HENKEL AG & CO. KGAA The Company The Company
The2 ComFpisacnayl 2020 at a glance
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Fiscal 2020 at a glance
Th2e CoFmispcaln2y020 at a glance
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Foreword Foreword
FFoirsecwalo2r0d20 at a glance
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Our Management Board ORuerpMoratnoafgtehmeeSnutpBeoravrisdory Board Shaping our future
Report of the Supervisory Board Report of the Supervisory Board RFeoproerwt orfdthe Supervisory Board Our Management Board
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Shaping our future SOhuapr iMnganoaugrefumtuenret Board
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Shaping our future Shares and bonds Shares and bonds Shares and bondsC2o3rporaStheagreosvearnndanbcoends Corporate governance Corporate governance 31 311
Takeover-relevant information TTaakkeeoovveer-rr-erelelevavnant tinifnofromrmataiotinon
Corporate governance
35 35 31 53 53 35 77 77 53
Corporate governance statement CCoorrppoorraateteggoovveernrnanacnecestsattaetmemenetnt Takeover-relevant information Remuneration system RReemuunneeraratitoionnsyssytsetmem Corporate governance statement
Remuneration report 2020 RReemuunneeraratitoionnrerpeporotr2t 0220020 Remuneration system
Combined management report Combiinneeddmaannaaggeemmeennt trerpeoprotrt
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Remuneration report 2020
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Fundamental principles of the Group FFuunnddaammeenntatal lpprirnincicpilpelsesofotfhteheGrGoruopup
103 103 94 146 146 103
Combined management report
Economic report EEccoonnoommicicrereppoortrt
Fundamental principles of the Group Heennkkeel lAAGG&&CCoo. K. KGGaAaA
Henkel AG & Co. KGaA Economic report ((ccoonnddeennsseeddvveersrisoionnacacocrodridnigngtotothtehGeeGrmeramnan (condensed version according to the German
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CHCooemnmkmelerAcrciGaial &lCCoCodode.e[KH[GHGaGBA]B)]) Commercial Code [HGB])
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(condensed version according to the German RRisiskkssaannddoopppoortrutunintiteisesrerpeoprotrt
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Risks and opportunities report Commercial Code [HGB]) FFoorreeccaasstt
Forecast
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Risks and opportunities report
Consolidated financial statements Consolidated financial statements
Con1s7o1lidatCeodnfsionlaidnactieadl sttatement sof financial position 171ConsCoolindsaotlieddatfeidnastnacteiaml esntat toefmfineanntcsial position
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Consolidated statement of financial position
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Consolidated statement of income ConCsonlisdoaltieddatsetadtestmateenmt oefnitnocfomfineancial positionConsolidated statement of income
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Consolidated statement of comprehensive income ConCsonlisdoaltieddatsetadtestmateenmt oefnctoomf pinrceohmenesive income
Consolidated statement of comprehensive income
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Consolidated statement of changes in equity Consolidated statement of changes in equity
175174 ConCsonlisdoaltieddatsetadtestmateenmt oefncthoafncgoems pinrehqeunitsyive income
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Consolidated statement of cash flows Consolidated statement of cash flows ConCsonlisdoaltieddatsetadtestmateenmt oefnctaosfhcfhloawngses in equity
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Notes to the consolidated financial statements NotCeosntosotlhideactoendssotlaidteatmedenfitnoafncaiaslhstfalotewmsents
Notes to the consolidated financial statements
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Subsequent events
Subsequent events
SubNseoqteusentot ethvenctosnsolidated financial statements
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Recommendation for the approval of the annual RecSoumbmseeqnudeantitoenvfeonrttshe approval of the annual financial statements and the appropriation of the financial statements and the appropriation of the financial statements and the appropriation of the pRreocfoitmomf Henednakteiol AnGfo&r tChoe. aKpGparAoval of the annual propfirtooffitHoefnHkelnAkeGl &AGCo&. KCGoa. AKGaA financial statements and the appropriation of the
Recommendation for the approval of the annual
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Corporate bodies of Henkel AG & Co. KGaA CorCporpatoerabtoedbieosdoiefsHoefnHkelnAkGel&ACGo&. KCGoa.AKGaA profit of Henkel AG & Co. KGaA
Further information FurFtuhretrhienrfoinrmfoartmioantion
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Corporate bodies of Henkel AG & Co. KGaA
281281 IndIenpdeenpdendt eAnutdAituodr'istoRre'spoRretport
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Independent Auditor's Report
Further information
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Responsibility statement ResRpeosnpsoibnisliitbyilsitaytestmateenmt ent
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291291 QuaQrutearrltyebrlryeabkrdeoawkdnoowfnsaolef s ales
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Independent Auditor's Report Quarterly breakdown of sales Responsibility statement Multi-year summary
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Quarterly breakdown of sales GloGsslaorsysary
Glossary
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Multi-year summary
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Credits
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Financial calendar ContactsFinancial calendar
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Forecast
The Company
Fiscal 2020 at a glance
Organic sales growth
Shares and bonds
-0.7%
Key financials
Combined management report
in million euros Sales
Operating profit (EBIT)
Adjusted1 operating profit (adjusted EBIT) Return on sales (EBIT margin)
Adjusted1 return on sales (adjusted EBIT margin) Net income
Attributable to non-controlling interests
Attributable to shareholders of Henkel AG & Co. KGaA
Earnings per preferred share (EPS)
Adjusted 1 earnings per preferred share (adjusted EPS) Return on capital employed (ROCE)
in eurosin euros
Dividend per ordinary share Dividend per preferred share
in eurosin euros
2016 | 2017 | 2018 | 2019 | 2020 |
18,714 | 20,029 | 19,899 | 20,114 | 19,250 |
2,775 | 3,055 | 3,116 | 2,899 | 2,019 |
3,172 | 3,461 | 3,496 | 3,220 | 2,579 |
14.8% | 15.3% | 15.7% | 14.4% | 10.5% |
16.9% | 17.3% | 17.6% | 16.0% | 13.4% |
2,093 | 2,541 | 2,330 | 2,103 | 1,424 |
40 | 22 | 16 | 18 | 16 |
2,053 | 2,519 | 2,314 | 2,085 | 1,408 |
4.74 | 5.81 | 5.34 | 4.81 | 3.25 |
5.36 | 5.85 | 6.01 | 5.43 | 4.26 |
17.5% | 16.3% | 15.5% | 13.5% | 9.6% |
1.60 | 1.77 | 1.83 | 1.83 | 1.832 |
1.62 | 1.79 | 1.85 | 1.85 | 1.852 |
+/- 2020 2019-2020
-4.3%
Adjusted1 EBIT margin
-30.4%
-19.9%
-3.9pp
13.4%
-2.6pp
1,424
-32.3%
-11.3%
-32.5%
3.25 4.26
-32.4%
Adjusted1 EPS
-21.5%
-3.9pp - -
4.26€
pp = percentage points
Sales by business unit 2020
Sales by region 2020
Development of adjusted1
-17.9%
EPS at constant exchange rates
Dividend per preferred share2
1.85€
1 Adjusted for one-time expenses and income, and for restructuring expenses.
2 Proposal to shareholders for the Annual General Meeting on April 16, 2021.
3 Sales and services not assignable to the individual business units.
4 Eastern Europe, Africa/Middle East, Latin America, Asia (excluding Japan).
Note: All individual figures in this report have been commercially rounded. Addition may result in deviations from the totals indicated.
The Company
Shares and bonds
Combined management report
Adhesive Technologies
Key financials
in million euros Sales
Proportion of Henkel sales Operating profit (EBIT)Adjusted1 operating profit (adjusted EBIT) -22.9%Return on sales (EBIT margin)Adjusted1 return on sales (adjusted EBIT margin) -2.9pp
Return on capital employed (ROCE) -3.8ppEconomic Value Added (EVA®)
2019 | 2020 |
9,461 | 8,684 |
47% | 45% |
1,631 | 1,248 |
1,712 | 1,320 |
17.2% | 14.4% |
18.1% | 15.2% |
17.2% | 13.4% |
685 | 410 |
2020 8,684 45%
1 Adjusted for one-time expenses and income, and for restructuring expenses. pp = percentage points
1,248 -23.5%
+/- -8.2% -
14.4% -2.9pp
410 -40.1%
Sales Adhesive Technologies in million euros
Organic sales growth
-4.2%
Our top brands
The Company
Shares and bonds
Combined management report
Beauty Care
Key financials
in million euros Sales
Proportion of Henkel sales Operating profit (EBIT)Adjusted1 operating profit (adjusted EBIT) -27.5%Return on sales (EBIT margin)Adjusted1 return on sales (adjusted EBIT margin) -3.4ppReturn on capital employed (ROCE) Economic Value Added (EVA®)
2019 | 2020 |
3,877 | 3,752 |
19% | 19% |
418 | 246 |
519 | 377 |
10.8% | 6.6% |
13.4% | 10.0% |
10.1% | 6.2% |
88 | -47 |
2020
1 Adjusted for one-time expenses and income, and for restructuring expenses. pp = percentage points
246 -41.2%
+/- -3.2% -
6.6% -4.2pp
6.2% -3.9pp
-47
-154.2%
Sales Beauty Care in million eurosOrganic sales growth
-2.8%
Our top brands
The Company
Shares and bonds
Combined management report
Laundry & Home Care
Key financials
in million euros Sales
Proportion of Henkel sales Operating profit (EBIT)Adjusted1 operating profit (adjusted EBIT) -8.4%
Return on sales (EBIT margin) -4.4pp
Adjusted1 return on sales (adjusted EBIT margin) -1.5pp
Return on capital employed (ROCE) -3.3pp
Economic Value Added (EVA®) -57.7%
2019 | 2020 |
6,656 | 6,704 |
33% | 35% |
973 | 688 |
1,096 | 1,004 |
14.6% | 10.3% |
16.5% | 15.0% |
12.6% | 9.3% |
356 | 150 |
2020
1 Adjusted for one-time expenses and income, and for restructuring expenses.
pp = percentage points
688 -29.3%
+/- 0.7% -
Sales Laundry & Home Care in million euros
Organic sales growth
+5.6%
Our top brands
The Company
Shares and bonds
Combined management report
"Our global team has what it takes to shape our successful future and deliver on our Purposeful Growth agenda."
CARSTEN KNOBEL
CHAIRMAN OF THE MANAGEMENT BOARD
When I wrote you my first letter as the newly appointed Chair-man of the Management Board of Henkel in last yearʼs Annual Report, the world looked very different from today. Over the past 12 months, we have encountered fundamental changes to the way we live, work and do business. People around the world have gone through very challenging times, facing severe risks to their health and the well-being of their loved ones. In 2020, over 75 million people went through a COVID-19 infection and more than 1.5 million sadly lost their lives to the virus.
In addition, many had to deal with losing their jobs or their business as a result of the crisis. Around the world, people were confined to their homes, unable to connect with family members or friends, and deprived of the social fabric of their communities and work environment.
As a consequence of the pandemic, the global economy encountered a sharp decline in demand and governments around the world were confronted with rising expenditures for emergency programs. However, the impact varied across indus-tries. While some were affected severely, such as the automotive sector, others saw rising demand for products and services, for example in the fields of hygiene or medical supplies. According to the OECD, global GDP declined by more than 4 percent in 2020. Despite hopes for a recovery in the course of 2021, backed by the roll-out of vaccination campaigns, concerted health policies and government financial support, many economies are expected to record a GDP in 2021 still below the pre-crisis level of 2019.
The Company
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Combined management report
2020 was far beyond anything we could have imagined when we developed our Purposeful Growth agenda for Henkel at the beginning of the year. But we were able to steer the company through this unprecedented crisis, doing everything possible to protect the health and safety of employees, ensuring our business continuity, serving our customers and consumers, and supporting communities around the world.
Despite the decline of the global economy, we delivered an overall robust performance in 2020 across all business units - thanks to our diversified portfolio, successful innovations, financial strength and the outstanding commitment of our employees around the world. For the full year, our results were at the upper end of our guidance. We recorded sales of 19.3 billion euros, maintained a profitable business with an adjusted1 EBIT margin of 13.4 percent, and generated a very strong free cash flow in excess of 2.3 billion euros, almost at the prior-year level. Based on these results, we will propose a stable dividend to shareholders at our upcoming Annual General Meeting.
At the same time, we were able to successfully launch and drive the implementation of our strategic agenda across all pillars: shaping a winning portfolio, creating competitive edge by accelerating impactful innovations, by integrating sustainability even more firmly in everything we do and by transforming digital into a value creator, and developing future-ready oper-ating models. But most important for me, we strengthened our collaborative culture and created a strong momentum for change that will enable us to deliver superior performance and purposeful growth - for our customers and consumers, our company, teams and shareholders, and for society and the planet.
1 Adjusted for one-time expenses and income, and for restructuring expenses.
"We care. And we act!"
When we were confronted with the first wave of infections early last year, we had robust crisis management processes in place. Our crisis teams around the world acted fast, decisively and effectively, taking appropriate measures to ensure the safety of our people, as well as the continuity of our businesses. Thanks to a strong and scalable digital infrastructure and our digital upskilling efforts in recent years, the majority of our administration and non-production teams were able to work from home - endorsing government guidance in many countries to enable remote working whenever possible.
In one of my first messages to Henkel employees in March, I assured them on behalf of the entire Management Board: "Our priority in this crisis is and will always be to ensure your health and safety! We care about you and your jobs, your families, our business partners, our communities and society. And we will take action to live up to this commitment. Of this you can be sure: We care. And we act!"
Early in the year, we committed to ruling out layoffs and furlough due to the pandemic. We did not make use of any emergency aid program, such as government-backed credits or loans. On the contrary, we continued to hire and fill open positions. In total, more than 6,000 new employees joined Henkel around the world in 2020. We also continued to invest in our people's skills and our training efforts. In Germany, for ex-ample, we maintained our vocational training program at a level unchanged from 2019.
The Company
Shares and bonds
Combined management report
In the course of 2020, more than 2,000 Henkel colleagues globally went through a COVID-19 infection. Fortunately, the vast majority recovered. But I regret to share with you that some of our valued colleagues also lost their lives to the virus. Our deepest sympathy, compassion and thoughts are with their families and loved ones. We will always remember our colleagues dearly.
Despite the disruption to global supply chains, temporary mandatory site closures and increased complexity in our procurement and production processes, we were able to serve our customers. Even at the peak of the crisis during the second quarter of 2020, we had more than 80 percent of our sites operational, enabling us to meet the rising demand for hygiene-related products in this crisis. This is testament to the perfor-mance and dedication of our outstanding teams in production and supply chain in these exceptional times.
We also took action in living up to our responsibility toward society and supporting our communities. We donated millions in financial aid to the World Health Organization, the United Nations Foundation and other organizations dedicated to fighting the pandemic. We donated 5 million units of our products to those in need, predominantly personal hygiene and household cleaning products. We converted production lines to quickly produce more than 110,000 liters of hand sani-tizers which we also donated to health authorities, hospitals and communities. This was complemented by many individual donations and initiatives by Henkel employees to support their communities.
Delivering robust business performance in 2020
Overall, our business performance in 2020 remained robust. We achieved sales of 19.3 billion euros. This is a slight decline in organic terms of -0.7 percent compared to the prior year. While organic growth in emerging markets was positive, reaching 3.0 percent, we recorded an organic development of -3.2 per-cent in mature markets.
In the first quarter, the impact from the crisis was mostly driven by the downturn in Asia, predominantly affecting our Adhesive Technologies business. In the second quarter, with the majority of Asian and European countries as well as North America in a widespread shutdown, we faced a substantial decline in sales, namely in specific industrial segments such as in the automotive sector. But also, our Beauty Care Hair Salon business was severely affected by the closure of salons in many countries. Our Laundry & Home Care business, how-ever, partially benefited from the rising demand for household and cleaning products. In the third quarter, we recorded a re-covery and returned to positive organic sales growth across all business units. This was partly driven by catch-up effects from the second quarter, but mostly by the underlying strength of our businesses thanks to the flow of innovations supported by increased investments in marketing and advertising. In the fourth quarter we saw a continuation of this positive trend, even though the onset of a second, more severe wave of COVID-19 infections and related lockdowns in many coun-tries again affected our business performance. Nevertheless, in the second half of 2020, we were able to generate strong or-ganic sales growth for Henkel with all business units reporting positive numbers.
For the full year, our Adhesive Technologies business reported sales below the prior-year level at -4.2 percent in organic terms, reflecting the overall decline in industrial markets globally. The organic sales development in our Beauty Care business was also negative at -2.8 percent, strongly impacted by our Hair Salon business due to enforced closures. Nevertheless, our Retail business recorded good growth, driven by the suc-cessful development of top brands, as well as new product launches addressing key consumer trends. Our Laundry & Home Care business achieved a strong organic sales growth of 5.6 percent, fueled both by the surge in demand for hygiene-related products and by successful innovations addressing in particular the increased demand for more sustainable products.
The Company
Shares and bonds
Combined management report
At Group level, adjusted1 earnings before interest and taxes (EBIT) decreased by 19.9 percent to 2.6 billion euros. Adjusted return on sales (EBIT margin) was at 13.4 percent, 2.6 percent-age points lower than in 2019. Adjusted earnings per preferred share were at 4.26 euros, a decline of 17.9 percent at constant exchange rates.
The development of our earnings reflects substantially in-creased expenditures to strengthen brands, technologies and innovations, as well as to accelerate our digital transformation. Declining demand in key business segments during the COVID-19 crisis also negatively affected our profitability. How-ever, thanks to our successful cost management, continuous efficiency improvements and the ongoing adaptation of structures, we were able to partially mitigate the impact from the crisis on our earnings.
Despite the pandemic, we were able to both deliver strong improvements in net working capital and generate a free cash flow of 2.3 billion euros in 2020, while our net financial position substantially improved to -0.9 billion euros compared to -2.0 billion at the end of 2019. Our solid financial foundation enabled us to adhere to our investment priorities and navigate our company through this crisis.
Our share price development reflects the impact of the COVID-19 crisis on the stock markets. The Henkel preferred share closed 2020 at 92.30 euros, a slight increase of 0.1 percent compared to the prior year. Accounting for a reinvestment of our dividend (prior to tax), which we held stable compared to 2019, total shareholder return amounted to 2.3 percent. This compares to a DAX performance of 3.5 percent over the same period.
1 Adjusted for one-time expenses and income, and for restructuring expenses.
Even though the global crisis impacted our businesses nega-tively, we will propose to our shareholders at our Annual General Meeting a stable dividend of 1.85 euros per preferred share and 1.83 euros per ordinary share. This equals a payout ratio of 43.7 percent and is thus above the higher end of our target payout range of 30 to 40 percent. The proposal of a stable dividend payout is possible thanks to our strong financial situation, underpinned by the low net financial debt level and the strong free cash flow achieved in fiscal 2020. Going forward, our dividend policy of a target payout range of 30 to 40 percent of adjusted net income after non-controlling interests remains in place.
Implementing our strategic agenda - despite the crisis 2020 has shown us the fragility of the world we live in, and it has made clear that the world is looking for new ideas, different approaches and deeper meaning. I am therefore more convinced than ever that the strategic agenda introduced last year is the right one. Our aspiration for purposeful growth aims at providing new solutions to our customers and consumers, contributing to a more sustainable way of living, developing our people and creating a sense of belonging for all of them. This will allow us to unlock the full potential of our company and enable us to be a force for good in this world.
Despite our focus on crisis management in 2020, we were able to launch and start the implementation of our growth agenda. We are fully committed to driving further progress in 2021 and the following years.
The Company
Shares and bonds
Combined management report
To actively manage our portfolio, we have identified brands and categories with a total sales volume of more than one bil-lion euros, predominantly in our consumer businesses, either for an improved performance or exit. Around 50 percent of this sales volume is earmarked to be divested or discontinued by the end of 2021. To date, we have already agreed divestments with a volume of around 100 million euros. And we are com-mitted to executing the remainder of the divestments in 2021 as planned. At the same time, we are strengthening our portfolio through M&A, leveraging our strong balance sheet. In 2020, we agreed and closed two acquisitions with a total volume of around 500 million euros in our Beauty Care and Adhesive Technologies businesses.
In order to further strengthen our competitive edge, we are accelerating impactful innovations, boosting sustainability as a differentiating factor and transforming digital into a customer and consumer value creator.
In 2020, we increased our investments by around 200 million euros compared to 2019 to strengthen our brands, technologies and innovations, as well as to accelerate our digital transfor-mation. And we can see how these are already making a differ-ence: We were able to further accelerate our innovation pro-cesses and bring new products faster to market. This helped us, for example, to respond quickly to the strong surge in demand for hygiene, disinfecting and cleaning products with "fast-track innovations." We focused our efforts in particular on key trends such as hygiene, more natural and sustainable products and higher convenience. This resulted in rising market share in many key markets and categories.
To accelerate innovation and develop new business models, our consumer business units Beauty Care and Laundry & Home Care have established internal incubator teams, combining agile work approaches with the scale and expertise of a global company: The "Fritz Beauty Lab," inspired by our founder Fritz Henkel, aims to identify niches with growth potential for existing brands or white spots to create completely new brands. Love Nature is the new sustainability idea factory of our Laundry & Home Care business, focusing on sustainable solutions starting in the field of laundry and homecare prod-ucts. Our new innovation center for Adhesive Technologies at our headquarters in Düsseldorf, with a total investment of 130 million euros, is nearing completion and will be operational in the first half of 2021. Going forward, innovation will remain a key driver to strengthen our competitiveness and win in highly contested global markets.
Building on our strong track record, we aim to leverage sustain-ability as a competitive differentiator. We have defined our next milestones for three key topics which are highly relevant for consumers, customers, business partners and society at large: On the way to becoming climate-positive by 2040, we want to reduce the carbon footprint of our production by 65 percent and save - together with consumers, customers and suppliers - 100 million tons CO2 by 2025. We are also pursuing ambitious packaging targets for 2025: 100 percent of our con-sumer goods packaging will be recyclable or reusable and we aim to reduce the use of fossil-based virgin plastics by 50 percent.
The Company
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Combined management report
In 2020, we were able to further anchor sustainability in every-thing we do and drive progress along the entire value chain. We launched new products addressing the rising consumer expectations toward natural and sustainable products, such as solid bars under our Beauty Care brands Nature Box and N.A.E., or in our Laundry & Home Care business by expanding our Pro Nature product range and the successful introduction of Love Nature, a cross-category sustainable brand. In Adhesive Tech-nologies, we have developed a new technology under the Loctite brand that allows us to replace polyethylene with paper for use in food and non-food packaging. Beyond innovations for more sustainable products, we entered into a virtual power purchase agreement for energy from renewable sources, which will cover the energy demand of all Henkel sites in North America. And we were the first company to issue a plastic waste reduction bond with a volume of around 100 million euros to finance measures to reduce plastic waste across our value chain.
This year, Henkel publishes its 30th Sustainability Report which provides more details, facts and figures on how we live up to our commitment to sustainability. You can find it at:www.henkel.com/sustainabilityreport. Based on this strong foundation, we will drive meaningful change and progress in sustainability in this decade and beyond.
Another key driver in strengthening our competitive edge is to transform digital into a customer and consumer value creator in both our consumer and industrial businesses. To enable and accelerate this process, we created a new unit in 2020, Henkel Digital Business, or Henkel dx for short, combining digital, business process management and IT expertise in one global organization. Henkel dx has opened its first innovation hub in Berlin and plans to expand its global network with more hubs in the future. In the course of 2020, the share of sales across digital channels increased substantially, with all business units benefiting.
In order to ensure future-ready operating models and improve competitiveness and efficiency, we continuously adapt and reshape processes and structures across the entire company. In doing so, we aspire to enable new business models, to step up customer and consumer proximity with faster decision-making, and to further increase efficiency. In 2020, for example, we established a new structure in our Adhesive Technologies business unit to address and serve specific customer segments and markets to even better effect. In our Beauty Care and Laundry & Home Care business units, we further implemented organizational changes to enable a stronger regional focus and increase customer and consumer proximity.
A strong culture, shared values and a clear framework for collaborating as one team form the foundation of our growth agenda. In 2020 we took steps to foster a culture of collaboration and empowerment, upskill employees for future capabilities and enable our people to grow and develop - personally and professionally. We conducted a global Organizational Health Survey to identify strengths and areas for improvement, and to design our cultural journey going forward, backed by a system-atic 360-degree feedback process. Our efforts to continuously adapt and evolve our culture and make Henkel an attractive employer of choice were also reflected in marked improve-ments in key employer reputation rankings and benchmarks.
The Company
Shares and bonds
Combined management report
Our new strategic framework for purposeful growth is also reflected in our mid- to long-term financial ambitions. We are aiming for an organic sales growth of between 2 and 4 percent and growth of adjusted1 earnings per preferred share in the mid- to high single-digit percentage range at constant exchange rates, while maintaining our focus on free cash flow expansion.
As we enter 2021, we still face a high level of uncertainty how the pandemic will continue to evolve, how quickly the vac-cination efforts will progress and how this will impact the widespread restrictions in many countries. We expect that industrial demand, as well as consumer segments which are relevant for our company, in particular the Hair Salon business, will recover. At the same time, we believe consumer demand will return to normal levels in those categories which saw higher demand due to the pandemic. In addition, we assume that current restrictions in many key markets will be lifted in the course of the first quarter and that there will be no wide-spread shutdowns of retail and industrial businesses and production facilities in the remainder of the year.
Based on these assumptions, we expect Henkel in fiscal 2021 to generate organic sales growth of 2.0 to 5.0 percent and adjusted return on sales (EBIT margin) in the range of 13.5 to 14.5 percent. For adjusted earnings per preferred share (EPS) at constant exchange rates, we expect an increase in the range of 5.0 to 15.0 percent.
Committed to delivering purposeful growth
On behalf of the Management Board, I would like to thank our supervisory bodies for their support, as well as their valuable advice in this challenging year. We would also like to thank our customers and consumers around the world for their trust in our company, our brands and technologies. In particular, I would like to thank you, our shareholders, for your continued confidence in our company, our strategy and our team in these exceptional times.
1 Adjusted for one-time expenses and income, and for restructuring expenses.
Looking back at my first year as Chairman of the Management Board and my 25th year with Henkel, many thoughts and emo-tions emerge. I am proud of the progress we have made with the implementation of our strategic agenda while addressing a global pandemic. I am impressed by the resilience of our busi-ness, which has enabled us to achieve a robust business per-formance and to further strengthen our financial foundation. But the most important of these is the feeling of gratitude and heartfelt respect for our employees at Henkel. The performance, collaboration and positive attitude they showed over the past year have touched and inspired me. I would like to thank all of them for their invaluable contributions in this truly exceptional year.
Looking ahead, I am more confident than ever that our global team has what it takes to shape our successful future and deliver on our Purposeful Growth agenda.
Düsseldorf, January 30, 2021
Carsten Knobel
Chairman of the Management Board
The Company
Shares and bonds
Combined management report
CHAIRWOMAN OF THE SHAREHOLDERS' COMMITTEE AND THE SUPERVISORY BOARD
"We believe that Henkel is well equipped for the future and are confident that we will be able to move the company further forward."
2020 was a very challenging year for Henkel. The COVID-19 pandemic has drastically changed all aspects of our lives over the past months and has had a severely adverse effect on the global economy. In this crisis, the health and safety of our em-ployees, customers and business partners were and are of the highest priority for us, prompting us to put a comprehensive range of protective measures in place at an early stage.
We also focused on keeping our supply chains and production up and running so that our customers and consumers can con-tinue to depend on us in these difficult times.
Despite this difficult environment, we were able to generate sales of 19.3 billion euros. We actively promoted the new Pur-poseful Growth agenda developed by the Management Board under Carsten Knobel's leadership as new Chairman, and have introduced specific changes that are already starting to show success.
