more than two other supervisory board mandates in listed companies or in supervisory bodies of companies which make similar requirements and which do not belong to the Group of the company for which he/she is on the Management Board. Supervisory Board members shall not exercise directorships or similar positions or advisory tasks for important competitors of the company.

Supervisory Board committees

The Supervisory Board sets up an Executive and Nomination Committee, an Audit Committee and a Finance Committee from among its members. Further committees are set up as required. Committees are made up of at least four members of the Supervisory Board. The committees prepare subjects which are to be discussed and/or resolved by the Supervisory Board. In addition, they pass resolutions on behalf of the Supervisory Board. The basis for committee work was the transfer of tasks and responsibilities within the scope of the legal provisions.

The Executive and Nomination Committee is made up of the chairman of the Supervisory Board and three other members to be elected by the Supervisory Board. The chairman of the Supervisory Board is the chairman of the Executive and Nomination Committee. The tasks of this committee are in particular to prepare the appointment of Management Board members, to advise on the remuneration system, to assign responsibilities and to decide in cases of legal transactions with Management Board members and conflicts of interest.

The Supervisory Board appoints one of the members of the Audit Committee as the chairman of the Audit Committee. When electing the committee members, the Supervisory Board shall ensure that the chairman of the Audit Committee has specialist knowledge and experience in the application of accounting principles and internal control processes. The Committee chairman should be independent and not be a former member of the Management Board whose appointment ended less than two years before his appointment as chairman of the Audit Committee. The chairman of the Supervisory Board shall not be the chairman of the Audit Committee.

The Audit Committee handles, in particular, the monitoring of the accounting process, the effectiveness of the internal control system, risk management system and internal audit system, the audit of the annual financial statements, here in particular the independence of the auditor, the services rendered additionally by the auditor, the issuing of the audit mandate to the auditor, the determination of strategic audit objectives and the fee agreement, and – unless another committee is entrusted therewith – compliance. The Audit Committee prepares the resolutions of the Supervisory Board on the annual financial statements (and, if applicable, the consolidated financial statements), and the agreements with the auditor (in particular the issuing of the audit mandate to the auditor, the determination of strategic audit objectives and the fee agreement). The Audit Committee takes suitable action to determine and monitor the independence of the auditor. In place of the Supervisory Board, the Audit Committee adopts resolutions on the approval of the contracts with the auditor on additional consultancy services, insofar as, according to the Articles of Association or the rules of procedure for the Management Board, these contracts require approval.

The Finance Committee prepares the resolutions of the Supervisory Board on the following matters:

  1. Financing and investment principles, including the capital structure of the Group companies and dividend payments
  2. Principles of the acquisition and disposal policies, including the acquisition and disposal of individual shareholdings of strategic importance

In place of the Supervisory Board, the Finance Committee adopts resolutions in particular on general guidelines and principles for the implementation of this strategy, including the handling of currency risks, interest, liquidity and other financial risks and the handling of credit risks and the implementation of external financing principles as well as on important transactions regarding the sale of real estate, the granting of securities, the acquisition and establishment of subsidiaries as well as on the contracting of loans.

Cooperation between the Management Board and the Supervisory Board

The Management Board develops the strategy of the company in cooperation with the Supervisory Board and discusses the current status of its implementation with the Supervisory Board at regular intervals. Furthermore, the Management Board regularly informs the Supervisory Board in written or verbal reports of topics including the development of business and the situation of the company. In this way, the Supervisory Board receives detailed documents from the Management Board without delay and regularly on the economic development and the company’s current situation as well as half-yearly a risk management report which deals with the most important risks for the business of Vonovia SE. On the basis of these reports, the Supervisory Board monitors the company’s management by the Management Board.

Avoidance of conflicts of interest

In the financial year, there were no conflicts of interest of Management Board or Supervisory Board members which are to be reported immediately to the Supervisory Board.

Management Board

The Management Board members are jointly accountable for independently managing the company in the company’s best interests while complying with the applicable laws and regulations, the Articles of Association and the rules of procedure. In doing so, they must take account of the interests of the shareholders, the employees and other stakeholders.

