Declaration of Corporate Governance

in accordance with § 289a of the German Commercial Code (HGB)

 
Statement of compliance in accordance with § 161 of the German Stock Company Act (Aktiengesetz)

On 15 February 2016, the Managing Board and on 16 February 2016, the Supervisory Board resolved to submit the following statement of compliance in accordance with § 161, section 1 of the German Stock Company Act: The Managing Board and Supervisory Board of HeidelbergCement AG declare, in accordance with § 161, section 1 of the German Stock Company Act, that they have complied with, and are in compliance with, the recommendations of the Government Commission on the German Corporate Governance Code (hereafter referred to as the Code), with the following exceptions:

  • The performance-oriented element of the remuneration of the Supervisory Board, which was initially still in force during the reporting period, was not geared towards the sustainable development of the Group (deviation from point 5.4.6). This deviation has now been eliminated with retroactive effect, as the Annual General Meeting on 7 May 2015 abolished the variable remuneration of members of the Supervisory Board with effect from 1 January 2015.
    Justification: The variable element of the remuneration of the Supervisory Board in force from 2010 to the end of 2014 was dependent on the Group earnings per share achieved in the respective previous year. As it was not based on a multi-year assessment, this variable element was thus not sustainable in the sense of the Code.
  • The shareholdings of members of the Supervisory Board are not disclosed (deviation from point 6.3).
    Justification: The members of the Supervisory Board are bound by the shareholding disclosure requirements under § 21 of the German Securities Trading Law (Wertpapierhandelsgesetz) and the Directors’ Dealings disclosure requirements under § 15a of the German Securities Trading Law. This seems to guarantee sufficient transparency as regards the shareholdings of members of the Supervisory Board.

For the reporting period from 9/10 February 2015 (submission date of previous statement of compliance) to 12 June 2015, the above statement relates to the version of the Code published in the German Federal Gazette (Bundesanzeiger) dated 24 June 2014. For the period since 13 June 2015, it relates to the version of the Code dated 5 May 2015, published on 12 June 2015.

Heidelberg, 15/16 February 2016

HeidelbergCement AG

The Managing Board                    The Supervisory Board

Code of Business Conduct

HeidelbergCement’s globalization process – characterized by rapid growth and geographical expansion – has required the integration of many different cultures. Being successful as one Group requires the sharing of common values. In our Corporate Mission, the company’s culture and our fundamental values are laid down in general. By adopting Group-wide leadership principles, we have built the foundation for a common management culture.
Our company’s ambition for operational excellence and a prime position in the champions league needs a solid foundation of commitment to lawful and ethical conduct. The Code of Business Conduct describes our values of high ethical and legal standards for all our business activities from strategic planning to day-to-day procedures in all countries in which we operate.
All HeidelbergCement employees must comply not only with the letter but also with the spirit of the Code of Business Conduct. Managers have the additional responsibility of fostering a culture in which compliance with the HeidelbergCement policy and applicable law is at the core of our business activities. Living high ethical and legal standards in all our business activities is fundamental for the future success of HeidelbergCement and its employees.

Compliance

Within the Group’s management culture, strong emphasis is placed on the compliance programme, which is firmly anchored in the Group-wide management and supervisory structures. It comprises the entire compliance organisation within the Group, the setup of guidelines, and verification of compliance with these guidelines.

The compliance organisation is under the authority of the Chairman of the Managing Board, to whom the Director Group Compliance reports directly. Each country has its own compliance officer; however, responsibility for ensuring that employees’ conduct complies with the law and regulations lies with all managers and, of course, the employees themselves.

The compliance officers are supported by modern technologies and media, such as electronic learning platforms and learning programmes as well as an internet- and telephone-based reporting system. The entire compliance programme is reviewed on an ongoing basis for any necessary adjustments to current legal and social developments, and is continuously improved and developed accordingly.

Group-wide implementation of the compliance programme is monitored by regular and special audits by Group Internal Audit as well as via special half-yearly compliance reporting by the Director Group Compliance to the Managing Board and the Audit Committee of the Supervisory Board. As part of his responsibilities, the Director Group Compliance monitors the effectiveness of the compliance programme and verifies in particular whether it adequately satisfies the legal requirements and recognised compliance standards. An additional quarterly report regularly informs the Managing Board members with regional responsibility about the most important compliance incidents in their Group areas.