In light of the challenging conditions and the unusual stress to which they have been exposed, I would like to thank all Henkel employees most sincerely on behalf of the Supervisory Board for their dedication and outstanding commitment over the past year. My thanks are equally due to the members of the Management Board who have steered the company with pru-dence and foresight through these difficult times. I would also like to express my gratitude to our employee representatives and works councils for their constantly constructive support and collaboration throughout this exceptional situation.
Last but not least, I extend my special thanks to you, our share-holders, for your continued confidence in our company, its management and employees, and our brands and technologies, even in these unusual times.
The Company
Shares and bonds
Combined management report
Ongoing dialog with the Management Board
We continued to diligently discharge in full our Supervisory Board duties in fiscal 2020 in accordance with the legal statutes, Articles of Association and rules of procedure governing our actions. We consistently monitored the work of the Management Board, advising and supporting it in its stewardship and in the strategic development of the corporation, and discussing with it business matters of major importance. In doing so, we were able to ascertain that the Management Board's performance of its duties was legally compliant, fit for purpose, and proper at all times.
The Management Board and Supervisory Board continued to cooperate in 2020 through extensive dialog founded on mutual trust and confidence. The Management Board kept us regularly and extensively informed of all major issues affecting the cor-poration's business and our Group companies with prompt written and oral reports. Specifically, the Management Board reported on the business situation, operational development, business policy, profitability issues, our short-term and long-term corporate, financial and personnel plans, as well as capital expenditures and organizational measures. We also discussed the risk situation and dealt with compliance issues. Financial reports focused on the sales and profits of the Henkel Group as a whole, with further analysis by business unit and region. All members of the Supervisory Board and the Audit Committee consistently had sufficient opportunity to critically review and address the issues raised by each of these reports and associated explanations, and to provide their individual guidance.
Outside of Supervisory Board meetings, the Chairman of the Audit Committee and I, as Chairwoman of the Supervisory Board, remained in regular contact with individual members of the Management Board or with the Management Board as a whole. This procedure ensured that we were constantly aware of current business developments and significant events. The other members were informed of major issues no later than by the next Supervisory Board or committee meeting.
There were no indications of conflicts of interest involving Management Board or Supervisory Board members that might have required immediate disclosure to the Supervisory Board and reporting to the Annual General Meeting.
Supervisory Board meetings
The Supervisory Board and the Audit Committee each held four regular meetings in the reporting year. Because of the COVID-19 pandemic, most of these meetings were a mixture of personal attendance and video/telephone conferences. Attend-ance at the meetings of the Supervisory Board and the Audit Committee - including participation by video/telephone conference - was 95.4 percent. For details of individual Super-visory Board members' attendance at meetings, please refer to the remuneration report.
In each of our meetings, we discussed the reports submitted by the Management Board, conferring with it on the develop-ment of the corporation and on strategic issues. We also re-viewed the overall economic situation and Henkel's business performance. Similarly, we were regularly updated on the im-pacts of the COVID-19 pandemic and the associated actions taken to protect our employees.
As already discussed in our last Annual Report, our meeting on March 3, 2020 focused on the annual and consolidated financial statements for 2019, including the combined management report for Henkel AG & Co. KGaA and the Group, together with the risk report, corporate governance report and separate com-bined non-financial statement for Henkel AG & Co. KGaA and the Group, which was issued in the form of the Sustainability Report. We also approved the declaration of compliance for 2020. In addition, we conferred in depth on the development of the new corporate strategy, its focal areas and the actions and activities involved.
In our meeting on April 20, 2020, we focused on the perfor-mance of our business units in the first three months of the fiscal year, the impacts of the COVID-19 pandemic and the
The Company
Shares and bonds
Combined management report
associated efforts to manage this crisis in terms of both assuring the health of our employees and business partners, and the analysis of various financial scenarios and associated actions.
We also reviewed the status of implementation of our strategic priorities and the next steps to be taken. The position occupied by our Adhesive Technologies business unit in its competitive environment, the key success factors and the strategic develop-ment of this business unit were likewise discussed. We also approved our proposals for resolution by the Annual General Meeting 2020, which was held online as a result of the COVID-19 pandemic.
In our meeting on September 18, 2020, we focused both on the performance of our business units over the first eight months, and on the progress achieved in implementing our strategic priorities in the business units and functions. Aspects under the headings "winning portfolio," "innovation," "sustainability," and "future-ready operating models" were specifically discussed. We also talked about our sustainability initiatives with regard to climate positivity, circular economy and social progress, in-cluding the relevant voluntary engagement of our employees.
Our digitalization strategy and our new unit "Henkel dx" were further focal areas of discussion, with in-depth examination of the issues surrounding the creation of digital business value, the structure of implementation components, and boosting digital innovation. We likewise reviewed our objectives with regard to strengthening our culture of collaboration and em-powering our people.
Our meeting on December 11, 2020 focused on the expected results for 2020 and our balance sheet and financial planning for fiscal 2021. We also discussed in detail the budgets of our business units on the basis of comprehensive documentation. The intra-Group Finance and HR functions were also on the agenda, with discussions of the respective organizational structures, the key challenges, and the strategic priorities and implementation of same.
Committees of the Supervisory Board
In order to enable us to efficiently comply with the duties incumbent upon us according to legal statute and our Articles of Association, we have established an Audit Committee and a Nominations Committee. Prof. Dr. Theo Siegert and Prof. Dr. Michael Kaschke, both of whom chaired the Audit Committee in the year under review, comply with the statutory requirements of impartiality and expertise in the fields of accounting or au-diting, with both experienced in the application of accounting principles and internal control procedures. For more details on the responsibilities and composition of the committees, please refer to the corporate governance statement (on pages 35 to 52) and the membership lists on page 277 of this Annual Report.
Committee activities
Following the appointment of the external auditor by the 2020 Annual General Meeting, it was mandated by the Audit Committee to audit the annual financial statements and the consolidated financial statements, including the combined management report for Henkel AG & Co. KGaA and the Group, and to review the half-year financial report for fiscal 2020. The audit fee was also established, and the key audit matters were discussed. It was agreed that the auditor will notify the Super-visory Board immediately of any findings or incidents discovered or occurring during the audit that are material to the performance of the Supervisory Board's duties. Appropriate procedures for the provision of non-audit-related services as permitted in the relevant EU regulations were specified. The Audit Committee also obtained the necessary validation of auditor independence for the performance of these tasks. The Audit Committee like-wise engaged the external auditor to review the content of the separate, combined non-financial statement for Henkel AG & Co. KGaA and the Group, which is compiled as a separate non-financial report and made available in the public domain through publication on our website.
The Company
Shares and bonds
Combined management report
The Audit Committee met four times in the year under review. The Chairman of the Audit Committee also remained in regular contact with the auditor outside of the meetings. The meetings and resolutions were prepared through the provision of reports and other information by the Management Board. The heads of the relevant Group functions also reported on individual agenda items and were available to answer questions. The Chairman of the Committee reported promptly and in full to the plenary Supervisory Board on the content and results of each of the Committee meetings.
The company and Group accounts, including the interim finan-cial reports (quarterly statements and half-year financial report) were discussed at all Audit Committee meetings, with all matters arising being duly examined with the Management Board. The three meetings at which we discussed and approved the interim financial reports were attended by the auditor. The latter reported on its findings with regard to the half-year finan-cial report that it reviewed on behalf of the Supervisory Board, on its findings with regard to the quarterly statements that it reviewed on behalf of the Management Board, and on the main issues and occurrences relevant to the work of the Audit Committee. There were no objections raised in response to these reports.
The Audit Committee also focused in great detail on the ac-counting process and the efficacy and further development of the Group-wide internal control and risk management systems. The efficiency of the risk management system was reviewed on the basis of the risk reports of previous years. The report given by the General Counsel & Chief Compliance Officer on material legal disputes and compliance within the Group was also discussed, as was the status report submitted by Internal Audit. The audit plan submitted by Internal Audit, focusing on audits of the functional reliability and effectiveness of the internal control system and the compliance organization, was approved. The Audit Committee likewise discussed treas-ury risks, their management, and the EMIR mandatory audit pursuant to Section 32 of the Securities Trading Act [WpHG]. It also monitored the provision of non-audit-related services by the auditor and adherence to the procedures specified for same.
Related party transactions and the internal procedures adopted by the corporation in this respect were also discussed.
At its meeting on February 25, 2021, attended by the auditor, the Audit Committee discussed the annual and consolidated financial statements, together with the combined management report for Henkel AG & Co. KGaA and the Group, and also the separate, combined non-financial report for Henkel AG & Co. KGaA and the Group for fiscal 2020, as well as the audit reports and auditor's notes, the associated proposal for appropriation of profit, and the risk report, and prepared the corresponding resolutions for the Supervisory Board. As in previous years, other members of the Supervisory Board took part as guests in this specifically accounting-related meeting of the Audit Committee.
The Company
Shares and bonds
Combined management report
Corporate governance and declaration of compliance
The Supervisory Board again dealt with questions of corporate governance in the reporting year. We particularly focused on related party transactions, with delegation of responsibility to the Audit Committee for issuing the requisite approvals. There were no transactions that required approval or disclosure.
Details of Henkel's corporate governance can be found in the corporate governance statement (pages 35 to 52 of this Annual Report), with which we fully acquiesce.
At our meeting on February 26, 2021, we discussed and approved the joint declaration of compliance for 2021 to be submitted by the Management Board, Shareholders' Committee and Super-visory Board, as specified in the German Corporate Governance Code. The full wording of the current and previous declarations of compliance can be accessed through the company website.
Annual and consolidated financial statements/Audit
In its capacity as auditor appointed for 2020 by the Annual General Meeting, PricewaterhouseCoopers GmbH Wirtschafts-prüfungsgesellschaft, Düsseldorf, (PwC) examined the annual financial statements prepared by the Management Board, and the consolidated financial statements, together with the consolidated management report, which has been combined with the management report for Henkel AG & Co. KGaA for fiscal 2020. The annual financial statements and the combined management report were prepared in accordance with German statutory provisions. The consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRSs) as endorsed by the EU, and in accordance with the supplementary German statutory provi-sions pursuant to Section 315e (1) German Commercial Code [HGB]. The consolidated financial statements in their present form exempt us from the requirement to prepare consolidated financial statements in accordance with German law.
PwC conducted its audits in accordance with Section 317 HGB and German generally accepted standards for the audit offinancial statements promulgated by the Institute of Public Auditors in Germany [Institut der Wirtschaftsprüfer, IDW]. Unqualified audit opinions were issued for the annual and the consolidated financial statements, as well as for the combined management report.
PwC also reviewed the separate, combined non-financial state-ment for Henkel AG & Co. KGaA and the Group for fiscal 2020 as compiled by the Management Board to ensure its content included the disclosures required by law. The review was based on the International Standard on Assurance Engage-ments (ISAE) 3000 (Revised): "Assurance Engagements other than Audits or Reviews of Historical Financial Information" as published by the International Auditing and Assurance Standards Board (IAASB) for the purpose of obtaining limited assurance. Based on its review and the evidence obtained, the auditor is not aware of any circumstances that might prompt it to believe that the disclosures in the separate, combined non-financial report for Henkel AG & Co. KGaA and the Group for fiscal 2020 have not been prepared in compliance with all material aspects of commercial law provisions.
The annual financial statements, consolidated financial state-ments, combined management report, and separate, combined non-financial report for fiscal 2020 were presented in good time to all members of the Supervisory Board, together with the corresponding audit reports and relevant auditor's notes and the recommendations by the Management Board for the appropriation of the profit made by Henkel AG & Co. KGaA. We examined these documents and discussed them at our meeting on February 26, 2021 in the presence of the auditor, which reported on its main audit findings. We received and approved the audit reports. The Chairman of the Audit Committee provided the plenary session of the Supervisory Board with a detailed account of the treatment of the annual financial state-ments, the consolidated financial statements, the combined management report and the separate, combined non-financial report at the Audit Committee's meeting on February 25, 2021. Having received the final results of the review conducted by
The Company
Shares and bonds
Combined management report
the Audit Committee and concluded our own examination, we see no reason for objection to the aforementioned documents. We confirm the results of PwC's audits. The assessment by the Management Board of the position of the company and the Group coincides with our own appraisal. At our meeting on February 26, 2021, we concurred with the recommendations of the Audit Committee and therefore approved the annual finan-cial statements, the consolidated financial statements, the combined management report and the separate, combined non-financial report as prepared by the Management Board.
Additionally, we discussed and approved the proposal by the Management Board to pay out of the unappropriated profit of Henkel AG & Co. KGaA a dividend of 1.83 euros per ordinary share and of 1.85 euros per preferred share, and to carry the remainder and the amount attributable to the treasury shares held by the corporation at the time of the Annual General Meeting forward to the following year. This proposal takes into account the financial and earnings position of the corpo-ration, its medium-term financial and investment planning, and the interests of our shareholders.
We also approved our proposals for resolution at the Annual General Meeting at our meeting on February 26, 2021. Following the recommendation of the Audit Committee, the Supervisory Board proposes the engagement of PwC to audit the annual and consolidated financial statements and to review the half-year financial report for fiscal 2021.
Risk management
Risk management issues were examined by both the Audit Committee and the plenary Supervisory Board, with emphasis on the risk management system in place at Henkel and any major individual risks of which we needed to be notified; there were no identifiable risks that might jeopardize the continued existence of the corporation as a going concern. The structure and function of the risk early warning system were also integral to the audit performed by PwC, which found no cause for reservation. It is also our considered opinion that the risk management system corresponds to the statutory requirements and is fit for the purpose of early identification of developments that could endanger the continuation of the corporation as a going concern.
Changes in the Supervisory Board and Management Board A number of changes occurred in the Supervisory Board and Management Board, some of which were included in last year's Annual Report.
Following the routine election of new shareholder represent-atives by the Annual General Meeting 2020, Dr. Kaspar von Braun and Prof. Dr. Theo Siegert left the Supervisory Board. Simone Menne and Lutz Bunnenberg were elected as new members to the Supervisory Board; the other shareholder representatives were re-elected.
During the constituent meeting, I was re-elected as Chair, while Birgit Helten-Kindlein was confirmed as Vice Chair of the Supervisory Board. Furthermore, new members were elected to the Audit and Nominations Committees, with others being re-elected.
The Company
Shares and bonds
Combined management report
Following the election of new shareholder representatives, we thanked the departing members of the Supervisory Board - some of whom had been members for many years - for their successful dedication to the interests of the company. We are particularly grateful to Prof. Siegert for his many years of active involvement on the Supervisory Board and as Chairman of the Audit Committee.
Following his death on December 11, 2020, we remembered Peter Emmerich, who had represented the employees on the Supervisory Board since April 9, 2018. Michael Baumscheiper joined the Supervisory Board as the elected replacement.
As already reported last year, Hans Van Bylen left the Manage-ment Board by mutual agreement at the end of December 31, 2019. Carsten Knobel was appointed new Chairman of the Management Board and Marco Swoboda as Chief Financial Officer, both effective January 1, 2020.
Looking ahead to the new fiscal year, the COVID-19 pandemic will continue to exert strong influence on our daily routines, and on society and the economy as a whole and will thus pose further challenges for all employees and managers of the corporation. We must therefore remain very flexible in our response to developments while at the same time adjusting to the long-term impacts. We believe that Henkel is well equipped for the future and are confident that we will continue to move the company forward.
We thank you for your ongoing trust and support.
Düsseldorf, February 26, 2021
On behalf of the Supervisory Board
Dr. Simone Bagel-Trah (Chairwoman)
The Company
Shares and bonds
Combined management report
Our Management Board
Carsten Knobel
Chairman of the Management Board
Marco Swoboda
Executive Vice President
Finance (CFO)/Purchasing/Global Business Solutions
Sylvie Nicol
Executive Vice President HR/Infrastructure ServicesBorn in Marburg/Lahn, Germany, on January 11, 1969; with Henkel since 1995.
Born in Velbert, Germany, on September 23, 1971; with Henkel since 1997.
Born in Paris, France, on February 28, 1973; with Henkel since 1996.
The Company
Shares and bonds
Combined management report
Jan-Dirk Auris
Executive Vice President Adhesive Technologies
Jens-Martin Schwärzler
Executive Vice President Beauty Care
Bruno Piacenza
Executive Vice President Laundry & Home CareBorn in Cologne, Germany, on February 1, 1968; with Henkel since 1984.
Born in Ravensburg, Germany, on August 23, 1963; with Henkel since 1992.
Born in Paris, France, on December 22, 1965; with Henkel since 1990.
The Company
Shares and bonds
Shaping our future
Combined management report
We shape our future on the basis of a long-term strategic framework that builds on our purpose and our values.
With this strategic framework, we want to be successful in the current decade - with a clear focus on purposeful growth. This means, we aim to create superior value for customers and con-sumers to outgrow our markets, to strengthen our leadership in sustainability, and to enable our employees to grow both professionally and personally at Henkel.
The key elements of our strategic framework are a winning portfolio, clear competitive edge in the areas of innovation, sustainability and digitalization, and future-ready operating models - underpinned by a strong foundation of a collabora-tive culture and empowered people.
The Company
Shares and bonds
Shares and bonds
Combined management report
In a challenging market environment, Henkel shares held up well overall in 2020. Henkel preferred shares closed the year slightly up versus the end of 2019. Following a solid start to the year, the price of Henkel shares initially dropped significantly in the wake of the COVID-19 pandemic, the resulting major decline in economic activity and the collapse of the stock markets in March. By the end of the 1st quarter, the stock market had already gradually started recovering, with share prices rising successively as a result. The price of Henkel shares also increased, not least thanks to robust performance in the first three months of 2020 and despite withdrawal of our guidance for the current fiscal year in April in light of the uncertainty surrounding the overall economic situation. The pre-release of our sales performance in the 3rd quarter and our issuance of a new guidance for full year 2020 on October 9 were very well received. Thereafter, Henkel share prices ini-tially rose back to the level of year-end 2019. As the pandemic regained strength at the end of October, prompting predomi-nantly regional lockdowns, share prices again dropped signifi-cantly, although Henkel shares quickly recovered as the year progressed.
Henkel preferred shares closed the year at 92.30 euros, up slightly year on year (0.1 percent), while the ordinary shares closed -6.1 percent down at 78.85 euros. Assuming reinvest-ment of the dividend (before tax deduction) in the shares at the time of payment, the preferred and ordinary shares gener-ated a total return of 2.3 and -3.9 percent respectively. Henkel preferred share performance therefore fell slightly short of its DAX benchmark (3.5 percent), but was significantly better than that of the STOXX® Europe 600, which dropped -4.0 percent over the course of the year. Henkel preferred shares traded at an average premium of 12.2 percent over the ordinary shares in 2020. The trading volume (Xetra) of preferred shares decreased slightly in 2020 versus 2019. Each trading day saw an averageof around 604,000 preferred shares changing hands (2019: 657,000). By contrast, the average trading volume of our ordi-nary shares increased marginally to around 121,000 shares (2019: 117,000). The market capitalization of our ordinary and preferred shares totaled 36.9 billion euros as of year-end 2020.
Key data on Henkel shares 2016 to 2020
in euros
Earnings per share
Ordinary share 3.23
Preferred share 3.25 Share price at year-end1
Ordinary share
Preferred share High for the year1 Ordinary share Preferred share Low for the year1 Ordinary share
Preferred share 64.94 Dividend
Ordinary share Preferred share
Market capitalization1 36.9
Ordinary shares Preferred shares
in bn eurosin bn euros
1 Closing share prices, Xetra trading system.
2016
2017
2018
2019
2020
4.72
5.79
5.32
4.79
3.23
4.74
5.81
5.34
4.81
3.25
98.98
100.00
85.75
84.00
78.85
113.25
110.35
95.40
92.20
92.30
105.45
113.70
104.70
89.55
87.55
122.90
128.90
115.05
97.02
96.02
77.00
96.15
83.30
76.20
55.00
88.95
110.10
93.46
81.78
64.94
1.60
1.77
1.83
1.83
1.832
1.62
1.79
1.85
1.85
1.852
45.9
45.6
39.3
38.2
36.9
25.7
26.0
22.3
21.8
20.5
20.2
19.6
17.0
16.4
16.4
2020
2 Proposal to shareholders for the Annual General Meeting on April 16, 2021.
16.4
The Company
Shares and bonds
Combined management report
Henkel shares have proven to be a good investment for long-term investors. Over the last ten years, Henkel preferred shares have shown an average return of 8.8 percent per year (assuming reinvestment of the dividend before tax deduction), which is higher than the average DAX performance of 7.1 percent per year for the same period. By contrast, Henkel preferred shares have underperformed the DAX over the past five years with an annual return of -0.5 percent per year for the period compared to the average DAX increase of 5.0 percent per year.
Performance of Henkel shares versus market January through December 2020 in euros
Shareholders who invested the equivalent of 1,000 euros when Henkel preferred shares were issued in 1985, and reinvested the dividends received (before tax deduction) in the stock, had a portfolio value of 33,056 euros at the end of 2020. This repre-sents an increase in value of 3,206 percent or an average return of 10.4 percent per year. Over the same period, the DAX provided an annual return of 7.3 percent.
The Company
Shares and bonds
Combined management report
Performance of Henkel shares versus market from 2011 through 2020 in euros
The Company
Shares and bonds
Combined management report
Henkel represented in all major indices
Henkel shares are traded on the Frankfurt Stock Exchange, predominantly on the Xetra electronic trading platform. Henkel is also listed on all regional stock exchanges in Ger-many. In the USA, investors are able to invest in Henkel pre-ferred and ordinary shares by way of stock ownership certifi-cates obtained through the Sponsored Level I ADR (American Depositary Receipt) program. One share is equivalent to four ADRs. The number of ADRs outstanding for ordinary and pre-ferred shares at the end of the year increased significantly to approximately 13.3 million (2019: 10.3 million).
The international importance of Henkel preferred shares derives not least from their inclusion in many leading indices that serve as important indicators for capital markets, and as bench-marks for fund managers. Particularly noteworthy in this respect are the STOXX® Europe 600, MSCI World and FTSE World Europe indices. Henkel's inclusion in the Dow Jones Titans 30 Personal & Household Goods Index also makes it one of the most important corporations in the personal and house-hold goods sector worldwide. As a DAX stock, Henkel is one of the 30 most significant exchange-listed companies in Germany.
Share data
At year-end 2020, Henkel ranked 22nd in terms of the market capitalization of the preferred shares included in the DAX index (2019: 19th) and 28th in terms of average trading volume (2019: 26th). Our DAX weighting decreased slightly to 1.49 percent (2019: 1.53 percent).
Once again our advances in sustainable management earned recognition from external experts in 2020. Our performance with respect to non-financial indicators (environmental, social and governance themes) was reflected in regular positive assess-ments by various national and international rating agencies, from which - among other things - sustainability indices are derived.
Henkel has been represented in the ethics index FTSE4Good since 2001, and in the STOXX® Global ESG Leaders index family since its launch by Deutsche Börse in 2011. Our inclusion in the Ethibel Pioneer Investment Register and the sustainability indices Euronext Vigeo Europe 120 and Eurozone 120 was also confirmed, as was our membership in the MSCI Global Sus-tainability Index series. Henkel is, moreover, one of only 50 companies worldwide to be included in the Global Chal-lenges Index.
ADR data
Preferred shares | Ordinary shares | Preferred shares | Ordinary shares | ||
Security code No. | 604843 | 604840 | CUSIP | 42550U208 | 42550U109 |
ISIN code | DE0006048432 | DE0006048408 | ISIN code | US42550U2087 | US42550U1097 |
Stock exch. symbol | HEN3.ETR | HEN.ETR | ADR symbol | HENOY | HENKY |
Number of shares | 178,162,875 | 259,795,875 | Ratio | 1 share : 4 ADRs | 1 share : 4 ADRs |
The Company
Shares and bonds
Combined management report
International shareholder structure
Compared to the ordinary shares, our preferred shares are the significantly more liquid class of Henkel stock. Apart from the treasury shares held, which amount to 2.07 percent, they are entirely in free float. A large majority are owned by institutional investors whose portfolios are, in most cases, broadly distrib-uted internationally.
According to notices received by the company, members of the Henkel family share-pooling agreement own a majority of the ordinary shares amounting to 61.54 percent as of April 24, 2020. We have received no other notices indicating that a shareholder holds more than 3 percent of the voting rights (notifiable own-ership).
As of December 31, 2020, treasury stock amounted to 3.7 million preferred shares.
Shareholder structure:
Institutional investors holding Henkel shares
At November 30, 2020 Source: Investor Update
Shareholder structure: Ordinary shares
At December 31, 2020 Source: Henkel
Employee share plan
Since 2001, Henkel has offered an employee share plan (ESP) enabling its employees to acquire Henkel shares. For each euro invested in 2020 by an employee (limited to 4 percent of salary up to a maximum of 4,992 euros per year), Henkel added 33 eurocents. Around 12,400 employees in 58 countries pur-chased Henkel preferred shares under this plan in 2020. At year-end, some 17,500 employees held a total of around 2.7 million shares in the ESP securities accounts, representing 1.5 percent of total preferred shares outstanding. The lock-up period for newly acquired ESP shares is three years.
Investing in Henkel shares through participation in our ESP has proven to be very beneficial for our employees in the past. Employees who invested 100 euros each month in Henkel shares since the program was first launched held portfolios valued at 85,900 euros at the end of 2020 (assuming reinvest-ment of the dividend before tax deduction), which equates to a total return of 63,100 euros or 377 percent of the cumulative individual investment.
The Company
Shares and bonds
Combined management report
Henkel bonds
In January 2020, Henkel added a second tranche of 100 million British pounds to its existing 400 million British pound bond. The proceeds from the issue were used to further redeem Henkel's commercial paper liabilities. In April 2020, Henkel successfully placed a 330 million Swiss franc bond on the Swiss stock exchange. The proceeds from the issue were used partly to refinance the maturing US dollar bond in June 2020 and partly as a liquidity buffer in critical COVID-19 times. In addition, Henkel was the world's first company to successfully place a plastic waste reduction bond in July 2020. The bond is comprised of two tranches - one of 70 million US dollars and one of 25 million euros - and has a term of five years.
Bond data1
In 2019, Henkel successfully placed in the capital market two bonds with a total volume of 750 million British pounds. One bond was issued with a volume of 400 million British pounds and a term of three years and another bond with a vol-ume of 350 million British pounds and a term of seven years.
Issued in 2016, a further bond with a volume of 700 million euros and a term of five years, and a 300 million British pound bond with a term of six years, remain outstanding. Further information can be found on the website:www.henkel.com/creditor-relations
2020
2016
2016 | 2019 |
Currency | EUR | GBP | GBP | GBP | GBP | CHF | USD | EUR |
Volume | 700 million | 300 million | 400 million | 350 million | 100 million | 330 million | 70 million | 25 million |
Coupon | 0.00% p.a. | 0.875% p.a. | 1.00% p.a. | 1.25% p.a. | 1.00% p.a. | 0.2725% p.a. | 1.042% p.a. | 0.12% p.a. |
Maturity | 9/13/2021 | 9/13/2022 | 9/30/2022 | 9/30/2026 | 9/30/2022 | 4/28/2023 | 7/7/2025 | 7/10/2025 |
Issue price | 100.00% | 99.59% | 100.00% | 99.99% | 100.22% | 100.00% | 100.00% | 100.00% |
Issue yield | 0.00% p.a. | 0.95% p.a. | 1.00% p.a. | 1.25% p.a. | 0.91% p.a. | 0.2725% p.a. | 1.042% p.a. | 0.12% p.a. |
Day count convention | Act/Act (ICMA) | Act/Act (ICMA) | Act/Act (ICMA) | Act/Act (ICMA) | Act/Act (ICMA) | 30/360 | 30/360 | Act/Act (ICMA) |
Denomination | 1,000 EUR | 1,000 GBP | 100,000 GBP | 100,000 GBP | 100,000 GBP | 5,000 CHF | 200,000 USD | 200,000 EUR |
Security code No. | A2BPAX | A2BPAZ | A2YN22 | A2YN23 | A254YF | A289R9 | A289QD | A289X0 |
ISIN | XS1488418960 | XS1488419935 | XS2057835717 | XS2057835808 | XS2108492468 | CH0541537996 | XS2198440260 | XS2202774969 |
SIX Swiss | ||||||||
Listing | Exchange Ltd. | not listed | not listed |
Regulated Market of the Luxembourg Stock Exchange
1 Bonds outstanding as of December 31, 2020.
The Company
Shares and bonds
Combined management report
Pro-active capital market communication
An active and open information policy ensuring prompt and continuous communication is a major component of the value-based management approach at Henkel. Hence, share-holders, shareholder associations, participants in the capital market, financial analysts, the media and the public at large are kept informed of the current situation and major business changes relating to the company. All stakeholders are treated equally in this respect.
