Declaration on Corporate Governance/ German Corporate Governance Code
Corporate Governance
The German Corporate Governance Code (DCGK) with its internationally and nationally established standards of good and responsible corporate management is intended to promote trust in the management and supervision of German listed stock corporations. UNITEDLABELS AG would like to maintain and further expand the trust in its company among its shareholders, customers, suppliers, employees and the public through openness and transparency. For these reasons, the UNITEDLABELS AG complies with the recommendations of the German Corporate Governance Code to the greatest possible extent.
The current declaration of compliance with the German Corporate Governance Code pursuant to § 161 of the German Stock Corporation Act (AktG) is printed at the end of this chapter and published on the company’s website under the following link: https://www.unitedlabels.com/investor-relations/corporate-governance.
1) Shareholders and Annual General Meeting
Our shareholders exercise their rights at the Annual General Meeting of the Company. The Annual General Meeting takes place in the first eight months of the financial year. The Annual General Meeting is chaired by the Chairman of the Supervisory Board. The Annual General Meeting decides on all tasks assigned to it by law. These include resolutions on the appropriation of the net profit shown in the annual financial statements, the discharge of the Supervisory Board and the Executive Board, the election of the auditor, the election of the members of the Supervisory Board and decisions on amendments to the Articles of Association. The Annual General Meeting also serves as a platform for shareholders to engage in dialogue with the Executive Board and the Supervisory Board.
Our goal is to make it as easy as possible for shareholders to participate in the Annual General Meeting. All documents required for participation are published in advance on the internet. In addition to the possibility of authorising a bank, a shareholders’ association or another person, shareholders will be given the name of a proxy for the Annual General Meeting, whom they can instruct to exercise their voting rights in accordance with their instructions. Directly after the Annual General Meeting, we publish the attendance and voting results on the internet.
2) Information on corporate governance practices
The UNITEDLABELS AG maintains a code of conduct which is binding for all employees of the group. It contains all standards and instructions on ethical and compliant behaviour of the employees towards each other and towards third parties. The Code of Conduct aims in particular to avoid conflicts of interest, corruption and money laundering and to comply with rules on data protection and environmental protection.
For UNITEDLABELS AG, compliance with these standards is an essential prerequisite for qualified and transparent corporate management with the aim of strengthening and maintaining the trust of its shareholders, customers, suppliers, employees and the public.
3) Working methods of the Executive Board and Supervisory Board and the composition and working methods of their committees
The German Stock Corporation Act prescribes a dual management system (“Two-Tier Board Structure”) for the UNITEDLABELS AG, consisting of a Management Board and a Supervisory Board. In the dual management system, management and control are strictly separated. The UNITEDLABELS Group is managed by the Management Board on the basis of legal provisions and the rules of procedure adopted by the Supervisory Board. In the management of the company, the Management Board is advised and supervised by the Supervisory Board. The Supervisory Board appoints the members of the Management Board; significant transactions of the Management Board require its approval. The Executive Board and the Supervisory Board observe the rules of proper corporate governance.
The Executive Board
The Executive Board of the company is the management body of the Group and consists of one person. The Executive Board is bound to the interests of the company and committed to increasing the sustainable value of the company. It develops the corporate strategy, also for the subsidiaries. The Executive Board ensures compliance with legal provisions and works towards their observance by the Group companies.
The Executive Board works closely with the Supervisory Board for the benefit of the company. It coordinates the strategic orientation of the company with the supervisory board and discusses the status of strategy implementation with it at regular intervals.
The Executive Board informs the Supervisory Board regularly, promptly and comprehensively about all issues of planning, business development, risk situation, risk management and compliance that are relevant to the company. In doing so, it addresses deviations in the course of business from the established plans and goals, stating the reasons.
Reports by the Executive Board and documents required for decision-making, in particular the annual financial statements, the management report, the consolidated financial statements, the Group management report and the auditor’s report, are forwarded to the members of the Supervisory Board as far as possible in good time before the meeting, usually eight days before the meeting. In addition, the Chairman of the Supervisory Board and the Executive Board are in constant contact outside the Supervisory Board meetings. If necessary, the members of the Supervisory Board are informed orally or in writing at short notice outside of meetings or can be convened for extraordinary meetings.
The Supervisory Board
The Supervisory Board of UNITEDLABELS AG consists of three members elected by the General Meeting.
