Corporate Governance (DCGK) 2023

Corporate Governance Declaration (DCGK)

Corporate Governance Declaration/German Corporate Governance Code

The following (Group) Declaration on Corporate Governance pursuant to sections 289f and 315d of the German Commercial Code (HGB) is an essential element of our corporate governance reporting and also includes the report of the Executive Board and Supervisory Board on corporate governance within the meaning of Principle 23 of the German Corporate Governance Code as amended by the GCGC on April 28, 2022.

1) Declaration of conformity with the German Corporate Governance Code

With its internationally and nationally established standards of good and responsible corporate governance, the German Corporate Governance Code (GCGC) is intended to promote confidence in the management and supervision of German listed stock corporations. The UNITEDLABELS AG would like to maintain and further develop 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 Section 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.

The current declarations of conformity with the German Corporate Governance Code and those of previous years are permanently available to the public on the Company’s website at www.unitedlabels.com/investor-relations/corporate-governance.

2) Stockholders and Annual General Meeting

Our shareholders exercise their rights at the Company’s Annual General Meeting. The Annual General Meeting is held in the first eight months of the fiscal 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 income reported in the annual financial statements, approval of the actions of the Supervisory Board and Executive Board, election of the auditors, 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 dialogue with the Executive Board and Supervisory Board.

Our aim is to make it as easy as possible for shareholders to attend the Annual General Meeting. For example, all documents required for participation are published in advance on the internet. In addition to the option of authorizing a bank, a stockholders’ association or another person, stockholders are also given the right to appoint a proxy for the Annual General Meeting, whom they can instruct to exercise their voting rights. Immediately after the Annual General Meeting we publish the attendance and voting results on the internet.

3) Information on corporate governance practices

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 Headquar¬ter 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 Labor Organization (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.

4) Working methods of the Management 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 statutory provisions and the rules of procedure adopted by the Supervisory Board. The Management Board is advised and supervised by the Supervisory Board in its management activities. The Supervisory Board appoints the members of the Management Board; significant transactions of the Management Board require its approval. The Executive Board and 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 requirements 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 agrees the strategic direction 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 relevance to the Company relating to planning, business development, the risk situation, risk management and compliance. In doing so, it addresses any deviations in the course of business from the plans and targets drawn up, stating the reasons for such deviations.

Reports by the Executive Board and documents required for decision-making, in particular the annual financial statements, management report, consolidated financial statements, Group management report and audit report, are sent to the members of the Supervisory Board as far in advance of the meeting as possible, generally eight days before the meeting. In addition, the Chairman of the Supervisory Board and the Executive Board are in regular contact outside Supervisory Board meetings. If necessary, the members of the Supervisory Board are informed orally or in writing at short notice outside meetings or may be convened to 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. At its regular meetings, the Supervisory Board discusses the monthly information and 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 content of which is the regulation of the composition and responsibilities of the Supervisory Board, its convening, preparation and chairing of meetings, and the regulation of committees and the quorum.

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.

In accordance with the recommendation in section C.1 of the German Corporate Governance Code, in the opinion of the UNITEDLABELS AG, the Supervisory Board includes an appropriate number of independent members. For in the estimation of the Supervisory Board, two members are to be regarded as 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 held Annual General Meeting on June 11, 2021, with effect from June 15, 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 consists of only three persons.

Detailed information on the focal points of the Supervisory Board’s work and advice in the 2022 financial year is explained in the Report of the Supervisory Board, which is included in the 2022 Annual Report. The Chairman of the Supervisory Board is prepared, to an appropriate extent, to hold discussions with investors on topics specific to the Supervisory Board.

Self-assessment of the effectiveness of the Supervisory Board’s work

The Supervisory Board has carried out the regular self-assessment of the effectiveness of the work of the Supervisory Board required by the Code. The self-assessment was last carried out on February 24, 2023 by means of a questionnaire by the members of the Supervisory Board and a subsequent discussion within the Supervisory Board.

5) Provisions to promote the equal participation of women and men in management positions.

The “Act on the Equal Participation of Women and Men in Leadership Positions in the Private and Public Sector”, which came into force on May 1, 2015, requires 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 September 30, 2015. For the first time, the implementation period for the targets could not legally extend beyond June 30, 2017.

On June 15, 2021, the Supervisory Board of the UNITEDLABELS AG resolved that it will adhere to the previous target of 0% for the composition of the Supervisory Board with regard to the equal participation of women and men until June 30, 2026, and that it will also adhere to the target of 0% for the composition of the Management Board. At the same time, the aim is to pay greater attention to compliance with the quota regulations when appointing new members to the corporate bodies. The composition of the Supervisory Board and the Management Board reflects the target.

On June 15, 2021, the Management Board of UNITEDLABELS AG resolved to increase the proportion of women at the first management level to 50% and to maintain this target until June 30, 2026. As of December 31, 2022, the management level (management circle) consisted of four women and one man. The target was therefore achieved.

6) Description of the diversity concept for the composition of the Management Board and the 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 governing body authorized to represent the company and the Supervisory Board.

7) Remuneration of the members of the executive bodies

The applicable remuneration system pursuant to Section 87a (1) and (2) sentence 1 of the German Stock Corporation Act (AktG), the remuneration report with the auditor’s report as well as the last remuneration resolution pursuant to Section 113 (3) of the German Stock Corporation Act (AktG) are published in the Investor Relations section under the following link: https://www.unitedlabels.com/investor-relations/.