Up-to-date information is incorporated in the regular financial reporting undertaken by the company. The dates of the major recurring publications, and also the dates for the press confer-ence on the preceding fiscal year and the Annual General Meeting, are published together with all relevant information on the internet atwww.henkel.com/ir. This also serves as the portal for the live broadcast of telephone conferences and parts of the Annual General Meeting (AGM). The COVID-19 pandemic posed special challenges; however, we were able to successfully overcome these. Thanks to our comprehensive commitment to digitalization, we were able to respond quickly to the changing conditions and to switch our communication to digital channels. Due to COVID-19 restrictions, our 2020 AGM was held exclusively online. Nevertheless, we made sure all shareholders had the opportunity to directly obtain exten-sive information about the company.
Shareholders, the media and the public at large are regularly provided with comprehensive information through press releases and information events - most of which took place online in 2020 - while occurrences with the potential to mate-rially affect the price of Henkel shares are communicated in the form of ad hoc announcements. The company's advancements and targets in relation to the environment, safety, health and social responsibility continue to be published annually in our Sustainability Report.
Henkel is covered by numerous financial analysts at an inter-national level. More than 25 equity analysts regularly publish reports and commentaries on the current performance of the company.
Analyst recommendations
At December 31, 2020 Basis: 26 equity analysts
Henkel places great importance on dialog with investors and analysts. There were 29 virtual capital market conferences and roadshows attended by people from Europe, North America and Asia, through which institutional investors and financial analysts had an opportunity to engage with representatives of the company and, in many instances, directly with senior management. In total, we exchanged views with more than 600 different institutional investors and financial analysts around the globe in individual or group meetings and tele-phone or video conferences.
The highlight of our Investor Relations diary was our Investor and Analyst Conference on March 5, 2020, during which Carsten Knobel (CEO) and Marco Swoboda (CFO) presented Henkel's new strategic framework for purposeful growth. The conference was originally planned to be held in London. Due to the COVID-19 pandemic and associated travel constraints, however, the event was moved at short notice to our site in Düsseldorf and took place online. Thanks to the innovative event format, both participants and the interested general public were able to access the conference digitally.
The Company
Shares and bonds
Combined management report
The good quality of our capital market communication was again acknowledged in 2020 by various independent rankings. In this year's Institutional Investor Europe Ranking, Henkel ranked second in the category Best Investor Relations Team in Household & Personal Care. The ranking is derived from eval-uations by some 1,200 professional investors and analysts.
In addition, Henkel came first in the NetFederation IR Bench-mark 2020, which analyzed the investor relations websites and digital activities of the 50 DAX, MDAX, TecDAX and SDAX companies with the highest capitalization.
The Company
Shares and bonds
Combined management report
Corporate governance at Henkel AG & Co. KGaA
The following takeover-relevant information as required in Sections 289a, 315a of the German Commercial Code [HGB] and the corporate governance statement in compliance with Sections 289f, 315d HGB, together with the relevant explanations, form part of the externally audited and certified combined management report for Henkel AG & Co. KGaA and the Group. It should be noted that Section 317 (2) sentence 6 HGB stipulates that the audit of the disclosures pursuant to Sections 289f (2), 315d HGB is limited to the question as to whether the requisite information has been disclosed.
Takeover-relevant information
(Disclosures required per Sections 289a, 315a HGB, and explanations)
Composition of issued capital/Shareholders' rights
The capital stock of the corporation amounts to 437,958,750 euros. It is divided into a total of 437,958,750 bearer shares (of no par value), with each share representing a nominal propor-tion of the capital stock of 1 euro. Of this total, 259,795,875 are ordinary shares (total nominal proportion of capital stock: 259,795,875 euros, representing 59.3 percent), and 178,162,875 are preferred shares without voting rights (total nominal proportion of capital stock: 178,162,875 euros, representing 40.7 percent). All shares are fully paid in. Multiple share certif-icates for shares may be issued. In accordance with Art. 6 (4) of the Articles of Association, there is no right to individual share certificates. Each ordinary share grants to its holder one vote (Art. 21 (1) of the Articles of Association). The preferred sharesgrant to their holders all shareholder rights apart from the right to vote (Sections 139 (1) and 140 (1) German Stock Corporation Act [AktG] in conjunction with Art. 6 (1) of the Articles of Asso-ciation). The preferred shares carry the following preferential right in the distribution of profit (Section 139 (1) AktG in con-junction with Art. 35 (2) of the Articles of Association) unless otherwise resolved by the Annual General Meeting:
The holders of preferred shares receive a preferred dividend in the amount of 0.04 euros per preferred share. If the profit to be distributed in a fiscal year is insufficient for payment of a preferred dividend of 0.04 euros per preferred share, the arrears are paid without interest from the profit of the following years, with older arrears to be paid in full before more recent arrears and the preferred dividend from the profit of a particular fiscal year paid only after the clear-ance of all arrears. The holders of ordinary shares then receive a preliminary dividend from the remaining unappropriated profit of 0.02 euros per ordinary share, with the residual amount being distributed to the holders of ordinary and preferred shares in accordance with the proportion of the capital stock attributable to them.
If the preferred dividend is not paid out either in part or in whole in a year, and the arrears are not paid off in the fol-lowing year together with the full preferred share dividend for that second year, the holders of preferred shares are ac-corded voting rights until such arrears are paid (Section 140 (2) AktG). Cancellation or limitation of this preferred dividend requires the consent of the holders of preferred shares (Sec-tion 141 (1) AktG).
The Company
Shares and bonds
Combined management report
The shareholders exercise their rights in the Annual General Meeting per the relevant statutory provisions (especially Sections 118 ff, 186 AktG) and the corporation's Articles of Association (especially Art. 18 ff). In particular, those holding shares with voting rights may exercise their right to vote either personally, by postal vote, through a legal representative or through a proxyholder nominated by the corporation (Section 134 (3) and (4) AktG in conjunction with Art. 21 (2) and (3) of the Articles of Association) and are also entitled to submit motions on the resolution proposals of management, speak on agenda items, and raise pertinent questions and propose motions (Sections 126 (1) and 131 AktG in conjunction with Art. 23 (2) of the Articles of Association). The ordinary Annual General Meeting usually takes place within the first four months of the fiscal year.
Shareholders whose shares jointly represent at least one twenti-eth of the capital stock - corresponding to 21,897,938 ordinary or preferred shares or a combination of both - may request that a general meeting of shareholders be called. If their proportionate amount of the capital stock jointly reaches 500,000 euros - corresponding to 500,000 ordinary or preferred shares or a combination of both - they may request that items be placed on the agenda and published (Section 122 (1) and (2) AktG). In addition, shareholders whose combined share of the capital stock amounts to 100,000 euros or more - equivalent to 100,000 ordinary or preferred shares or a combination of the two - may, subject to certain conditions, request that a special auditor be appointed by the court to examine certain matters (Section 142 (2) AktG).
Through the use of electronic communications, particularly the internet, the corporation makes it easy for shareholders to participate in the Annual General Meeting. It also enables them to be represented by proxyholders for exercising their voting rights. The reports, documents and information required by law for the Annual General Meeting, including the financial statements and annual reports, are made available on the in-ternet, as are the agenda for the Annual General Meeting andany countermotions or nominations for election by share-holders that require publication.
Restrictions with respect to voting rights or the transfer of shares
Generally, preferred shares do not convey any voting rights (Sections 139 (1), 140 (1) AktG; please refer to the remarks above for further details). Voting rights attached to treasury shares held by the corporation (Section 71b AktG) and to ordinary shares for which the statutory notification requirement has not been met (Section 44 sentence 1 German Securities Trading Act [WpHG]) may not be exercised. The voting rights attached to ordinary shares are also excluded by law in the cases cited in Section 136 AktG (conflicts of interest concerning ordinary shares held by members of the Management Board, Supervisory Board or Shareholders' Committee).
A share-pooling agreement has been concluded between members of the families of the descendants of company founder Fritz Henkel, pursuant to which the members agree on how to exercise the voting rights conveyed by their relevant ordinary shares in Henkel AG & Co. KGaA and ensure their voting rights are exercised consistently. The agreement also contains restrictions with respect to transfers of the ordinary shares covered (Art. 7 of the Articles of Association).
Henkel preferred shares acquired by employees through the employee share plan, including bonus shares acquired with-out additional payment, are subject to a company-imposed contractual lock-up period of three years, which begins on the first day of the respective participation period. The shares may not be sold before expiration of this lock-up period. If employee shares are sold during the lock-up period, the bonus shares are forfeited.
Henkel preferred shares acquired by employees through the Long Term Incentive (LTI) Plan 2020+ are also subject to a com-pany-imposed contractual lock-up period and may not be sold before expiration of the four-year term of each tranche.
The Company
Shares and bonds
Combined management report
Contractual agreements also exist with members of the Manage-ment Board governing lock-up periods for Henkel preferred shares which they purchase out of part of their variable annual cash remuneration (for additional information, please refer to the description the remuneration system on pages 53 to 76).
Major shareholders
According to notifications received by the corporation, as of April 24, 2020, a total of 61.54 percent of the voting rights are held by members of the Henkel family share-pooling agree-ment (for additional information, please see the disclosures provided in the notes to the consolidated financial statements under Note 42 on pages 271 and 272). No other direct or indirect investment in capital stock exceeding 10 percent of the voting rights has been reported to us or is known to us.
Shares with special rights
There are no shares carrying multiple voting rights, preference voting rights, maximum voting rights or other special controlling rights.
Statutory requirements and provisions in the Articles of Association governing the appointment and dismissal of members of the Management Board and amendment of the Articles of Association
Decisions regarding the appointment and dismissal of personally liable partners are taken by the Shareholders' Committee of Henkel AG & Co. KGaA and not by the Annual General Meeting (Art. 26 of the Articles of Association). Henkel Management AG is the sole Personally Liable Partner of the corporation (Art. 8 (1) of the Articles of Association).
The Supervisory Board of Henkel Management AG is responsible for the appointment and dismissal of members of the Manage-ment Board of Henkel Management AG (Management Board). The appointments are for a maximum tenure of five years, although initial appointments tend to be for a period of three years, in accordance with the recommendations of the German Corporate Governance Code (GCGC). Reappointment or anextension of tenure is permitted for a maximum period of five years in each case (Section 84 (1) AktG). The Supervisory Board may revoke the appointment as member of the Management Board for good cause or reason, which may consist of gross dereliction of management board duties or inability to properly manage the company's affairs (Section 84 (3) AktG). The Super-visory Board exercises due discretion when appointing and revoking appointments.
The Management Board is composed of at least two members in accordance with Art. 7 (1) of the Articles of Association of Henkel Management AG. The Supervisory Board of Henkel Management AG is also responsible for determining the number of members on the Management Board. The Supervisory Board can appoint a member of the Management Board as Chairperson.
Unless otherwise mandated by statute or the Articles of Asso-ciation, the resolutions of the Annual General Meeting of Henkel AG & Co. KGaA are adopted by simple majority of the votes cast. If a majority of capital is required by statute, resolutions are adopted by simple majority of the voting capital represented (Art. 24 of the Articles of Association). This also applies to changes in the Articles of Association. However, modifications to the object of the corporation require a three-quarters' majority (Section 179 (2) AktG). The Supervisory Board and Shareholders' Committee have the authority to resolve purely formal modifications of and amendments to the Articles of Association (Art. 34 of the Articles of Association). By resolution of the Annual General Meeting, the Supervisory Board is also authorized to amend Art. 5 and 6 of the Articles of Association with respect to each use of the authorized capital and upon expiration of the term of the authorization.
The Company
Shares and bonds
Combined management report
Authorization of the Management Board to issue or buy back shares
The resolution adopted by the Annual General Meeting on April 13, 2015, authorizing the Personally Liable Partner, with the approval of the Shareholders' Committee and of the Super-visory Board, to increase the capital of the corporation by up to a nominal amount of 43,795,875 euros in total by issuing up to 43,795,875 new non-voting preferred shares for cash and/or in-kind consideration expired on April 12, 2020.
New authorized capital was created by resolution of the Annual General Meeting on June 17, 2020 (Art. 6 (5) of our Articles of Association). Under the new resolution, the Personally Liable Partner is authorized, with the approval of the Shareholders' Committee and of the Supervisory Board, to increase the capital of the corporation at any time through to June 16, 2025, by up to a nominal amount of 43,795,875 euros in total from the issu-ance of up to 43,795,875 new non-voting preferred bearer shares for cash consideration (Authorized Capital 2020). The new shares have exactly the same rights as the preferred bearer shares already in circulation in respect of eligibility for distribution of profits or corporation assets. Existing shareholders must be granted pre-emptive rights. Pursuant to Section 186 (5) sentence 1 AktG, the new shares can be acquired by one or more banks or companies to be nominated by the Personally Liable Partner on condition that they offer them for purchase to the shareholders.
The authorization may be utilized to the full extent allowed or once or several times in installments. The new non-voting preferred shares participate in profit distributions from the beginning of the fiscal year in which they are issued. To the extent permitted by law, the Personally Liable Partner may, with the approval of the Shareholders' Committee and of the Supervisory Board and in derogation from Section 60 (2) AktG, determine that the new shares shall participate in profits from the beginning of a fiscal year that has already elapsed and for which, at the time of their issuance, no resolution has yet been passed by the Annual General Meeting on the appropriation of retained earnings.
In addition, the Personally Liable Partner is authorized to pur-chase ordinary and/or preferred shares of the corporation at any time until April 7, 2024 up to a maximum proportion of 10 percent of the capital stock existing at the time the resolution is adopted by the Annual General Meeting or at the time the authorization is exercised, whichever is lower. Equity derivatives (put and/or call options and/or forward contracts or a combi-nation of these) can also be used for such purchase. The volume of any and all shares purchased using such derivatives must not exceed 5 percent of the capital stock existing at the time the resolution is adopted by the Annual General Meeting or at the time the authorization is exercised, whichever is lower. The terms of the derivatives must not exceed 18 months in each case and shall be contracted such that, after April 7, 2024, it will not be possible to acquire treasury shares through exercise of such derivatives.
This authorization to purchase treasury shares can be exercised for any legal purpose. To the exclusion of the pre-emptive rights of existing shareholders, treasury shares may, in particular, be transferred to third parties for the purpose of acquiring entities or participating interests in entities. Treasury shares may also be sold to third parties against payment in cash, provided that the selling price is not significantly below the quoted market price at the time of share disposal. Treasury shares may also be offered for purchase or transferred to members of the corpora-tion's staff or managers of affiliated companies, particularly in connection with share-based payment plans, including the Long Term Incentive (LTI) Plan 2020+. The shares may likewise be used to satisfy warrants or conversion rights granted by the corporation. The Personally Liable Partner is also authorized, with the approval of the Shareholders' Committee and of the Supervisory Board, to cancel treasury shares without the need for further resolution by the General Meeting.
Insofar as shares are issued or used to the exclusion of pre-emptive rights, the proportion of capital stock represented by such shares shall not exceed 10 percent.
The Company
Shares and bonds
Combined management report
Concerning the number of treasury shares and their use, please refer to the disclosures provided in the notes to the financial statements of Henkel AG & Co. KGaA, Note 10, on pages 13 and 14, and in the notes to the consolidated financial statements, Note 10, on pages 208 and 209.
Material agreements governed by a change of control, and compensation agreements in the event of a takeover bid The corporation has not entered into any material agreements governed by a change of control in the wake of a takeover bid, nor any compensation agreements with members of the Management Board or individual employees in the event of a takeover bid.
Corporate governance statement
(Disclosures required under Sections 289f, 315d HGB, and explanations)
The following statement takes into account the relevant rec-ommendations of the German Corporate Governance Code (GCGC) as amended on December 16, 2019, and contains all disclosures and explanations required according to Sections 289f and 315d (corporate governance statement) of the German Commercial Code [HGB]. It should be noted that Section 317 (2) sentence 6 HGB stipulates that the audit of the disclosures pursuant to Sections 289f (2), 315d HGB is limited to the question as to whether the requisite information has been disclosed.
The Management Board, the Shareholders' Committee and the Supervisory Board are committed to ensuring that the manage-ment and stewardship of the corporation are conducted in a responsible and transparent manner aligned to achieving a long-term increase in shareholder value. With this in mind, they have pledged allegiance to the following three principles:
Value creation as the foundation of our management approach
Sustainability achieved through the application of socially responsible management principles
Transparency supported by an active and open information policy
The GCGC was introduced in order to promote confidence among investors, customers, the workforce and the general public in the management and oversight of listed German corporations.
The aim of the GCGC is to make the German corporate govern-ance system with its institutional segregation of management (Management Board) and oversight (Supervisory Board) trans-parent and comprehensible. The GCGC offers fundamental principles, recommendations and suggestions with regard to the management and oversight of German listed companies that are recognized nationally and internationally as standards of good and responsible corporate governance.
How Henkel applies the GCGC
The GCGC is substantially aligned to the statutory provisions applicable to a German joint stock corporation ("Aktiengesell-schaft" [AG]). It is applied analogously by Henkel AG & Co. KGaA (the corporation). A description is provided below to enable a better understanding of the principles underlying the manage-ment and control structure of the corporation and the special features distinguishing us from an AG which derive from our specific legal form and our Articles of Association, with indi-cation also of the primary rights accruing to the shareholders of Henkel AG & Co. KGaA.
The Company
Shares and bonds
Combined management report
Legal form/Special statutory features of Henkel AG & Co. KGaA
Henkel is a "Kommanditgesellschaft auf Aktien" [KGaA]. A KGaA is a company with a legal identity (legal entity) in which at least one partner has unlimited liability with respect to the company's creditors (personally liable partner). The other partners' liability is limited to their shares in the capital stock and they are thus not personally liable for the company's debts (limited partners per Section 278 (1) German Stock Corporation Act [AktG]).
In terms of its legal structure, a KGaA is a mixture of a joint stock corporation [AG] and a limited partnership [KG], with a leaning toward stock corporation law. The differences with respect to an AG are primarily as follows: The duties of the executive board of an AG are performed at the corporation by Henkel Management AG - acting through its Management Board - as the sole Personally Liable Partner (Sections 278 (2) and 283 AktG in conjunction with Art. 11 of our Articles of As-sociation). The corporation is the sole shareholder of Henkel Management AG.
The rights and duties of the supervisory board of a KGaA are more limited compared to those of the supervisory board of an AG. Specifically, the supervisory board of a KGaA is not authorized to appoint personally liable partners, preside over the partners' contractual arrangements, impose procedural rules on the management board, or rule on business transac-tions. These duties are performed for the corporation by the Shareholders' Committee and by the Supervisory Board of Henkel Management AG respectively. A KGaA is not required to appoint a director of labor affairs, even if, like Henkel, the company is bound to abide by Germany's Codetermination Act of 1976.
The general meeting of a KGaA essentially has the same rights as the shareholders' meeting of an AG. For example, it votes on the appropriation of earnings, elects members of the super-visory board (shareholder representatives) and formally approvesthe supervisory board's actions. It appoints the auditor and also votes on amendments to the articles of association and measures that change the company's capital, which are imple-mented by the management board. Additionally, as stipulated by the legal form, it also votes on the adoption of the annual financial statements of the company, formally approves the actions of the personally liable partner (general partner), and elects and approves the actions of the members of the share-holders' committee as established under the articles of asso-ciation. Resolutions passed in general meeting require the approval of the personally liable partner where they involve matters which, in the case of a limited partnership, require the authorization of the personally liable partners and that of the limited partners (Section 285 (2) AktG) or relate to the adoption of annual financial statements (Section 286 (1) AktG).
According to our Articles of Association, in addition to the Super-visory Board, Henkel also has a standing Shareholders' Com-mittee comprising a minimum of five and a maximum of ten members, all of whom are elected by the General Meeting (Art. 27 of the Articles of Association). The Shareholders' Committee is required in particular to perform the following functions (Section 278 (2) AktG in conjunction with Sections 114 and 161 HGB, and Art. 8, 9 and 26 of the Articles of Association):
It acts in place of the General Meeting in guiding the business activities of the corporation.
It decides on the appointment and dismissal of the Person-ally Liable Partners.
It holds both the power of representation and executive powers over the legal relationships prevailing between the corporation and Henkel Management AG, the Personally Liable Partner.
It exercises the voting rights of the corporation in the Annual General Meeting of Henkel Management AG, thereby choosing its three-member Supervisory Board which, in turn, appoints and dismisses the members of the Manage-ment Board.
The Company
Shares and bonds
Combined management report
It determines the rules of procedure for Henkel Manage-ment AG and specifies which transactions are subject to its approval.
There were no changes in the Group management and super-visory structure in the year under review. The following chart illustrates the structure of the corporation.
Structure of Henkel AG & Co. KGaA
The Company
Shares and bonds
Combined management report
Application of the German Corporate Governance Code (GCGC)
Where the GCGC offers recommendations concerning the duties and responsibilities of a supervisory board that are performed by the corporation's Shareholders' Committee or the Supervisory Board of Henkel Management AG in compliance with the Articles of Association, those recommendations have been adopted accordingly for the Shareholders' Committee and the Supervisory Board of Henkel Management AG respectively. Such recommendations by the GCGC relate to the composition of the Management Board, succession planning, the length of first terms in office, reappointment and specification of an age limit, definition of a remuneration system and of total remu-neration, specification of the amount of variable remunera-tion to be paid to the Management Board and of the monetary arrangements upon termination of a contract.
Taking into account the special features arising from our legal form and Articles of Association, the corporation complies with all recommendations ("shall" provisions) of the GCGC, with the following exceptions:
According to Recommendation C.5 GCGC, management board members of listed companies should not accept more than two supervisory board appointments or comparable offices in non-Group listed companies. Nor should they chair a supervisory board of a non-Group listed company. Whether the number of mandates held by members of the management board remains appropriate is to be assessed on a case-by-case basis as a more reasonable approach, rather than by means of a rigid upper limit.
In derogation from Recommendation D.8 GCGC, individual meeting attendance by Supervisory Board members is disclosed together with individual meeting attendance by the members of the Shareholders' Committee in the remunera-tion report and not in the report of the Supervisory Board.
According to Recommendation G.8 GCGC, any subsequent change in performance targets or comparison parameters should be precluded in the case of variable remunerationcomponents. Following modifications to the Management Board remuneration since 2019 with regard to the Long Term Incentive (LTI) tranches issued in 2017 and 2018 - of which the three-year performance measurement periods end on December 31, 2019 and December 31, 2020 respectively - the method of performance measurement derogates from this recommendation insofar as the related benchmark parameters are determined pro rata temporis in accordance with the previously valid conditions for the period up to December 31, 2018, and for the period since January 1, 2019 in accordance with the conditions effective from 2019. This will ensure a cogent and consistent incentive system of Management Board compensation.
In keeping with Recommendation G.11 GCGC giving super-visory boards the option of considering unusual develop-ments, the Supervisory Board of Henkel Management AG can, at its discretion, include reasonable consideration of unusual developments - the effects of which are not appro-priately reflected in the achievement of the targets - when determining the targets for the Short Term Incentive (STI) and for the LTI. This can result in both higher and lower target achievement values and, therefore, corresponding payout amounts.
According to Recommendation G.10 GCGC, the amount cor-responding to the variable components of remuneration awarded to the members of the Management Board should be predominantly invested by them in company shares, or be awarded in appropriately share-based form. Long-term variable remuneration awards to Management Board mem-bers should be subject to a four-year lock-up period.
In derogation from this recommendation, the portion of the personal investment in Henkel preferred shares (share deferral) to be made under the STI scheme in relation to the at-target remuneration (target achievement, functional factor 1) amounts to around 25 percent of the total variable remuneration (comprising the STI and the LTI) and around
The Company
Shares and bonds
Combined management report
47 percent of the total long-term remuneration (comprising the share deferral and the LTI).
The lock-up period for the Henkel preferred shares expires in each case on December 31 of the fourth year following the remuneration year. This share deferral ensures that the mem-bers of the Management Board are required to accumulate a significant share portfolio during the rolling lock-up period, and that they participate in the long-term performance of the corporation, whether this be positive or negative. This share portfolio continues to grow due to the fact that shares are sold, if at all, only in exceptional instances once the respective lock-up period has expired.
The performance measurement period for the LTI is three years. The LTI is paid in cash once the corporation's annual financial statements for the final year in the performance measurement period have been approved by the Annual General Meeting.
In keeping with the objectives of the Management Board remuneration policy, this structure of the STI and LTI not only rewards sustainably profitable growth and thus sup-ports the long-term development of Henkel, but also aligns the Management Board remuneration to the interests of the corporation's shareholders.
In derogation from Recommendation G.12 GCGC to refrain from premature payment of variable remuneration compo-nents in the event of termination of a Management Board contract, all lock-up periods relating to investments in Henkel preferred shares that are financed by the recipients (share deferral) end if said recipient dies. By the same token, LTI entitlements with regard to outstanding tranches are settled on the basis of budget figures and paid to the heirs.
Notwithstanding the aforementioned exception and the special features arising from its legal form, the corporation has adopted the discretionary suggestions of the GCGC.
The corresponding declarations of compliance together with the reasons for deviations from recommendations can be found on our website:www.henkel.com/ir.
Remuneration report/Remuneration system
For details of the remuneration report for fiscal 2020, please refer to the Annual Report 2020, which can be found on our websitewww.henkel.com/ir. For details per Section 87a (1) AktG of the remuneration system in place for the Management Board, please refer to the notice of convocation of the Annual General Meeting on June 17, 2020 and the corresponding resolution, both of which are also available on the websitewww.henkel.com/ir.
The remuneration of the members of the Supervisory Board and of the Shareholders' Committee is governed by Article 17 (Supervisory Board remuneration) and Article 33 (Shareholders' Committee remuneration) of the Articles of Association of Henkel AG & Co. KGaA. According to Section 113 (3) AktG, listed companies must adopt resolutions governing the remuneration of their supervisory boards at least every four years, whereby a resolution simply confirming the status quo is permissible. Such a resolution will be proposed for the first time at our Annual General Meeting 2021.
Managers' transactions
In accordance with Article 19 (1) of Regulation (EU) No. 596/2014 of the European Parliament and of the Council on Market Abuse (Market Abuse Regulation), members of the Management Board, the Supervisory Board and the Shareholders' Commit-tee, and parties related to same, are obliged by law to disclose notifiable transactions involving shares in Henkel AG & Co. KGaA or their derivative financial instruments where the value of such transactions by the member, or a party related to the member, attains or exceeds 20,000 euros in a calendar year. The transactions reported to the corporation in the past fiscal year were properly disclosed and can be seen on the website:www.henkel.com/ir.
The Company
Shares and bonds
Combined management report
Principles of corporate governance/Compliance
The members of the Management Board conduct the corpora-tion's business with the care of a prudent and conscientious business director in accordance with legal requirements, the Articles of Association of Henkel Management AG and the Articles of Association of Henkel AG & Co. KGaA, the rules of procedure governing the actions of the Management Board, the provisions contained in the individual contracts of employ-ment of its members, and also the compliance guidelines and resolutions adopted by and within the Management Board.