The Supervisory Board appoints the members of the Management Board and represents the company vis-à-vis them. It supervises and advises the Management Board in the management of the company and decides on all essential business transactions of the company for which approval is required. It regularly discusses business development, planning and strategy. In its regular meetings, the Supervisory Board discusses the monthly information and the quarterly reports. It examines the annual financial statements of UNITEDLABELS AG, the consolidated financial statements and the management report of the company and the group in consultation with the auditor, who reports directly to the Supervisory Board, and decides on their adoption or approval.
The Supervisory Board has adopted rules of procedure for its work, the main contents of which are the regulations governing the composition and responsibilities of the Supervisory Board, its convening, preparation and chairing of meetings, as well as the regulations governing committees and the quorum.
Since the supervisory board consists of only three members, the supervisory board assumes the tasks of an audit committee and records these under separate agenda items.
In accordance with the recommendation in Principle 11 C.1 of the German Corporate Governance Code, the Supervisory Board includes, in the opinion of UNITEDLABELS AG, an appropriate number of independent members, taking into account the ownership structure. Accordingly, all three members of the Supervisory Board are considered independent.
The period of membership is the same for all three members of the Supervisory Board, namely they have been elected to office since the Annual General Meeting held on 11 June 2021 with effect from 15 June 2021. The Supervisory Board consists of Dr David Strack (Chairman), Volker Deck (Deputy Chairman) and Albert Hirsch.
The Supervisory Board does not see the need for professionally qualified committees with regard to the company and its specific circumstances, taking into account that it only consists of three persons.
Detailed information on the focal points of the Supervisory Board’s work and consultations in the 2021 financial year is explained in the report of the Supervisory Board, which is included in the 2021 annual report. The Chairman of the Supervisory Board is prepared, within reason, to hold discussions with investors on topics specific to the Supervisory Board.
Self-assessment of the effectiveness of the work of the Supervisory Board
The Supervisory Board conducted the regular self-assessment of the effectiveness of the work of the Supervisory Board and its committees as required by the Code. The self-assessment was carried out by means of a questionnaire by the members of the Supervisory Board and a subsequent discussion within the Supervisory Board.
Specifications for the promotion of equal participation of women and men in management positions
The “Act for the Equal Participation of Women and Men in Leadership Positions in the Private and Public Sector”, which came into force on 1 May 2015, obliges the executive and supervisory boards of certain companies in Germany to set targets for the proportion of women on the supervisory board, executive board and the next two management levels for the first time and to determine by when the respective proportion of women should be achieved. The companies had to decide on their targets and implementation deadlines by 30 September 2015. When the targets were set for the first time, the implementation period for the targets was not allowed by law to go beyond 30 June 2017.
On 15 June 2021, the Supervisory Board of UNITEDLABELS AG resolved to adhere to the previous target of 0% for the composition of the Supervisory Board with regard to the equal participation of women and men and to the target of 0% for the composition of the Management Board until 30 June 2026. Nevertheless, the goal is to pay more attention to the fulfilment of the quota regulation when making new appointments to the executive bodies. The composition of the Supervisory Board and the Management Board reflects the target.
On 15 June 2021, the Management Board of UNITEDLABELS AG resolved to increase the proportion of women on the first management level to 50% and to maintain this target until 30 June 2026. As of 31 December 2021, the management level (management circle) consisted of 1 man and 2 women. The target was thus achieved.
Description of the diversity concept for the composition of the Executive Board and Supervisory Board
Beyond the objectives of the composition of the Management Board and Supervisory Board described in this declaration, the UNITEDLABELS AG currently does not pursue a diversity concept with regard to the composition of the representative body and the Supervisory Board. The development of a detailed diversity concept is currently under discussion.
Remuneration report
For information on remuneration, please refer to the notes to the consolidated financial statements. These also include the sample tables for the remuneration of the Executive Board.
The remuneration system submitted to the 2021 Annual General Meeting for approval, the remuneration report and the resolution will be published in the Investor Relations section following the 2022 Annual General Meeting under the following link: https://www.unitedlabels.com/investor-relations/.
Reportable securities transactions by the Executive Board and Supervisory Board
According to § 19 of the Market Abuse Regulation (MAR), members of the Management Board and the Supervisory Board as well as persons close to them are obliged to disclose the purchase and sale of shares of the UNITEDLABELS AG or financial instruments relating to them, if the value of the transactions they have carried out within one calendar year reaches or exceeds the sum of € 5,000. No transactions have been reported to the UNITEDLABELS AG for the business year 2021.
