Declaration on Corporate Governace
Corporate Governance stands for responsible and transparent management and corporate control oriented toward a sustainable increase in value. We are convinced that good corporate governance is an essential foundation for sustainable corporate success and enhances the confidence placed in our company by our shareholders, business partners, and employees, as well as the financial markets.
Declaration of the adidas AG Executive Board and Supervisory Board on the German Corporate Governance Code pursuant to § 161 German Stock Corporation Act (Aktiengesetz – AktG)
The adidas AG Executive Board and Supervisory Board issued the last Declaration of Compliance with the German Corporate Governance Code pursuant to § 161 AktG in December 2019. Insofar as it is related to the past, the following declaration refers to the recommendations of the ‘Government Commission on the German Corporate Governance Code’ as of February 7, 2017, published in the Federal Gazette on April 24, 2017 and May 19, 2017 (corrected version) (‘Code 2017’); as far as it is related to the present and future, the following declaration refers to the recommendations in the version as of December 16, 2019, published in the Federal Gazette on May 20, 2020 (‘Code 2019’ or ‘Code’).
1. The adidas AG Executive Board and Supervisory Board declare that since the last declaration, the recommendations of the Code 2017 have been met with the following exception:
Recommendation 5.4.5 Section 1 Sentence 2 Code 2017
One member of the Supervisory Board, Ian Gallienne, holds more than three mandates in supervisory bodies of non-Group companies which are listed at a stock exchange or have similar requirements. Ian Gallienne is Chief Executive Officer of Groupe Bruxelles Lambert (‘GBL’). GBL is a holding company that is regularly represented in the supervisory bodies of portfolio companies as an institutional investor, inter alia by its Chief Executive Officer. All companies (apart from adidas AG) in which Ian Gallienne is a member of the supervisory body are portfolio companies or subsidiaries of GBL or are under joint control of GBL and therefore belong to the same group of companies. They have to be attributed to his main occupation as Chief Executive Officer of GBL.
We are of the opinion that in accordance with its rationale, the recommendation 5.4.5 section 1 sentence 2 Code 2017 is thus not applicable to Ian Gallienne. For precautionary reasons, however, a deviation is declared. The Supervisory Board has also assured itself that Ian Gallienne has sufficient time to duly perform his duties as a member of the Supervisory Board of adidas AG.
2. The adidas AG Executive Board and Supervisory Board also declare that the recommendations of the Code 2019 have been and are met with the following deviations:
Recommendation C.5 Alternative 1 Code 2019
With regards to the mandates held by Ian Gallienne, reference is made to the above explanations. We are of the opinion that in accordance with its rationale, the recommendation C.5 alternative 1 Code 2019 is also not applicable to Ian Gallienne. However, a deviation is declared for precautionary reasons.
Recommendation C.5 Alternative 2 Code 2019
The Chairman of the Supervisory Board, Thomas Rabe, also is Chief Executive Officer of the listed company RTL Group S.A., Luxembourg. In this respect, the company deviates from recommendation C.5 alternative 2. However, the Supervisory Board is convinced that the mandate of Thomas Rabe at RTL Group S.A. does not affect the due performance of his duties as Chairman of the Supervisory Board. In particular, the Supervisory Board has assured itself that Thomas Rabe has sufficient time to perform his duties.
Recommendations G.1 and G.10 Sentence 2 Code 2019
In comparison to the Code 2017, the Code 2019 contains modified recommendations for the Executive Board compensation. The current Executive Board compensation system, as resolved by the Supervisory Board and approved by the Annual General Meeting of adidas AG on May 9, 2018, does not fully comply with the new recommendations G.1 and G.10 sentence 2 Code 2019. The Supervisory Board will propose a modified Executive Board compensation system to the 2021 Annual General Meeting which fully complies with the recommendations of the Code 2019.