Corporate management principles which go beyond the statutory requirements are derived from our purpose, our vision, our mission and our values. For our corporation to be successful, it is essential that we share a common approach to entrepre-neurship. We have defined a clear strategic framework with a long-term horizon. It guides us in making the right decisions and helps us to concentrate on our strategic priorities and focus resolutely on our ambition for the future.
We want to create value - for our customers and our consumers, for our people, for our shareholders, as well as for the wider society and communities in which we operate.
Our purpose:
Creating sustainable value.
Our vision:
Leading with our innovations, brands and technologies.
Our mission:
Serving our customers and consumers worldwide as the most trusted partner with leading positions in all relevant markets and categories - as a passionate team united by shared values.
Our values:
We put our customers and consumers at the center of what we do.
We value, challenge and reward our people.
We drive excellent sustainable financial performance.
We are committed to leadership in sustainability.
We shape our future with a strong entrepreneurial spirit based on our family business tradition.
The corporate bodies of Henkel and our employees worldwide are guided by this purpose, this vision, this mission, and these values. They reaffirm our ambition to meet the highest ethical standards in everything we do. And they guide our employees in all the day-to-day decisions they make, providing a compass for their conduct and actions.
Henkel is committed to ensuring that all business transactions are conducted in an ethically irreproachable, legal fashion. Consequently, Henkel expects all our employees not only to respect the corporation's internal rules and all relevant laws, but also to avoid conflicts of interest, to protect Henkel's assets and to respect the social values of the countries and cultural environments in which Henkel does business. The Manage-ment Board has therefore issued a series of Group-wide codes and standards with precepts that are binding worldwide. These regulatory instruments are not static, but are periodically re-viewed and amended as appropriate, evolving in step with the changing legal and commercial conditions that affect Henkel as a globally active corporation. The Code of Conduct supports our employees in ethical and legal issues. The Leadership Commitments define the principles of management conduct. The Code of Corporate Sustainability describes the principles that drive our sustainable, socially responsible approach to business. This code also enables Henkel to meet the commit-ments derived from the United Nations Global Compact.
Ensuring compliance with laws and regulations is an integral component of our operating models and business processes. Henkel has established a Group-wide compliance organization with locally and regionally responsible compliance officers led by a globally responsible General Counsel & Chief Compliance Officer (CCO). The General Counsel & CCO, supported by the Corporate Compliance Office and the interdisciplinary
The Company
Shares and bonds
Combined management report
Compliance & Risk Committee, manages and controls compli-ance-related activities undertaken at the corporate level, coor-dinates training courses, oversees fulfillment of both inter-nal and external regulations, and takes appropriate action in the event of compliance violations.
The local and regional compliance officers are responsible for organizing and overseeing the training activities and imple-mentation measures tailored to the specific local and regional requirements. They report to the Corporate Compliance Office. The General Counsel & CCO reports regularly to the Manage-ment Board and to the Audit Committee of the Supervisory Board on identified compliance violations.
The issue of compliance is also a permanent item in the target agreements signed by all managerial staff of Henkel. Due to their position, it is particularly incumbent on them to set the right example for their subordinates, to effectively communicate the compliance rules and to ensure through the implementation of suitable organizational measures that these are obeyed.
The procedures to be followed in the event of complaints or suspicion of malpractice also constitute an important element of the compliance policy. In addition to our internal reporting system and complaint registration channels, employees and third parties may also, for the purpose of reporting serious violations to the Corporate Compliance Office, anonymously use a compliance hotline operated by an external service pro-vider. The Head of the Corporate Compliance Office is man-dated to initiate the necessary follow-up procedures.
Our corporate compliance activities are focused on antitrust law and the fight against corruption. In our Code of Conduct, the corporate guidelines based upon it, and in other publica-tions, the Management Board clearly expresses its rejection of all infringements of the principles of compliance, particularly antitrust violations and corruption. We do not tolerate such violations in any way. For Henkel, bribery, anticompetitive agreements, or any other violations of laws are no way to initiate or conduct business.
A further compliance-relevant area relates to capital market law. Supplementing the legal provisions, internal codes of conduct have been put in place to regulate the treatment of issues and information that have the potential to materially affect share prices. The corporation has an Ad Hoc Committee comprised of representatives from various departments. In order to ensure that potential insider information is handled as required by law, this Committee reviews occurrences for their possible effect on share prices, determining the need to issue reports to the capital markets on an ad hoc basis. The ultimate authority to decide how to handle potential insider information lies with the Management Board. There are also rules that go beyond the legal requirements, governing the behavior of the members of the Management Board, the Super-visory Board and the Shareholders' Committee, and also em-ployees of the corporation who, due to their function or involve-ment in projects, have access to potential insider information.
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Management and control structure
Management Board
The Management Board is composed of at least two members in accordance with Art. 7 (1) of the Articles of Association of Henkel Management AG. The Supervisory Board of Henkel Management AG is also responsible for determining the number of members on the Management Board; it can appoint a member of the Management Board as Chairperson.
The members of the Management Board are segregated from both the Supervisory Board and the Shareholders' Committee of Henkel AG & Co. KGaA and from the Supervisory Board of Henkel Management AG; no member of the Management Board may also sit on either of the aforementioned Supervisory Boards nor the Shareholders' Committee.
As the executive body of the Group, the Management Board is bound to uphold the interests of the corporation and is re-sponsible for ensuring a sustainable increase in shareholder value. The members of the Management Board are responsible for managing Henkel's business operations in their entirety. The individual Management Board members are assigned, in accordance with a business distribution plan, areas of compe-tence for which they bear lead responsibility. The members of the Management Board cooperate closely as colleagues, informing one another of all major occurrences within their areas of competence and conferring on all actions that may affect several such areas. Further details relating to coopera-tion and the division of operational responsibilities within the Management Board are regulated by the rules of procedure issued by the Supervisory Board of Henkel Management AG.
It is the duty of the Management Board to prepare the annual financial statements of Henkel AG & Co. KGaA, the consolidated financial statements and combined management reports for Henkel AG & Co. KGaA and the Group, and the interim financial reports. The Management Board is responsible for management of the overall business including planning, coordination,allocation of resources, and control/risk management. It must also ensure compliance with legal provisions, regulatory re-quirements and internal company guidelines, and take steps to ensure that Group companies also observe them. To this end, the Management Board has put a comprehensive compliance management system in place that also enables confidential whistleblowing.
The Management Board adopts its resolutions in meetings held at regular intervals or by written procedure. Decisions by the Management Board are taken on the basis of detailed infor-mation submitted by the business units and central functions and - to the extent deemed necessary - by external consultants. Wherever possible, Management Board resolutions are adopted unanimously. In the absence of a unanimous vote, the major-ity decides; in the event of a tie, the Chair of the Management Board has the casting vote. If outvoted, the Chair has a veto right. Exercising the veto right prompts renewed debate of the resolution by the Management Board. If the veto right is exer-cised again in response to the proposed adoption of a resolu-tion, the matter is forwarded to the Shareholders' Committee for a final decision.
Supervisory Board and Shareholders' Committee; (sub)committees
Composition, duties
The corporation's Supervisory Board is composed of equal numbers of shareholder and employee representatives as specified in Germany's 1976 Codetermination Act, and is made up of 16 members. In keeping with the 1976 Codetermination Act and the relevant voting procedures, the eight employee repre-sentatives are elected by the workforce and the eight shareholder representatives by the General Meeting. All members of the Supervisory Board are bound in equal measure to protect the interests of the corporation. Members are appointed for five-year terms unless otherwise specified at election. At the last election of the shareholder representatives by the Annual Gen-eral Meeting 2020, their term of office was set at four years.
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It is the responsibility of the Supervisory Board to advise and supervise the Management Board in the performance of its business management duties. The Supervisory Board regularly discusses business performance and planning with the Manage-ment Board. It reviews the annual financial statements of Henkel AG & Co. KGaA and the Group's consolidated financial statements together with the associated combined management reports and the non-financial statement, taking into account the reviews and audit reports submitted by the auditor. It also votes on the proposal of the Management Board regarding the appropriation of profit and submits to the Annual General Meeting a proposal for the appointment of the external auditor.
As a general rule, the Supervisory Board meets four times per year. If deemed necessary, the Management Board does not participate in such meetings. The Supervisory Board reaches its decisions by a simple majority of the votes cast. In the event of a tie, the Chair has the casting vote. The Supervisory Board has established an Audit Committee and a Nominations Committee.
The Audit Committee is made up of three shareholder and three employee representative members of the Supervisory Board. Each member is elected by the Supervisory Board based on nominations of their fellow shareholder or fellow employee representatives on the Board. The Chair of the Audit Committee is elected based on a proposal of the shareholder representative members. As of December 31, 2020, the following were members of the Audit Committee: Prof. Dr. Michael Kaschke (Chair), Simone Menne (Vice Chair) and Dr. Simone Bagel-Trah as shareholder representatives, and Birgit Helten-Kindlein, Edgar Topsch and Michael Vassiliadis as employee representatives. It is a statutory requirement that the Audit Committee includes at least one independent member with expertise in the fields of accounting or auditing; all members must be familiar with the sector in which the corporation operates. Henkel's Audit Committee meets these requirements. Prof. Dr. Michael Kaschke, current Chair of the Audit Committee, and Simone Menne are both experts in the fields of accounting and auditing.
Prof. Kaschke, who is neither Chair of the Supervisory Board nor a former member of the Management Board, is also in-dependent from the controlling shareholder as defined in Recommendation C.9 GCGC in that he neither is, nor was, party to the Henkel family share-pooling agreement. The same applies to Prof. Dr. Theo Siegert, who chaired the Audit Commit-tee up until June 17, 2020, and also in equal measure to Simone Menne.
As a general rule, the Audit Committee meets four times per year. It prepares the proceedings and resolutions of the Super-visory Board relating to the adoption of the annual financial statements and the consolidated financial statements, the review of the non-financial statement and also the auditor appointment proposal to be made to the Annual General Meet-ing. It issues audit mandates to the auditor and defines the focal areas of the audit, as well as deciding on the fee for the audit and other advisory services provided by the auditor. The Audit Committee specifies a cap on the provision of other advisory services, i.e., non-audit-related services as permitted in the relevant EU regulations, and oversees adherence to same. It also monitors the independence and qualifications of the auditor, requiring the latter to submit a declaration of independence, which it then evaluates. Furthermore, the Audit Committee monitors the accounts and the accounting process and assesses the effectiveness of the internal control system, the risk management system and the internal auditing and review system. It is likewise involved in compliance issues. The Group's Internal Audit function reports regularly to the Audit Committee. Prior to the respective publication dates, it discusses the quarterly statements and the financial report for the half year with the Management Board in a meeting that is also attended by the external auditor. The Audit Committee is also responsible for approving related party transactions as defined in Section 111b AktG.
The Nominations Committee comprises the Chair of the Super-visory Board and two further shareholder representatives elected by the Supervisory Board based on nominations of
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the shareholders' representatives. The Chair of the Supervisory Board is also Chair of the Nominations Committee. The Nomi-nations Committee prepares the resolutions of the Supervisory Board on election proposals to be presented to the Annual General Meeting for the election of members to the Supervisory Board (shareholder representatives). As of December 31, 2020, the following were members of the Nominations Committee: Dr. Simone Bagel-Trah (Chair), Benedikt-Richard Freiherr von Herman and Barbara Kux.
According to our Articles of Association, in addition to the Supervisory Board, Henkel also has a standing Shareholders' Committee comprising a minimum of five and a maximum of ten members, all of whom are elected by the General Meeting (Art. 27 of the Articles of Association). Members are appointed for five-year terms unless otherwise specified at election. At the last election by the Annual General Meeting of 2020, the term of office was set at four years. The Shareholders' Committee comprised ten members in the year under review.
As a general rule, the Shareholders' Committee meets six times per year. If deemed necessary, the Management Board does not participate in such meetings. It also holds a joint conference with the Management Board lasting several days. The Share-holders' Committee reaches its decisions by a simple majority of the votes cast. It has established Finance and Human Re-sources subcommittees that likewise meet six times per year, as a rule. Each subcommittee comprises five of the members of the Shareholders' Committee.
The Finance Subcommittee deals primarily with financial matters, questions of financial strategy, financial position and structure, taxation and accounting policy, as well as risk manage-ment within the corporation. It also performs the necessary preparatory work for decisions to be made by the Shareholders' Committee in matters for which decision authority has not been delegated to it. As of December 31, 2020, the following were members of the Finance Subcommittee: Dr. ChristophHenkel (Chair), Konstantin von Unger (Vice Chair), Prof. Dr. Paul Achleitner, Dr. Christoph Kneip and Prof. Dr. Ulrich Lehner.
The Human Resources Subcommittee deals primarily with personnel matters relating to members of the Management Board, with issues pertaining to human resources strategy, and with remuneration. It performs the necessary preparatory work for decisions to be made by the Shareholders' Committee in matters for which decision authority has not been delegated to it. The Subcommittee also addresses issues concerned with succession planning and management potential within the individual business units, taking into account relevant diver-sity aspects. As of December 31, 2020, the following were members of the Human Resources Subcommittee: Dr. Simone Bagel-Trah (Chair), Johann-Christoph Frey (Vice Chair), Alexander Birken, Dr.-Ing. Norbert Reithofer and Jean-François van Boxmeer.
Conflicts of interest must be disclosed in an appropriate manner to the Supervisory Board or Shareholders' Committee, particularly those that may arise as the result of a consultancy or committee function performed in the service of customers, suppliers, lenders or other business partners. Members encoun-tering material conflicts of interest that are not of a merely temporary nature are required to resign their mandate.
In an onboarding procedure, newly elected members of the Supervisory Board and Shareholders' Committee are familiarized with our corporate values, applicable codes and standards, the basic organizational structure and strategy of the corporation together with the main corresponding initiatives, the corpo-ration's operational performance and other current issues of relevance, and members' rights and obligations, taking into account the special features arising from our legal form and Articles of Association. Further, members take it upon them-selves to seek the training needed to perform their duties; these efforts are supported by the corporation.
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Some members of the Supervisory Board and of the Sharehold-ers' Committee are or were in past years holders of senior managerial positions in other companies. If and when Henkel pursues business activities with these companies, the same arm's length principles apply as those adopted in transactions with and between unrelated third parties. In our view, such transactions do not affect the impartiality of the members in question.
Activities of the Supervisory Board and Shareholders' Committee in the year under review
For details of the activities of the Supervisory Board and its committees in fiscal 2020, please refer to the Report of the Supervisory Board (pages 13 to 19).
The Shareholders' Committee continued to discharge its duties diligently in fiscal 2020 in accordance with the legal statutes and Articles of Association. In compliance with the Articles of Association, the Shareholders' Committee engaged in the management of the corporation and carefully and regularly monitored the work of the Management Board, advising and supporting it in its stewardship and in the strategic develop-ment of the corporation. It also discussed and ruled on those transactions that required its approval.
Six scheduled meetings took place in the year under review, together with one extraordinary meeting/video/telephone conference and a conference with the Management Board of several days' duration. Likewise, the Human Resources and Finance subcommittees each met six times. Due to the COVID-19 pandemic, most of the meetings were a mixture of personal attendance and video/telephone conferences. Participation in the meetings of the Shareholders' Committee and its subcom-mittees was 94.6 percent. For details of individual members' attendance at meetings, please refer to the remuneration re-port (page 92). Following the election by the Annual General Meeting of Henkel AG & Co. KGaA on June 17, 2020, of new members to the Shareholders' Committee, the Chair and ViceChair were elected and the composition of the subcommittees decided by written procedure.
At all meetings, the reports submitted by the Management Board were discussed, and the general development of the corpora-tion, the status of acquisitions and divestments, and other matters of strategic importance were analyzed together with the Management Board. The overall economic situation and Henkel's business performance were also discussed, together with a report on how the corporation was dealing with the COVID-19 pandemic and what actions had been taken to pro-tect the workforce. Areas of particular focus included the new strategic alignment of the corporation and its implementation status, the status and strategic directions of the business units, financial reporting, overall performance by the business units and in the regions, capital expenditures and innovations, sustainability, and the short- and mid-term plans of both the Group and the individual business units.
Business transactions requiring the approval of the Shareholders' Committee were discussed in detail together with the Manage-ment Board and appropriate resolutions adopted, some of which required preliminary consultation with the relevant subcommittees. The issues involved focused mainly on strategy and financial planning, major capital expenditures, acquisi-tions and divestments, fundamental HR issues and Henkel's funding and financing strategy. The Shareholders' Committee and the Human Resources Subcommittee also submitted ap-propriate recommendations with regard to Management Board matters to the Supervisory Board of Henkel Management AG.
Efficiency audit
Every two years, the Supervisory Board and the Shareholders' Committee hold an internal review to determine the efficiency with which they and their committees/subcommittees carry out their duties. This self-assessment is performed on the basis of an extensive checklist focusing on meeting frequency, duration, preparation and organization, minutes, committee work and information disclosure, reports submitted by the
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Management Board, financial control and risk management systems, requests for information, collaboration with the auditor, corporate governance matters and improvement opportunities.
The efficiency of the activities of the Supervisory Board and Shareholders' Committee and their respective (sub)commit-tees, and the impartiality of their members, were confirmed in the efficiency audit performed in 2019/2020. The next effi-ciency audit is scheduled to take place in 2021/2022.
Interaction between Management Board, Supervisory Board and Shareholders' Committee
The Management Board, Supervisory Board and Shareholders' Committee work in close cooperation for the benefit of the corporation.
The Management Board agrees the strategic direction of the corporation with the Shareholders' Committee and discusses with it the status of strategy implementation at regular intervals.
In keeping with the precepts of good corporate governance, the Management Board informs the Supervisory Board and the Shareholders' Committee regularly, and in a timely and com-prehensive fashion, of all relevant issues concerning business policy, corporate planning, profitability, the business develop-ment of the corporation and major affiliated companies, and also matters relating to risk exposure and risk management.
For transactions of fundamental significance, the Shareholders' Committee has established a right of veto in the procedural rules governing the actions of Henkel Management AG in its function as sole Personally Liable Partner (Art. 26 of the Arti-cles of Association). This covers, in particular, decisions or measures that materially change the net assets, financial position or results of operations of the corporation. The Management Board complies with these rights of consent of the Shareholders' Committee and also duly submits to the decision authority of the corporation's Annual General Meeting.
Our vision and values, Code of Conduct, Code of Corporate Sustainability and other codes and policies governing our stewardship of the corporation can be found on our websitewww.henkel.com.
Supervisory Board of Henkel Management AG
The corporation holds all shares in Henkel Management AG. The voting rights to which the corporation is entitled at the general meetings of Henkel Management AG are exercised by the Shareholders' Committee, which therefore also elects the members of the Supervisory Board of Henkel Management AG. Members are appointed for five-year terms unless otherwise specified at election. At the last election by the Annual General Meeting 2020, the term of office was set at four years.
The Supervisory Board of Henkel Management AG consists of three members who are also members of the Shareholders' Committee. At December 31, 2020, the following were members of the Supervisory Board: Dr. Simone Bagel-Trah (Chair), Johann-Christoph Frey (Vice Chair) and Dr.-Ing. Norbert Reithofer. Electing certain members to both corporate bodies ensures that the Shareholders' Committee not only appoints Henkel Management AG as the Personally Liable Partner, but also (through the members of the Supervisory Board of Henkel Management AG) appoints its Management Board and there-fore the individuals who are responsible for managing the corporation. Effective control of management - i.e. of the Management Board of Henkel Management AG - is therefore also assured:
The Supervisory Board of Henkel Management AG can over-see and monitor the Management Board in accordance with laws governing joint stock corporations.
Henkel Management AG as the Personally Liable Partner and therefore (also) its Management Board can also be over-seen and monitored - by the Shareholders' Committee which, in doing so, exercises the powers of the corporation's shareholders, and
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- by the Supervisory Board at KGaA level in accordance with laws governing joint stock corporations.
Targets for the proportion of women on the Management Board and in the first two management levels below the Management Board
In accordance with Sections 76 (4) and 111 (5) AktG, targets must be set for the proportion of women on the Management Board and in the first two management levels below the Manage-ment Board. If the proportion of women is below 30 percent at the time the targets are set, the targets may not be below the proportion already achieved. Deadlines for achievement of the targets must be established at the same time and must not be longer than five years in each case.
Proportion of women on the Management Board
As part of its responsibility for Management Board composition, the Supervisory Board of Henkel Management AG has established a target, as recommended by the Shareholders' Committee and its Human Resources Subcommittee, for the proportion of women on the Management Board of 17 percent, taking into account the current composition and an appropriate Manage-ment Board size for the corporation. This proportion will apply, and the target will be met, in the period through to Decem-ber 31, 2021.
The proportion of women on the Management Board at December 31, 2020 was 17 percent.
Proportion of women in the management levels below the Management Board
Based on the current personnel mix, the Management Board has established the following targets for the first two levels of management below the Management Board. These targets are expected to be achieved by December 31, 2021:
First management level: Proportion of women 25 percent
Second management level: Proportion of women 30 percentIn accordance with the legal requirements, the point of refer-ence for the definition of the management levels was based exclusively on Henkel AG & Co. KGaA and not the Henkel Group - regardless of Henkel's globally aligned management organization. As a result, the figures include only employees of Henkel AG & Co. KGaA with management responsibility who report directly to the Management Board (management level 1) and those who report to management level 1 (manage-ment level 2).
Separately from the targets for the first two levels of manage-ment below the Management Board of Henkel AG & Co. KGaA - and mindful of our globally aligned management organization - it is our goal to increase our ratio of women at all levels of management at Henkel in the long term. In 2020, we were again able to raise the proportion of women in management worldwide - to 36.9 percent at December 31, 2020.
Statutory gender quota for Supervisory Board composition Given Henkel's position as a listed corporation subject to Germany's Codetermination Act of 1976, the Supervisory Board of Henkel AG & Co. KGaA must consist of at least 30 percent women and at least 30 percent men (Section 96 (2) AktG).
Throughout the entire year under review, the statutory mini-mum quota of both women and men was represented among both the shareholder representatives and the employee repre-sentatives.
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Diversity considerations governing Management Board composition/Succession planning
Notwithstanding the key requirements of qualification, com-petence and professional excellence for the relevant areas of responsibility on the Management Board, the Supervisory Board of Henkel Management AG has specified the following criteria - after consultation in the Shareholders' Committee and its Human Resources Subcommittee - that must be con-sidered when making Management Board appointments to en-sure as broad a spectrum as possible of knowledge, skills and professional experience (diversity) on the Management Board:
Education/career experience
Overall, the members of the Management Board must demonstrate knowledge, skills and professional experience in the following areas in particular:
- Management/leadership experience: Experience with managing globally operating entities, involvement of employee representative bodies, leading and motivating employees, succession planning.
- Understanding of the business: Knowledge of/experience in industrial/consumer business areas and key markets, including the social environment in which Henkel operates, as well as knowledge of/experience in the fields of marketing, selling and distribution, digitaliza-tion/eCommerce, research and development, produc-tion/engineering and sustainable management.
- Strategic expertise: Experience in developing and im-plementing prospects and strategies for the future.
- Financial expertise: Experience in accounting, auditing financial statements, issues surrounding funding and capital markets.
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Financial control/risk management: Experience in the fields of internal control and risk management systems, as well as internal auditing systems.
- Governance/compliance/ethics: Experience with inter-action among corporate bodies (governance) and in compliance with statutory/in-house requirements; modern understanding of corporate ethics and how to implement them.
Internationality
The international activities of the corporation in both emerging and mature markets should be appropriately reflected in the composition of the Management Board. Henkel therefore strives to ensure that several members of different nationalities or with international backgrounds (who have spent several years working abroad or supervising foreign business activities, for example) are included on the Management Board.
Gender
A reasonable proportion of women shall be represented in the Management Board. Henkel therefore strives to ensure that at least one woman is a member of the Management Board.
Seniority
Change and continuity are two issues that must be taken into reasonable account when composing the Management Board. Henkel therefore aims to include members with different levels of seniority on the Management Board. Irre-spective of this requirement, members of the Management Board should generally not be older than 63.
Implementation progress
We believe that the aforementioned requirements were met in full in the reporting period.
Overall, the Management Board, which includes one woman, has the knowledge, skills and professional experience needed to properly and effectively perform its duties. Several members of the Management Board have international business experi-ence with both emerging and mature markets. No individual on the Management Board exceeds the specified maximum age.
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Succession planning
Together with the Management Board, the Shareholders' Com-mittee and the Supervisory Board of Henkel Management AG ensure the long-term succession planning with regard to Man-agement Board composition. Although both in-house and ex-ternal candidates are considered for future appointment, every effort is made to select candidates from within the organization who have proven their aptitude for such duties.
Long-term succession planning takes account of the corporate strategy and the aforementioned diversity considerations.
Key elements of the systematic management development process include:
Early identification of suitable candidates
Systematic development of managers by giving them tasks involving increasing levels of responsibility and in differ-ent areas of the corporation, regions and functions, where possible
Proven ambition to successfully shape strategy and opera-tions; strong leadership skills
Role model in implementing our corporate values
Each year, the members of the first management level below the Management Board undergo corresponding assessment, during which the issue of potentially taking on Management Board responsibility and measures to secure succession are also considered. Management potential within the individual business units is likewise discussed.
Diversity considerations/Objectives governing Supervisory Board composition
Bearing in mind the recommendations of the GCGC, and taking into account the specific situation and global reach of the corporation's activities in industrial and consumer business areas, the Supervisory Board has specified the following objec-tives governing its composition. When proposing candidates to the Annual General Meeting for both routine re-election and replacement election, the Supervisory Board considers theseobjectives, whereby the particular regulations of Germany's 1976 Codetermination Act must be observed with regard to the employee representative candidates.
Education/career experience
Overall, the Supervisory Board must demonstrate knowledge, skills and professional experience in the follow-ing areas in particular:
- Management/leadership experience: Experience with managing globally operating corporations/companies and with employee management.
- Understanding of the business: Knowledge of/experience in the fields of research and development, production/ engineering, marketing, selling and distribution, digi-talization/eCommerce, as well as knowledge of/experi-ence in industrial/consumer business areas, in the key markets in which Henkel operates, and in sustainable management.
- Financial expertise: Experience in the fields of account-ing/accounting processes or with auditing financial statements, knowledge of financial instruments and funding strategies.
- Financial control/risk management: Experience in the fields of internal control and risk management systems, as well as internal auditing systems.
- Governance/compliance: Experience with interaction among corporate bodies (governance) and in ensuring compliance with statutory/in-house requirements.
Impartiality, integrity
To ensure the impartiality of its counseling activities and supervision of the Management Board, the shareholder representatives on the Supervisory Board must include what they believe to be a reasonable number of independent mem-bers, bearing in mind the corporation's ownership structure.
According to Recommendation C.6 GCGC, a member of a supervisory board is considered independent if they are in-dependent from the corporation and its management board and independent from a controlling shareholder.
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Pursuant to Recommendation C.7 GCGC, more than half the shareholder representatives should be independent from the corporation and the Management Board. Supervisory Board members are considered independent from the corporation and its Management Board if they have no personal or business relationship with the corporation or its Management Board that may cause a material - and not merely temporary - conflict of interest.
Assessing the independence of shareholder representatives from the company and its Management Board requires par-ticular consideration of whether the respective Supervisory Board member or a close family member
- was a member of the company's Management Board in the two years prior to appointment,
- is or was in the past three years a partner of or in the employ of the present or previous external auditors of the corporation,
- receives or has received over the past three years not inconsiderable remuneration of any nature from Henkel AG & Co. KGaA or one of its affiliates (excluding remuneration for Supervisory Board or Shareholders' Committee membership),
- is currently involved in, maintains, or has maintained in the year prior to appointment by Henkel AG & Co. KGaA or one of its affiliates, a material business relationship - either directly or indirectly - as a partner, shareholder, member of management or in a leading position of the entity maintaining the business relationship (e.g. as customer, supplier, lender or advisor),
- is a close family member of a member of the Manage-ment Board or
- has been a member of the Supervisory Board for more than 12 years.