The Management Board, which must be made up of at least two members, is appointed by the Supervisory Board, whereby the term of office must not exceed six years. The Management Board is monitored and advised by the Supervisory Board. It has adopted rules of procedure and resolved the allocation of duties in consultation with the Supervisory Board. The Management Board has a chairman who coordinates the work of the Management Board and represents it in dealings with the Supervisory Board. The chairman of the Management Board has the right to veto Management Board resolutions.

The members of the Management Board are Rolf Buch (chairman) as well as Klaus Freiberg and Dr Stefan A. Kirsten. Further information is to be found in the 2014 Annual Report on page 215 et seq.

The Management Board informs the Supervisory Board regularly, in due time and comprehensively in line with the principles of diligent and faithful accounting in accordance with the law and the reporting duties specified by the Supervisory Board.

The Management Board develops the company’s strategy, coordinates it with the Supervisory Board and implements it. The Management Board ensures that all statutory provisions and the company’s internal policies are complied with. The Management Board also ensures appropriate risk management and risk controlling in the company.

It submits the corporate planning for the coming year to the Supervisory Board as well as the mid-term and strategic planning. The Management Board informs the Supervisory Board chairman without delay of important events which are essential for the assessment of the situation and development or for the management of the company as well as of any shortcomings which occur in the monitoring systems.

The Management Board requires the approval of the Supervisory Board for certain important transactions. Transactions and measures which require Supervisory Board approval are submitted to the Supervisory Board in good time.

The Management Board members are obliged to disclose any conflicts of interest to the Supervisory Board without delay and to inform the other Management Board members accordingly.

The Management Board members are subject to a comprehensive non-competition obligation. Management Board members may only take up sideline activities, in particular supervisory board mandates outside the Group, with the approval of the Supervisory Board.

Important transactions between the company, on the one hand, and the Management Board members as well as persons they are close to or companies they have a personal association with, on the other hand, require the approval of the Supervisory Board. Reference is made to such relations in the remuneration report.

Transparency

Shareholders can obtain full and timely information about our company on our website and can access current as well as historical company data. Among other information, Vonovia regularly posts all financial reports, important information on the company’s governing bodies, its corporate governance documentation, information requiring ad-hoc disclosure, press releases as well as directors’ dealings notifiable pursuant to Section 15a of the German Securities Trading Act (WpHG). Our shareholders can exercise their voting rights at the meeting or instruct a proxy of their choice or one of the proxies provided for that purpose by the company. Our shareholders are also able to vote by postal ballot. The details are in the invitation to the Annual General Meeting. The entire documentation for the Annual General Meeting and opportunities to authorise, and issue instructions to, the company’s proxies, as well as opportunities for postal ballots, are available to shareholders at all times on the website.

Accounting and financial statement auditing

The Annual General Meeting elected KPMG AG Wirtschaftsprüfungsgesellschaft as auditor for the annual financial statements and consolidated financial statements. We prepare the annual financial statements of Vonovia SE in accordance with the German Commercial Code (HGB) and the consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) to be applied in the EU. In addition, we prepare a combined management report as required by the German Commercial Code and the German Stock Corporation Act (AktG). The Management Board is responsible for financial accounting. The Supervisory Board examines and adopts or approves the annual financial statements, the consolidated financial statements and the combined management report.

In addition to our annual financial statements, we also prepare quarterly reports for the first, second, and third quarters. Our quarterly reports comply with the German Securities Trading Act and are discussed with the Audit Committee of the Supervisory Board before they are published. Under German stock corporation and commercial law, there are special requirements for internal risk management that apply to Vonovia. Therefore, our risk management system covers risk inventory, analysis, handling and elimination. In accordance with Section 317 (4) of the German Commercial Code applicable to listed companies, KPMG assesses in its audit the risk early warning system as part of the risk management system.

Furthermore, we maintain throughout the Group standard documentation of all our internal control mechanisms and continually evaluate their effectiveness. Our auditor has not reported any material weaknesses in the accounting-related internal control system detected in its audit to the Management Board and the Supervisory Board.

In the combined management report, we provide comprehensive information on the main features of the internal control and risk management system with regard to the accounting process and the Group accounting process in accordance with our reporting duties pursuant to Sections 289, para. 5, and 315, para. 2, No. 5 of the German Commercial Code.