Herzogenaurach, December 2020
For the Executive Board
Chief Executive Officer
For the Supervisory Board
Chairman of the Supervisory Board
Dual board system
As a globally operating public listed company with its registered seat in Herzogenaurach, Germany, adidas AG is subject to, inter alia, the provisions of German stock corporation law. A dual board system, which assigns the management of the company to the Executive Board and advice and monitoring of the Executive Board to the Supervisory Board, is one of the fundamental principles of German stock corporation law. These two boards are strictly separated both in terms of members and competencies. However, both boards cooperate closely in the interest of the company.
Composition and working methods of the Executive Board
The composition of our Executive Board, which consists of six members, reflects the international character of our company. The Executive Board is responsible for independently managing the company, determining the Group’s strategic orientation, agreeing the strategy with the Supervisory Board, and ensuring its implementation. Further, it defines business targets, company policy, and the organization of the Group. The Executive Board is in charge of preparing the quarterly statements, the half-year report, and the annual financial statements and consolidated financial statements as well as the combined Management Report of adidas AG and the Group. Moreover, it prepares a combined non-financial statement for the company and the Group. Additionally, the Executive Board ensures appropriate risk management and risk controlling as well as compliance with statutory regulations and internal guidelines. In this regard, the Executive Board is responsible for implementing an adequate compliance management system which meets the requirements of the company’s risk situation. It is bound to the company’s interest and obligated to strive for a sustained increase in company value.
Notwithstanding the Executive Board’s overall responsibility, its members are individually responsible for managing their respective operations in accordance with the Business Allocation Plan for the Executive Board. There are no Executive Board committees. The Chief Executive Officer is responsible for lead management and development of the company, including the coordination of the operations, brands, and markets. The members of the Executive Board keep each other informed regularly and comprehensively about all significant developments in their business areas and align on all cross-functional measures. Collaboration within the Executive Board is further governed by the Rules of Procedure of the Executive Board and the Business Allocation Plan. These documents specifically stipulate requirements for meetings and resolutions as well as for cooperation with the Supervisory Board.
The Executive Board and Supervisory Board cooperate closely for the benefit of the company. The Executive Board reports to the Supervisory Board regularly, extensively, and in a timely manner on all matters relevant to the company’s strategy, planning, business development, financial position, and compliance as well as on material business risks. Fundamental questions related to the corporate strategy and its implementation are thoroughly discussed and agreed with the Supervisory Board.
The Executive Board is appointed by the Supervisory Board. The Supervisory Board is committed to promoting a culture of diversity and inclusion at adidas. Diversity is understood in the broadest sense, including age, gender, cultural origin, nationality, educational background, professional qualifications, and experience. Greater diversity on the Executive Board will help secure the long-term success of adidas by taking diverse perspectives into account. In addition, the Supervisory Board has agreed upon an age limit of 65 years for Executive Board members.
The General Committee of the Supervisory Board already accounts for diversity when selecting candidates for Executive Board positions. Every decision by the Supervisory Board on the composition of the Executive Board is made in the best interests of the company and with due consideration of all the circumstances in each individual case. In the opinion of the Supervisory Board, the current composition of the Executive Board meets the diversity requirement outlined above.
No member of the Executive Board has accepted a Supervisory Board chair or more than two Supervisory Board mandates in non-group listed companies or in supervisory bodies of non-group companies with comparable requirements. Executive Board
Composition and working methods of the Supervisory Board
Our Supervisory Board consists of 16 members. It comprises eight shareholder representatives and eight employee representatives in accordance with the German Co-Determination Act (Mitbestimmungsgesetz – MitbestG). The shareholder representatives are elected by the shareholders at the Annual General Meeting, and the employee representatives by the employees. Supervisory Board
The most recent regular elections to the Supervisory Board were held in the 2019 financial year. In the 2020 financial year, the Annual General Meeting appointed Christian Klein to the Supervisory Board as a shareholder representative. This by-election was required as the term of office of Igor Landau, the former Chairman of the Supervisory Board, ended at the conclusion of the 2020 Annual General Meeting. The departure of Igor Landau also necessitated a new Chairman of the Supervisory Board. The Supervisory Board elected Thomas Rabe to this role with effect from the end of the 2020 Annual General Meeting. The terms of office of the current members of the Supervisory Board end at the conclusion of the 2024 Annual General Meeting – with the sole exception of Herbert Kauffmann, whose term ends at the conclusion of the 2021 Annual General Meeting.
