Deutsche Lufthansa AG is managed via the management and supervisory structures according to legal requirements for public limited liability corporations in Germany. The Executive Board is responsible for managing the company and defining its strategic direction. The Supervisory Board appoints, advises and monitors the Executive Board. The joint objective of the Executive Board and Supervisory Board is to increase the value of the Company on a sustainable basis. To this end, they work together closely and in a spirit of trust in the interests of the Company.
The Supervisory Board has adopted rules of procedure that set out binding rules for the work of the Executive Board and Supervisory Board and for the cooperation between the two bodies.
Members of the Executive Board and allocation of responsibilities
The allocation of responsibilities of the Executive Board of Deutsche Lufthansa AG remained unchanged in the financial year 2021. The Executive Board consists of six departments.
As Chief Executive Officer, the Executive Board is chaired by Carsten Spohr. The Chief Customer Officer is Christina Foerster. She is also responsible for IT, corporate responsibility and the Lufthansa Innovation Hub. The Chief Commercial Officer is Harry Hohmeister. Detlef Kayser is Chief Operations Officer. Michael Niggemann is Chief HR & Legal Officer. Remco Steenbergen is Chief Financial Officer.
The Executive Board responsibilities of the Chief Customer Officer, Chief Operations Officer and Chief Commercial Officer have functional responsibility for specific cross-airline processes in order to realize synergies and coordinate the activities of the Group airlines.
Together with the Executive Board and with the support of the Steering Committee, the Supervisory Board ensures long-term succession planning. To this end, the Supervisory Board and the Steering Committee maintain an ongoing dialog with the Executive Board on suitable internal candidates. At Supervisory Board and committee meetings and at regular information and training events, the members of the Supervisory Board have the opportunity to get to know selected executives both professionally and personally. In addition, the Steering Committee and Supervisory Board also evaluate external candidates where necessary. As part of the selection process, the Supervisory Board takes particular account of the criteria of the diversity concept adopted by the Supervisory Board for the composition of the Executive Board, in addition to the statutory minimum of one woman and one man. The decisive factor for filling a specific Executive Board position is always the interests of the company, taking into account all the circumstances of the individual case.
Work of the Executive Board
The members of the Executive Board are jointly responsible for the overall management of the Company and inform each other of all significant activities and transactions. The entire Executive Board decides on all matters of a fundamental or significant financial importance that are bindingly defined by law, the Articles of Association, or the Rules of Procedure. The Rules of Procedure contain a list of individual decisions requiring the approval of the Executive Board as a whole.
Decisions of the Executive Board are generally taken at meetings, which, in accordance with the provisions of the Rules of Procedure, are held at least once a month, but generally twice a month. The Executive Board passes resolutions by a simple majority of the votes cast.
The Executive Board has set up a standing committee to manage its tasks efficiently. This committee also includes persons who are not members of the Executive Board. It prepares major decisions of the Executive Board, examines them in the light of the specialist expertise represented on the committee, and decides on matters assigned to it or makes recommendations to the Executive Board. The committee generally meets twice a month in advance of Executive Board meetings.
The Executive Board reports regularly to the Supervisory Board, which is made up of an equal numbers of shareholder and employee representatives. At the Supervisory Board meetings, the Executive Board informs the Supervisory Board at least four times a year about the business development of the Group and its affiliated companies. The Chairman of the Executive Board informs the Chairman of the Supervisory Board and the Supervisory Board about important events also between the meetings. The Executive Board submits the Company's quarterly reports to the Supervisory Board.
Composition of the Supervisory Board
The Supervisory Board of Deutsche Lufthansa AG consists of 20 members and, in accordance with the German Codetermination Act, is composed of an equal number of shareholder and employee representatives. Pursuant to Section 96 (2) sentence 1 of the German Stock Corporation Act (AktG), the Supervisory Board must be composed of at least 30 percent women and at least 30 percent men. The overall fulfillment of this minimum proportion was objected to by both the employee representatives and the shareholder representatives for the 2021 Supervisory Board elections vis-à-vis the Supervisory Board Chairman, so that the minimum proportion must be fulfilled separately by the shareholder representatives and the employee representatives on the Supervisory Board. As a result, at least three seats on the Company's Supervisory Board must be held by women and at least three seats by men on both the shareholder and employee sides. In the 2021 financial year, the Supervisory Board comprised four women and six men each on the shareholder side and on the employee side, so that the minimum proportion requirement was consistently met on both sides.