If one or more of the aforementioned indicators apply and the Supervisory Board member concerned is still considered inde-pendent from the corporation and/or the Management Board, the reasons for this assessment must be given in the corporate governance statement.
In keeping with the ownership structure and the corporation's tradition as an open family business to which the Henkel family has been committed ever since the company was founded in 1876, possession of a controlling interest or attribution of a controlling interest due to membership in the Henkel family share-pooling agreement is not viewed as a circumstance that creates a substantial and not merely temporary conflict of in-terest as indicated in the GCGC recommendations. Member-ship of the Shareholders' Committee or of the Supervisory Board of Henkel Management AG is compatible with member-ship of the corporation's Supervisory Board. As a rule, how-ever, three, but at least two, of the shareholder representatives on the Supervisory Board or close members of their families should be neither members of the share-pooling agreement nor members of the Shareholders' Committee nor members of the Supervisory Board of Henkel Management AG, and they must be named accordingly in the corporate governance statement.
Moreover, no more than two former members of the Manage-ment Board should be elected to the Supervisory Board, nor people - who - if not members of a management board of a listed company - exercise more than five supervisory board mandates in total for non-Group listed companies or for non-Group companies with similar require-ments (chairing a supervisory board counts twice),
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- who - if members of a management board of a listed company - exercise more than two supervisory board mandates in total for non-Group listed companies or for non-Group companies with similar requirements, or chair the supervisory board of a non-Group listed company,
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who perform management or advisory tasks for material competitors.
Members of the Supervisory Board should, moreover, be capable of duly upholding Henkel's reputation in the public domain.
Availability
When proposing new candidates to the Annual General Meeting for election to the Supervisory Board, the Super-visory Board must make sure that the relevant candidates can devote the anticipated time required to the task.
Internationality
The international activities of the corporation should be appropriately reflected in the composition of the Supervisory Board. Henkel therefore strives to ensure that several members with international backgrounds (who have spent several years working abroad or supervising foreign business activ-ities, for example) are included on the Supervisory Board.
Gender
A reasonable proportion of women shall be appointed to the Supervisory Board. The statutory minimum require-ment of 30 percent is deemed to be reasonable. Henkel strives to increase the proportion of women when new or replacement members are elected.
Age
The Supervisory Board should appropriately include represent-atives from different generations/age groups. Henkel there-fore aims to include members from different generations/age groups on the Supervisory Board. Irrespective of the afore-mentioned, nobody should, as a rule, be proposed to the Annual General Meeting for election to the Supervisory Board who, at the time of the election, has already reached their 70th birthday.
Implementation progress
In addition to the statutory minimum quota, the Supervisory Board believes that these aforementioned requirements were met in full in the reporting period. Among the 16 members of the Supervisory Board are nine men and seven women. Share-holder representatives consist of five men and three women, while the employee representatives consist of four men and four women. This represents an overall ratio on the Supervi-sory Board of around 56 percent men and 44 percent women.
Overall, the Supervisory Board believes it has the knowledge, skills and professional experience needed to properly and ef-fectively perform its duties. In addition, several shareholder representatives on the Supervisory Board offer international business experience or other international expertise. No share-holder representative exceeded the specified maximum age at the time of their election.
The GCGC recommendations on impartiality have been adopted. None of the shareholder representatives nor close family members of a shareholder representative is a former Management Board member, or performs board or committee functions or acts as a consultant for major competitors, and none are persons whose business or personal relationship with the corporation or members of the Management Board could give rise to material conflicts of interest that are not of a merely temporary nature. Six out of eight shareholder repre-sentatives had been on the Supervisory Board for fewer than twelve years in the year under review. According to the precepts of Recommendation C.7 GCGC, these shareholder representa-tives are therefore independent from the corporation and the Management Board.
Four of the eight shareholder representatives - Barbara Kux, Simone Menne, Timotheus Höttges and Prof. Dr. Michael Kaschke - are not party to the Henkel family share-pooling agreement; under GCGC Recommendation C.9, they are there-fore independent from the controlling shareholder. Apart from Dr. Simone Bagel-Trah, none of the shareholder
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representatives in office is a member of the Shareholders' Committee or the Supervisory Board of Henkel Management AG.
As such, the shareholder representatives on the Supervisory Board include what they believe to be a reasonable number of independent members as recommended by the GCGC.
For more details on the composition of the Management Board, Supervisory Board and the Shareholders' Committee or the (sub)committees established by the Supervisory Board and Shareholders' Committee, please refer to pages 276 to 279. Members' vitae can be found on the website:www.henkel.com. Details of the compensation of the Management Board, the Supervisory Board and the Shareholders' Committee can be found in the remuneration report 2020.
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Remuneration system
The remuneration policy currently in place for the members of the Management Board of Henkel Management AG, which is the sole Personally Liable Partner of Henkel AG & Co. KGaA ("Management Board"), was approved by the Annual General Meeting of June 17, 2020 of Henkel AG & Co. KGaA by a majority of around 98.9 percent. To reflect the outcome of discussions on this topic with shareholders, shareholders' representatives and investors, the Supervisory Board of Henkel Management AG has further refined the remuneration policy, made some editorial changes and added more detailed explanations, as well as deciding to implement the following adjustments, starting in 2021:
Option to increase components of remuneration while up-holding the specified caps for the respective total remuner-ation (see Remuneration policy, 2 a) "Regulation, structure and amounts").
Share Ownership Guideline:
The obligation to purchase and hold shares is a key element of Management Board remuneration policy. In addition to the existing obligation of Management Board members to purchase and hold shares, the revised policy plans to make it mandatory for them in future to hold at least as many shares acquired under the STI (share deferral) as equates to 100 percent of their basic remuneration, or 200 percent of the annual basic remuneration in the case of the CEO, for the duration of their tenure (see Remuneration policy 2 c) "Performance-related components," subsection "Share Ownership Guideline").
Consideration of unusual developments when determining target achievement in respect of variable remuneration: Consistent with Recommendation G.11 of the German Cor-porate Governance Code (GCGC) as amended on Decem-ber 16, 2019, the Supervisory Board of Henkel Management AG has defined in more detail the former options for reason-ably considering unusual developments when determining variable remuneration payout amounts (see Remunerationpolicy, 2 c) "Performance-related components," subsection "Consideration of unusual developments when determin-ing target achievement or specifying STI and LTI payout amounts").
Option to grant a lump-sum pension payout in order to accumulate private pension entitlements instead of partic-ipating in the company pension scheme (see Remuneration policy, 2 g) "Pension benefits (retirement pensions and survivors' benefits)").
Temporary deviations from the remuneration policy: Consistent with the specifications of Section 87a (2) sen-tence 2 AktG, a clause governing temporary deviation from the remuneration policy has been incorporated (see Remu-neration policy 2 k) "Temporary deviations from the remu-neration policy").
This revised remuneration policy for the members of the Man-agement Board will be submitted for approval to the Annual General Meeting 2021.
1. General objectives and principles
Henkel is committed to corporate governance that is responsible, transparent and aligned to the sustainable and long-term development of the corporation. We want to create sustainable value - for our customers and consumers, for our people, for our shareholders, as well as for the communities in which we operate. We shape our future on the basis of a long-term strategic framework that builds on our purpose and our values, with a clear focus on purposeful growth.
Accordingly, the remuneration system for the Management Board, the Supervisory Board and the Shareholders' Committee takes account of the relevant duties and responsibilities, and is designed to drive implementation of our corporate strategy, to offer incentives for successful and sustainable business performance over the long term, and to avoid inappropriate risk-taking. The following principles play a key role in defining the remuneration:
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General:
Remuneration and its individual elements must be con-sistent with regulatory/statutory requirements and the principles of good corporate governance.
Remuneration must be consistent with market levels, competitive, and commensurate with the size, complexity and international nature of the corporation's business, its economic and financial position, its success, and its pro-spects for the future.
Management Board:
Total remuneration is aligned to sustainable long-term business performance and corresponding stakeholder targets.
Remuneration consists of non-performance-related com-ponents and a substantial portion of variable, performance-related components.
A large portion of the variable, performance-related remu-neration is tied to future performance spanning several years such that long-term variable target remuneration ac-counts for a greater share of the total than short-term varia-ble target remuneration.
For the variable, performance-related components of remu-neration, challenging financial performance indicators - related to the corporation's objectives and in some cases reflecting strategic objectives derived from the corporate strategy - exist alongside non-financial individual targets. The financial performance indicators are weighted more heavily, and are based on quantitative criteria.
Reasonable account is taken of the remuneration and employment policy applied to the corporation's staff.
Reasonable account is taken of the relevant function-specific duties and individual performance.
Overall remuneration is equitable; reasonable caps on vari-able components of remuneration and maximum remuner-ation payable to a Management Board member have been defined.
The members of the Management Board invest a substantial portion of their remuneration in Henkel preferred shares (Share Ownership Guideline).
Supervisory Board/Shareholders' Committee:
The remuneration strengthens the impartiality of the members of these corporate bodies.
The remuneration is appropriate for the relevant duties of the bodies.
Reasonable account is taken of the roles and functions performed by the relevant members on the respective corporate bodies and their (sub)committees.
2. Remuneration policy for members of the Management Board
a) Regulation, structure and amounts
The legal form of Henkel AG & Co. KGaA as a "Kommanditge-sellschaft auf Aktien" with Henkel Management AG as its sole Personally Liable Partner means that, unlike in the case of joint stock corporations, the Supervisory Board of Henkel Management AG is responsible for appointing and dismissing members of the Management Board, the drafting of their contracts, assignment of their business duties, and their re-muneration. Regarding Management Board remuneration, the Supervisory Board of Henkel Management AG is responsible, in particular, for:
Determining and reviewing remuneration policy
Specifying the non-performance-related and variable performance-related components of remuneration
Defining individual targets each year, and measuring performance with regard to same
Determining the extent to which financial targets have been met each year and quantifying annual and multi-year variable, performance-related remuneration
Approving the assumption of voluntary duties or supervisory board, advisory board or similar mandates in other compa-nies, as well as other ancillary professional activities
Approving loans and advances
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Corresponding resolutions are adopted by the Supervisory Board of Henkel Management AG, which is comprised of three members of the Shareholders' Committee of Henkel AG & Co. KGaA, after prior consultation in the Shareholders' Committee's Human Resources Subcommittee. The general rules governing the treatment of conflicts of interest are applied. Specifically, members of the Management Board are excluded from such consultations and resolutions to the extent necessary to avoid conflicts of interest. The Supervisory Board of Henkel Manage-ment AG is responsible for engaging external remuneration experts to either develop or modify the remuneration system or to assess whether Management Board remuneration is ap-propriate. In doing so, it ensures the independence of remu-neration experts from both the Management Board and the corporation at large.
The structure and amounts of Management Board remuner-ation are aligned to the size, complexity and international activities of the corporation, its economic and financial posi-tion, its performance and future prospects, the normal levels of remuneration encountered in comparable companies, and also the general compensation structure within the corporation. The remuneration paid to Management Board members of companies listed in the Deutscher Aktienindex (DAX 30 share index) - excluding financial services companies and taking account of concomitant market standing and complexity - substantially represents the external benchmark used to assess whether the remuneration structure is commonplace and whether the target and maximum remuneration levels applied are appropriate (horizontal comparison). In addition, the Super-visory Board of Henkel Management AG considers the ratio of Management Board remuneration to the compensation paid to senior management (management levels 0 and 1 of the Henkel Group) and to the workforce in Germany, in terms of both total remuneration and progress over time (vertical comparison).
The compensation package is further determined on the basis of the functions, responsibilities and personal performance of the individual officers, and the performance of the Management Board as a whole. The following criteria play a key role in measuring individual performance:
The absolute and relative performance of the business unit for which each officer is responsible compared to market/ competition performance
The personal contribution toward implementing the strategic priorities and achieving the sustainability targets
Achievement of the relevant separate targets agreed with each individual
The variable annual remuneration components take into ac-count both positive and negative developments. The overall remuneration is designed to be internationally competitive while also providing an incentive for sustainable business development and a sustainable increase in shareholder value in a dynamic environment.
The Supervisory Board of Henkel Management AG regularly reviews the compensation system, as well as the appropriate-ness of the remuneration, based on the aforementioned crite-ria, and adjusts it as necessary. The remuneration policy must be submitted for approval to the Annual General Meeting of Henkel AG & Co. KGaA if substantial changes are planned, and in all cases every four years. If the Annual General Meet-ing refuses to approve the remuneration policy, a revised com-pensation system must be submitted for approval at the next Annual General Meeting, at the latest.
Members of the Management Board receive non-performance- | The Supervisory Board of Henkel Management AG has capped | |
The Company | ||
related components and performance-related components | the maximum amounts payable both as individual variable | |
Shares and bonds | consisting of the following three main elements: | components of remuneration and as the total compensation |
Fixed basic remuneration | payable in any fiscal year - taking into account the other | |
Corporate governance | ||
Variable annual remuneration (Short Term Incentive, STI) | emoluments and pension contributions. Insofar as the Annual | |
Variable cash remuneration based on the long-term perfor- | General Meeting adopts resolutions to lower the cap on re- | |
Combined management report | ||
mance of the company (Long Term Incentive, LTI) | muneration that is specified in the remuneration policy, this | |
Consolidated financial statements | change is taken into account when entering into new, or ex- | |
Management Board members receive 65 percent of the STI as | ||
tending existing Management Board contracts. | ||
Further information | short-term variable cash remuneration, and must invest the | |
remaining 35 percent long term in Henkel preferred shares | The Supervisory Board of Henkel Management AG is authorized | |
Credits | ||
(Share Ownership Guideline, share deferral). Accordingly, the | to apply reasonable caps to the variable components of remu- | |
performance-related, long-term, variable components are | neration in exceptional circumstances, such caps to then also | |
Contacts | ||
made up of the share deferral and the LTI. | apply to ongoing tranches. In addition, in specific circumstances | |
Financial calendar | it may withhold some or all of the variable remuneration or | |
Fringe benefits (other emoluments) are also paid, as are pension | ||
demand the repayment, within specific limits and time periods, | ||
contributions. Rules that are consistent with market practice | ||
of variable remuneration that has already been paid (malus | ||
also exist to govern the various components of remuneration | ||
and clawback regulations). | ||
upon joining or leaving the Management Board. |
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The overall structure of the remuneration system reads as follows:
Remuneration system overview
Non-performance-related componentsPerformance-related components
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Basic remuneration
• Chairman of the Management Board: currently 1,200,000 euros p.a.
• Other Management Board members: 750,000 euros p.a.
Other emoluments
• Insurance, reimbursement of accommodation/relocation costs, home security costs, provision of a company car, use of a car service, other in-kind benefits; amounts vary dependent on personal needs
• Caps: - Chairman of the Management Board: 250,000 euros p.a. - Other Management Board members: 175,000 euros p.a.
Variable annual remuneration (Short Term Incentive, STI)
• Target remuneration if all targets are met, with application of the respective functional factors: - Chairman of the Management Board: currently 3,500,000 euros - Other Management Board members: currently 1,800,000 to 2,200,000 euros
• One-year performance measurement period: Amount dependent on achievements in the fiscal year (remuneration year) with respect to:
- Business performance (financial targets, bonus): organic sales growth (OSG), adjusted earnings per preferred share (EPS) at constant exchange rates versus prior year (actual-to-actual comparison); each weighted 50 percent
- Individual performance: Individual multiplier ranging from 0.8 to 1.2 applied to the bonus amount
• Cap: 150 percent of the respective target remuneration
• 65 percent freely disposable (short-term component, cash remuneration), 35 percent invested in Henkel preferred shares (long-term component; Share Ownership Guideline, share deferral)
General objective and strategic reference
• Assurance of equitable basic compensation commensurate with market conditions and the function performed
• Avoidance of incentives to take inappropriate risks
• Inclusion of fringe benefits and benefits in kind that are commensurate with market conditions and directly related to, and supportive of, Management Board activity
• Incentive to meet the corporate targets for the current fiscal year
• Incentive for long-term purposeful growth
• Allowance for operational success relative to benchmark group
• Promoting implementation of the strategic priorities and sustainability targets
• Differences in performance possible between Management Board members
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Remuneration system overview
Performance-related components
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Share Ownership Guideline
• Obligation to purchase Henkel preferred shares
• Holding a minimum portfolio while on the Management Board
Long-term variable cash remuneration (Long Term Incentive, LTI)
• Target remuneration if all targets are met, with application of the respective functional factors - Chairman of the Management Board: currently 1,400,000 euros - Other Management Board members: currently 720,000 to 880,000 euros
• Three-year prospective performance measurement period: The criterion is the average target achievement of the adjusted return on capital employed (ROCE) in a three-year performance measurement period (remuneration year and the two subsequent fiscal years); target value is set for each year (three yearly tranches)
• Cap: 150 percent of the respective target remuneration
Functional factors
• General functional factors as multipliers for the STI and LTI payout amounts based on target achievement
General objective and strategic reference
• Aligning the interests of Management Board and shareholders
• Incentive for long-term business performance
• Incentives to raise shareholder value over the long term
• Allowance for profitability
• Greater allowance for the different requirements and complexity of the business units/functions
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Remuneration system overview
Pension commitments/ Lump-sum pension payoutOther regulations governing remuneration
Defined contribution pension scheme
• Superannuation lump sum comprised of the total annual contributions. Annual allocation (lump-sum contribution):
- Chairman of the Management Board: 750,000 euros (62.5 percent of basic remuneration)
- Other Management Board members: 450,000 euros (60.0 percent of basic remuneration)
or, alternatively (starting in 2021)
• Lump-sum pension payout, payable annually:
- Chairman of the Management Board: currently 750,000 euros (62.5 percent of basic remuneration)
- Other Management Board members: currently 450,000 euros (60.0 percent of basic remuneration)
Malus and clawback regulations
• The Supervisory Board of Henkel Management AG is authorized - in specific circumstances - to wholly or partially withhold variable remuneration (STI, LTI) or to demand repayment, within specific limits, of variable remuneration that has already been paid
Remuneration cap
• Caps on total remuneration (basic remuneration, other emoluments and pension commitments/lump-sum pension payouts, and variable components of remuneration):
- Chairman of the Management Board: 9,550,000 euros p.a.
- Other Management Board members: 5,155,000 to 5,995,000 euros p.a.
Severance cap
• Payment limited to maximum two years' compensation but no more than due for • the remaining term of the contract
Post-contractual non-competition clause
• Two-year term; discretionary payment totaling 50 percent of the annual compensation, payable in 24 monthly installments
• Severance pay credited against any discretionary payment for the same period
General objective and strategic reference
• Granting of amounts enabling accumulation of an equitable company pension
• Granting of amounts enabling accumulation of an equitable company pension
• Assurance of equitability of variable remuneration (STI, LTI)
• Ensuring compliance with essential principles of corporate governance
• Avoidance of inappropriately high payments
Consistent with the German Corporate Governance Code, specification of a cap on payments and benefits in the event of premature termination of Management Board appointment
• Protecting Henkel's interests
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For all Management Board members except the Chairman, the target remuneration (excluding other emoluments and pension benefits) is derived from the functional factor ranging be-tween 0.9 and 1.1 that particularly reflects the complexity and importance of the respective business unit or function for which that member is responsible (see 2c)) and is currently within the annual range of 3,270,000 euros and 3,830,000 euros, subject to 100 percent achievement of all success targets ("at target"). At a functional factor of 1, the at-target remuneration of all Management Board members except the Chairman is 3,550,000 euros. Of this figure, 750,000 euros is attributable to basic remuneration (around 21 percent of target remuneration), 2,000,000 euros to the STI including share deferral (around 56 percent of target remuneration) and 800,000 euros to the LTI (around 23 percent of target remuneration). Accordingly, some 79 percent of the target remuneration (= 2,800,000 euros) is therefore variable. Of this total, short-term variable target remuneration (STI without share deferral) accounts for around 46 percent (= 1,300,000 euros) and long-term variable target remuneration (share deferral and LTI) for around 54 percent (= 1,500,000 euros).
The annual target remuneration for the Chairman of the Man-agement Board (for a functional factor of 1.75) currently totals 6,100,000 euros: 1,200,000 euros basic remuneration (around 20 percent of target remuneration), 3,500,000 euros STI includ-ing share deferral (around 57 percent of target remuneration) and 1,400,000 euros LTI (around 23 percent of target remu-neration). By resolution of the Supervisory Board of Henkel Management AG, a functional factor of 1.625 was specified for the Chairman of the Management Board for STI and LTI for fiscal 2020.
Other emoluments are paid to all members of the Management Board except the Chairman up to a maximum of 175,000 euros, together with annual pension contributions of 450,000 euros. Bearing in mind these amounts, and based on a functional factor of 1 and 100-percent target achievement ("at target"), members of the Management Board receive total annual remuneration (remuneration plus other emoluments and pension bene-fits) of up to 4,175,000 euros, of which around 33 percent
(= 1,375,000 euros) takes the form of basic remuneration plus other emoluments and annual allocations to the pension reserve, while some 67 percent (= 2,800,000 euros) represents short-term and long-term variable remuneration (STI and LTI).
Other emoluments are paid to the Chairman of the Manage-ment Board up to a maximum of 250,000 euros per year, together with annual pension contributions of 750,000 euros. Bearing in mind these amounts, the Chairman of the Manage-ment Board, on achievement of all performance targets to the tune of 100 percent ("at target"), receives total annual remu-neration of up to 7,100,000 euros, of which around 31 percent (= 2,200,000 euros) takes the form of basic remuneration plus other emoluments and annual allocations to the pension reserve, while some 69 percent (= 4,900,000 euros) represents short-term and long-term variable remuneration (STI and LTI).
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Remuneration structure (without other emoluments, pension benefits)
The Supervisory Board of Henkel Management AG regularly reviews the amounts of the individual components of remu-neration and their ratio to one another and adjusts them if deemed appropriate in light of the duties and performance of a Management Board member, the state of the corporation, and the need to maintain competitiveness. Any increase in the target remuneration of an individual component of remuneration and thus of the total target remuneration is capped at 5 percent p.a. Such increase must not cause the caps, indicated below, on respective total remuneration for a fiscal year to be exceeded. Equally, the ratio of basic remuneration to the various variable components of remuneration per the above overview must not substantially change overall; care must also be taken to ensure that a large portion of the variable, performance-related remu-neration continues to be tied to future performance spanning several years, and that long-term variable target remuneration still accounts for a greater share of the total than short-term variable target remuneration.
b) Non-performance-related components
Basic remuneration
The basic remuneration reflects market conditions and serves as a basic salary to secure a decent income and thus help avoid the urge to take inappropriate risks. It is paid out in monthly installments and currently amounts to 1,200,000 euros per year for the Chairman of the Management Board and 750,000 euros per year for the other Management Board members.
Other emoluments
The members of the Management Board also receive other emoluments, primarily in the form of costs associated with, or the cash value of, in-kind benefits and other fringe benefits such as standard commercial insurance policies, reimbursement of accommodation/relocation costs and the cost of home secu-rity installations, provision of a company car that they may also use for private purposes or use of a car service, including any taxes on same, and the costs of precautionary medical
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examinations. All members of the Management Board are entitled, in principle, to the same emoluments, whereby the amounts vary depending on personal situation. These emolu-ments are recognized at cost or the equivalent cash value in the case of benefits in kind.
A cap has been set on other emoluments, amounting to 250,000 euros per year for the Chairman of the Management Board and 175,000 euros per year for the other Management Board members.
The Supervisory Board of Henkel Management AG can, more-over, award newly appointed Management Board members one-off compensation if remuneration commitments of a former employer are forfeited due to the move to Henkel Management AG. Such compensation is capped at 200 percent of the basic remuneration, which may result in higher maximum total remuneration in the first year of appointment to the Man-agement Board. Members of the Management Board who are domiciled abroad may also be granted the usual tax reimburse-ments and compensation for currency conversion losses.
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Components | |
Consolidated financial statements | |
Financial targets (bonus) | |
Further information | |
Credits | Individual multiplier |
Contacts | |
Financial calendar | |
Performance | |
measurement period | |
Cap3 |
c) Performance-related components
Variable annual remuneration (Short Term Incentive, STI)
Overview STI
Basis for assessment/Parameters | Weighting | Lower threshold |
Organic sales growth1 (OSG) | 50% | Minimum OSG |
(50% OSG target amount) | ||
Adjusted earnings | 50% | 80% of the prior-year figure |
per preferred share (EPS)2 | (50% EPS target amount) |
• Absolute and relative performance of business unit compared to market/competition
• Personal contribution to the implementation of strategic priorities and sustainability targets
• Achievement of personal targets
Fiscal year (remuneration year)
150% of the STI target amount (= 3,000,000 euros4)
1 Threshold/target figures derived annually from budgets.
2 At constant exchange rates, versus prior year (actual-to-actual comparison).
3 Including individual multiplier.
4 Remuneration for an ordinary member of the Management Board at a functional factor of 1.
100% target achievement OSG target
(100% OSG target amount) 100% of the prior-year figure (100% EPS target amount)Multiplier ranging from 0.8 to 1.2
Upper threshold Maximum OSG
(150% OSG target amount) 120% of the prior-year figure (150% EPS target amount)
The variable annual remuneration (STI) represents a uniform incentive to achieve the financial targets derived from the budgets and the corporate strategy, and an incentive to achieve non-financial targets aligned to sustainability; it thus contributes toward implementation of the corporate strategy.
The benchmark parameters for the STI are the achieved financial targets for each fiscal year ("remuneration year") - which determine the so-called bonus - and the individual performance of each Management Board member, in respect of which a multiplier ranging from 0.8 to 1.2 is applied.
The Henkel Group pursues a strategy of long-term, sustainable, purposeful growth. This forms the basis for derivation of the strategic financial target for organic sales growth (OSG) - i.e. sales development adjusted for foreign exchange and acquisi-tions/divestments - in the remuneration year, which is one of the criteria (50-percent weighting) used to determine the amount of the bonus. The other financial target (also weighted at 50 percent) is earnings per preferred share (EPS) adjusted for one-time expenses and income, for restructuring expenses, and for foreign exchange. Both targets are linked additively, i.e. the 50-percent-weighted OSG component of the bonus amount is added to the EPS component, which is also weighted at 50 percent.
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The OSG target is derived from the budget for the relevant fiscal year. It is set annually by the Supervisory Board of Henkel Management AG. EPS performance is measured on the basis of actual-to-actual comparison, i.e. the EPS at constant exchange rates in the remuneration year is compared to the EPS from the previous year.
The Supervisory Board of Henkel Management AG reserves the right to exercise due discretion in determining a target value that differs from the actual EPS in the previous year, rather than basing EPS performance for a new remuneration year on prior-year comparison. This is particularly applicable if early expectations indicate that actual EPS in the remuneration year is going to differ significantly from the prior-year figure.
An appropriate remuneration scale has been established for both key financials. Thresholds have also been defined; payment is withheld if the minimum targets are not met, and capped if they are exceeded. The scale of payment amounts attributable to the OSG target is always linear between the lower threshold (minimum amount) and the at-target amount, and between the at-target amount and the upper threshold (cap). The scale of payment amounts attributable to the EPS target is consistently linear between the lower and upper thresholds. Exceeding the relevant maximum target does not result in any further increase in the relevant OSG or EPS bonus component above and beyond 150 percent of the at-target remuneration.
Examples of the payout curves for the OSG and EPS targets are shown below:
Key financial OSG
Remuneration for an ordinary member of the Management Board with an individual multiplier of 1 and a functional factor of 1.
Key financial EPS
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Achievement of the OSG and EPS targets is determined on the basis of the figures in the consolidated financial statements of Henkel AG & Co. KGaA for the remuneration year as certified without qualification and approved in each case.