In order to increase the efficiency of its work and to deal with complex topics, the Supervisory Board has formed five permanent committees from within its members, which, inter alia, prepare its resolutions and, in certain cases, pass resolutions on its behalf. At present, these committees are as follows:
Thomas Rabe (Chairman)
Thomas Rabe (Chairman)
Bodo Uebber (Chairman)
Thomas Rabe (Chairman)
Thomas Rabe (Chairman)
The tasks, responsibilities, and work processes of the committees are in line with the requirements of the German Stock Corporation Act and the Code. The Chairmen of the committees report to the Supervisory Board on the results of the committee work on a regular basis. Further information on the committees can be found on the company’s website. -group.com/s/supervisory-board-committees
Objectives for the composition of the Supervisory Board
In its meeting in October 2020, the Supervisory Board agreed upon the objectives for its composition (including the competency profile for the entire Supervisory Board), taking into account the recommendations of the Code. These objectives are published on our website. According to these objectives, the Supervisory Board should be composed in such a way that qualified monitoring of and advice to the Executive Board are ensured. Its members as a whole are expected to have the knowledge, skills, and professional experience required to properly perform the tasks of a supervisory board in a capital market-oriented international company in the sporting goods industry. To this end, it is ensured that the Supervisory Board as a whole possesses the competencies considered essential in view of adidas’ activities. This includes, in particular, in-depth knowledge and experience in the sporting goods and sports- and leisurewear industry, in the business of fast-moving consumer-oriented goods and in the areas of digital transformation and information technology (including IT security), production, marketing, and sales, in particular in the e-commerce and retail sector. Moreover, the Supervisory Board is expected to possess knowledge and experience in the markets relevant to adidas, in particular the Asian and US markets, and in the management of a large international company. Furthermore, the Supervisory Board as a whole must possess knowledge and experience in the areas of business strategy development and implementation, human resources planning and management, accounting and financial reporting, controlling/risk management, governance/compliance, corporate social responsibility, and sustainability. At least one member of the Supervisory Board must have expertise in the areas of accounting or auditing of annual accounts. Additionally, the Supervisory Board members as a whole are expected to be familiar with the sporting goods industry. -group.com/s/bodies
Regarding the independence of its members, the Supervisory Board considers the following provisions to be appropriate: More than half of the Supervisory Board members should be independent within the meaning of the Code, whereby it is assumed that the independence of employee representatives is not impaired either by their role as employee representatives or their status as adidas employees. If we consider shareholder representatives and employee representatives separately, more than half of the Supervisory Board members in each of these groups must be independent. From the company’s view and following the regulations of the German Corporate Governance Code, Supervisory Board members are to be considered independent if they have no personal or business relationship with the company or its Executive Board that may cause a substantial, and not merely temporary, conflict of interest.
More than two-thirds of the shareholder representatives must be free of any potential conflicts of interest. This applies in particular to potential conflicts of interest that may arise as a result of an advisory or board role among customers, suppliers, lenders, or other third parties. As a rule, members of the Supervisory Board should not have a board-level or advisory role with any key competitor and should not have a personal relationship with any key competitor.
Furthermore, the Supervisory Board is committed to a diverse composition in terms of age, gender, cultural origin, nationality, educational background, professional qualifications, and experience. An adequate number of the shareholder representatives should have long-standing international experience. In addition, each Supervisory Board member must ensure that they have sufficient time to properly perform the tasks associated with the mandate. In general, the age limit for the Supervisory Board should be 72 years at the time of their appointment. As a rule, the length of membership in the Supervisory Board should not exceed 15 years or three terms of office.
