As a European Company (SE) based in Germany, the formal structure of our corporate governance is determined by national law. The fundamental hallmarks are the two-tier system with its transparent and effective split into the management of the company (Executive Board) and its oversight (Supervisory Board), the composition of the Supervisory Board with representatives of the shareholders and employees as well as the shareholders' rights of co-administration and supervision at the General Meeting. The interaction between these bodies is regulated in German stock corporation law as well as in the company's Articles of Association. In addition, our corporate strategy, the Corporate Governance Principles and our Code of Conduct form the basis of our enterprise management.
Overall responsibility for enterprise management and Group-wide risk management as well as for the definition of the Risk Strategy rests with the Executive Board of our company. The Supervisory Board takes responsibility for advising, and especially for monitoring and supervising, the Executive Board in its management of the company and also with respect to risk management.
The avoidance of conflicts of interest is assisted by the control mechanisms stipulated in law and in the Articles of Association that exist between the Executive Board, Supervisory Board and General Meeting. In order to assure the provision of independent advice to and oversight of the Executive Board by the Supervisory Board, no more than two former members of the Executive Board shall belong to the Supervisory Board. