The actions of TUI AG´s management and oversight bodies are determined by the principles of good and responsible corporate governance.

The Executive Board and the Supervisory Board comprehensively discussed Corporate Governance issues in financial year 2015 / 16. In this chapter, the Executive Board and the Supervisory Board provide their report on Corporate Governance in the Company pursuant to sub-­section 3.10 of the German Corporate Governance Code (the German Code, DCGK) and section 289a of the German Commercial Code (HGB) as well as Disclosure and Transparency Rule (DTR) 7.2 and Listing Rule (LR) 9.8.7R. 

Declaration of Compliance pursuant to section 161 of the German Stock Corporation Act (AktG)

In December 2016, the Executive Board and the Supervisory Board jointly submitted the declaration of compliance for 2016 pursuant to section 161 of the German Stock Corporation Act. The declaration was made permanently accessible to the general public on TUI AG’s website in December 2016.

Wording of the declaration of compliance for 2016
“In accordance with section 161 of the German Stock Corporation Act, the Executive Board and Supervisory Board of TUI AG hereby declare:

The recommendations of the German Corporate Governance Code in its version of 5 May 2015 have been fully observed since the last annual declaration of compliance was submitted in December 2015.”

UK Corporate Governance Code
As a stock corporation company under German law, TUI AG’s Executive Board and Supervisory Board are obliged to submit a declaration of compliance with the German Corporate Governance Code pursuant to section 161 of the German Stock Corporation Act 

UK Corporate Governance Statement 2016


Functioning of the Executive and Supervisory Boards

TUI AG is a company under German law. One of the fundamental principles of German stock corporation law is the dual management system involving two bodies, the Executive Board in charge of managing the company and the Supervisory Board in charge of monitoring the company. TUI AG’s Executive Board and Supervisory Board cooperate closely and in a spirit of trust in managing and overseeing the Company, with strict separation between the two bodies in terms of their membership and competences. Both bodies are obliged to ensure the continued existence of the Company and sustainable creation of added value in harmony with the principles of the social market economy.

TUI AG’s Executive Board comprised five members as at the closing date 30 September 2016. The Executive Board is responsible for managing the Company’s business operations in the interests of the Company. The allocation of functions and responsibilities to individual Board members is presented in a separate section. 

In accordance with the law and the Articles of Association, the Supervisory Board had 20 members at the balance sheet date, i. e. 30 September 2016. The Supervisory Board advises and oversees the Executive Board in the management of the Company. It is involved in strategic and planning decisions and all decisions of fundamental importance to the Company. When the Executive Board takes decisions on major transactions, such as the annual budget, major acquisitions or divestments, it is required by its terms of reference to seek the approval of the Supervisory Board. The Chairman of the Supervisory Board coordinates the work in the Supervisory Board, chairs its meetings and represents the concerns of the body externally. The Supervisory Board and the Audit Committee have adopted terms of reference for their own work. In the run-up to the Supervisory Board meetings, the representatives of shareholders and employees meet separately.

The Executive Board provides the Supervisory Board at regular meetings and in writing with comprehensive, up-to-date information about the strategy, the budget, business performance and the situation of the Group, including risk management and compliance. The Executive Board works on the basis of terms of reference issued by the Supervisory Board.

The Executive Board provides the Supervisory Board at regular meetings and in writing with comprehensive, up-to-date information about the strategy, the budget, business performance and the situation of the Group, including risk management and compliance. The Executive Board works on the basis of terms of reference issued by the Supervisory Board, which are also being revised.

TUI AG has taken out a D&O insurance policy with an appropriate deductible for all members of the Executive Board and Supervisory Board. The deductible amounts to 10 % of the loss up to the amount of one and a half times the fixed annual compensation.

Composition of the Supervisory Board
As at the balance sheet date, 30 September 2016, the Supervisory Board of TUI AG comprised 20 members. The composition of the Supervisory Board in financial year 2015 / 16 ensured that its members as a group had the knowledge, ability and expert experience required to properly complete their tasks. The goals set by the Supervisory Board itself for its composition include in particular comprehensive industry knowledge, at least five independent shareholder representatives, at least five members with international experience, and diversity.

Twelve members of the Supervisory Board had considerable international experience. Due to the different professional experiences of its members, the composition of the Supervisory Board overall reflects a great diversity of relevant experience, ability and industry knowhow. None of the shareholder representatives on the Supervisory Board had any commercial or personal relationship with the Company, its Executive Board or third parties that might cause a material clash of interests. Seven shareholder representatives are independent.Twelve members of the Supervisory Board had considerable international experience. Due to the different professional careers of its members, the composition of the Supervisory Board overall reflects a great diversity of relevant experience, ability and industry knowhow. None of the shareholder representatives on the Supervisory Board had any commercial or personal relationship with the Company, its Executive Board or third parties that might cause a material clash of interests. Eight shareholder representatives are independent. 