8) Transparency

UNITEDLABELS AG attaches great importance to uniform, comprehensive and timely information. 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, the UNITEDLABELS AG participates in press and analyst conferences.

Furthermore, information is provided through press releases or ad hoc announcements, as far 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 most important 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. The dates of the Annual General Meeting, the Annual Report and the financial reports during the year are also published in a financial calendar.

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.

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 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 April 28, 2022, published in the Federal Gazette on June 27, 2022 (‘Code 2022’ or ‘Code’).

Furthermore, the Board of Management 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:

A. Management and supervision

Recommendation A.1

According to the new Recommendation A.1, the Executive Board should identify and assess the risks and opportunities for the company associated with social and environmental factors as well as the ecological impact of the company’s activities. Further, environmental and social objectives should be appropriately considered in the corporate strategy. Corporate planning shall include corresponding financial and sustainability-related targets.

The Board of Management and Supervisory Board generally recognize that sustainability aspects are important and take appropriate account of them in their activities on behalf of the company. However, the recommendations mentioned are vague and a statement on their compliance is therefore subject to considerable uncertainty. The Executive Board and Supervisory Board therefore declare a deviation in this respect as a precaution.

Recommendation A.3

According to the newly introduced recommendation A.3, the internal control system and the risk management system should also cover sustainability-related objectives, insofar as this is not yet required by law. This should include the processes and systems for recording and processing sustainability-related data.

At present, the design of the internal control system and the risk management system is based on the statutory requirements. Sustainability-related objectives that go beyond these legal requirements are not yet covered by the internal control system and the risk management system due to the size of the company.

Recommendation A.4

There is no whistleblowing system for employees or for third parties. Due to the size of the company and an open corporate culture, the formal establishment of a whistleblower system is not considered necessary.

Recommendation A.5

According to the newly introduced recommendation A.5, the main features of the internal control system and the risk management system should be described in the management report and a statement should be made on the appropriateness and effectiveness of these systems.

The Company has an internal control system and risk management system. However, the recommendations on the disclosures in the management report go well beyond the statutory requirements. At present, the Company is guided by the statutory requirements with regard to the management report and considers these to be sufficient.

B. Composition of the Management Board

Recommendation B.1

The Code recommends paying attention to diversity in the composition of the Executive Board. As the Management 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.

Recommendation B.2

The UNITEDLABELS AG deviates from this recommendation. Since, in the view of the Supervisory Board, the Management Board continues to be well staffed, there is currently no need to provide for long-term succession planning.

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. Furthermore, an age limit is not considered appropriate in consideration of the prohibition of discrimination.

C. Composition of the Supervisory Board

Recommendations C.1/C.2

In addition, the Supervisory Board should specify concrete objectives for its composition and draw up a competence profile for the entire body. The status of implementation should be disclosed in the form of a qualification matrix in the corporate governance declaration. This should also provide information on the number of independent shareholder representatives on the Supervisory Board, as deemed appropriate by the shareholder representatives, and the names of these members.

In the opinion of the Executive Board and Supervisory Board, the composition of the Supervisory Board must be aligned with the interests of the company and must ensure effective supervision and advice of the Executive Board. The Supervisory Board therefore selects candidates for election proposals to the Annual General Meeting exclusively on the basis of professional and personal competence and 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 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 stated above, and also taking into account the small number of Supervisory Board mandates to be filled, no commitment can be made in this respect.

For these reasons, no concrete objectives for the composition of the Supervisory Board are specified, nor is a competence profile drawn up for the entire body. For the same reasons, there is no reporting in the form of a qualification matrix.

The Code recommends setting age limits for members of the Supervisory Board and disclosing these in the corporate governance declaration. The examination of suitability should continue to be carried out irrespective of age in the future. Moreover, an age limit is not considered appropriate in view of the prohibition of discrimination.

Recommendation C.14

With regard to the inclusion of a curriculum vitae with the Supervisory Board’s candidate proposal and 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 Supervisory Board are of the opinion that a comprehensive picture of the Supervisory Board candidates and members is already provided by fulfilling the statutory submission requirements in the notice of the Annual General Meeting and in the notes or notes to the annual 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.

D. Working methods of the Supervisory Board

Recommendations D.2/D.3

The Code 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 consists of only three persons.

Recommendation D.4

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.

F. Transparency and external reporting

Recommendation F.2

The Code recommendation stipulates 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. As the Company gives priority to the quality of the financial reports over compliance with the aforementioned deadlines, this may mean that the Company is unable to comply with the publication deadlines recommended by the German Corporate Governance Code. Instead, the consolidated financial statements and interim reports are published in accordance with the statutory deadlines and those set by Deutsche Börse for the Prime Standard.

G. Compensation of the Management Board and Supervisory Board

Recommendation G.1

With regard to compensation in the area of G.I., the Code contains a large number of recommendations concerning the compensation of the Management Board. The current compensation 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 the existing Executive Board contract is protected as a going concern.

In particular, the current compensation 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 retaining 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 adopted 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 and the resolution are published at https://www.unitedlabels.com/investor-relations/hauptversammlung/.

Recommendation G.17

The Code recommendation stipulates that Supervisory Board compensation should also take into account, among other things, the chairmanship and membership of committees. The amount of compensation paid to members of the Supervisory Board is governed conclusively by § 10 of the Articles of Association. There are still no committees, so the chairmanship and membership of committees are not taken into account in Supervisory Board compensation.

Muenster, March 2023

 

The Executive Board                                                      The Supervisory Board