In 2015, the compliance officers’ preventive activities once again placed great emphasis on compliance with the provisions of competition legislation and anti-corruption regulations. This was backed by appropriate training measures in these areas. The project for the evaluation and reduction of corruption risks was successfully continued and almost completed. Another point of focus was the topic of trade sanctions. In 2014, we adopted a policy with the objective of implementing an IT-supported test procedure across the Group. In 2015, we fully implemented the processes for the assessment of new business partners as well as the regular review of almost the entire business partner position.

In addition to these key areas, other focuses continue to be occupational safety legislation and environmental law. This reflects the characteristics and specific features of a heavy industry that extracts raw materials and manufactures and markets homogeneous mass goods, and which generally operates locally. Special efforts are also made to observe the prohibition of insider trading, capital market and data protection regulations, regulations on non-discrimination in dealings with employees, and internal purchasing principles.

Compliance Reporting System

In order to support our commitment to compliance with applicable laws and international ethical standards we offer our employees as well as external persons the possibility to report concerns regarding any kind of unlawful behaviour or violation of internationally acknowledged conventions via our compliance hotline* “MySafeWorkplace”.

*As regards data protection/privacy issues, please note that the provider of the MySafeWorkplace hotline is a US-American company and that data entered into the system might be processed outside the European Union.

Examples of incident types to be reported:
  • Bribery/Kickbacks
  • Child labour
  • Discrimination
  • Information Security
  • Environmental issues
  • Safety issues etc.
Access to MySafeWorkplace

The MySafeWorkplace internet portal can be accessed by clicking the link http://www.mysafeworkplace.com/. The portal provides a means for communication between the reporting and the investigating person with the possibility to guarantee full anonymity of the reporting person if required.

Reporting guidelines

In order to ensure efficient and timely investigations of the reported incident the following details are necessary to be included in the report, additionally to the mandatory details:

  • appellation and address of the site/plant where the incident has taken place ("Additional Location Information")
  • precise date when the incident occurred
  • full names of suspected individuals and witnesses

The description of the incident should be as precise and straightforward as possible.

Principles

If wished so, the report can be made anonymously. The submitted incident reports are handled confidentially and in a way which avoids any retaliation towards the reporting person.

Working methods of Managing Board and Supervisory Board, and of their committees

As a German public limited company, HeidelbergCement is required by law to have a two-tier board system. The Managing Board is responsible for independently managing the Group; its members are jointly accountable for the management of the Group; the Chairman of the Managing Board coordinates the work of the members of the Managing Board. The Supervisory Board appoints, monitors, and advises the Managing Board and is directly involved in decisions of fundamental importance to the Group; the Chairman of the Supervisory Board coordinates the work of the Supervisory Board.

Management by the Managing Board

In managing the Group, the Managing Board is obliged to act in the Group’s best interests. It takes into account the interests of shareholders, its employees, and other stakeholders with the aim of creating sustainable added value. The Managing Board develops the Group’s strategy, coordinates it with the Supervisory Board, and ensures its implementation. It ensures that all provisions of law and the Group’s internal guidelines are adhered to, and works to achieve compliance by Group companies. It ensures appropriate risk management and risk controlling within the Group.

The Managing Board considers diversity when filling management positions within the Group, and in doing so, strives to give due consideration to women. On 15 September 2015, the Managing Board resolved to achieve a target figure of 14 % by 30 June 2017 for the proportion of women in managerial positions at the first level below the Managing Board at HeidelbergCement AG and a target figure of 15 % for the proportion at the second level. For further information, refer to the chapter Employees and society on page 97 f. After reconsideration, the Supervisory Board resolved on 14 September 2015 to maintain the current proportion of women in the Managing Board and to set the target figure for the proportion of women in the Managing Board by 30 June 2017 to 0%, although this specification explicitly states that the Supervisory Board is committed, as was previously the case, to take diversity into account when making personnel decisions.

The Managing Board Rules of Procedure issued by the Managing and Supervisory Boards govern, in connection with the schedule of responsibilities approved by the Supervisory Board, the work of the Managing Board, in particular the departmental responsibilities of individual members of the Managing Board, matters reserved for the full Managing Board, and the required majority for resolutions. In accordance with these rules, each member of the Managing Board runs his management department independently, with the provision that all matters of clearly defined fundamental importance are to be decided upon by the full Managing Board. This takes place in the regular meetings of the Managing Board, led by the Chairman of the Managing Board, on the basis of prepared meeting documents. The results of the meetings are recorded in minutes, which are issued to all members of the Managing Board. There are no Managing Board committees.