In accordance with the recommendations of the German Corporate Governance Code, the original shareholder representatives were individually elected for five-year terms of office during elections to the Supervisory Board at the relevant General Meetings (October 2014, February 2016). Only Prof. Klaus Mangold and Sir Michael Hodgkinson were older than 68 years when they were elected as members of the Supervisory Board. In both cases, the Supervisory Board deemed it appropriate to deviate from the regular age limit in order for the Company to benefit from Prof. Klaus Mangold’s and Sir Michael Hodgkinson’s extensive experi­ence in order to complete the integration process and in order to ensure continuity. With Peter Long, a former member of the Executive Board has been a Supervisory Board member since the Annual General Meeting 2016 held on 9 February 2016.

Committees of the Supervisory Board and their ­composition
At 30 September 2016, the balance sheet date, the Supervisory Board had established five committees from among its members to support its work: the Presiding Committee, the Audit Committee, the Nomination Committee, the Integration Committee (until December 2016) and the Strategy Committee (since 9 February 2016).

A Mediation Committee was furthermore established in accordance with section 27 (3) of the German Co-Determination Act.

The Presiding Committee and Audit Committee have eight members each, with an equal number of shareholder representatives (including the respective chairpersons of the committees) and employee representatives. The Presiding Committee prepares, in particular, the appointment of Executive Board members, including the terms and conditions of service contracts and remuneration proposals. The Audit Committee’s task is to support the Supervisory Board in exercising its oversight function. The Chairman of the Audit Committee is an independent financial expert and has particular knowledge and experience in the application of accounting principles and internal control methods from his own professional practice.

The Nomination Committee consists exclusively of shareholder representatives, in keeping with the recommendation in the German Corporate Governance Code. The task of its four members is to suggest suitable candidates for the Supervisory Board to propose to the Annual General Meeting.

The Integration Committee was set up to advise and supervise the Execu­tive Board in the integration process following the merger for two years after the merger’s completion. It prepares proposals for resolutions for the Supervisory Board but does not have a mandate to take any decisions on behalf of the Supervisory Board. It comprises five shareholder representatives and one employee representative.

The Strategy Committee began its work after the Annual General Meeting 2016. Its task is to comprehensively advise and oversee the Executive Board in developing and implementing the corporate strategy. It prepares the annual strategy offsite meeting for the Supervisory Board, but does not have a mandate to take any decisions on behalf of the Supervisory Board. It comprises five shareholder representatives and one employee representative.


Conflicts of interest
Executive and Supervisory Board members have a duty to act in TUI AG’s best interests. In the completed financial year 2015 / 16, there were no conflicts of interest requiring disclosure to the Supervisory Board. None of the Executive Board or Supervisory Board members has a board role or a consultancy contract with one of TUI’s competitors. Peter Long did not take part in the Supervisory Board resolution regarding payment of remuneration entitlements still arising from his Executive Board role adopted on 15 September 2016. 

Specifications pursuant to sections 76 (4), 111 (5) of the German Stock Corporation Act

At least 30 % of the Supervisory Board members were women and at least 30 % were men at the balance sheet date. The Supervisory Board was therefore compliant with section 96 (2) sentence 1 of the German Stock Corporation Act. Neither the shareholder nor the employee representatives on the Supervisory Board objected to overall compliance in accordance with section 96 (2) sentence 2 of the German Stock Corpor­ation Act.

The Supervisory Board resolved, in keeping with section 111 (5) of the German Stock Corporation Act, that a woman should be recruited to the Executive Board. This objective has been implemented with Dr Elke Eller joining the Executive Board as at 15 October 2015.

In turn, the Executive Board resolved, in keeping with section 76 (4) of the German Stock Corporation Act, that women should account for 20 % of executives at the level immediately below the Executive Board and 30 % at the level below this. Both targets are to be achieved by 30 June 2017.

Shareholders and Annual General Meeting
TUI AG shareholders exercise their co-determination and monitoring rights at the Annual General Meeting, which takes place at least once a year. The AGM takes decisions on all statutory matters, and these are binding on all shareholders and the Company. For voting on resolutions, each share confers one vote.

All shareholders registering in due time are entitled to participate in the Annual General Meeting. Shareholders who are not able to attend the AGM in person are entitled to have their voting rights exercised by a bank, a shareholder association, one of the representatives provided by TUI AG and acting on the shareholders’ behalf in accordance with their instructions, or some other proxy of their own choosing. Shareholders also have the opportunity of authorising the representative provided by TUI AG via the web in the run-up to the AGM. Shareholders can, moreover, register for electronic dispatch of the AGM documents.