In the Supervisory Board’s assessment, the Supervisory Board as a whole in its current composition fulfills the objectives stated and the competency profile. With Bodo Uebber, Chairman of the Audit Committee, at least one member of the Supervisory Board has proven expertise in the areas of accounting or auditing of annual accounts. The names of the independent shareholder representatives are set out in the overview of all Supervisory Board members in this Annual Report. In the opinion of the Supervisory Board, all shareholder representatives qualified as ‘independent’ in the year under review. Supervisory Board
The Supervisory Board’s election proposals to the Annual General Meeting are always prepared by the Nomination Committee. They take into account the objectives regarding the Supervisory Board’s composition resolved upon by the Supervisory Board and are aimed at fulfilling the competency profile developed by the Supervisory Board for the Board as a whole. The Supervisory Board pays attention to a balanced composition to ensure that the required know-how is represented on as broad of a scale as possible. Moreover, the Supervisory Board ascertains that each proposed candidate has sufficient time to perform their mandates. Supervisory Board
Tasks of the Supervisory Board
The Supervisory Board monitors and advises the Executive Board on questions relating to the management of the company. The Executive Board regularly, expeditiously, and comprehensively reports on business development and planning as well as on the company’s risk situation including compliance and coordinates the strategy of the company and its implementation with the Supervisory Board. The Supervisory Board examines and approves the annual financial statements and consolidated financial statements as well as the combined Management Report of adidas AG and the Group, taking into consideration the auditor’s reports, and resolves upon the proposal of the Executive Board on the appropriation of retained earnings. Additionally, it resolves upon the Supervisory Board’s resolution proposals to be presented to the Annual General Meeting. Moreover, the Supervisory Board examines the combined non-financial statement for the company and the Group. Certain business transactions and measures of the Executive Board with fundamental significance are subject to prior approval by the Supervisory Board or by a Supervisory Board committee. The respective details are set out in § 9 of the Rules of Procedure of the Supervisory Board of adidas AG. Furthermore, the requirement of prior Supervisory Board approval is stipulated in some resolutions by the Annual General Meeting.
The Supervisory Board is also responsible for the appointment and dismissal of the Executive Board members as well as for the allocation of their areas of responsibility. The respective proposals are prepared by the General Committee. When appointing new Executive Board members, the Supervisory Board aims to select candidates with a wide range of complementary skills to ensure the best possible Executive Board composition for the company, keeping long-term succession planning in mind. The Supervisory Board takes a structural approach in its succession planning for the Executive Board. This is based on multiple planning horizons. Accordingly, the company has established a number of management groups (Core Leadership Group [CLG], Extended Leadership Group [ELG], and High Potentials). This ensures a sustainable approach to identifying and evaluating successor candidates for Executive Board positions, while also accommodating the company’s diversity concept. The Supervisory Board discusses succession planning on a regular basis.
Furthermore, the Supervisory Board determines the Executive Board compensation system, examines it regularly and decides on the individual overall compensation of each Executive Board member. Further information on Executive Board compensation is compiled in the Compensation Report. Compensation Report
Further information on Corporate Governance
More information on topics covered in this report can be found on our website, including:
- Articles of Association
- Rules of Procedure of the Executive Board
- Rules of Procedure of the Supervisory Board
- Rules of Procedure of the Audit Committee
- Supervisory Board committees (composition and tasks)
- CVs of Executive Board members and Supervisory Board members
- Objectives of the Supervisory Board regarding its composition (including competency profile for the full Supervisory Board)
Apart from the individual skills expected of the members, the Rules of Procedure of the Supervisory Board and of the Audit Committee also set out the tasks and responsibilities as well as the procedure for meetings and passing resolutions. These Rules of Procedure are available on our website. The Supervisory Board Report provides information on the activities of the Supervisory Board and its committees in the year under review. Supervisory Board Report
The members of the Supervisory Board are individually responsible for undertaking any necessary training and professional development measures required for their tasks and are supported by adidas AG in this regard. The company informs the Supervisory Board regularly about current legislative changes as well as opportunities for external training, and provides the Supervisory Board with relevant specialist literature. In this regard, the Supervisory Board was also informed about the latest corporate governance developments and dealt extensively with the new version of the German Corporate Governance Code, which came into force during the year under review.
