tensively with other key company business at their meetings and in separate discussions. The members of the Supervisory Board were also available to the Exec- utive Board for consultation outside the meetings. The chairman of the Supervisory Board in particular was in regular contact with the Executive Board and its chairman and discussed current company issues and developments with them.
Meetings of the Supervisory Board and the committees
The Supervisory Board held four regular meetings in the year under review as well as the separate strategy meeting, which has now become a permanently estab- lished event. One conference call also took place. No member was absent from more than two of the meet- ings or conference calls. The Chairman’s Committee held four meetings and three conference calls in the year under review. The Audit Committee met four times in 2012. The Mediation Committee in accordance with Section 27 (3) of the German Co-determination Act (Mitbestimmungsgesetz) and the Nomination Commit- tee did not need to meet. There are no other commit- tees. All committees report to the plenary session on a regular basis. Their duties are described in more detail and their members listed in the Corporate Governance Report (pages 32 et seq.).
Key topics dealt with by the Supervisory Board, Chairman’s Committee and Audit Committee The Supervisory Board again held in-depth discussions on the company’s strategic development and orienta- tion in general as well as the strategy and strategic planning of its divisions, particularly at its strategy meeting. In addition to the regular reports from the Executive Board on current business developments, another frequent topic of discussion for the plenary session and the committees was the continuing debt crisis in Europe and its effects on the economy, partic- ularly the automotive industry. Other regularly dis- cussed topics included the development of prices for
and was subsequently adopted by the Annual Share- holders’ Meeting on April 27, 2012. Further details are provided in the Remuneration Report (pages 38 et seq.). Following preparation by the Chairman’s Com- mittee, the plenary session of the Supervisory Board also dealt with matters relating to Executive Board remuneration.
To ensure that the Supervisory Board is involved in the decisions on key company matters, the company’s Articles of Incorporation and the Supervisory Board’s By-Laws establish the legal transactions that require the approval of the Supervisory Board and/or its Chairman’s Committee. In line with these regulations, the Supervisory Board and the Chairman’s Committee held several in-depth discussions on the establishment of the joint venture with SK Innovation, which is ex- tremely important for the company’s future in the area of electric and hybrid vehicles. In addition, the Super- visory Board and/or the Chairman’s Committee dis- cussed and approved plans for the acquisition of the automotive air conditioning business of Parker Hannifin and the acquisition of two British companies for the Automotive Group, the construction of a production facility in Kaluga, Russia, for ContiTech’s Fluid Tech- nology business unit, and the provision of collateral by subsidiaries, among other matters. The Supervisory Board and its committees also closely monitored the measures of the Executive Board to further improve the financing situation, i.e. the issue of a U.S. dollar bond and the refinancing of the syndicated loan. In addition, the news of the shares’ return to the DAX was of course particularly pleasing. At its meeting on December 12, 2012, the Supervisory Board discussed the annual planning for 2013 and long-term planning and also approved the planning and investment plans for fiscal 2013.
The Audit Committee was also informed by the Execu- tive Board in detail and on an ongoing basis of the sales, results and employment development in the
the Audit Committee. The Audit Committee also issued the mandate for the audit of the 2012 annual and consolidated financial statements to KPMG, pursuant to the resolution adopted by the Annual Shareholders’ Meeting, and stipulated the focus of the audit.
The Audit Committee is closely involved in compliance and risk management as well. The Executive Board regularly reported to it on the work of the Compliance department and the Internal Auditing department, and on significant events. The head of the Compliance department and the head of Internal Auditing were also available to provide information to the Audit Committee and its chairman directly in coordination with the Exec- utive Board. Furthermore, the Audit Committee re- ceived reports on the audit performed by Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft in ac- cordance with Audit Standard 980 of the Institut der Wirtschaftsprüfer e.V. (IDW), as a result of which it issued an unqualified audit opinion at the beginning of 2013 regarding the implementation of the compliance management system with respect to anti-corruption and competition/antitrust. In addition, the other materi- al risks covered by the risk management system were presented in the Audit Committee with the correspond- ing measures resolved by the Executive Board. The Audit Committee has satisfied itself of the effectiveness of the internal control system, the risk management system and the internal audit system.
Conflicts of interest and corporate governance No conflicts of interest arose among the members of the Executive Board or the Supervisory Board in the year under review. In its opinion, the Supervisory Board also had an appropriate number of independent mem- bers as defined in the German Corporate Governance Code at all times in the period under review.
On April 27, 2012, the Supervisory Board and Execu- tive Board agreed an updated declaration in accord- ance with Section 161 of the German Stock Corpora- tion Act (Aktiengesetz – AktG) on the recommendations of the German Corporate Governance Code. The Su- pervisory Board will discuss the amendments made to the German Corporate Governance Code in 2012 at its meeting in March 2013. In particular, it will once again discuss the recommendation to state specific targets for the future composition of the Supervisory Board and will review the targets set in 2011 and reformulate them where necessary. Further details on corporate
governance are included in the Corporate Governance Report (pages 32 et seq.).