In accordance with the framework agreement of June 29, 2020 concluded between Deutsche Lufthansa AG and the Economic Stabilization Fund (ESF), the Supervisory Board also includes two members proposed by the Chairman of the Supervisory Board after consultation with the Nomination Committee of the Supervisory Board and appointed by the ESF, one of whom is also to be a member of the Audit Committee. Accordingly, Michael Kerkloh and Angela Titzrath have been elected to the Supervisory Board by the Annual General Meeting on 4 May 2021 after previous appointment by the Cologne Local Court. Since September 21st, Mr. Kerkloh is a member of the Audit Committee. The two members appointed by the ESF regularly consult with the ESF in advance of Supervisory Board meetings. In doing so, they too are always subject to the fundamental obligation to act in the Company's best interests. In addition, Jutta Dönges, Managing Director of the Federal Republic of Germany - Finance Agency GmbH (Finanzagentur), or her representative Lutz Kaßmann have regularly been exercising the guest right on the Supervisory Board of Deutsche Lufthansa AG as agreed with the ESF since September 2020.
The Supervisory Board has adopted a comprehensive requirements profile for its composition, which includes both the competence profile required by the German Corporate Governance Code (GCGC) and the diversity concept required by Section 289f of the German Commercial Code (HGB).
As part of a detailed onboarding program, the Company provides new Supervisory Board members with an overview of important topics in order to familiarize them with the Company, its operating business and the structures of the Lufthansa Group. In addition, the new Supervisory Board members are provided with a comprehensive information package that includes the Articles of Association and the rules of procedure for the Supervisory Board, its Audit Committee and the Executive Board, the requirements profile for the composition of the Supervisory Board and the diversity concept for the Executive Board, as well as information on capital market regulations for Supervisory Board members and on D&O insurance. In fulfilling their duties, Lufthansa also supports the members of the Supervisory Board with training and continuing education measures, which they are generally responsible for themselves. To this end, Lufthansa regularly offers topic-specific information and training events on the day before Supervisory Board meetings as well as other training courses on Supervisory Board-specific topics. In the financial year 2021, a total of four training and continuing education events were offered on topics including ESG and other Lufthansa-specific topics. Information on conflicts of interest that arose in the financial year is provided in the Report of the Supervisory Board. No conflicts of interest were reported in the 2021 financial year.
Work of the Supervisory Board
The Supervisory Board appoints the Executive Board, advises it on the management of the Company and monitors its activities. It also decides on the system and amount of compensation for the Executive Board. The Rules of Procedure for the Executive Board contain a catalog of transactions for which the Executive Board requires the prior approval of the Supervisory Board. Above a certain value threshold, these include, for example, borrowing, investments in aircraft and other fixed assets, the long-term leasing of aircraft, the establishment of companies, and the acquisition or sale of shares in companies. In addition, the Supervisory Board approves the company's strategy, key performance indicators (KPIs) for the following year, and the Group's medium-term financial planning on an annual basis.
The principles of the Supervisory Board's cooperation are set out in the Rules of Procedure for the Supervisory Board. According to these, the Supervisory Board meets at least twice every calendar half-year. In the 2021 financial year, the Supervisory Board held a total of five meetings. The presence of Supervisory Board members at meetings of the Supervisory Board and its committees totaled 98% in the 2021 financial year. An overview of individual meeting attendance for the 2021 financial year can be found here.
The Supervisory Board regularly reviews the efficiency of its activities (sel-assessment). This is done annually on the basis of a detailed questionnaire. In addition, the Chairman of the Supervisory Board holds individual discussions with each member of the Supervisory Board every two years. In addition, 360° feedback from the Executive Board on the work of the Supervisory Board is also provided on a regular basis. For the 2021 financial year, the Supervisory Board conducted its self-assessment on the basis of a detailed questionnaire and in individual discussions between each member and the Chairman of the Supervisory Board. This showed that the work of the Supervisory Board was perceived to be at a consistently high level overall.