Individual target achievement by each member of the Manage-ment Board is reflected in the STI using an individual multiplier applied to the total bonus amount assigned in respect of the overall achievement of all financial targets. This individual multiplier ranges from 0.8 to 1.2. STI caps may not, however, be exceeded when applying said multiplier. If the bonus al-ready equals the capped STI amount, any multiplier greater than 1 will have no further effect on the remuneration total.
The following criteria play a key role in measuring individual performance:
The absolute and relative performance of the business unit for which each officer is responsible, compared to market/ competition performance
The personal contribution toward implementing the strategic priorities and achieving the sustainability targets
Achievement of the relevant separate targets agreed with each individual
The non-financial performance indicators are specified by the Supervisory Board of Henkel Management AG each year and published in the remuneration report.
The following benchmark group is used to measure the individ-ual performance of the relevant business unit compared to the market/competition:
Benchmark group
Adhesive Technologies
• Sika
• H.B. Fuller
• RPM
• 3M
Beauty Care
• Procter & Gamble (Beauty)
• Beiersdorf (Consumer)
• Colgate-Palmolive (Oral, Personal and Home Care)
• L'Oréal (Group)
• KAO (Cosmetics, Skin Care and Hair Care)
• Unilever (Beauty & Personal Care)
• Coty (Group)
Laundry & Home Care
• Procter & Gamble (Fabric & Home Care)
• Reckitt Benckiser (Hygiene Home)
• Unilever (Home Care)
In the event of major changes among the relevant competitors, the Supervisory Board of Henkel Management AG will appro-priately reconsider the composition of the benchmark group and/or the definition of the relevant competitor parameters.
At the end of a fiscal year, both the achievement of the financial targets and the respective individual performance based on appropriate target agreements will be decided by the Supervisory Board of Henkel Management AG after prior consultation with the Human Resources Subcommittee of the Shareholders' Committee. It also decides whether and to what extent adjust-ments of the key financials to reflect exceptional items are to be taken into consideration when determining the bonus. In determining the STI payout amount and/or individual target achievement, the Supervisory Board of Henkel Management AG also gives due consideration to the degree to which financial success and Management Board performance are sustainable beyond the end of a fiscal year.
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The total payable STI amount (bonus times individual multiplier) is capped at 150 percent of the target amount, bearing in mind the respective functional factor.
Share Ownership Guideline/Short- and long-term components of the variable annual remuneration
The obligation to purchase and hold shares (Share Ownership Guideline) is a key element of Management Board remuneration policy. The aim here is to promote a certain degree of alignment in the interests of the Management Board members with those of the shareholders while ensuring the sustainable and long-term performance of the corporation. In accordance with the following, Management Board members are obligated to purchase Henkel preferred shares and (starting in 2021) to hold at least as many shares as equates to 100 percent of their annual basic remuneration, or 200 percent of the annual basic remuneration in the case of the Chairman, for the duration of their tenure (minimum portfolio). Even once they have acquired the minimum portfolio, Management Board members must still continue purchasing the specified volume of Henkel preferred shares, which in turn are also subject to a lock-up period. Management Board members must pay for these shares from their after-tax net income.
The full amount of the STI is paid in cash once the annual financial statements of Henkel AG & Co. KGaA for the remuner-ation year have been approved by the Annual General Meeting of Henkel AG & Co. KGaA. Recipients may only dispose of around 65 percent of this payment as they wish (short-term component, cash remuneration). In compliance with the Share Ownership Guideline explained above, Management Board members are obligated to invest around 35 percent of the respective (net) payout amount in the purchase of Henkel preferred shares (= long-term component, share deferral), which are placed in a blocked custody account with a drawing restriction. The company transfers the relevant investment amount of each individual directly to the bank responsible for settling the investment transactions and managing the blocked custody account. On the first trading day of the monthfollowing payout, this bank invests the relevant amount on behalf and for the account of the member of the Management Board in Henkel preferred shares at the price prevailing at the time of purchase on the stock exchange, and credits the acquired shares to the blocked custody account. The lock-up period in each case expires on December 31 of the fourth year following the remuneration year.
The Share Ownership Guideline ensures that the members of the Management Board are required to accumulate a significant share portfolio during their tenure, and that they participate in the long-term performance of the corporation, whether this be positive or negative. Assuming the target for the STI is met, the total (net) amount to be invested under the STI program in shares over a four-year period is 2,450,000 euros for the Chair-man of the Management Board and 1,400,000 euros for each of the other Management Board members with a functional factor of 1. As such, the amounts constitute a multiple of about 4 and 3.7 respectively of the annual (net) basic remuneration. This share portfolio continues to grow due to the fact that shares are sold, if at all, only in exceptional instances once the respective four-year lock-up period for shares acquired above and beyond the relevant minimum portfolio has expired. At the same time, the share deferral (in addition to the LTI) com-plies with German company law [AktG] and GCGC precepts re-quiring a remuneration policy that focuses on long-term busi-ness development.
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Long-term variable cash remuneration (Long Term Incentive, LTI)
Overview LTI
Basis for assessment/Parameters
Adjusted return on capital employed (ROCE), average target achievement over the performance measurement period (three yearly tranches)
Performance measurement period
Cap
1 Respective 100% target derived from the budget.
Lower threshold
Average target achievement 80% (50% target remuneration)Three-year period (remuneration year plus two subsequent fiscal years) 150% of the target amount (= 1,200,000 euros)2
2 Remuneration for an ordinary member of the Management Board at a functional factor of 1.
100% target achievement1 Average target achievement 100% (100% target remuneration)
Upper threshold
Average target achievement 120% (150% target remuneration)
In addition to the Share Ownership Guideline explained above, the long-term variable cash remuneration (LTI) provides incen-tives to promote the long-term development of the corporation.
The LTI represents variable cash remuneration, the amount of which is based on the long-term future performance of the corporation and derived from the average return on capital employed (ROCE) adjusted for one-time expenses and in-come, and for restructuring expenses over a period of three years (performance measurement period). The LTI is a rolling program. As such, a new LTI tranche with a three-year perfor-mance measurement period is issued every year. For each LTI tranche, the adjusted ROCE is measured in the relevant remu-neration year and the two subsequent years (three annual values).
The ROCE targets are derived from our budget and are set for each year of each three-year performance measurement period by the Supervisory Board of Henkel Management AG at the start of the relevant year. At the end of the respective year, target achievement for the year in question is analyzed. The average target achievement for the relevant performance measurement period is then calculated on the basis of the three measurements of relevance for the respective LTI tranche.
Target achievement with regard to adjusted ROCE figures is determined on the basis of the consolidated financial statements for the relevant fiscal years as certified without qualification and approved in each case.
The LTI is paid in cash once the annual financial statements of Henkel AG & Co. KGaA for the final year in the performance measurement period have been approved by the Annual General Meeting of Henkel AG & Co. KGaA.
The Company
Shares and bonds
Combined management report
A remuneration scale has been defined for the LTI. A threshold has also been established, below which payments are withheld. The scale of payout amounts is consistently linear between the upper and lower thresholds, as follows:
LTI remuneration scale
Remuneration for an ordinary member of the Management Board at a functional factor of 1.
The total payable LTI amount is capped at 150 percent of the target amount, bearing in mind the respective functional factor.
To ensure cogent and consistent incentivization and efficacy in the structure of Management Board remuneration following the change (from adjusted EPS to adjusted ROCE) in the LTI per-formance indicators in 2019, the performance values governing the LTI tranches issued in 2017 and 2018, of which the three-year performance measurement periods did not end until December 31, 2019 and December 31, 2020 respectively, were determined pro rata temporis in accordance with the previously valid conditions for the periods up to December 31, 2018, while for the periods from January 1, 2019 they will be determined in accordance with the conditions that became effective as of 2019.
Functional factors governing variable remuneration
In order to ensure consideration of the differing requirements of the relevant areas of Management Board responsibility and of the differing levels of complexity and importance of the respective corporate functions and business units, the follow-ing general functional factors were defined, starting in fiscal 2019, as multipliers for the STI and LTI payout amounts based on target achievement:
Functional factors*
Area of responsibility/Business unit
STI/LTI factor
CEO 1.751
Finance 1.102
HR/Infrastructure Services 0.90
Adhesive Technologies 1.10
Beauty Care 0.90
Laundry & Home Care 1.00
* Up until 2018, only the CEO qualified for a higher factor.
1 A functional factor of 1.625 was specified for fiscal 2020.
2 A functional factor of 1.0 was specified for fiscal 2020.
A marginally lower factor for individual or all variable com-ponents of remuneration may be set for newly appointed Management Board members in their first year of office.
These functional factors are regularly reviewed and adjusted if necessary, particularly if structural changes are made to Management Board responsibilities.
The Company
Shares and bonds
Combined management report
Overall, the STI and LTI are calculated as follows:
Calculation of STI and LTI
1 Adjusted return on capital employed.
In keeping with the objectives of the Management Board remuneration policy, this structure of the STI and LTI not only rewards sustainable profitable growth and thus supports the long-term development of the corporation, but also ensures that Management Board remuneration is aligned to the inter-ests of shareholders.
Consideration of unusual developments when determining target achievement or specifying STI and LTI payout amounts (starting in 2021)
Changes are not made to the benchmark parameters, nor to the STI and LTI targets in the course of a fiscal year.
When determining the STI and LTI payout amounts, the Super-visory Board of Henkel Management AG may, at its discretion, consider unusual developments of which the effects were not taken into reasonable account when setting the targets and the target remuneration; this can result in both an increase or a reduction of the target achievement and, accordingly, in the corresponding payout amounts. In this context, unusualdevelopments are deemed to be circumstances that have oc-curred or of which occurrence is highly likely, which were not predicted or predictable at the time of setting the targets and which significantly impact the total remuneration of the Man-agement Board. Such circumstances may include, in particular, substantial acquisitions, the sale of material parts of the cor-poration, severe changes in applicable accounting standards or tax regulations, natural catastrophes, pandemics or similar occurrences. Market developments that turn out to be less favorable than expected but deemed to be within the realms of possibility when setting the targets do not justify such adjust-ments. Specific target achievements and payout amounts are published in the remuneration report, together with expla-nations of, and the rationale behind any adjustments by the Supervisory Board of Henkel Management AG.
The Company
Shares and bonds
Combined management report
Accordingly, the previous policy whereby the Supervisory Board of Henkel Management AG could, at its discretion and after due consideration, decide to adjust the target or could determine a new reference value for measuring performance in the following year if adjusted EPS in the remuneration year was more than 20 percent above or below the comparable prior-year figure as a result of extraordinary events, will no longer apply from 2021 onward.
d) Special payments/bonuses
No authorization exists to allow the Supervisory Board of Henkel Management AG to exercise its discretionary judgment to award special payments for outstanding performance (known as the "Mannesmann" clause).
e) Malus and clawback regulations
The Supervisory Board of Henkel Management AG is authorized to wholly or partially withhold or refuse to pay a variable com-ponent of remuneration (STI, LTI) that was awarded for a fiscal year in which a Management Board member commits a severe breach of duty (malus).
If variable components of remuneration have already been paid, the Supervisory Board of Henkel Management AG can demand their repayment (clawback) if (i) a severe breach of duty is only discovered after the variable components of remuneration have been paid, or (ii) a financial report is found to contain a material misstatement that impacted the calculation of the variable remuneration of the Management Board.
The Supervisory Board of Henkel Management AG decides at its due discretion whether and which variable compensation components are to be withheld or reclaimed, and in what amount and for which years. Such decisions take account of the severity and consequences of a breach, the degree to which a Management Board member is at fault, the amount of loss or reputational damage suffered by the corporation, and the willingness of the Management Board member to assist in the investigation.
In cases of material misstatements in financial reports, the maximum amount that can be reclaimed is the difference between the newly calculated figure based on corrected data and the original payout amount; in all other instances, repay-ment of a maximum of 50 percent of the payout amount can be demanded.
Clawback is also possible if the tenure and/or employment of the Management Board member has already ended by the time the Supervisory Board of Henkel Management AG issues its reclaim demand. Irrespective of the termination of tenure or employment, the repayment obligation does not apply if more than two years have passed between the payout and the re-claim demand by the Supervisory Board of Henkel Manage-ment AG. This regulation is without prejudice to the right to assert further claims on grounds of personal misconduct by a member of the Management Board, and especially to claim damages under Section 93 AktG.
f) Ancillary activities
After consultation with the Supervisory Board of Henkel Man-agement AG, members of the Management Board may accept supervisory board mandates and similar offices in companies in which Henkel AG & Co. KGaA holds a direct or indirect par-ticipating interest, or may engage in activities in associations and similar organizations to which Henkel AG & Co. KGaA belongs by virtue of its business activities. Any other paid or unpaid ancillary activities must be approved in advance by the Supervisory Board of Henkel Management AG. The remuneration received for offices assumed on behalf of other companies in the Henkel Group is offset against the Management Board re-muneration. When accepting other offices, particularly seats on statutory supervisory boards and comparable oversight bodies of non-Group companies in Germany or abroad, the Supervisory Board of Henkel Management AG decides on a case-by-case basis whether and to what extent any compensation paid for the non-Group board activity is to be offset against the Management Board remuneration.
The Company
Shares and bonds
Combined management report
g) Pension benefits (retirement pensions and survivors' benefits)
The corporation has been operating a company pension scheme with purely defined contributions since January 1, 2015. Accordingly, members of the Management Board now receive a superannuation lump-sum payment comprised, at least, of the total annual non-interest-bearing (lump-sum) contributions to the plan during their time in office. The lump-sum contri-butions are added to the special fund set up for company pension purposes; Management Board members are entitled to any sur-plus return, albeit not guaranteed, from investing the lump-sum contributions. The lump-sum contributions - based on a full fiscal year - are currently 750,000 euros for the Chairman and 450,000 euros each for the other members of the Management Board.
An entitlement to pension benefits arises on retirement upon reaching the age of 63, on termination of the employment rela-tionship on or after attainment of the statutory retirement age, in the event of death, or in the event of permanent complete incapacity for work. If a member of the Management Board has received no pension benefits prior to their death, the super-annuation lump sum accumulated up to time of death is paid out to the surviving spouse or to surviving children eligible for orphan benefits.
Instead of granting a company pension in accordance with the defined contribution pension scheme described above, from 2021 onward, Management Board members may also be granted a so-called pension payout in the form of an earmarked lump sum to be transferred directly to the Management Board members each year. The amount of annual pension payout is equivalent to the aforementioned lump-sum contributions. As a result, Management Board members become solely responsible for funding their pensions, which lessens the administrative workload for the corporation accordingly.
If a Management Board member opts for the lump-sum pension payout route, they cannot switch/return to the company's defined contribution pension scheme.
h) Continued payment of salaries in the event of illness In the event of illness, payment of the basic remuneration continues for the duration of the statutory period of continued payment of wages. If the illness persists beyond this period, the corporation pays the difference between the sick pay awarded by the statutory health insurance and the appropriate net basic remuneration for the duration of the illness, but over a period no longer than 72 weeks in duration or up until termination of the employment relationship.
The Company
Shares and bonds
Combined management report
i) Caps on total remuneration
After allowing for the aforementioned functional factors and caps for the variable, performance-related components of remu-neration as well as for other emoluments and pension benefits (lump-sum contribution), the Supervisory Board of Henkel Management AG has specified the following caps on total remu-neration for a full fiscal year:
Caps on annual total remuneration
Basic remuneration
in euros Chairman of the Management Board (Functional factor STI/LTI 1.75) Ordinary member of the Management Board (Functional factor STI/LTI 0.9) Ordinary member of the Management Board (Functional factor STI/LTI 1.0) Ordinary member of the Management Board (Functional factor STI/LTI 1.1)
1,200,000
Other emoluments
0 to 250,000
750,000 0 to 175,000
750,000 0 to 175,000
750,000 0 to 175,000
Variable annual remunerationVariable annual remuneration
(short term, (long term, sharecash)
0 to 3,412,500
0 to 1,755,000
0 to 1,950,000
0 to 2,145,000
deferral)
0 to 1,837,500
0 to 945,000
0 to 1,050,000
0 to 1,155,000
Conditional entitlement to long-term incentive
0 to 2,100,000
0 to 1,080,000
0 to 1,200,000
0 to 1,320,000
Pension lump-sum contribution/
Pension remuneration
750,000
450,000
450,000
450,000
Minimum total remunerationMaximum total remuneration
1,950,000 9,550,000
1,200,000 5,155,000
1,200,000 5,575,000
1,200,000 5,995,000
The Company
Shares and bonds
Combined management report
While this remuneration policy is in place, the amounts of the individual components of remuneration may increase in line with the principles explained above, but without affecting the aforementioned caps on total remuneration.
j) Remuneration-related legal transactions; provisions governing termination of position on the Management Board
Executive contracts
The basic provisions governing appointment to the Manage-ment Board, including remuneration, are agreed with Manage-ment Board members in executive contracts. Subject to prior change by mutual agreement, the term of such a contract is equivalent to the term of office. If the member is re-appointed to the Management Board at the end of the term of office, the employment contract is extended for the duration of the new tenure. Initial appointment to the Management Board is gen-erally for a term of three years. Any extension of an executive contract or re-appointment to the Management Board is for a period of no longer than five years.
Resignation from the Management Board/Other premature termination of executive contracts
In accordance with company law, the executive contracts do not provide for ordinary resignation from the Management Board other than at the end of the appointment period. If the appointment of a member of the Management Board ends prematurely - for whatever reason -, either party to the con-tract is entitled to give notice to terminate the executive con-tract effective from the end of the period stipulated in Section 622 (1) and (2) German Civil Code [Bürgerliches Gesetzbuch, BGB], without prejudice to any right to terminate for good cause or reason. The entire time of office on the corporation's Management Board is relevant for the calculation of all periods as are any prior periods spent working for Henkel AG & Co. KGaA or any of its affiliated companies if and insofar as they immediately preceded the appointment to the corporation's Management Board. The aforementioned is without prejudice to the right of either party to terminate for good cause orreason without the need to give notice. Equally, an executive contract can be terminated by mutual agreement.
In the event of remuneration being reduced in accordance with Section 87 (2) AktG, the Management Board member is entitled to give notice of six weeks to terminate the executive contract to the end of the next calendar quarter.
In addition, an executive contract ends without the need for separate notice at the end of the month in which that Manage-ment Board member becomes permanently incapacitated for work, in which case they qualify for pension benefits for reduced earning capacity.
Compensation payment
In the event that appointment to Management Board is terminated prematurely and due notice is given to terminate the executive contract effective from the end of the period stipulated in Section 622 (1) and (2) BGB, the executive contracts provide for a compensation settlement amounting to the remuneration for the remaining term of the contract (basic remuneration plus variable remuneration for single and multiple years). This compensation is limited to a maximum of two years' remuneration (basic remuneration plus variable remuneration for single and multiple years) ("severance pay-ment cap") and may not extend over a period that exceeds the remaining term of the executive contract. Members of the Man-agement Board are not entitled to compensation, however, if the premature termination of their tenure is prompted by circum-stances that would have entitled the corporation to terminate the executive contract without notice for good cause or reason for which the Management Board member is responsible. The Supervisory Board of Henkel Management AG is authorized to reduce the compensation settlement to the reasonable amount in application of Section 87 (2) AktG.
The Company
Shares and bonds
Combined management report
In the event that the sphere of responsibility/executive function is altered or restricted against the wishes of the relevant Man-agement Board member to such an extent that it is no longer comparable to the position prior to the change or restriction, that member is entitled to resign from office and request prem-ature termination of their executive contract. In such cases, members are entitled to compensation payments amounting to not more than two years' remuneration.
No entitlements exist in the event of premature termination of executive duties resulting from a change in control.
Payment/forfeiture of variable components of remuneration When a member leaves the Management Board, the STI is calculated pro rata temporis and paid out on the contractually agreed due dates; personal investment from these amounts in Henkel preferred shares (share deferral) is no longer required. Unless otherwise agreed individually, LTI entitlements are calculated at the end of the relevant performance measurement period and paid out on the contractually agreed due dates. How-ever, entitlements from any tranche of which the performance measurement period has not yet ended at the date of departure are forfeited without replacement if the departure is based on good cause or reason that would have justified revocation of the appointment or termination of the executive contract. Special provisions apply in the case of death: All lock-up periods relating to investments in Henkel preferred shares that are financed by the recipients (share deferral) shall end. By the same token, LTI entitlements with regard to outstanding tranches are settled on the basis of budget figures and paid to the heirs.
Post-contractual non-competition clause
Management Board executive contracts include a post-con-tractual non-competition clause with a term of two years. Members of the Management Board are entitled to a discre-tionary payment totaling 50 percent of the annual remunera-tion (basic remuneration plus variable remuneration for single and multiple years), which is payable in 24 monthly install-ments unless the Supervisory Board of Henkel ManagementAG waives the non-competition clause. This discretionary pay-ment is based on the average annual remuneration awarded to the Management Board member for the three full fiscal years leading up to the termination of their executive activity, but is equivalent to no less than 150 percent of the annual basic re-muneration awarded in the final full fiscal year prior to termi-nation of their tenure on the Management Board. Any com-pensation settlements for equivalent periods are offset against the discretionary payment. The same applies to any income that the Management Board member earns - or desists from earning without compelling reason - during the non-com-petition period from any new activity elsewhere if and insofar as this income and the discretionary payment together exceed the (total) remuneration applicable to the relevant period.
Miscellaneous
The corporation can take out directors and officers insurance (D&O insurance) that also covers members of the corporate bodies. For members of the Management Board, a deductible amounting to 10 percent per loss event is applied in such cases, subject to a maximum for the fiscal year of one and a half times their annual basic remuneration. The corporation may also, at its expense, insure Management Board members against risks associated with their professional activity, in which case the Supervisory Board of Henkel Management AG may specify a reasonable deductible in the absence of any statutory deductible. The corporation insures its Management Board members against accidents, including private risks, for the duration of their executive contracts.
The company does not grant any loans or advances to members of the Management Board.
The Company
Shares and bonds
Combined management report
k) Temporary deviations from the remuneration policy (starting in 2021)
The Supervisory Board of Henkel Management AG may tempo-rarily deviate from individual elements of this remuneration policy if deemed necessary in the interests of the corporation's long-term good. Such necessity may occur, in particular, in situations that could adversely affect the long-term survival and profitability of the corporation. These situations may arise due to the circumstances in the economy as a whole or excep-tional occurrences in the corporation itself. The STI and LTI, and their ratio to each other, the basis for calculation, the rules governing the specification of their targets and the determina-tion of target achievement, or the determination of the payout amounts and timing are elements of the remuneration system from which deviations are permissible in exceptional circum-stances. Changes during the course of a year to targets and benchmarks that have already been specified for variable perfor-mance-related components of remuneration are not permitted.
Deviations from the remuneration system should not extend over more than three years. Such temporary deviation from the remuneration policy described above is conditional on the Supervisory Board of Henkel Management AG unanimously adopting a resolution ascertaining the occurrence of a situation necessitating temporary deviation from the remuneration policy in the interests of the long-term good of the corporation and, by the same token, unanimously deciding on the specific deviations that it believes are necessary. Insofar as executive contract provisions permit unilateral amendment of the relevant remuneration rules, the Supervisory Board of Henkel Manage-ment AG will unilaterally implement the deviations it believes to be necessary; otherwise it will make every effort to reach appropriate contractual agreement with the affected member(s) of the Management Board.
Notwithstanding the aforementioned, the Supervisory Board of Henkel Management AG may reduce remuneration to the reasonable amount calculated in application of the strict rules of Section 87 (2) AktG if the situation of the Henkel Group deteri-orates to such an extent that to continue awarding the remuner-ation would be untenable for the corporation.
3. Remuneration policy for members of the Supervisory Board and of the Shareholders' Committee of Henkel AG & Co. KGaA
Regulation, structure and amounts
The Annual General Meeting has defined the remuneration for the Supervisory Board and the Shareholders' Committee in provisions contained in Art. 17 and 33 of the Articles of Associ-ation.
Remuneration is of a purely fixed nature to strengthen im-partiality and to avoid conflicts of interest for corporate body members performing their supervisory function. In accordance with GCGC recommendations, remuneration is increased or additional remuneration paid to take account of the responsi-bility and scope of duties associated with being Chair, Vice Chair or member of a (sub)committee.
The components in detail:
Each member of the Supervisory Board and of the Share-holders' Committee receives a fixed fee of 70,000 euros and 100,000 euros per year respectively. The Chairwoman of the Su-pervisory Board and the Shareholders' Committee receives double, and the Vice Chair in each case one and a half times the aforementioned amounts.
The Company
Shares and bonds
Combined management report
Members of the Supervisory Board who are also members of one or more committees each receive additional remuneration of 35,000 euros; if they chair one or more committees, they receive 70,000 euros. Activity in the Nominations Committee is not remunerated separately.
Members of the Shareholders' Committee who are also members of one or more subcommittees of the Shareholders' Committee each receive additional remuneration of 100,000 euros; if they chair one or more subcommittees, they receive 200,000 euros.
The higher remuneration allocated to the members of the Shareholders' Committee as compared to the Supervisory Board reflects the fact that, under the Articles of Association, the Shareholders' Committee participates in the management of the corporation.
Miscellaneous
The members of the Supervisory Board or a committee receive an attendance fee amounting to 1,000 euros for each meeting in which they participate. If several meetings take place on one day, the attendance fee is only paid once. In addition, the members of the Supervisory Board and of the Shareholders' Committee are reimbursed expenses incurred in connection with their positions. The members of the Supervisory Board are also reimbursed the value-added tax (VAT) payable on their total remunerations and defrayed expenses.
The corporation can take out directors and officers insurance (D&O insurance) that also covers members of the corporate bodies. For members of the Supervisory Board and Shareholders' Committee, a deductible amounting to 10 percent per loss event is applied in such cases, subject to a maximum for the fiscal year of one and a half times their annual fixed remuneration.
The corporation provides the members of the Supervisory Board and Shareholders' Committee with technical support, equipment and benefits in kind to an extent that is appropriate for them to exercise their office. The Chairwoman of the Su-pervisory Board and of the Shareholders' Committee is pro-vided with an office and secretarial support to enable her to perform these duties.
The corporation does not grant any loans or advances to mem-bers of the Supervisory Board or the Shareholders' Committee.
4. Remuneration of Henkel Management AG for assumption of personal liability, and reimbursement of expenses to same
For assumption of personal liability and management respon-sibility, Henkel Management AG in its function as Personally Liable Partner receives an annual payment of 50,000 euros
(= 5 percent of its capital stock) plus any value-added tax (VAT) due, said fee being payable irrespective of any profit or loss made.
Henkel Management AG may also claim reimbursement from or payment by the corporation of all expenses incurred in connection with the management of the corporation's business, including the remuneration and pensions paid to its corporate bodies.
5. Remuneration of the members of the Supervisory Board of Henkel Management AG
According to Art. 14 of the Articles of Association of Henkel Management AG, the members of the Supervisory Board of Henkel Management AG are each entitled to receive annual remuneration of 10,000 euros. However, those members of said Supervisory Board who are also and simultaneously mem-bers of the Supervisory Board or the Shareholders' Committee of Henkel AG & Co. KGaA do not receive this remuneration.
The Company
Shares and bonds
Combined management report
Remuneration report 2020
This remuneration report describes the remuneration policy for the Management Board of Henkel Management AG as the sole Personally Liable Partner of Henkel AG & Co. KGaA (Management Board), the Supervisory Board and Shareholders' Committee of Henkel AG & Co. KGaA and the remuneration of Henkel Management AG as the Personally Liable Partner and its Supervisory Board for fiscal 2020.
The report contains all disclosures and explanations pursuant to the provisions of the German Commercial Code [HGB] and the concomitant principles of German Accounting Standard No. 17 [DRS 17]. It also includes the tables detailing Manage-ment Board remuneration (payments/awards) as recommended by the German Corporate Governance Code as amended on February 7, 2017 (GCGC 2017), and is in part already compliant with the requirements of the German Act Implementing the Second Shareholders' Rights Directive [Gesetz zur Umsetzung der zweiten Aktionärsrechterichtlinie, ARUG II]. The remuner-ation report forms part of the combined management report for Henkel AG & Co. KGaA and the Group, which has been audited by the external auditor; the associated individualized information has not been additionally disclosed in the notes to the consolidated financial statements (Sections 289a (2), 315a (2) HGB as applicable to the annual financial statements 2020).