Transparency
Uniform, comprehensive and timely information is of great importance to the UNITEDLABELS AG. The reporting on the business situation and the results of the UNITEDLABELS AG is carried out in the annual report, in the quarterly reports and in the 6-monthly report within the framework of the deadlines specified for this purpose. Furthermore, UNITEDLABELS AG participates in press and analysts’ conferences.
Furthermore, information is provided in the form of press releases and ad-hoc announcements, insofar as this is required by law. All announcements and notifications can be viewed on the internet at www.unitedlabels.com/investor-relations. The scheduled dates of the main recurring events and publications – such as the Annual General Meeting, the Annual Report and financial reports during the year – are compiled in a financial calendar, which is published sufficiently in advance and is available on the company’s website at http://www.unitedlabels.com/investor-relations/finanzkalender.
UNITEDLABELS AG has established compliance structures in line with its current size and will continue to develop them in view of growing requirements from the regulatory environment and with a view to the company’s development.
Violations of applicable law and internal guidelines are sanctioned appropriately.
The UNITEDLABELS AG has created the prescribed insider directory and affected persons have been informed about the legal obligations and sanctions. Further information of these structures is omitted in the declaration on corporate governance.
Corporate Governance on the Internet
The current declarations of compliance with the German Corporate Governance Code as well as those of previous years are published on the Internet on the company’s homepage at www.unitedlabels.com/investor-relations/corporate-governance.
Code of Conduct for Manufacturers
In order to promote compliance with ethical standards in the age of global production, the UNITEDLABELS-Group has developed a Code of Conduct for Manufacturers. The UNITEDLABELS-Group comprises the headquarters UNITEDLABELS AG (Germany), UNITEDLABELS Belgium, N.V. (Belgium), UNITEDLABELS Comicware Ltd. (Hong Kong), UNITEDLABELS Ltd. (England), House of Trends europe GmbH (Germany), Open Mark United Labels GmbH (Germany) and Elfen-Service GmbH (Germany). The Code of Conduct is based both on the conventions of the International Labour Organisation (ILO) and the United Nations and on the national legislation of the respective country of production. The full text of the Code of Conduct is published on the internet on the company’s homepage at www.unitedlabels.com/unternehmen/code-of-conducts.
Declaration of Compliance with the German Corporate Governance Code by the Management Board and Supervisory Board of UNITEDLABELS Aktiengesellschaft pursuant to Section 161 of the German Stock Corporation Act (AktG)
The Management Board and the Supervisory Board of UNITEDLABELS Aktiengesellschaft declare that the recommendations of the ‘Government Commission on the German Corporate Governance Code’ published by the Federal Ministry of Justice and Consumer Protection in the official section of the Federal Gazette have generally been complied with in the past and will be complied with in the future. The following declaration refers to the recommendations of the ‘Government Commission on the German Corporate Governance Code’ as amended on 16 December 2019, published in the Federal Gazette on 20 May 2020 (‘Code 2019’ or ‘Code’).
Furthermore, the Executive Board and the Supervisory Board declare that the recommendations of the ‘Government Commission on the German Corporate Governance Code’ have only been deviated from and are expected to be deviated from in the future as follows:
Management and supervision
Principle 5 – Recommendation A.2
The UNITEDLABELS AG does not disclose the principles of the Compliance Management System and there is no whistleblowing system for employees or for third parties.
Composition of the Management Board
Principle 9:- Recommendation B.1
The GCGC recommends paying attention to diversity in the composition of the Management Board. As the Executive Board consists of only one member, diversity cannot be achieved. The Supervisory Board will include the aspect of diversity in its considerations when expanding the composition of the Executive Board.
Principle 9 – Recommendation B.2
The UNITEDLABELS AG deviates from this recommendation.
Principle 9 – Recommendation B.5
The UNITEDLABELS AG deviates from this recommendation. A maximum age for the Management Board is not envisaged. The examination of suitability shall continue to be carried out irrespective of age. Moreover, an age limit is not considered appropriate in consideration of the prohibition of discrimination.
Composition of the Supervisory Board
Principle 11 – Recommendation C.1/C.2:
The GCGC recommends setting age limits for the members of the supervisory board. In addition, the supervisory board should specify concrete objectives for its composition and develop a competence profile for the entire body. The status of implementation shall be published in the corporate governance statement. This shall also provide information on the number of independent shareholder representatives on the supervisory board that is appropriate in the opinion of the shareholder representatives and the names of these members.