Further information on the work of the Supervisory Board and its committees in the 2021 financial year can be found in the Report of the Supervisory Board.
Committees of the Supervisory Board
The Rules of Procedure of the Supervisory Board provide for the formation of Supervisory Board committees. The provisions applicable to the Supervisory Board with regard to formal regulations also apply to the committees in accordance with the Rules of Procedure. The Audit Committee has regulated the internal order of committee activities in its own rules of procedure, which must be submitted to the Supervisory Board for approval in the event of modifications. There are currently four Supervisory Board committees at Deutsche Lufthansa AG:
The Supervisory Board has formed a Steering and Remuneration Committee with equal representation from among its members, consisting of the Chairman of the Supervisory Board and his deputy, each in a corresponding function, and two further members of the Supervisory Board to be elected by the Supervisory Board. The Steering and Remuneration Committee prepares the Supervisory Board meetings and makes recommendations to the Supervisory Board regarding the appointment of Executive Board members, the appointment of a Chairman of the Executive Board, the determination of the total compensation of the individual Executive Board members including salary and fringe benefits of any kind and any reductions pursuant to Art. 87 AktG. The Steering and Remuneration Committee is responsible for all other personnel matters relating to Executive Board members not reserved for the full Supervisory Board. It is also responsible for contracts with Supervisory Board members (including granting of loans) and for granting approval for transactions with related parties in accordance with § 111a ff. of the German Stock Corporation Act (AktG). In the event of a tie, the Chairman of the Supervisory Board has the casting vote. The Steering and Remuneration Committee generally meets prior to Supervisory Board meetings and as required. In the period from May 5, 2021 to September 20, 2021, the Supervisory Board again transferred its responsibilities for urgent cases to the Steering and Remuneration Committee to the extent permitted by law, in order to ensure that it can act quickly in times of crisis. The Steering and Remuneration Committee met a total of six times in fiscal 2021. Regular follow-up reports on the discussions and resolutions were submitted to the full Supervisory Board.
In addition, a six-member Audit Committee is elected, also with equal representation of shareholders and employees. This committee is mainly responsible for auditing the financial reporting (i.e. the consolidated financial statements and the Group management report, including the non-financial reporting on corporate social responsibility, the interim financial information, and the separate financial statements in accordance with the German Commercial Code) and monitoring the effectiveness of the risk management, internal control system, and compliance management system in the financial reporting process. This Committee also discusses the quarterly reports with the Executive Board prior to their publication. Other key issues are the required independence of the auditor, the issuing of the audit engagement to the auditor, the determination of the focal points of the audit and the fee agreement, as well as the regular review of the quality of the audit. The committee also makes a recommendation to the Supervisory Board on the proposal of the auditor to the Annual General Meeting and on the adoption or approval of the annual and consolidated financial statements. In particular, Harald Krüger, newly elected by the Supervisory Board as a member and Chairman of the Audit Committee with effect from the end of the Annual General Meeting on May 4, 2021, and the other shareholder representative Carsten Knobel are independent, have special knowledge and experience in the application of accounting principles and international control procedures, and are familiar with auditing. They therefore qualify as financial experts within the meaning of Section 100 (5) of the German Stock Corporation Act (AktG). The Audit Committee meets at least four times a fiscal year. In the 2021 financial year, the Audit Committee met a total of six times, each time in the presence of the auditors.
The Nomination Committee consists of three members elected from among the shareholder representatives. It proposes suitable candidates to the Supervisory Board prior to election of new Supervisory Board members, which the Supervisory Board may propose to the Annual General Meeting. The selection process of the Nomination Committee is based on the requirements profile for Supervisory Board members adopted by the Supervisory Board. The committee generally meets in connection with upcoming changes to the Company's Supervisory Board. The Nomination Committee met once in the 2021 financial year.
The Arbitration Committee required by Section 27 (3) of the Codetermination Act (MitbestG) and formed in accordance with Section 9 (3) of the Company's Articles of Association only meets if the necessary two-thirds majority of votes is not achieved in the case of an appointment or revocation of an appointment to the Executive Board. Pursuant to Sec. 31 (3) Sentence 1 MitbestG, the committee must then submit a corresponding proposal to the Supervisory Board within one month. The Arbitration Committee did not have to be convened in the 2021 financial year.