Report by the Supervisory Board
Last year was an eventful year for PUMA SE. Kering S.A. distributed the majority of its PUMA shares to its own shareholders by means of a dividend in kind. As a result, Kering is no longer the majority shareholder of PUMA. The change in the shareholder structure has prompted PUMA to change the management structure of PUMA SE from monistic to dualistic. As a result, managing the company is now the responsibility of the Management Board, as is customary in German stock corporations. The three managing directors were appointed as members of the Management Board. The members of the Administrative Board were elected as members of the Supervisory Board by the Annual General Meeting, which ensures the continuity of the Board’s work. These topics were discussed in detail at the company’s Annual General Meeting in 2018. The preparation and follow-up of the separation of PUMA SE from the scope of consolidation of the Kering Group shaped the work of the Supervisory Board of PUMA SE during the reporting period. The work of the Supervisory Board described below refers to the work of the Administrative Board and the Supervisory Board.
In the financial year 2018, the Supervisory Board has exercised all its duties under the law, statutes, and company rules. The Supervisory Board has dealt extensively with the status and the development of PUMA and has regularly advised and supervised the Management Board in its management of the company.
In this regard, the Supervisory Board has in its four regular meetings discussed and resolved on the company’s business policies, all relevant aspects of corporate development and corporation planning, the company’s economic situation, including its net assets, financial position and results of operations, and all key decisions for the Group. All members participated in drawing up the resolutions. The Management Board has informed the Supervisory Board regularly, comprehensively, and in a timely manner in written and verbal form about the implementation of all decisions and about all major business transactions. Furthermore, in 2018 two extraordinary and a constitutive meeting of the Supervisory Board took place.
The Supervisory Board discussed in detail all of the company’s key business transactions, based on the reports by the Management Board and the committees, and presented its own ideas. The Management Board has provided the Supervisory Board with information on any deviations of the business performance from the expected figures. The Supervisory Board verified all of these explanations using the supporting documents submitted. The Supervisory Board was involved in all key decisions at an early stage. In addition, the Chairman of the Supervisory Board maintained, and continues to maintain, regular verbal or written contact with the CEO and keeps himself informed of all major developments. Overall, these discussions did not give rise to any doubts that the Management Board were managing the Group in anything other than a lawful and proper manner.
Main advisory focus
In the financial year 2018, the focus was primarily on the following topics: Audit and approval of the 2017 financial statements, consequences of the distribution of the dividend in kind by Kering S.A. and measures to be taken, one-time dividend to PUMA’s shareholders, mid-term outlook, change from the monistic to the dualistic governance structure, conclusion of credit facility agreements, setting the agenda for the Annual General Meeting of April 12, 2018, ongoing business and sales development, the Group’s financial position, business planning for 2018, and medium-term planning, including investments, compliance and internal control system as well as material litigation in the Group.
In addition, the Supervisory Board confirmed the target figures for the proportion of women on the Supervisory Board, the Management Board, and the two management levels below the Management Board set by the Administrative Board in the monistic structure, as well as the competence profile and diversity concept for the Supervisory Board.
As every year, the Personnel Committee and the Supervisory Board set the target achievements for 2017 and decided on the bonus for the members of the Management Board.
Against the background of the need to conclude new employment contracts with the members of the Management Board, the Personnel Committee and the Supervisory Board dealt with the remuneration of the Management Board. In order to review all Management Board employment contracts and to ensure the appropriateness of the individual remuneration, the Supervisory Board obtained a benchmark analysis taking into account the peer group companies defined by the Supervisory Board. The benchmark analysis was evaluated by the Personnel Committee and the resulting measures were prepared for the Supervisory Board. The Supervisory Board examined the appropriateness of the remuneration of the Management Board and determined that it was appropriate in terms of amount and structure. In addition, the Supervisory Board was informed about the status of the implementation of the General Data Protection Regulation.
Conflicts of interest
The members of the Supervisory Board are required to disclose any conflicts of interest immediately. In the past year, no such disclosures were made.