The invitation to the AGM and the reports and information required for voting are published in accordance with the provisions of the German Stock Corporation Act and provided in German and English on TUI AG’s website. During the AGM, the presentations by the chairman of the Supervisory Board and the Executive Board members can be followed live over the Internet.

Risk management
Good corporate governance entails the responsible handling of commercial risks. The Executive Board of TUI AG and the management of the TUI Group have comprehensive general and company-specific reporting and monitoring systems available to identify, assess and manage these risks. These systems are continually developed, adjusted to match changes in overall conditions and reviewed by the auditors. The Executive Board regularly informs the Supervisory Board about existing risks and changes to these risks. The Audit Committee deals in particular with monitoring the accounting process, including reporting, the effectiveness of the internal control and risk management systems and the internal auditing system, compliance and audit of the annual financial statements.

More detailed information about risk management in the TUI Group is presented in the Risk Report. It also contains the report on the accounting-­related internal control and risk management system required in accordance with the German Commercial Code (sections 289 (5), 315 (2) no. 5 HGB).

Transparency
TUI provides immediate, regular and up-to-date information about the Group’s economic situation and new developments to capital market participants and the interested public. The Annual Report and the Interim Reports are published within the applicable timeframes. The Company publishes press releases and ad hoc announcements, if required, on topical events and any new developments. Moreover, the company website at www.tuigroup.com provides comprehensive information on TUI Group and the TUI share.

The scheduled dates for the principal regular events and publications – such as the AGM, Annual Report and Interim Reports – are set out in a financial calendar. The calendar is published well in advance and made permanently accessible to the public on TUI AG’s website.

Directors’ dealings
The Company was informed by Prof. Klaus Mangold, Alexey Mordashov, Friedrich Joussen, Horst Baier, Dr Elke Eller and William Waggott of notifiable purchase and sale transactions of TUI AG shares or related financial instruments by directors (directors’ dealings or managers’ transactions) concerning financial year 2015 / 16. Details are provided on the Company’s website.

Purchase and sales transactions by members of the boards were governed by the TUI Share Dealing Code, adopted by the Executive Board on 16 December 2014 for TUI Group, alongside corresponding statutory provisions. The TUI Share Dealing Code will be adjusted as Regulation (EU) 596 / 2014 (“Market Abuse Regulation“) has entered into force. 

Apart from Alexey Mordashov (share ownership: approx. 19.3 %), no member of the Executive Board or Supervisory Board holds shares in TUI AG, related options or other derivatives representing 1 % or more of the capital stock. Details regarding share ownership of individual members are presented in the table on the Supervisory Board and Executive Board. 

Accounting and auditing
TUI AG prepares its consolidated financial statements and consolidated interim financial statements in accordance with the provisions of the International Financial Reporting Standards (IFRS) as applicable in the European Union. The statutory annual financial statements of TUI AG, which form the basis for the dividend payment, are prepared in accordance with the German Commercial Code (HGB). The consolidated financial statements are prepared by the Executive Board, audited by the auditors and approved by the Supervisory Board. The interim reports are discussed between the Audit Committee and the Executive Board prior to publication. The consolidated financial statements and the financial statements of TUI AG were audited by PricewaterhouseCoopers Aktien­gesellschaft Wirtschaftsprüfungsgesellschaft, Hanover, the auditors elected by the 2016 Annual General Meeting. The audit was based on German auditing rules, taking account of the generally accepted auditing standards issued by the German Auditors’ Institute as well as the International Standards on Auditing. It also covered risk management and compliance with reporting requirements on corporate governance pursuant to section 161 of the German Stock Corporation Act and Listing Rules 9.8.7 R and 9.8.10.

The condensed consolidated interim financial statements and management reports as at 31 December 2015, 31 March and 30 June 2016 were examined by the auditors. 

In addition, a contractual agreement was concluded with the auditors to the effect that the auditors will immediately inform the Supervisory Board of any grounds for disqualification or partiality as well as of all findings and events of importance arising during the performance of the audit. There were no grounds to provide such information in the framework of the audit of financial year 2015 / 16. 


Compliance

TUI Group’s Compliance Management System is a fundamental element of our commitment to commercial, environmental and socially responsible activity and operations. It is underlined by our membership in the UN Global Compact and therefore forms an indispensable part of TUI Group’s corporate culture and our corporate governance activities. 

The strategic goal of TUI Group’s Compliance Management System is to prevent misconduct and avoid liability risks for the Company, its legal representatives, executives and employees and protect the reputation of the Company. 

Compliance Management System
TUI Group’s Compliance Management System is based on three pillars: prevention, discovery and response, which, in turn, comprise a large number of internal measures and processes. 