1. Remuneration of members of the Management Board for fiscal 2020
Objectives/specification of remuneration policy
Henkel is committed to corporate governance that is responsible, transparent and aligned to the sustainable and long-term development of the corporation. We want to create sustainable value - for our customers and consumers, for our people, for our shareholders, as well as for the communities in which we operate. We shape our future on the basis of a long-term strategic framework that builds on our purpose and our values, with a clear focus on purposeful growth.
The legal form of Henkel AG & Co. KGaA means that the Super-visory Board of Henkel Management AG is responsible for appointing and dismissing members of the Management Board, the drafting of their contracts, assignment of their business duties, and their remuneration. Regarding Manage-ment Board remuneration, the Supervisory Board of Henkel Management AG is responsible, in particular, for:
Determining and reviewing remuneration policy
Specifying the non-performance-related and variable performance-related components of remuneration
Defining individual targets each year, and measuring performance with regard to same
Determining the extent to which financial targets have been met each year and quantifying annual and multi-year variable, performance-related remuneration
Approving the assumption of voluntary duties or supervi-sory board, advisory board or similar mandates in other companies, as well as other ancillary professional activities
Approving loans and advances
The remuneration system takes account of the relevant duties and responsibilities, and is designed to drive implementation of our corporate strategy, to offer incentives for successful and sustainable business performance over the long term, and to avoid inappropriate risk-taking. Members of the Management Board receive non-performance-related components and variable, performance-related components consisting of the following three elements:
Fixed basic remuneration to assure a reasonable basic salary
Variable annual remuneration (Short Term Incentive, STI)
Variable cash remuneration based on the long-term perfor-mance of the company (Long Term Incentive, LTI)
The Company
Shares and bonds
Combined management report
The benchmark parameters for the STI are the achieved financial targets for each fiscal year - which determine the so-called bonus - and the individual performance of each Management Board member, specifically their personal contribution to-ward implementing the strategic priorities and sustainability targets. In keeping with our corporate strategy for purposeful growth, one financial target specified for the STI is organic sales growth (OSG) - i.e. sales development adjusted for for-eign exchange and acquisitions/divestments - in the remu-neration year, which is one of the criteria (50-percent weighting) used to determine the amount of the bonus. The other financial target (also weighted at 50 percent) is earnings per preferred share (EPS) adjusted for one-time expenses and income, for restructuring expenses, and for foreign exchange.
The STI is paid out in full in cash. Recipients may only dispose of around 65 percent of this payment as they wish (short-term component, cash remuneration). Members of the Management Board must invest 35 percent of the respective STI (net) payment amount long term in Henkel preferred shares (long-term component, Share Ownership Guideline/share deferral). The aim here is to promote a certain degree of align-ment in the interests of the Management Board members with those of the shareholders while ensuring the sustainable and long-term performance of the corporation.
The LTI amount is derived from the average return on capital employed (ROCE) over a period of three years, adjusted for one-time expenses and income, and for restructuring expenses, and - like the Share Ownership Guideline described above - serves also as an incentive to promote the long-term develop-ment of the corporation.
Ancillary benefits (other emoluments) and pension contribu-tions are awarded in addition to the fixed basic remuneration and variable remuneration. Rules that are consistent with market practice also exist to govern the various components of remuneration upon joining or leaving the Management Board.
The Supervisory Board of Henkel Management AG has capped the maximum amounts payable both as individual variable components of remuneration and as the total compensation payable in any fiscal year - taking into account the other emolu-ments and pension contributions. In specific circumstances, the Supervisory Board of Henkel Management AG may with-hold some or all of the variable remuneration or demand the repayment, within specific limits and time periods, of variable remuneration that has already been paid (malus and clawback regulations).
For further details of the remuneration policy in place for 2020, please refer to the discussions above and to the remuneration system approved by the Annual General Meeting 2020.
Remuneration 2020
Excluding pension commitments, the total remuneration paid to members of the Management Board serving in 2020 for the performance of their duties for and on behalf of Henkel AG & Co. KGaA and its subsidiaries during the year under review amounted to 15,880,397 euros (previous year: 17,247,891 euros). Basic remuneration accounted for 4,950,000 euros (previous year: 4,950,000 euros), other emoluments for 444,057 euros (previous year: 431,024 euros), the short-term component of annual variable remuneration for 5,918,029 euros (previous year: 6,993,808 euros), the long-term component of annual variable remuneration - share deferral - for 3,186,631 euros (previous year: 2,043,252 euros), and the 2018 LTI tranche - for which the plan term of three years ended at the end of the fis-cal year - for 1,381,680 euros (previous year: 2017 LTI tranche, 2,829,807 euros). In addition, members of the Management Board serving in 2020 were granted an LTI tranche for 2020 (term: 1/1/2020 - 12/31/2022) that will be paid out after the plan term of three years in 2023, subject to achievement of certain performance targets.
The basis for assessment/parameters and the target achieve-ment/remuneration for the 2020 STI and the 2019 and 2020 LTI tranches are listed in the following tables:
The Company
Shares and bonds
Combined management report
Calculation of target achievement/STI remuneration 2020
Target parameter
WeightingFinancial targets (bonus)Personal targets
Organic sales growth (OSG) Adjusted earnings per preferred share (EPS)3
50%
50%
• | Absolute and relative performance | Personal target achievement/ |
compared to market/competition | Bonus multiplier: | |
• | Personal contribution to the implementation of strategic priorities | Range 0.8 - 1.2 |
and sustainability targets |
• Achievement of personal targets (focus topics)
Focus topics 2020:
• Implementation of strategic objectives
• Financial management, scenario plans and measures
• Digitalization, new business models, higher digital sales
• Growth initiatives, portfolio management
• Sustainability, contribution toward prioritized climate positivity and circular economy
• Succession planning, leadership team development, empowerment, diversity
• Management of the COVID-19 pandemic, employee protection, business continuity
1 Percentage of the relevant bonus target amount.
100% target achievement 1.0%
5.43 euros
2 Bonus amount, given a personal multiplier and functional factor of 1 in each case.
3 Year-on-year comparison of actual figures at constant exchange rates.
Actual 2020
Target achievement1
-0.7% 71.5%
4.46 euros 55.4%
Bonus amount2
1,268,500 euros
The Company
Shares and bonds
Combined management report
STI target parameters (bonus)
The organic sales growth figure representing 100-percent target achievement was 1.0 percent in 2020. The lower and upper thresholds were -2.0 percent and 2.0 percent respectively.
The adjusted EPS figure that is of relevance for the actual-to-actual comparison for remuneration purposes and which represents 100-percent target achievement was 5.43 euros in 2020. The lower and upper thresholds were 4.34 euros and 6.52 euros.
Individual target achievement/Bonus multiplier
The following criteria play a key role in measuring individual performance:
The absolute and relative performance of the business unit for which each officer is responsible, compared to market/ competition performance
The contribution toward implementing the strategic priorities and achieving the sustainability targets
Achievement of the relevant separate targets agreed with each individual (focal areas)
Calculation of target achievement/LTI remuneration
At the start of the year, the Supervisory Board specified the individual targets for the members of the Management Board, and evaluated their individual performance at the end of the year after consultation in the Human Resources Subcommittee of the Shareholders' Committee. For all members of the Manage-ment Board, the individual target achievement factor in the form of the individual bonus multiplier was set at 1.1, which in particular takes into consideration successful management of the COVID-19 pandemic.
LTI trancheLTI tranche 2019
LTI tranche 2020
Performance year
1. (2019)
2. (2020)
3. (2021)
1. (2020)
2. (2021)
3. (2022)
100% target Adjusted ROCE (%)
16.9% 14.1% - 14.1% - -
Actual Adjusted ROCE (%)
15.0% 88.9%
12.1% 85.6%
- 12.1% - -
1 Remuneration for an ordinary member of the Management Board at a functional factor of 1.
Target achievement (%)
- 85.6% - -
Average target achievement over three-year performance measurement period (%)
-
-
Remuneration for respective LTI tranche1
-
-
The Company
Shares and bonds
Combined management report
LTI target parameters
The adjusted ROCE figure representing 100-percent target achievement was 14.13 percent in 2020. The resulting target achievement for the yearly tranche 2020 is 85.6 percent.
To ensure cogent and consistent incentivization and efficacy in the structure of Management Board remuneration following the change (from adjusted EPS to adjusted ROCE) in the LTI performance indicators in 2019, the performance values gov-erning the LTI tranches issued in 2017 and 2018, of which the three-year performance measurement periods did not end until December 31, 2019 and December 31, 2020 respectively, were determined pro rata temporis in accordance with the previously valid conditions for the periods up to December 31, 2018, while for the periods from January 1, 2019, they will be determined in accordance with the conditions that became effective as of 2019. The resulting target achievement for the LTI tranche 2018 for performance year 2018 (based on adjusted EPS as the performance indicator) was 0 percent. Average target achievement for performance years 2019 and 2020 (based on adjusted ROCE as the performance indicator) was 87.3 percent for this period. At a functional factor of 1, this resulted in a payout amount of 363,600.00 euros.
Individual remuneration
The individual amounts in these and the following tables are rounded up or down to full euros. As a result, rounded figures in some of the lines in the tables may not add up to the indicated total. The same applies for percentage figures.
The following table shows the remuneration per HGB/DRS 17 paid/awarded individually to the members of the Management Board who served in 2020 - broken down into basic remunera-tion, other emoluments, short-term and long-term components of variable annual remuneration (STI), LTI and the cost of the pension benefits for each member. The table shows the components of remuneration for fiscal 2020 that have already been paid (basic remuneration, other emoluments) and those that have been awarded but not yet paid (STI and LTI with plan term expiry in the year under review) and contains all the information regarding remuneration paid or awarded but not yet paid for fiscal 2020 in line with GCGC 2017.
The Company
Shares and bonds
Combined management report
Remuneration of Management Board members who served in 2020
1. Basic remuneration1
in euros Carsten Knobel (Chairman of the Manage-ment Board) (since 1/1/2020)
Board member since 7/1/2012
Jan-Dirk Auris (Adhesive Technologies)
Board member since 1/1/2011
Sylvie Nicol (Human Resources)
Board member since 4/9/2019
2020 1,200,000
2019 750,000
2020 750,000
2019 750,000
2020 750,000
2019
TABLE CONTINUED ON NEXT PAGE
2. Other emoluments1
3. Annual variable remuneration
167,863
(short term, cash)2 1,473,838
25.2%
3.5%
31.0%
158,666 882,909
23.4%
4.9%
27.5%
64,624 997,675
23.7%
2.0%
31.5%
55,317 882,909
24.2%
1.8%
28.5%
43,236 816,280
Single-year remuneration
(Total of 1 to 3)
2,841,701
4. Annual variable remuneration
(long term, share deferral)
793,605
55.9% 1,812,299
59.8% 1,791,575
16.7% 475,413 14.8% 537,210
57.2% 1,688,226
17.0% 475,413
54.4% 1,609,516
15.3% 439,535
545,455 30.6%
30.0%
1.7% 33,613 1.9%
32.7% 541,785 30.4%
64.4% 1,120,853
62.9%
17.6% 291,731 16.4%
5. Long Term
Incentive3
363,600
7.6% 480,987
Multi-yearremuneration
1,157,205
(Total of4 and 5)
24.3%
956,400
15.0% 363,600
29.8% 900,810
Total remuneration (Total of 1 to 5) | Total remuneration (Total of 1 to 6) |
3,998,907 | 4,754,947 |
84.1% | 100.0% |
remuneration
2,747,975
11.5% 480,987
28.4% 956,400
85.6% 2,644,626
458,206
14.3% 454,935
15.5% 0
30.8% 439,535
82.0% 1,412,584
14.4% 457,722 14.8% 450,702
4,754,947
3,206,181
100.0% 3,102,348
0.0% 0 0.0%
17.6% 291,731 16.4%
79.3%
18.0% 369,748
20.7%
100.0% 1,782,332 100.0%
The Company
Remuneration of Management Board members who served in 2020
Shares and bonds
1. Basic remuneration1
2. Other emoluments1
3. Annual variable remuneration
Single-year remuneration
Corporate governance in euros
(short term, cash)2
(Total of 1 to 3)
4. Annual variable remuneration
5. Long Term
Incentive3
Multi-yearremuneration
(long term, share deferral)
(Total of4 and 5)
Combined management report
Bruno Piacenza (Laundry & Home Care)
2020 750,000
50,098 906,978
1,707,076
488,373
363,600
851,973
24.9%
1.7%
30.1%
Board member since 1/1/2011
2019 750,000
49,707 802,645
56.7% 1,602,352
25.2%
1.7%
27.0%
Jens-Martin Schwärzler (Beauty Care)
2020 750,000
58,256 816,280
53.9% 1,624,536
16.2% 432,193 14.5% 439,535
12.1% 480,987
28.3%
Total remuneration
(Total of 1 to 5)
Total remuneration
(Total of 1 to 6)
2,559,048
3,012,664
84.9%
100.0%
remuneration
3,012,664
913,180
2,515,532
456,090
2,971,622
16.2% 290,880
30.7% 730,415
15.3% 465,332
26.6%
2.1%
28.9%
Board member since 11/1/2017
2019 750,000
59,861 684,360
57.6% 1,494,221
15.6% 368,502
31.4%
2.5%
28.6%
Marco Swoboda (Finance)
2020 750,000
59,980 906,978
62.5% 1,716,958
15.4% 488,373
10.3% 64,132 2.7%
25.9% 432,634
83.5% 1,926,855
16.5% 465,040
100.0% 2,391,895
18.1%
0 488,373
80.6% 2,205,331
19.4% 450,697
100.0% 2,656,028
28.2%
Board member since 1/1/2020
2019
- -
2.3% -
34.1% -
64.6% -
18.4% -
0.0% -
18.4% -
83.0% -
17.0% -
100.0% -
Total4
2020 4,950,000 26.2%
2019 3,545,455 26.4%
- 444,057 2.3% 357,164 2.7%
- 5,918,029 31.3% 3,794,608 28.2%
- 11,312,086 59.8% 7,697,227 57.2%
- 3,186,631 16.9% 2,043,252 15.2%
- 1,381,680 7.3% 1,507,093 11.2%
- 4,568,311 24.2% 3,550,345 26.4%
- 15,880,397 84.0% 11,247,572 83.6%
- 3,031,322 16.0% 2,206,806 16.4%
- 18,911,719 100.0% 13,454,378 100.0%
1 Payout in the relevant fiscal year.
2 Payout in the relevant following fiscal year.
3 Amount paid at relevant fiscal year-end for LTI tranches upon expiry of their respective three-year terms; term of LTI tranche 2018: 1/1/2018 - 12/31/2020; term of LTI tranche 2017:
1/1/2017 - 12/31/2019, payout in the relevant following fiscal year.
4 The totals for 2019 only relate to prior-year remuneration paid to members of the Management Board who also served in 2020, but not those who left in 2019.
The Company
Shares and bonds
Combined management report
Share Ownership Guideline/Own investment under the STI 2019 program (share deferral)
The net amounts to be invested by the members of the Man-agement Board in office at December 31, 2020 in Henkel pre-ferred shares under the STI 2020 program (share deferral) are shown in the following table, together with the Henkel pre-ferred shares already held as of December 31, 2020 which were acquired under the Share Ownership Guideline in earlier years.
Shareholdings and own investments/Share deferral under the STI program
Management Board member | Number of shares already | Total value of | Amount invested under |
purchased as of Dec. 31, 2020 | existing share portfolio1 | ||
Carsten Knobel | 35,573 | 3,283,387.90 EUR | 396,802.67 EUR |
Jan-Dirk Auris | 46,658 | 4,306,533.40 EUR | 268,604.88 EUR |
Sylvie Nicol | 1,760 | 162,448.00 EUR | 219,767.63 EUR |
Bruno Piacenza | 46,313 | 4,274,689.90 EUR | 244,186.26 EUR |
Jens-Martin Schwärzler | 5,590 | 515,957.00 EUR | 219,767.63 EUR |
Marco Swoboda | - | - | 244,186.26 EUR |
STI 20202
1 92.30 euros per share, Xetra closing price on December 30, 2020.
2 Net amounts.
The Company
Shares and bonds
Combined management report
Pension benefits
The corporation has been operating a purely defined contribu-tion system since January 1, 2015. Accordingly, members of the Management Board now receive a superannuation lump-sum payment comprised, at least, of the total annual non-interest-bearing (lump-sum) contributions to the plan during their time in office. The lump-sum contributions are added to the special fund set up for company pension purposes; Manage-ment Board members are entitled to any surplus return, albeit not guaranteed, from investing the lump-sum contributions.
Cost/Present value of pension benefits
The lump-sum contributions - based on a full fiscal year - are currently 750,000 euros for the Chairman and 450,000 euros each for the other members of the Management Board.
The figures calculated in accordance with the German Com-mercial Code [HGB] and International Accounting Standard (IAS 19) for payroll cost and service cost for total benefit enti-tlements acquired in the reporting year, and the present value of total pension benefits accruing to the end of the fiscal year, are shown in the following table:
HGB | IAS | ||||
Payroll cost of | Present value of | Service cost for | Present value of | ||
pension benefits in | pension benefits | pension benefits in | pension benefits | ||
in euros | the reporting year | as of December 31 | the reporting year | as of December 31 | |
Carsten Knobel | 2020 | 755,264 | 5,315,537 | 756,040 | 5,423,389 |
2019 | 457,468 | 4,312,944 | 458,206 | 4,420,293 | |
Jan-Dirk Auris | 2020 | 454,632 | 5,780,806 | 454,935 | 5,898,252 |
2019 | 457,428 | 5,062,931 | 457,722 | 5,180,131 | |
Sylvie Nicol | 2020 | 450,649 | 1,194,492 | 450,702 | 1,196,560 |
2019 | 369,748 | 669,355 | 369,748 | 671,517 | |
Bruno Piacenza | 2020 | 453,569 | 5,013,704 | 453,616 | 5,018,404 |
2019 | 456,047 | 4,347,510 | 456,090 | 4,352,193 | |
Jens-Martin Schwärzler | 2020 | 461,865 | 2,860,608 | 465,332 | 2,962,033 |
2019 | 461,791 | 2,263,214 | 465,040 | 2,364,673 | |
Marco Swoboda1 | 2020 | 450,664 | 1,326,353 | 450,697 | 1,353,512 |
(since 1/1/2020) | 2019 | - | - | - | - |
Total | 2020 | 3,026,643 | 21,491,500 | 3,031,322 | 21,852,150 |
2019 | 2,202,482 | 16,655,954 | 2,206,806 | 16,988,807 |
1 Including amounts vested prior to appointment to the Management Board.
The Company
Shares and bonds
Combined management report
Additional disclosures
The following table lists the benefits granted in line with GCGC 2017 for fiscal 2020, together with the maximum/mini-mum potential amounts for variable remuneration components. Variable remuneration is disclosed at the amount that would be payable upon 100-percent target achievement rather thanthe payout amount, together with the maximum/minimum potential amounts. For details of payments made and amounts awarded but not yet paid in fiscal 2020 in line with the recom-mendations of GCGC 2017, please refer to the table entitled "Remuneration of Management Board members who served in 2020" on pages 82 and 83.
Pursuant to GCGC*, payments/benefits granted for the reporting year to members of the Management Board serving in 2020
in euros Carsten Knobel (Chairman)
1. Basic remuneration1
2. Other Total (1 and 2) emoluments1
(since 1/1/2020) Board member since 7/1/2012
Jan-Dirk Auris (Adhesive Technologies)
Board member since 1/1/2011
Sylvie Nicol (Human Resources)
Board member since 4/9/2019
TABLE CONTINUED ON NEXT PAGE
3. Annual variable remuneration
(short term, cash)2
2020
1,200,000 1,200,000 1,200,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 545,455
167,863 167,863 167,863 158,666 64,624 64,624 64,624 55,317 43,236 43,236 43,236 33,613
1,367,863 2,112,500
2020 (max)
2020 (max)
2020 (min)
2020 (min)
2020 (min)
2019 2020
2019 2020
1,367,863 1,367,863 908,666 814,624 814,624 814,624 805,317 793,236 793,236
0 3,168,750 1,430,000 1,430,000 0 2,145,000 1,430,000 1,170,000 0
2020 (max)
793,236 1,755,000
4. Annual variable remuneration
(long term, share deferral)2
1,137,500 0 1,706,250 770,000 770,000 0 1,155,000 770,000 630,000 0
5. Long Term
1,300,00001,950,000
Total (1 to 5) | Total remuneration pursuant to GCGC (Total 1 to 6) |
5,917,863 | 6,673,903 |
1,367,863 | 2,123,903 |
8,192,863 | 8,948,903 |
Incentive2
880,000 880,000 0 1,320,000 880,000 720,000 0
945,000 1,080,000
2019
579,068
877,500
472,500 540,000
remuneration pursuant to
GCGC
3,988,666 3,894,624
458,206 4,446,872
454,935 4,349,559
814,624 454,935 1,269,559
5,434,624 3,885,317 3,313,236
454,935 5,889,559
457,722 4,343,039
450,702 3,763,938
793,236 450,702 1,243,938
4,573,236 2,469,068
450,702 5,023,938
369,748 2,838,816
The Company
Shares and bonds
Combined management report
Pursuant to GCGC*, payments/benefits granted for the reporting year to members of the Management Board serving in 2020
1. Basic remuneration1
2. Other Total (1 and 2) emoluments1
in euros
Bruno Piacenza (Laundry & Home Care)
Board member since 1/1/2011
Jens-Martin Schwärzler (Beauty Care)
Board member since 11/1/2017
Marco Swoboda (Finance)
Board member since 1/1/2020
* Granted pursuant to GCGC 2017.
2020 (max)
2020 (max)
2020 (max)
1 Payout in the relevant fiscal year.
3. Annual variable remuneration
(short term, cash)2
2020 (min)
2020
750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 -
50,098 50,098 50,098 49,707 58,256 58,256 58,256 59,861 59,980 59,980 59,980 -
800,098 1,300,000
4. Annual variable remuneration
(long term, share deferral)2
2019 2020
2020 (min)
2020 (min)
2019 2020
800,098 800,098 799,707 808,256 808,256 808,256 809,861 809,980 809,980
0 1,950,000 1,300,000 1,170,000 0 1,755,000 1,170,000 1,300,000 0
700,000 0 1,050,000 700,000
5. Long Term
Total (1 to 5)
Total remuneration pursuant to
GCGC (Total 1 to 6)
3,600,098
4,053,714
800,098
1,253,714
5,000,098
5,453,714
Incentive2
800,00001,200,000
630,000
0
800,000 720,000 0
3,599,707 3,328,256
808,256 465,332 1,273,588
945,000 1,080,000
2019
809,980 1,950,000
-
-
630,000 700,000 0 1,050,000 -
720,000 800,000 0 1,200,000 -
4,588,256 3,329,861 3,609,980
809,980 450,697 1,260,677
5,009,980 450,697 5,460,677
2 Figures for 2020 reflect the target amounts payable upon 100-percent target achievement/LTI tranche 2020: 1/1/2020 - 12/31/2022; payout in 2023/LTI tranche 2019: 1/1/2019 - 12/31/2021; payout in 2022. Target amount applies to yearly tranches from 2020 onward.
remuneration pursuant to
GCGC
456,090 4,055,797
465,332 3,793,588
465,332 5,053,588
465,040 3,794,901
450,697 4,060,677
-
-
-
The Company
Shares and bonds
Combined management report
Other benefits/Clawback/Caps
In the year under review, no member of the Management Board was granted non-standard benefits by the company in connection with premature termination of their tenure, nor were any such entitlements or arrangements modified. No member of the Management Board was pledged payments from third parties in respect of their duties as executives of the corporation, nor were any such payments granted in the reporting period.
No use was made of the option to demand repayment of varia-ble components of remuneration (clawback) in the year under review.
When determining the variable components of remuneration (STI and LTI) and awarding other emoluments, the Supervisory Board of Henkel Management AG observed the relevant caps in the remuneration policy. The caps in the remuneration policy applicable to the total remuneration of the individual mem-bers of the Management Board were also observed in respect of the variable components of remuneration and pension contri-butions (lump-sum contributions), and other emoluments.
2. Remuneration of members of the Supervisory Board and of the Shareholders' Committee for fiscal 2020
The Annual General Meeting has defined the remuneration for the Supervisory Board and the Shareholders' Committee in provisions contained in Art. 17 and 33 of the Articles of Associ-ation. Remuneration is of a purely fixed nature to strengthen impartiality and to avoid conflicts of interest for corporate body members performing their oversight function. In ac-cordance with GCGC recommendations, remuneration is in-creased or additional remuneration paid to take account of the responsibility and scope of duties associated with being Chair, Vice Chair or member of a (sub)committee:
Each member of the Supervisory Board and of the Share-holders' Committee receives a fixed fee of 70,000 euros and 100,000 euros per year respectively. The Chairwoman of the Supervisory Board and the Shareholders' Committee re-ceives double, and the Vice Chair in each case one and a half times the aforementioned amounts.
Members of the Supervisory Board who are also members of one or more committees each receive additional remunera-tion of 35,000 euros; if they chair one or more committees, they receive 70,000 euros. Activity in the Nominations Committee is not remunerated separately.
Members of the Shareholders' Committee who are also members of one or more subcommittees of the Sharehold-ers' Committee each receive additional remuneration of 100,000 euros; if they chair one or more subcommittees, they receive 200,000 euros.
Total remuneration paid to the members of the Supervisory Board for the year under review (fixed fee, attendance fee, re-muneration for committee activity) amounted to 1,562,000 euros plus VAT (previous year: 1,565,000 euros plus VAT). Of this amount, fixed fees accounted for 1,225,000 euros, attendance fees for 92,000 euros, and remuneration for committee activ-ity (including associated attendance fees) for 245,000 euros.
Total remuneration paid to the members of the Sharehold-ers' Committee for the year under review (fixed fee and re-muneration for subcommittee activity) amounted to 2,350,000 euros (previous year: 2,350,000 euros) respectively. Of this amount, fixed fees were 1,150,000 euros and remuneration for subcommittee activity 1,200,000 euros.
In the year under review, no compensation or benefits were paid or granted for personally performed services, including in particular advisory, brokerage or (inter)mediation services.