Consultation and supervision by the Supervisory Board

The task of the Supervisory Board is to regularly advise and supervise the Managing Board in the management of the Group. The Managing Board must involve the Supervisory Board in decisions of fundamental importance to the Group. The Supervisory Board Rules of Procedure issued by the Supervisory Board govern its organisation and work, in particular the required majority for resolutions, the legal transactions and measures requiring its consent, the standard retirement age for Managing and Supervisory Board members, and the tasks of established committees.

The Supervisory Board meets at least twice every half-year; at these meetings, it usually discus­ses the open topics and passes the required resolutions, on the basis of reports drawn up by the Managing Board and documents received in advance in preparation for the meeting. Additional or extraordinary meetings are held if necessary. The results of the meetings are recorded in minutes, which are issued to all members of the Supervisory Board. The Supervisory Board comprises a number of independent members – a number which it deems sufficient – and at least one independent member with expertise in either accounting or auditing. In accordance with the Articles of Association, the Supervisory Board has set up a total of four committees, which are entrusted with the tasks and working methods described below. The following respective plenary session of the Supervisory Board is given an account of the results of the committee work.

The Personnel Committee is responsible for preparing the decision of the Supervisory Board concerning the appointment of members of the Managing Board, for preparing the election of the Chairman of the Managing Board, and the establishment of the Managing Board’s remuneration structure as well as the remuneration paid to the individual members of the Managing Board. It is also responsible for making a decision concerning the structuring of the non-remuneration-related legal relationships between the company and the members of the Managing Board. The Personnel Committee comprises Messrs Fritz-Jürgen Heckmann, Josef Heumann, Hans Georg Kraut, Ludwig Merckle, Alan Murray, and Heinz Schmitt; the Chairman is Mr Ludwig Merckle.

The Audit Committee is responsible for preparing the decision of the Supervisory Board con­cerning the adoption of the annual financial statements and the approval of the consolidated financial statements. It is also responsible for monitoring the accounting process, the effectiveness of the internal control system, the risk management system, the internal audit system, the compliance programme, and the audit. When dealing with the audit, it is responsible in particular for the preparation of the Supervisory Board’s proposal to the Annual General Meeting for the appointment of the auditor, issuing the audit assignment, establishing points of focus for the audit, additional services provided by the auditor, concluding the fee agreement with the auditor, verifying the auditor’s independence including obtaining the auditor’s statement of independence, and making the decision concerning measures to be taken if reasons emerge during the audit to warrant the possible disqualification of the auditor or suggest a conflict of interest on the part of the auditor. The Audit Committee discusses the half-yearly and quarterly reports with the Managing Board before they are published.

The Chairman of the Audit Committee has specialist knowledge and experience in the application of accounting principles and internal control processes. In addition to the Chairman, the Audit Committee includes at least one independent member with expertise in either accounting or auditing. The Audit Committee comprises Messrs Robert Feiger, Fritz-Jürgen Heckmann, Max Dietrich Kley, Ludwig Merckle, Heinz Schmitt, and Werner Schraeder; the Chairman is Mr Ludwig Merckle.

The Nomination Committee is responsible for putting suitable candidates forward to the Super­visory Board for its proposals for election to be made to the Annual General Meeting. It comprises Messrs Fritz-Jürgen Heckmann, Ludwig Merckle, and Tobias Merckle as shareholder representatives; the Chairman is Mr Fritz-Jürgen Heckmann.

The Arbitration Committee, formed in accordance with § 27, section 3 and § 31, section 3 of the German Codetermination Law, is responsible for making a proposal to the Supervisory Board for the appointment of members of the Managing Board if the necessary two-thirds majority is not initially achieved. It comprises Messrs Fritz-Jürgen Heckmann, Hans Georg Kraut, Tobias Merckle, and Heinz Schmitt; the Chairman is Mr Fritz-Jürgen Heckmann.