In addition, the Supervisory Board as well as the Audit Committee, General Committee, and Nomination Committee regularly review the efficiency of their work. After an external review was last conducted in 2018 the Supervisory Board and the aforementioned committees again conducted an internal self-assessment review in the year under review as well as in the previous year. The members of the Supervisory Board found the work of the Supervisory Board as a whole and of the individual committees to be efficient and agreed specific measures aimed at improving the organization of the Supervisory Board’s work.
Commitment to the promotion of equal participation of women and men in leadership positions
When filling leadership positions in the company, the Executive Board takes diversity into account and aims for an appropriate consideration of women in particular. The Supervisory Board is also convinced that an increase in the number of women in leadership positions within the company is necessary to ensure that, in the future, a larger number of suitable female candidates are available for Executive Board positions. The Executive Board and Supervisory Board therefore recognize the enormous importance of the company’s initiatives to foster diversity and inclusion and to promote women to leadership positions. Our People
In August 2017, the Supervisory Board set a target for female representation on the Executive Board of 1/7 (14.29%), with a deadline of June 30, 2022. That target is met as a result of Amanda Rajkumar joining the Executive Board.
In addition, the Executive Board has set targets and deadlines for female representation in the first two management levels of adidas AG. The targets are 24.2% for the first management level below the Executive Board and 30% for the second management level. The deadline for both targets is December 31, 2021.
On the first management level below the Executive Board, the percentage share of women amounted to 18% at the balance sheet date. The target figure was thus not achieved. In this respect, it must be noted that adidas AG has only a small number of leadership positions on this management level; therefore, minor changes already result in considerable changes in percentage numbers. The missing of the defined target figure is particularly attributable to unplanned departures from the company in the year under review and partly also to replacements that only take effect in the following year. Due to the coronavirus pandemic, fewer replacements or personnel measures than originally planned were realized. On the second management level below the Executive Board, the percentage share of women amounted to 27% at the balance sheet date. The target figure was thus not achieved. This slight shortfall is also particularly attributable to unplanned departures from the company in the year under review and to the exceptional circumstances caused by the coronavirus pandemic. As at balance sheet date, female representation in leadership positions on a global level however amounted to 35.2%. The target figure of 32% for the year 2020 was thus clearly exceeded. The company will continue to intensify its efforts to remain an attractive employer in the future, with a particular focus on a long-term approach for equal participation in leadership positions – both through recruitment and through appropriate talent and succession planning management.
In accordance with § 96 section 2 sentence 1 AktG, at least 30% of the members of the Supervisory Board have to be female and at least 30% have to be male. In the year under review, the shareholder representatives and the employee representatives each resolved in accordance with § 96 section 2 sentence 3 AktG that this minimum quota shall be fulfilled separately for the shareholder representatives and the employee representatives. As at December 31, 2020, altogether five of the 16 Supervisory Board mandates of the company were held by women, two on the shareholder representative side and three on the employee representative side. The minimum quota required is thus fulfilled on both sides.