The composition of the supervisory board shall be aligned with the interests of the company and must ensure the effective supervision and consultation of the executive board. The Supervisory Board therefore selects the candidates for election proposals to the Annual General Meeting exclusively on the basis of professional and personal competence as well as experience; other characteristics such as gender or national affiliation as well as age were and are irrelevant for these election proposals for reasons of equal opportunity. In addition to these selection criteria, the company considers the aspects mentioned in the Code to be worthy of consideration in principle and the Supervisory Board will include them in its decision at the time of the respective election proposals, taking into account the specific situation of the company at that time, however, for the reasons mentioned above, even taking into account the small number of Supervisory Board mandates to be filled, no determination can be made in this regard.
For these reasons, neither concrete objectives for the composition of the Supervisory Board nor a competence profile for the entire body are specified.
Elections to the Supervisory Board
Recommendation C.14
With regard to the enclosure of a curriculum vitae to the candidate proposal of the supervisory board as well as the publication of the curriculum vitae of all supervisory board members together with an overview of the main activities in addition to the supervisory board mandate, the executive board and the supervisory board are of the opinion that a comprehensive picture of the supervisory board candidates and members is already given with the fulfilment of the legal duties of submission in the invitation to the general meeting as well as in the notes or notes to the annual financial statements or consolidated financial statements. The publication of CVs would also unreasonably interfere with the right to informational self-determination of the supervisory board candidates and members.
Functioning of the Supervisory Board
Principle 14 – Recommendation D.2:
The GCGC recommends forming professionally qualified committees depending on the specific circumstances of the company and the number of its members. The Supervisory Board consists of only three members. It has therefore not formed any committees. The Supervisory Board does not see the need for professionally qualified committees to increase the efficiency of the Supervisory Board’s work with regard to the company and its specific circumstances, taking into account that it only consists of three persons.
Principle 14 – Recommendation D.3:
As the Supervisory Board consists of only three members, the Supervisory Board assumes the tasks of an audit committee and records these under separate agenda items.
Principle 14 – Recommendation D.5:
The supervisory board consists of only three members. These are elected exclusively by the shareholders. The Supervisory Board therefore sees no need to establish a nomination committee.
Transparency and external reporting
Principle 21 – Recommendation F.2
The GCGC recommendation states that the consolidated financial statements should be publicly accessible within 90 days of the end of the financial year, and interim reports within 45 days of the end of the reporting period. Since the Company gives priority to the quality of the financial reports over compliance with the aforementioned deadlines, this may result in the Company being unable to comply with the publication deadlines recommended by the German Corporate Governance Code. Instead, the consolidated financial statements and interim reports are published within the statutory deadlines and those set by Deutsche Börse for the Prime Standard.
Remuneration of the Executive Board and Supervisory Board
Principle 23 – Recommendation G1
With regard to remuneration in the G.I. area, the German Corporate Governance Code 2020 contains new recommendations on the remuneration of the Executive Board compared to the previous version of the Code. The current remuneration system with regard to the sole Executive Board member Peter Boder does not fully comply with the new regulations and the company therefore declares a deviation in item G.I. as a precautionary measure, even though a grandfathering applies to the existing Executive Board contract.
In particular, the current remuneration system does not fully comply with the following of these recommendations: G.3 (peer group comparison of Management Board salaries), G.4 (comparison of Management Board salaries with top management), G.8 (exclusion of subsequent change of targets), G.11 sentence 2 (possibility of reclaiming or withholding variable remuneration by the Supervisory Board), G.16 (crediting of remuneration for external Supervisory Board mandates).
In accordance with its legal obligation, the Supervisory Board of UNITEDLABELS Aktiengesellschaft has decided on a new remuneration system for the Management Board, which was approved by the General Meeting 2021, to be taken into account in particular for Management Board contracts concluded in the future. The remuneration system submitted to the 2021 Annual General Meeting for approval as well as the resolution are published at https://www.unitedlabels.com/investor-relations/hauptversammlung/.
Principle 24 – Recommendation G.17.
The GCGC recommendation provides that the remuneration of the supervisory board should also take into account, among other things, the chairmanship and membership of committees. The amount of the remuneration of the members of the Supervisory Board is conclusively regulated in § 10 of the Articles of Association. There are still no committees, so that the chairmanship and membership of committees are not taken into account in the remuneration of the Supervisory Board.
Muenster, March 2022
The Executive Board The Supervisory Board
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