Composition of the Supervisory Board, Diversity

Adopting the recommendations stated in point 5.4.1 of the Code, the Supervisory Board resolved on 28 June 2012 and 14 September 2015 to set the following concrete objectives regarding its composition: The composition of the Supervisory Board is an appropriate reflection of the national and international alignment of HeidelbergCement as a leading building materials manufacturer. The Supervisory Board comprises at least three members who have been elected by the shareholders and who are independent members in line with point 5.4.2 of the Code. The Supervisory Board comprises at least two female members. The standard retirement age for members of the Supervisory Board is 75 years; at this age ends also the regular limit of length of membership of the Supervisory Board. The Supervisory Board considers that its constitution corresponds to its specified goals.

At present, the Supervisory Board includes two women, one of whom was elected by shareholders and the other by employees. In accordance with the legal transitional periods, the minimum proportion of at least 30% each of women and men in the Supervisory Board, as specified in § 96, section 2 of the German Stock Company Act, only applies to new appointments to the Supervisory Board of the company as of 1 January 2016. No new appointments have yet been made.

Cooperation between Managing Board and Supervisory Board

The Managing Board and Supervisory Board cooperate closely for the benefit of the Group. To this end, the Managing Board coordinates the Group’s strategic approach with the Supervisory Board and discusses the current state of strategy implementation with the Supervisory Board at regular intervals. For clearly defined transactions of fundamental importance, the Supervisory Board has specified provisions in the Managing Board Rules of Procedure requiring its approval.

The Managing Board informs the Supervisory Board regularly, without delay and comprehensively, of all issues of importance to the Group with regard to strategy, planning, business development, risk situation, risk management, and compliance. The Managing Board explains deviations of the actual business development from previously formulated plans and goals, indicating the reasons for this. The Supervisory Board has included detailed provisions in the Managing Board Rules of Procedure with regard to the Managing Board’s information and reporting duties. Documents required for decisions, in particular, the annual financial statements, the consolidated financial statements, and the Auditors’ report, are sent to the members of the Supervisory Board in due time before the meeting. The cooperation between the Managing Board and the Supervisory Board is shaped by mutual trust and a culture of open debate while fully protecting confidentiality.

In the periods between Supervisory Board meetings, the Chairman of the Supervisory Board also maintains regular contact with the Managing Board, especially the Chairman of the Managing Board, to discuss Group issues regarding strategy, planning, business development, risk situation, risk management, and compliance. The Chairman of the Supervisory Board is informed by the Chairman of the Managing Board without delay on important events which are essential for the assessment of the situation and development, as well as for the management of the company.

Shareholdings of members of the Managing Board and Supervisory Board

The direct or indirect ownership of shares or share-based financial instruments, especially derivatives, by members of the Managing Board has, neither in any individual case nor in total, exceeded the threshold of 1% of the issued shares.

According to the notifications available to the company, Supervisory Board member Ludwig Merckle holds via VEMOS 2 Beteiligungen GmbH, a company under his control, 26.2% of the issued shares. As regards the other members of the Supervisory Board, the ownership of shares or share-based derivatives has, neither in any individual case nor in total, exceeded the threshold of 1 % of the issued shares, according to the available reports.

Relationships with shareholders

In line with the options provided for in accordance with the law or the Articles of Association, the shareholders exercise their rights before or during the Annual General Meeting and thereby exercise their voting right. Each share carries one vote at the Annual General Meeting (one-share-one-vote principle). The ordinary Annual General Meeting is normally held in the first five months of the financial year. All important documents for exercising shareholder rights as well as the resolution issues and documentation are duly and easily available on our website for shareholders to access. Both the notice of the agenda for the Annual General Meeting and our website will provide shareholders with the information they need to exercise their rights, and particularly their voting rights at the Annual General Meeting, including by way of proxy or postal vote. A company proxy bound by instructions is also available to shareholders to exercise their voting rights at the Annual General Meeting. The presentation slides accompanying the report given by the Chairman of the Managing Board to the Annual General Meeting will be made available on the Internet at the same time. After the Annual General Meeting is over, our website will be updated with the attendance details and the voting results of each agenda item.

As part of our investor relations work, we provide information to shareholders and other investors comprehensively and regularly on a quarterly basis to tell them about the business development as well as the financial situation and earnings position, and also provide them with notifications in accordance with the German Securities Trading Law and information on analyst presentations, press releases, and the annual financial calendar.

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