Annual and consolidated financial statements The annual financial statements as at December 31, 2012, prepared by the Executive Board in line with the requirements of the German Commercial Code
(Handelsgesetzbuch – HGB), the 2012 consolidated
financial statements and the management reports for the company and the corporation were reviewed by KPMG, including the accounting, the accounting- related internal control system and the system for early risk recognition. KPMG also reviewed the Executive Board’s Dependent Company Report in accordance with Section 312 AktG. The 2012 consolidated finan- cial statements of Continental AG were prepared in accordance with the International Financial Reporting Standards (IFRS). The auditor issued unqualified audit opinions. In terms of the system for early risk recogni- tion, the auditor found that the Executive Board had taken the necessary measures under Section 91 (2)
AktG and that the company’s system for early risk
recognition is suitable for identifying developments at an early stage that pose a risk to the company as a going concern. KPMG issued the following unqualified audit opinion on the Dependent Company Report in accordance with Section 313 (3) AktG:
“Based on the results of our statutory audit and eval- uation we confirm that:
► the actual information included in the report is cor- rect,
► payments by the company in connection with the legal transactions listed in the report were not unduly high or that disadvantages had been compensated for, and
► there are no circumstances in favor of a significantly different assessment than that made by the Execu- tive Board in regard to the measures listed in the report.”
The documents relating to the annual financial state- ments, including the Dependent Company Report, and the audit reports were discussed with the Executive Board and the auditor in the Audit Committee meeting on February 26, 2013. They were also discussed at length at the Supervisory Board’s meeting to approve
the annual financial statements on March 19, 2013. The required documents were distributed to all mem- bers of the Audit Committee and the Supervisory Board in good time before these meetings so that the members had sufficient opportunity to review them. The auditor was present at these discussions. The auditor reported on the main results of the audits and was available to provide additional information to the Audit Committee and the Supervisory Board. Based on its own review of the annual financial statements, the consolidated financial statements, the company man- agement report, the corporation management report and the Dependent Company Report including the final declaration of the Executive Board, and based on the report and the recommendation of the Audit Commit- tee, the Supervisory Board concurred with the results of the auditor’s audit. There were no objections. The Supervisory Board approved the annual financial statements and the consolidated financial statements. The annual financial statements are thereby adopted. Personnel changes in the Supervisory Board and Executive Board
There were no changes in the Supervisory Board in 2012. Further information on the members of the Su- pervisory Board and its committees who were in office
in the year under review can be found on pages 252 and 253. In the Executive Board, Ms. Elke Strathmann, who had been appointed by the Supervisory Board in September 2011, took up her position on January 2, 2012.
The Supervisory Board would like to thank the Execu- tive Board, all the employees and the employee repre- sentatives for their excellent performance, which made the company’s great success in the past year possible. Hanover, March 19, 2013
For the Supervisory Board Sincerely,
Prof. Dr.-Ing. Wolfgang Reitzle Chairman
Good, responsible corporate governance geared to- wards sustainable, long-term value creation is the measure that governs the actions of the Executive Board and Supervisory Board of Continental AG, and the basis of the company’s success in the interests of all its stakeholders. In the following, the Executive Board and Supervisory Board report on corporate governance at Continental in accordance with our Corporate Governance Principles, Item 3.10 of the German Corporate Governance Code and Section 289a of the German Commercial Code (Handels-
gesetzbuch – HGB). The report is supplemented by
the remuneration report of Continental AG, which is a part of the company’s Management Report.
Continental AG’s Corporate Governance Principles are closely modeled on the German Corporate Govern- ance Code. Together with the BASICS, in which we have set out our values and guidelines since 1989, and our Code of Conduct, these principles form a guideline for corporate management and control at Continental.
Corporate bodies
In line with the law and the Articles of Incorporation, the company’s corporate bodies are the Executive Board, the Supervisory Board and the Shareholders’ Meeting. As a German stock corporation, Continental AG has a dual management system characterized by a strict personnel division between the Executive Board as the management body and the Supervisory Board as the monitoring body.
The Executive Board and its practices
The Executive Board has sole responsibility for manag- ing the company free from instructions from third parties in accordance with the law, the Articles of Incorporation and the Executive Board’s By-Laws, while taking into account the resolutions of the Share- holders’ Meeting. Regardless of the principle of joint responsibility, whereby all members of the Executive
Board equally share responsibility for the management of the company, each Executive Board member is responsible for the areas entrusted to him or her ac- cordingly. The chairman of the Executive Board is responsible for the company’s overall management and business policy. He ensures management coordi- nation and uniformity on the Executive Board and represents the company to the public. The Executive Board currently has eight members.
The Executive Board has By-Laws which regulate in particular the allocation of duties among the Executive Board members, key matters pertaining to the compa- ny and its subsidiaries that require a decision to be made by the Executive Board, the duties of the Execu- tive Board chairman, as well as the process in which the Executive Board passes resolutions. The Articles of Incorporation and the Supervisory Board By-Laws require the consent of the Supervisory Board for signi- ficant measures carried out by management.
The Supervisory Board and its practices
The Supervisory Board appoints the Executive Board and supervises and advises it in the management of the company. The Supervisory Board is directly in- volved in decisions of material importance to the com- pany. As specified by law, the Articles of Incorporation and the Supervisory Board By-Laws, certain corporate management matters require the approval of the Su- pervisory Board. The chairman of the Supervisory Board coordinates its work and represents its interests vis-à-vis third parties. He maintains regular contact between meetings with the Executive Board, and in particular with its chairman, to discuss issues relating to the company’s strategy, business development, risk management and compliance.
Composition of the Supervisory Board
In accordance with the German Co-determination Act
(Mitbestimmungsgesetz – MitbestG) and the compa-
ny’s Articles of Incorporation, the Supervisory Board