Avoiding conflicts of interest
The members of the Executive Board and Supervisory Board are obligated to disclose any conflicts of interest to the Supervisory Board without delay. Substantial transactions between the company and members of the Executive Board or related parties of the Executive Board require Supervisory Board approval. Contracts between the company and members of the Supervisory Board also require Supervisory Board approval. The Supervisory Board reports any conflicts of interest, as well as the handling thereof, to the Annual General Meeting. In the year under review, the members of the Executive Board and the members of the Supervisory Board did not face any conflicts of interest. Supervisory Board Report
Share transactions conducted by the Executive Board and Supervisory Board
An overview of the transactions of the Executive Board and the Supervisory Board pursuant to Article 19 of the Regulation (EU) No 596/2014 (Market Abuse Regulation) notified to adidas AG in 2020 is published on our website. -group.com/s/managers-transactions
Relevant management practices
Our business activities are oriented toward the legal systems in the various countries and markets in which we operate. This implies a high level of social and environmental responsibility. Further information on company-specific practices which are applied in addition to statutory requirements, such as our Code of Conduct (‘Fair Play’), on compliance with working and social standards within our supply chain, environ-mentally friendly resource management in our manufacturing processes and our social commitment, is available in this Annual Report and on our website. Our People Sustainability-GROUP.COM/S/SUSTAINABILITY
Compliance and risk management
Compliance with laws, internal and external provisions, and responsible risk management are part of corporate governance at adidas. Our compliance management system is linked to the company’s risk and opportunity management system. As part of our global ‘Fair Play Concept’, the compliance management system establishes the organizational framework for company-wide awareness of our internal rules and guidelines and for the legally compliant conduct of our business. It underscores our strong commitment to ethical and fair behavior in our own organization and also sets the parameters for how we deal with others. The principles of our compliance management system are set out in the Risk and Opportunity Report. The risk and opportunity management system ensures risk-aware, opportunity-oriented, and informed actions in a dynamic business environment in order to guarantee the competitiveness and sustainable success of adidas. Risk and Opportunity Report
Transparency and protection of shareholders’ interests
It is our goal to inform all institutional investors, private shareholders, financial analysts, business partners, employees, and the interested public about the company’s situation, at the same time and to an equal extent, through regular, transparent, and up-to-date communication. We publish all essential information, such as ad hoc announcements, press releases, and voting rights notifications as well as all presentations from roadshows and conferences, all financial reports, and the financial calendar on our website. With our Investor Relations activities, we maintain close and continuous contact with our current and potential shareholders. -group.com/s/investors Our Share
In addition, we provide all documents and information on our Annual General Meeting on our website. The shareholders of adidas AG exercise their shareholders’ rights at the Annual General Meeting. Each share grants one vote. Our shareholders are involved in all fundamental decisions at the Annual General Meeting through their participation rights. The company is committed to supporting our shareholders in exercising their rights at the Annual General Meeting.
Further information on the principles of our management
More information on topics covered in this report can be found on our website, including:
- Code of Conduct
- Social commitment
- Risk and opportunity management and compliance
- Information and documents on the Annual General Meeting
- Managers’ transactions
- Accounting and annual audit
A long-term incentive plan, which is part of the remuneration for senior executives of adidas, applies. Based on this plan, the plan participants receive virtual shares (Restricted Stock Units). As per their contracts, each Executive Board member is entitled to participate in the Long-Term Incentive Plan (LTIP) established for Executive Board members. The adidas shares purchased are subject to a multi-year lock-up period. Note 30 Our People Compensation Report
Employees of adidas AG and its affiliated companies are able to participate in an employee stock purchase plan, under which they can acquire adidas AG shares with a discount and benefit, on a prorated basis, from free matching shares. Note 28
Accounting and annual audit
adidas AG prepares the annual financial statements in accordance with the provisions of the German Commercial Code (Handelsgesetzbuch – HGB) and German Stock Corporation Act (AktG). The annual consolidated financial statements are prepared in accordance with the principles of the International Financial Reporting Standards (IFRS), as adopted by the European Union (EU).
KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin, was appointed as auditor for the 2020 annual financial statements and consolidated financial statements by the Annual General Meeting. The Supervisory Board had previously assured itself of the auditor’s independence. REPRODUCTION OF THE INDEPENDENT AUDITOR‘S REPORT