In the reporting period, the Supervisory Board of Bertelsmann SE & Co. KGaA diligently fulfilled the duties incumbent upon it by law and under the articles of association and bylaws. Its members regularly advised and monitored the personally liable partner, Bertelsmann Management SE, represented by its Executive Board, in the task of managing and directing the company’s operations. This report concerns the activities of the Supervisory Board of Bertelsmann SE & Co. KGaA. The activities of the Supervisory Board of Bertelsmann Management SE are not the subject of this report.
Chairman of the Supervisory Board of Bertelsmann SE & Co. KGaA
Advising and Monitoring the Executive Board of Bertelsmann Management SE
As part of its advisory and monitoring activities, the Supervisory Board of Bertelsmann SE & Co. KGaA was directly involved in important company decisions and transactions at an early stage and discussed and reviewed these at length on the basis of reports from the Executive Board.
The personally liable partner, represented by the Executive Board of Bertelsmann Management SE, provided the Supervisory Board with regular, prompt and comprehensive written and verbal reports on all significant issues of strategy, planning, business performance, intended business policies and other fundamental management issues. A wide range of topics and projects were presented for discussion at the meetings of the Supervisory Board. Reporting of the Executive Board concerned, but was not limited to, the position and development of the company, especially the current business and financial position, and material business transactions, particularly major planned investments and divestments. Instances where business performance deviated from official projections and targets were discussed in detail with the Supervisory Board, which reviewed these matters on the basis of the documentation submitted. The Supervisory Board obtained regular information concerning financial debt levels. The risk situation and risk management were also in focus of the Supervisory Board. The internal control system, risk management system and internal auditing system were the subjects of regular reports and discussions. The Supervisory Board also monitored and carefully followed corporate governance and compliance developments at Bertelsmann on an ongoing basis. The Executive Board and the Supervisory Board report jointly on corporate governance and compliance at Bertelsmann in chapter “Corporate Governance at Bertelsmann”.
Supervisory Board Plenary Meeting
In the plenary meetings, the Supervisory Board of Bertelsmann SE & Co. KGaA regularly heard reports from the Executive Board on the current business and financial position of the Group and of the individual divisions as well as reports on Group planning and material business transactions, particularly major planned investments and divestments. These focused on the investments SpotXchange and StyleHaul in the United States to further the digital transformation of the RTL Group businesses; the further development of the education segment, in particular through the acquisition of Relias Learning; the acquisition of the remaining shares in Gruner + Jahr and also the divestments in the printing sector of Be Printers Print Italy and Brown Printing. Another focus was on the Group-wide “Operational Excellence” efficiency program for optimizing structures and processes.
The Supervisory Board was kept regularly informed of the status of the implementation of the Group’s strategy. During a full-day meeting in summer 2014 with the Bertelsmann Management SE Executive Board, the Bertelsmann SE & Co. KGaA Supervisory Board discussed fundamental issues of strategic Group development and was able to form an opinion on the status of the transformation of the Group portfolio into a more rapidly growing and more digital and international portfolio. To the extent stipulated by law and the articles of association or bylaws, the plenary meeting made the necessary decisions. Thus, the annual and consolidated financial statements of Bertelsmann SE & Co. KGaA, as well as the proposal of the personally liable partner for appropriation of net income, were thoroughly reviewed and approved in the Supervisory Board’s financial review meeting in March 2015.
In financial year 2014, the Supervisory Board met for four meetings and one strategy retreat together with the Executive Board. The Supervisory Board Chairman maintained ongoing contact with the Executive Board outside the framework of Supervisory Board meetings, in particular with the Executive Board Chairman, in order to stay abreast of the current business situation and significant transactions. All Supervisory Board members attended at least half of the Supervisory Board meetings convened. No potential conflicts of interest arose on the Supervisory Board. The Supervisory Board addressed the German Corporate Governance Code and Bertelsmann’s compliance therewith. A joint report by the Supervisory and Executive Boards of Bertelsmann Management SE on corporate governance within the company is provided on page 194f. of this Annual Report. As a non-listed company, Bertelsmann does not issue a formal declaration of compliance as per section 161 of the German Stock Corporation Act.
Supervisory Board Audit and Finance Committee
Within its sphere of responsibility, the Supervisory Board of Bertelsmann SE & Co. KGaA established the Audit and Finance Committee to perform its tasks efficiently. The Audit and Finance Committee has six members, while the Chair of the Supervisory Board does not lead this Committee. The German Corporate Governance Code stipulates that the Chair of the Audit and Finance Committee is independent for the purposes of the Code requirements and has special knowledge and experience in the application of accounting standards and internal control procedures. In particular, and in accordance with its mandate, the Audit and Finance Committee discussed issues of corporate financing, financial planning and development, fiscal policy, improvement of the internal control system, compliance within the Group, in particular the compliance structure, as well as any negative deviations of business performance from budgeted performance. The Committee also focused on the Executive Board’s Operational Excellence project, the goal of which is to optimize the structures and processes of the support functions of finance, IT and human resources at Bertelsmann. A further focus was the auditing of the annual financial statements and the consolidated financial statements in March 2015. In this role, the Committee also addressed the independence of the auditor and the additional services performed by the latter. The Audit and Finance Committee discussed the provisional findings from the audit of the annual financial statements in depth in a conference call with the auditor before the actual financial review meeting. The 2014 Interim Report was extensively discussed with the Committee prior to publishing in August 2014. In the reporting period, the Committee also thoroughly examined the accounting process, the effectiveness of the internal control system, the risk management system and the internal audit system, and it also requested regular reports from the Head of Corporate Audit and Consulting. The Audit and Finance Committee of Bertelsmann SE & Co. KGaA met four times and held one conference call during the reporting period 2014.