In its constitutive meeting on June 6, 2018, the Supervisory Board established three committees to perform its duties. The Board receives regular reports on their work. The members of the committees are listed in the Notes to the Consolidated Financial Statements.
The Personnel Committee is responsible for entering into and making changes to Management Board employment contracts and for establishing policies for Human Resources and personnel development. It met twice in 2018. Discussions focused on recommendations for setting bonus payments for the members of the Management Board. The Supervisory Board was given a respective recommendation for a resolution. Moreover, as described above, the Personnel Committee dealt with the new Management Board employment contracts and the appropriateness of the remuneration for the Management Board members.
The Audit Committee held four regular meetings in financial year 2018. In particular, the Audit Committee is responsible for accounting issues and monitoring the accounting process, the effectiveness of the internal control system, risk management and the risk management system, internal audits, compliance, and the statutory audit of the financial statements, with particular regard to the required independence of the statutory auditors, issuing the audit mandate to the statutory auditors, defining the audit areas of focus, any additional services to be performed by the auditors, and the fee agreement.
The Sustainability Committee was abolished after the transition from the monistic to the dualistic management system.
The Nominating Committee proposes suitable shareholder candidates to the Supervisory Board for its voting recommendations to the Annual General Meeting. It held one meeting in the last financial year. The Nominating Committee recommended to the Supervisory Board that the Supervisory Board proposes the election of Mr. Jean-François Palus (Group Managing Director and member of the Supervisory Board of Kering S.A., Paris / France), Mr. Jean-Marc Duplaix (Chief Financial Officer (CFO) of Kering S.A., Paris / France), Mr. Thore Ohlsson (President of Elimexo AB, Falsterbo / Sweden) and Ms. Béatrice Lazat (Human Resources Director, Kering S.A., Paris / France) at the Annual General Meeting on April 12, 2018.
As in previous years, the Supervisory Board addressed current developments in the German Corporate Governance Code (GCGC) in the financial year 2018. The GCGC contains essential statutory regulations and recommendations for the management and supervision of listed companies and standards for responsible corporate governance. The corporate governance standards have long been a part of the corporate routine.
Pursuant to Paragraph 3.10 of the GCGC, the Supervisory Board reports on corporate governance in the Corporate Governance Report. With very few exceptions, the company satisfies the requirements of the GCGC and explains these system-related exceptions in the Statement of Compliance. The Statement of Compliance of November 9, 2018, is available to our shareholders at any time on the company’s website under http://about.puma.com/en/investor-relations/corporate-governance/declaration-of-compliance.
Annual financial statements adopted
The annual financial statements for PUMA SE prepared by the Management Board in accordance with German Commercial Code (Handelsgesetzbuch / HGB), the consolidated financial statements and the combined management report for PUMA SE and the PUMA Group, each for the financial year 2018, prepared in accordance with Section 315a HGB on the basis of the International Financial Reporting Standards (IFRS) have been audited by the statutory auditors Deloitte GmbH Wirtschaftsprüfungsgesellschaft, Munich, who were appointed at the Annual General Meeting on April 12, 2018, and commissioned by the Supervisory Board to audit the annual financial statements and the consolidated financial statements, and have been given an unqualified auditor’s opinion.
In their report, the statutory auditors conclude that PUMA’s institutionalized risk management system, in accordance with Section 91(2) of the German Stock Corporation Act (Aktiengesetz / AktG), is capable of detecting at an early stage, and countering, any developments that might jeopardize the continuity of the company as a going concern. The Supervisory Board has been updated by the Management Board regularly on all relevant risks in this regard, in particular their assessments of market and procurement risks, financial risks (including currency risks), and organizational risks.
The accounting records, the audit reports from the statutory auditors, and the Management Board’s and Supervisory Board’s recommendation on the appropriation of net profit were made available to all members of the Supervisory Board in a timely manner. At the meeting of the Audit Committee on February 13, 2019, and at the subsequent Supervisory Board meeting held on the same day, the statutory auditors reported on the key results of their audit and discussed them in detail with the Management Board and the members of the Supervisory Board. No discrepancies were detected.