The Company
The remuneration of the individual members of the Supervisory Board and of the Shareholders' Committee,broken down according to the above-mentioned components, is presented in the tables on the following pages:
Shares and bonds
Supervisory Board remuneration 2020
Components of total remuneration
Combined management report
Fixed remuneration
Remuneration for
Attendance fee*
Total remuneration1
(share of total remuneration in %)
Audit Committee membership (share of total remuneration in %)
(share of total remuneration in %)
in euros | 2019 | in % | 2020 | |
Dr. Simone Bagel-Trah | ||||
(Chair)² | 140,000 | 77 | 140,000 | |
Birgit Helten-Kindlein | ||||
(Vice Chair)² | 105,000 | 71 | 105,000 | |
Michael Baumscheiper | ||||
(since 12/11/2020) | - | - | 3,825 | 100 |
Jutta Bernicke | 70,000 | 93 | 70,000 | 95 |
Dr. Kaspar von Braun | ||||
(until 6/17/2020) | 70,000 | 93 | 32,322 | 92 |
Lutz Bunnenberg | ||||
(since 6/17/2020) | - | - | 37,678 | 95 |
Peter Emmerich | ||||
(until 12/11/2020) | 70,000 | 93 | 66,175 | 94 |
Benedikt-Richard | ||||
Freiherr von Herman | 70,000 | 93 | 70,000 | 93 |
Timotheus Höttges | 70,000 | 93 | 70,000 | 95 |
Prof. Dr. Michael | ||||
Kaschke2 | 70,000 | 63 | 70,000 | |
Barbara Kux | 70,000 | 93 | 70,000 | |
Simone Menne2 | ||||
(since 6/17/2020) | - | - | 37,678 | |
Andrea Pichottka | 70,000 | 93 | 70,000 | |
Philipp Scholz | 70,000 | 93 | 70,000 | |
Dr. Martina Seiler | 70,000 | 93 | 70,000 | |
Prof. Dr. Theo Siegert2 | ||||
(until 6/17/2020) | 70,000 | 47 | 32,322 | |
Dirk Thiede | 70,000 | 95 | 70,000 | |
Edgar Topsch2 | 70,000 | 62 | 70,000 | |
Michael Vassiliadis2 | 70,000 | 63 | 70,000 | |
Total | 1,225,000 | 78 | 1,225,000 |
2019 | in % | 2020 | in % | 2019 | 2020 | |
8,000 | 4 | 8,000 | 4 | 183,000 | 183,000 | |
8,000 | 5 | 8,000 | 5 | 148,000 | 148,000 | |
- | - | - | - | - | 3,825 | |
5,000 | 7 | 4,000 | 5 | 75,000 | 74,000 | |
5,000 | 7 | 3,000 | 8 | 75,000 | 35,322 | |
- | - | 2,000 | 5 | - | 39,678 | |
5,000 | 7 | 4,000 | 6 | 75,000 | 70,175 | |
5,000 | 7 | 5,000 | 7 | 75,000 | 75,000 | |
5,000 | 7 | 4,000 | 5 | 75,000 | 74,000 | |
7,000 | 6 | 6,000 | 5 | 112,000 | 129,839 | |
5,000 | 7 | 5,000 | 7 | 75,000 | 75,000 | |
- | - | 3,000 | 5 | - | 59,516 | |
93 | 5,000 | 7 | 5,000 | 7 | 75,000 | 75,000 |
93 | 5,000 | 7 | 5,000 | 7 | 75,000 | 75,000 |
93 | 5,000 | 7 | 5,000 | 7 | 75,000 | 75,000 |
8,000 | 5 | 4,000 | 6 | 148,000 | 68,645 | |
4,000 | 5 | 5,000 | 7 | 74,000 | 75,000 | |
8,000 | 7 | 8,000 | 7 | 113,000 | 113,000 | |
7,000 | 6 | 8,000 | 7 | 112,000 | 113,000 | |
95,000 | 6 | 92,000 | 6 | 1,565,000 | 1,562,000 |
93
93 |
in %
2019
in %
2020
in %
77 71
35,000 35,000
19 24
35,000 19
35,000 24
54
35,000
31
53,839 41
63
-
-
18,839 32
47
70,000
47
32,322 47
62 62 78
35,000 35,000 245,000
31 31 16
35,000 31
35,000 31
245,000 16
* Including attendance at the Audit Committee's meeting to discuss the annual financial statements, which may also be attended by members of the Supervisory Board who are not members of the Audit Committee.
1 Figures do not include VAT.
2 Member of the Audit Committee. Audit Committee Chair: Prof. Dr. Theo Siegert until 6/17/2020; Prof. Dr. Michael Kaschke since 6/17/2020.
The Company
Shares and bonds
Combined management report
Individual meeting attendance Supervisory Board 2020
Supervisory Board member
Dr. Simone Bagel-Trah
Supervisory
Board and
Audit Committee meetings1
AttendancePresence
(Chair) 8 8 100% Birgit Helten-Kindlein
(Vice Chair) 8 8 100%Michael Baumscheiper (since 12/11/2020)
-
-
-
Jutta Bernicke 4 3 75% Dr. Kaspar von Braun
(until 6/17/2020) 2 2 100% Lutz Bunnenberg
(since 6/17/2020) 2 2 100% Peter Emmerich
(until 12/11/2020) 3 3 100% Benedikt-Richard
Freiherr von Herman 4 4 100%
Timotheus Höttges 4 4 100%
Prof. Dr. Michael Kaschke 8 6 75%
Barbara Kux 4 4 100% Simone Menne
(since 6/17/2020) 4 3 75%
Andrea Pichottka 4 4 100%
Philipp Scholz 4 4 100%
Dr. Martina Seiler 4 4 100% Prof. Dr. Theo Siegert
(until 6/17/2020) 4 4 100%
Dirk Thiede 4 4 100%
Edgar Topsch 8 8 100%
Michael Vassiliadis 8 8 100%
1 Number of meetings of relevance for the respective member, i.e. excluding attendance at the Audit Committee's meeting to discuss the annual financial statements by members of the Supervisory Board who are not members of the Audit Committee.
Henkel Annual Report 2020 91
The Company
Shares and bonds
Combined management report
Shareholders' Committee remuneration 2020
Components of total remuneration
(share of total remuneration in %)Fixed remuneration
in euros
Dr. Simone Bagel-Trah,
Chair (Chair Human Resources Subcommittee) Dr. Christoph Henkel,
Vice Chair
(Chair Finance Subcommittee) Prof. Dr. Paul Achleitner (Member Finance Subcommittee) Alexander Birken (since 6/17/2020) (Member HR Subcommittee since 6/17/2020) Johann-Christoph Frey
(Member HR Subcommittee; Vice Chair since 6/17/2020)
Stefan Hamelmann (until 6/17/2020) (Vice Chair Finance Subcommittee until 6/17/2020)
Dr. Christoph Kneip (since 6/17/2020) (Member Finance Subcommittee since 6/17/2020)
Prof. Dr. Ulrich Lehner
(Member Finance Subcommittee) Dr. Norbert Reithofer
(Member Finance Subcommittee until 6/17/2020,
Member HR Subcommittee since 6/17/2020) Konstantin von Unger
(Vice Chair HR Subcommittee until 6/17/2020, Vice Chair Finance Subcommittee since 6/17/2020)
Jean-François van Boxmeer (Member HR Subcommittee) Werner Wenning (until 6/17/2020) (Member HR Subcommittee until 6/17/2020)
Total
2019
Fee for subcommittee activity (share of total remuneration in %)Total remuneration
in %
2020
in %
2019
in %
2020
200,000
in %
2019 2020
50
200,000
50
200,000
50
200,000
50
400,000 400,000
150,000 100,000
43 50 -
150,000 100,000
43 50 50
200,000 100,000
57 50 -
200,000 100,000
-
57 50 50
350,000 350,000
200,000 200,000
53,825
-
53,825
100,000
- 107,650
50
100,000
50
100,000
50
100,000
100,000
50
200,000 200,000
50
46,175
50
100,000
50
46,175
50
200,000 92,350
- 100,000
- 50
53,825 100,000
50 50
- 100,000
- 50
53,825 100,000
100,000
50 50
- 107,650
200,000 200,000
50
100,000
50
100,000
50
100,000
50
200,000 200,000
100,000 100,000 100,000 1,150,000
50 50 50
100,000 100,000
50 50 50
100,000 100,000 100,000
46,175
50 50 50
100,000 100,000
46,175
50 50 50
200,000 200,000
200,000 200,000
200,000 92,350
49 1,150,000
49 1,200,000
51 1,200,000
51 2,350,000
2,350,000
The Company
Shares and bonds
Combined management report
Individual meeting attendance Shareholders' Committee 2020
Member of Shareholders' Committee
Meetings of the
Shareholders' Committee and of the Finance and Human
Resources Subcommittees1
Dr. Simone Bagel-Trah (Chair)
Dr. Christoph Henkel (Vice Chair)
Prof. Dr. Paul Achleitner Alexander Birken (since 6/17/2020) Johann-Christoph Frey Stefan Hamelmann (until 6/17/2020) Dr. Christoph Kneip (since 6/17/2020) Prof. Dr. Ulrich Lehner Dr. Norbert Reithofer Konstantin von Unger Jean-François van Boxmeer Werner Wenning
(until 6/17/2020)
13 13 13 8 13 5
8
13
13
13
13 5
Atten-dance
13 100% of any profit or loss made.
13 100% Henkel Management AG may also claim reimbursement from
13 100%
6 75%
13 100% including the remuneration and pensions paid to its corporate bodies.
5 100%
8 100%
13 100%
11 85% According to Art. 14 of the Articles of Association of Henkel
13 100% Management AG, members of the Supervisory Board or Share-
10 77%
5 100%
Presence
1 Number of meetings of relevance for the respective member.
3. Remuneration of Henkel Management AG for assumption of personal liability, and reimbursement of expenses for fiscal 2020
For assumption of personal liability and management respon-sibility, Henkel Management AG in its function as Personally Liable Partner received, as in previous years, an annual pay-ment of 50,000 euros (= 5 percent of its capital stock) plus any value-added tax (VAT) due, said fee being payable irrespectiveor payment by the corporation of all expenses incurred in con-
nection with the management of the corporation's business,
4. Remuneration of members of the Supervisory Board of
Henkel Management AG for fiscal 2020
holders' Committee of Henkel AG & Co. KGaA do not receive
remuneration for serving on the Supervisory Board of Henkel Management AG. As the Supervisory Board of Henkel Manage-ment AG is only comprised of members who also belong to the Shareholders' Committee, as was also the case in previous years, no remuneration was paid in respect of this Supervisory Board in the year under review.
The Company The Company
942 2
FFuisncdaal m20e2n0taaltparignlacinpcles of the Group Fiscal 2020 at a glance
T9h4e CoOmppearantyional activities
6
6
2
13
Foreword Foreword 9F4iscalO2v0e2r0vieawt a glance
20
13
6
20
Report of the Supervisory Board Report of the Supervisory Board 9F4orewOorrgdanization and business units Our Management Board
9163
22
22
Our Management Board SRtreaptoergticofrtahmeeSwuoprekrfvoisropruyrpBosaerfdul growth Shaping our future
Shaping our future
20
22 23 23
9O6ur MOaunramgeidm-etontloBnoga-rtderm financial ambitions
9S6hapiOngurosutraftuetguirceframework
Shares and bonds
98 Progress in fiscal 2020
Shares and bonds
101
Management system and performance indicators
C2o3rporaStheagreosvearnndanbcoends Corporate governance 102 31 31
Cost of capital Takeover-relevant information Takeover-relevant information
1C0o2rporTaatkeegoovevre-renlaenvacnet information, corporate
35
35
31
53
10325
53
77
77
53
103 77
Corporate governance statement Corporate governance statement gToavkeeronvaenrc-ereslteavtaenmteintf,orremautnioenration report Remuneration system
Remuneration system SCeopraproatreatneogno-fvienranacniacleresptaotretment
Remuneration report 2020
Remuneration report 2020 Remuneration system
Economic report
Combined management report 1C0o3mbinMeadcrmoeacnoangoemmicednetvereloppomrtent
94 94 104
Remuneration report 2020
Combined management report
103
11053
94
146
10456
103
Fundamental principles of the Group Fundamental principles of the Group Development by sector
Economic report REecvoinewomoifcorveeproarlltbusiness performance Fundamental principles of the Group Henkel AG & Co. KGaA RHeesnukltesloAfGop&erCaoti.oKnGsaoAf the Group Economic report
105 107
(condensed version according to the German (condensed version according to the German
Sales
146
HCoemnkmeleArcGia&l CCood.eK[GHaGAB])
Commercial Code [HGB])
(condensed version according to the German Risks and opportunities report
Operating profit
151
151
166
166
Risks and opportunities report 1C0o8mmEexrpceinasl eCoitdeem[sHGB]) Forecast
1R0i9sks Oanthdeor popoertautinigtieinscroempeoratnd expenses
Forecast
151
166
109 Financial result
Forecast
109 Net income and earnings per share (EPS)
109 Dividend
110 Return on capital employed (ROCE)
110 Economic Value Added (EVA®)
110 Comparison between actual business performance and guidance
Consolidated financial statements Consolidated financial statements
112
171 ResCuoltnssoofliodpaetreadtisotnasteomf tehnet boufsfiineasnscuianlitpsosition
171
Consolidated statement of financial position
Cons1o12lidatAeddhefisnivaenTceiachl nstoalotgeimesents
173
173
171
174
174
173
175
175
121174
176
176
175
178
178
176
Consolidated statement of income
Consolidated statement of income
115 ConBseoaluidtyatCeadrestatement of financial position
Consolidated statement of comprehensive income 118 ConLsaoulnidaryte&d HstoamteemCeanrte of income
Consolidated statement of comprehensive income
Consolidated statement of changes in equity NetCaosnsseotslidanadtefdinsatnacteiaml peonstitoifoncomprehensive income
Consolidated statement of changes in equity
Consolidated statement of cash flows
Consolidated statement of cash flows
121 ConAscoqluidisaiteiodnstantedmdeivnetsotmf cehnatsnges in equity
Notes to the consolidated financial statements 121 ConCsaoplitdaaltexdpsetnadtietmurenst of cash flows
Notes to the consolidated financial statements
274
274
178 122NotReisghtot-othf-eusceonassoelitdsated financial statements
275
275
274
275
276 276
128276
Subsequent events
Subsequent events
Recommendation for the approval of the annual Recommendation for the approval of the annual 122SubNsetqausesnetsevents financial statements and the appropriation of the financial statements and the appropriation of the 125pRreocFfoiintmaomnfcHeianeldnpakoteisolitAnioGfno&r tChoe. aKpGparAoval of the annual profit of Henkel AG & Co. KGaA 126finaFnincaianlcsintagteamndecnatpsiatanldmtahneaagpepmroenptriation of the
Corporate bodies of Henkel AG & Co. KGaA 127proKfietyoffinHaennckiaellrAatGio&s Co. KGaA
Corporate bodies of Henkel AG & Co. KGaA
Further information Further information
132281 281
EmpClorypeoersate bodies of Henkel AG & Co. KGaAProIcnudrempeendtent Auditor's Report
Independent Auditor's Report
134FurthPerordiuncftoiormn ation
290
290
Responsibility statement ResIenadrecpheandednetvAeulodpitmoer'nstReportResponsibility statement
136281
291
291
141290
Quarterly breakdown of sales MarRkestpinognasinbdilidtiystsrtiabtuetmioennt
Quarterly breakdown of sales
292
292
Multi-year summary
Multi-year summary
291
Quarterly breakdown of sales
294
294
Glossary HenMkuelltiA-yGea&r Csuom.KmGaarAy
Glossary
146292
297
297
Credits
294 (coGndloesnsaseryd version according to the German
298
298
297
298
298
298 151 298
Credits
Contacts
ComComnetarccitasl Code [HGB])
Credits
Financial calendar Financial calendar Contacts
Risks and opportunities report
Financial calendar
151 Risks and opportunities
151 Risk management system
154 Major risk categories
164 Major opportunity categories
165 Risks and opportunities in summary
166 Forecast
166 Macroeconomic development
166 Development by sector
167 Outlook for the Henkel Group in 2021
1 1
1
The Company
Shares and bonds
Fundamental principles of the Group
Combined management report
Operational activities
Overview
Henkel was founded in 1876. Therefore, the year under review marks the 144th in our corporate history. At the end of 2020, Henkel's workforce worldwide numbered around 52,950. We hold globally leading market positions in our consumer and industrial businesses.
Our purpose is to create sustainable value - for our customers and consumers, for our people and for our shareholders, as well as for the wider society and communities in which we operate.
Organization and business units
Henkel AG & Co. KGaA is operationally active as well as being the parent company of the Henkel Group. As such it is respon-sible for defining and pursuing Henkel's corporate objectives and also for the management, control and monitoring of Group-wide activities, including risk management and the allocation of resources. Henkel AG & Co. KGaA performs its tasks within the legal scope afforded to it as part of the Henkel Group, with the affiliated companies otherwise operating as legally independent entities.
Operational management and control is the responsibility of the Management Board of Henkel Management AG in its function as sole Personally Liable Partner. The Management Board is supported in this by the central, corporate functions.
Henkel is organized into three operational business units: Adhesive Technologies, Beauty Care and Laundry & Home Care. The Adhesive Technologies business unit is global market leader in the field of adhesives. In our Beauty Care and Laundry & Home Care consumer businesses, we also hold top positions in numerous markets and categories.
Adhesive Technologies offers a broad and globally leading portfolio of high-impact solutions in adhesives, sealants and functional coatings. The business unit is composed of four business areas: Automotive & Metals, Packaging & Consumer Goods, Electronics & Industrials, and Craftsmen, Construction & Professional.
In our Automotive & Metals business area, we supply our global customers in the automotive and metal processing industries with tailor-made, high-impact and future-oriented system solutions along the value chain, a comprehensive tech-nology portfolio and specialized technical services.
Our Packaging & Consumer Goods business area serves both small and medium-sized branded goods manufacturers, as well as major international companies operating in the con-sumer goods, packaging and furniture industries. We lead the way in developing innovative solutions addressing global con-sumer trends, such as the growing demand for more sustaina-ble products, and actively foster a circular economy.
In our Electronics & Industrials business area, we hold global leadership, offering major customers a specialized portfolio of innovative high-technology adhesives, materials for the man-ufacture of microchips and electronic assemblies, as well as for industrial fabrication. Building on our strong technical knowledge and extensive research expertise, we support our customers to realize innovative designs for products that are world-renowned. Our solutions are also deployed in the ex-pansion of digital infrastructures.
In our Craftsmen, Construction & Professional business area, we distribute a comprehensive range of branded products for private consumers, DIYers, craftsmen and retailers, as well as serving maintenance and installation experts in more than 800 different industry branches. We supply our customers and
1876
Year of foundation
The Company
Shares and bonds
Combined management report
consumers with adhesives and sealants for home use, with adhesive, sealant and insulating systems and building materials for use in construction, and with a comprehensive portfolio of high-impact solutions for machinery assembly and mainte-nance.
The Beauty Care business unit is globally active in the Branded Consumer Goods business area - in the Hair Cosmetics, Body Care, Skin Care and Oral Care categories - as well as in the professional Hair Salon business. In both business areas, we hold top positions in numerous markets and categories. Both our Branded Consumer Goods and Hair Salon businesses offer focused brand portfolios featuring consumer-relevant innovations that create added value for our customers and consumers. We distribute our products through brick-and-mor-tar stores, hair salons, third-party online platforms and direct-to-consumer channels.
The Laundry & Home Care business unit occupies leading market positions in both its Laundry Care and Home Care business areas. Our strong brands and consumer-relevant innovations - such as our Persil 4-in-1 Discs - play a key role in the everyday lives of our consumers. Our product portfolio ranges from heavy-duty and specialty detergents, laundry additives, dishwashing products, hard surface and WC cleaners, to air fresheners and insect control products. Our products are sold mainly in brick-and-mortar stores, but also increasingly via online and TV-based retailing.
Henkel around the world: Regional Centers
The business activities of our three business units are sup-ported by the central functions of Henkel AG & Co. KGaA, our Global Supply Chain organization and our Global Business Solutions organization with its Shared Service Centers, thus enabling optimum utilization of corporate network synergies.
Implementation of the business activities at the country and regional level is the responsibility of the national affiliated companies whose operations are supported and coordinated by Regional Centers. The executive bodies of these national affiliates manage their businesses in line with the relevant statutory regulations, supplemented by their own articles of association, internal procedural rules and the principles in-corporated in our globally applicable management standards, codes and guidelines.
The Company
Shares and bonds
Combined management report
Strategic framework for purposeful growth
We shape our future on the basis of a long-term strategic framework that builds on our purpose and our values.
With this strategic framework, we want to be successful in the current decade - with a clear focus on purposeful growth. This means, we aim to create superior value for customers and con-sumers to outgrow our markets, to strengthen our leadership in sustainability, and to enable our employees to grow both professionally and personally at Henkel.
Our mid- to long-term financial ambitions
The implementation of our growth agenda supports us in the achievement of our mid- to long-term financial ambitions:
We are aiming to achieve organic sales growth of 2 to 4 percent.
For adjusted earnings per preferred share at constant exchange rates we are targeting growth in the mid- to high single-digit percentage range.
We are aiming to further expand our free cash flow.
We also want to pursue compelling growth opportunities while maintaining our focus on strict cost discipline and margin development.
Our strategic framework
The key elements of our strategic framework are a winning portfolio, clear competitive edge in the areas of innovation, sustainability and digitalization, and future-ready operating models - underpinned by a strong foundation of a collabora-tive culture and empowered people.
The Company
Shares and bonds
Combined management report
Rigorously shape a winning portfolio
A key element of our growth agenda is active portfolio manage-ment. With emphasis on our consumer businesses, we have identified brands and categories with a total annual sales vol-ume of more than one billion euros for portfolio measures that include turnaround strategies, as well as the divestment or discontinuation of brands or categories. We plan to divest or discontinue around 50 percent of the identified sales volume by the end of 2021.
In addition, M&A activities remain an integral part of Henkel's strategy, supported by our strong balance sheet. Our assessment of potential acquisitions is based on whether the targets are available, fit Henkel's strategy, and are financially attractive. In the Adhesive Technologies business unit, we aim to advance our technology leadership, whereas in our Beauty Care and Laundry & Home Care business units, we are focusing on strengthening our categories in the respective countries, on "white spots" - regions or segments in which we are not active - as well as on new business models.
Accelerate impactful innovations with increased investments
We aim to accelerate impactful innovations with increased in-vestments. This includes an enhanced innovation approach, for example by utilizing digital applications and data to gain faster and better insights into consumer behavior, and identify-ing key market trends. Decision-making across the organization is to take place closer to the market. We want to leverage the potential of open innovation and idea crowdsourcing, increas-ingly use agile methods, and continue investing in incuba-tors and innovation centers. In doing so, we want to speed up the development of impactful innovations in all three busi-ness units. Innovations and brands in core categories and re-gions will be supported with consistent investments.
Hence, we announced that we would step up our investments in marketing, advertising, digitalization and IT by 350 million eu-ros in 2020 compared to 2018 and by 200 million euros in 2020 versus 2019.
Boost sustainability as a true competitive differentiator Commitment to sustainability is an integral part of our corporate culture. As reflected in our corporate values, we are determined to continuously expand our leadership in sustainability. As leaders, we aim to pioneer new solutions while continuing to shape our business responsibly and increasing our economic success. We want to create more value - while at the same time reducing our environmental footprint. Our sustainability strategy provides a clear framework for this aim and reflects the high expectations of our stakeholders.
We concentrate our activities along the value chain on six focal areas. They reflect the challenges and opportunities of sustainable development as they relate to our operations. Three focal areas - social progress, performance, and safety and health - describe how we want to create more value for our customers and consumers, our employees and our share-holders, and for society in general. In the other three focal ar-eas - energy and climate, materials and waste, and water and wastewater - we want to reduce our environmental footprint, for example by using less energy and producing less waste.
Building on our strong track record and progress in implement-ing our sustainability strategy along the value chain, we want to boost sustainability as a competitive differentiator. There-fore, we have defined three areas which are of particular rele-vance for consumers, customers, business partners and soci-ety at large and in which we want to accelerate our efforts to drive sustainable development: becoming climate-positive by 2040, driving a circular economy, and contributing to social progress.
The Company
Shares and bonds
Combined management report
At the same time, we want to anchor sustainability even more firmly in all our activities at Henkel. Sustainability is a central pillar in the innovation strategies of our Beauty Care and Laundry & Home Care business units, both of which are advanc-ing their product portfolios with a particular focus on sustainable packaging solutions and are driving the further roll-out of sustainable products and brands with purpose. Also in the Adhesive Technologies business unit, sustainability is a key driver of innovation in all our markets. Here, we plan to fur-ther leverage our potential with products and technologies that set industry standards.
More details and background reading can be found in our Sustainability Report:www.henkel.com/sustainabilityreport
Transform digitalization into a customer and consumer value creator
We aim to use digitalization to increase the value added for our customers and consumers. In our consumer businesses, we want to boost direct interaction with our consumers and to increase our digital sales. To achieve this, we are expanding existing digital consumer platforms and establishing new ones. We want to drive customer-centric digitalization in our industrial business in order to develop new businesses and further enhance the customer experience. We also plan to expand our end-to-end data integration to enable, for exam-ple, innovative and customized solutions based on artificial intelligence. Moreover, we will be investing more in digital tal-ents - especially data specialists with extensive technological in-dustry knowledge. Finally, we want to strengthen our digital business focus and increase efficiency. In this context, we are reorganizing our digital organization under the roof of the dig-ital unit "Henkel dx."
We are merging the digital and IT teams as part of Henkel dx under the Chief Digital & Information Officer (CDIO) position, which was newly created at the end of 2019. The CDIO reports directly to the Chairman of the Management Board. Henkel dx is responsible both for the continuous optimization of business processes and IT systems, and for market-oriented incubation and innovation, for which we are, for example, opening new digital innovation hubs and engaging in venture capital activities.
Reshape operating models to be lean, fast and simple We are reshaping our operating models across the entire company to be lean, fast and simple, while continuously im-proving the competitiveness of our processes and structures. We want to step up customer and consumer proximity and establish faster decision-making processes. We are also further striving for continuous efficiency improvements.
Strengthen a collaborative culture with empowered people A strong culture, shared values and a clear framework for collaborating as one team are key to Henkel's future success. We started by introducing new Leadership Commitments for all Henkel employees around the globe in 2019. Building on this first step, we plan to accelerate this cultural change and establish a culture of collaboration and empowerment, foster the upskilling of our employees on future capabilities and enable them to constantly develop further.
Progress in fiscal 2020
In March 2020, we presented our new strategic framework and started implementing the announced measures. The further course of the year was to a large extent characterized by the COVID-19 pandemic. In spite of these challenging conditions, we adhered to our agenda and were able to achieve good pro-gress in implementing the newly launched strategic frame-work.
The Company
Shares and bonds
Combined management report
We pushed ahead with the announced review of our portfolio, despite the difficult market environment. We have so far signed divestment contracts, completed the divestment or dis-continued businesses representing annual sales of more than 100 million euros. At the same time, we strengthened our portfolio with the addition of two acquisitions offering prom-ising growth opportunities. In its Beauty Care business unit, Henkel expanded its digital direct-to-consumer (D2C) activi-ties by acquiring a majority stake in a business comprising the three premium brands HelloBody, Mermaid+Me and Banana Beauty. In its Adhesive Technologies business unit, Henkel ex-panded its position in adhesives and sealants for consumers and craftsmen in North America by acquiring an attractive portfolio of consumer sealants marketed under the licensed GE brand. Together, the two acquired businesses generated proforma sales for the year as a whole of 212 million euros in fiscal 2020.
Acquisitions in fiscal 2020
Business
Purchase of 75 percent of the shares in a business comprising the three premium direct-to-consumer brands HelloBody, Mermaid+Me and Banana Beauty
Purchase of a portfolio of consumer sealants marketed under the GE1 brand
Key countries
Germany, France, Italy, Austria, Switzerland USA, Canada
1 GE is a trademark of General Electric Company, used under license.
We also made progress in the area of impactful innovations. We were able to further accelerate our innovation processes and speed up the time-to-market of new products. This enabled us, for example, to very quickly respond to the pandemic-driven increased demand for hygiene, disinfectant and cleaning products with corresponding product innovations. In our Beauty Care and Laundry & Home Care business units, we established new internal idea factories and incubator teams. The "Fritz Beauty Lab" aims to identify attractive niches with growth potential for existing and new categories or "white spots" to create new brands. The "Love Nature" team particu-larly focuses on sustainable solutions - starting in the field of laundry and home care products, but also embracing new technologies and business models that go beyond the core business. In the Adhesive Technologies business unit, we con-tinued to invest in our state-of-the-art innovation center in Düsseldorf.
Contract signed on
7/28/2020
8/1/2020
Completion on
9/1/2020
11/2/2020
Purchase price in million euros
299
153
For further information, see pages 121, 123, 143, 182-183, 225
121, 182-183
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Henkel AG & Co. KGaA published this content on 02 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 March 2021 08:24:07 UTC.