Working Group of Employee Representatives on the Supervisory Board
In addition to the Audit and Finance Committee, the Supervisory Board also established the Working Group of Employee Representatives on the Supervisory Board. This Committee facilitates the Executive Board’s dialog with employee representatives on the Supervisory Board about corporate-culture issues and current topics of general significance for employees as well as the preparation and discussion of matters that are relevant to the Supervisory Board. The creation of this Working Group is indicative of the special corporate culture at Bertelsmann, which promotes active partnership, and this idea has proven highly productive in practice. The meetings of this Working Group were chaired by Ms. Liz Mohn. The Working Group of Employee Representatives on the Supervisory Board met four times in financial year 2014.
Audit of the Annual and Consolidated Financial Statements
PricewaterhouseCoopers AG, Frankfurt, audited the annual and consolidated financial statements produced by the Bertelsmann Management SE Executive Board as well as the Bertelsmann SE & Co. KGaA Group management report, which is combined with the company’s management report, for the financial year January 1 through December 31, 2014, each of which received an unqualified auditor’s opinion. The annual financial statements were produced in accordance with HGB (German Commercial Code) and the consolidated financial statements of Bertelsmann SE & Co. KGaA were produced in accordance with the International Financial Reporting Standards (IFRS) as applicable in the European Union in line with section 315a HGB. The Supervisory Board’s Audit and Finance Committee mandated the auditor of the annual financial statements and consolidated financial statements in accordance with the Annual General Meeting resolution. The auditor performed the audit in observance of German accepted auditing principles established by the German Institute of Independent Auditors (IDW). The auditor was additionally instructed to audit the risk early-warning system at Bertelsmann SE & Co. KGaA, which it found to be satisfactory in terms of section 91 (2) AktG (German Stock Corporation Act). The auditor and Group auditor of the annual and consolidated financial statements promptly submitted financial statement documents and the audit reports to all members of the Supervisory Board by the specified deadline in advance of the financial review meeting. On March 27, 2015, the auditor attended the financial-review meetings of both the Audit and Finance Committees and the plenary session of the Supervisory Board and gave an extensive report and answered questions. He was able to confirm that, in the course of the audit, no significant weaknesses had been identified in the accounting-related internal control system. The Audit and Finance Committee discussed the annual financial statement documents and audit reports in detail. The findings of the auditor and Group auditor of the annual and consolidated financial statements were carefully reviewed in an internal audit of the annual and consolidated financial statements. The Audit and Finance Committee reported comprehensively to the plenary session of the Supervisory Board concerning the audit of the annual and consolidated financial statements and the audit reports.
The plenary session of the Supervisory Board reviewed the annual financial statements, consolidated financial statements and combined management report, taking into account the recommendations of the Audit and Finance Committee and those contained in the audit reports and following further discussion with the auditor. The Supervisory Board concurred with the audit findings. After its own final scrutiny of the annual and consolidated financial statements and the combined management report, the Supervisory Board – acting in accordance with the Audit and Finance Committee’s recommendation – has raised no objections. The financial statements produced by the Bertelsmann Management SE Executive Board are thus approved. The Supervisory Board has furthermore reviewed the Bertelsmann Management SE Executive Board proposal as to the amount of net retained profits for appropriation to shareholders and concurs with said proposal. The amount of the dividend proposed by the Executive Board of Bertelsmann Management SE is appropriate, in the view of the Supervisory Board, in consideration of the economic environment, the company’s economic situation and the interests of the shareholders.
Membership Changes in the Bertelsmann Management SE Executive Board and Supervisory Board
The business of Bertelsmann SE & Co. KGaA has been managed by its personally liable partner, Bertelsmann Management SE, represented by its Executive Board. The past financial year saw the following changes to the Executive Board of Bertelsmann Management SE: On November 28, 2014, Dr. Immanuel Hermreck was appointed as a member of the Executive Board of Bertelsmann Management SE with effect from January 1, 2015. The appointment of Dr. Judith Hartmann as a member of the Executive Board ended by mutual consent on December 31, 2014. The Supervisory Board would like to thank Dr. Hartmann for her excellent and successful work.
The reporting period saw the following changes to the Supervisory Board: With the end of the ordinary Annual General Meeting of Bertelsmann SE & Co. KGaA, the periods of office of Mr. Kai Brettmann, Mr. Helmut Gettkant, Mr. Horst Keil and Ms. Christiane Sussieck came to an end. In an extraordinary Annual General Meeting on July 4, 2014, Mr. Kai Brettmann, Mr. Murat Cetin, Mr. Helmut Gettkant and Ms. Christiane Sussieck were appointed as employee representatives as members of the Supervisory Board. The Supervisory Board would like to thank Mr. Horst Keil for his excellent, constructive and trusting cooperation. At present, all twelve members of the Supervisory Board of Bertelsmann Management SE are also members of the currently 17-strong Supervisory Board of Bertelsmann SE & Co. KGaA.
In 2014, the global economy showed moderate growth. Most European TV markets recovered slightly after largely declining in the previous year. The English- and German-language book markets showed stable development, with a significant increase in the share represented by e-books in Germany. The magazine markets in Germany and France were characterized by declining advertising and circulation business, while the service markets continued to grow. The European print and global storage media markets continued to decline. The music markets for publishing rights grew slightly. Overall, the Group achieved a good operating result and an adequate return on sales with moderate revenue growth. In this connection the Supervisory Board is pleased to note that the share represented by growth businesses continued to increase in financial year 2014 as well.
The Supervisory Board expresses its deep gratitude and appreciation for the good work of the Executive Board in financial year 2014 and would like to thank all executives and employees for their commitment and achievements.
Gütersloh, March 27, 2015
Christoph Mohn Chairman of the Supervisory Board