In the completed financial year, TUI Group’s Compliance Management System was subjected to a design audit by a leading auditing firm in accordance with auditing standard PS 980 of the German Institute of Auditors. The audit confirmed that TUI Group’s Compliance Management System has been designed so as to meet the requirements of that certification standard. In the run-up to the audit, the Group-wide Compliance Management System had been readjusted and compliance processes had been harmonised aross the Group. 

Compliance Culture
The compliance culture forms the basis for the appropriateness and effectiveness of the Compliance Management System. It reflects management’s fundamental attitude and conduct and the role of the supervisory body. 

It is expressed in our corporate value “Trusted”, appealing to our employees’ personal responsibility and their honesty and sincerity in handling customers, stakeholders and employees. 

Code of Conduct / Suppliers’ Code of Conduct
The Code of Conduct, drawn up for the entire TUI Group, is a further embodiment of our compliance culture and enshrines guiding principles for everyone to follow, from executives and senior management to every Group employee. It defines minimum standards aimed at assisting our employees in their everyday work and providing orientation in conflict situations. 

The Suppliers’ Code of Conduct forms the counterpart to TUI’s Code of Conduct. It details our ethical, social and legal expectations of our business partners. All business partners are required by contract to observe all national and international anti-corruption laws applicable to the supplier relationship. This places our business relationship with our partners on a solid legal and social basis. 

Compliance Rules
In addition, the principles set out in the Code of Conduct are detailed in various policies and rules reflecting the legal requirements. This is supported by our Group-wide policy management, developing the standards for Group-wide policies and coordinating incorporation of the relevant internal stakeholder groups, e. g. other departments or the works council. This approach is designed to provide TUI Group with a set of policies which are as complete and comprehensible as possible without seeking overregulation.

TUI Group’s Compliance Rules offer guidance on appropriate conduct regarding gifts and invitations, data protection and trade sanctions. All groups of employees have thus been acquainted with the policies of relevance to their everyday work. 

Compliance Programme
In the period under review, the Compliance Programme focused on various issues including anti-corruption measures, protecting free and fair competition, data protection and the handling of trade sanctions including anti-money laundering.

In the completed financial year, a software was used to facilitate risk identification based on self-disclosure by TUI Group companies, above all for the above topics: it was evaluated on the basis of the criteria of likelihood of occurrence and potential damage (including reputational damage). The results of identified compliance risks are used to derive corresponding risk-minimising measures, which are agreed with the relevant bodies, and implementation of the measures is automated. 

Moreover, TUI Group focused even more strongly on data protection, which had already played a major role. Numerous measures were initiated, e. g. structured coordination of all technical functions in the Company relating to data protection law. As an international organisation, TUI Group will therefore be prepared for future European changes in the overall framework for data protection law. 

Compliance training
Compliance training is a key element of TUI’s Compliance Management System, with its focus on preventing misconduct, and a crucial component of TUI Group’s Compliance culture. It is carried out according to a graded concept: managers and staff at TUI have all benefited from face-to-face teaching and online programmes. This enables all our employees to acquaint themselves with Compliance and the underlying corporate values, regardless of their position in the company hierarchy and their geographical location. In the completed financial year, the online training programme was extended so as to include a refresher course on TUI’s Code of Conduct. It has now been rolled out in the Group companies. In addition, TUI companies and sectors offered training schemes with their own specific focus to raise awareness of challenges they might face. 

Whistleblowing
In agreement with various stakeholder groups, TUI offers its managers and employees a Group-wide whistleblower system to enable serious infringements of the corporate values anchored in TUI’s Code of Conduct to be reported anonymously and without reprisals. This whistleblowing system is currently available to staff in 47 countries. All reports are followed up in the interests of all stakeholders and the Company. Our top priority is to ensure confidentiality and handle information discreetly. Any incidents resulting from the use of the whistleblower system are reviewed by Group Legal Compliance in conjunction with Group Audit. Infringements are fully investigated in the interests of all our staff and the Company itself.

Compliance structure
TUI Group’s Compliance structure supports those responsible in the task of communicating the values and rules and anchoring them in the Group. It ensures that Compliance requirements are implemented throughout the Group in different countries and cultures. The decentralised Compliance structure was reinforced by additional staff resources in recent months in order to respond to the requirements resulting from structural change and internationalisation. Under the aegis of the Chief Legal Compliance Officer, Group Legal Compliance work with the decentralised Compliance Officers to perform the following tasks at different management levels: 

  • Raising awareness of Compliance and the technical issues allocated to Legal Compliance 
  • Achieving the goals of the Code of Conduct and the Compliance Rules 
  • Providing training 
  • Advising managers and employees 
  • Securing the necessary exchange of information
  • Monitoring national and international legislative initiatives
  • Providing regular reports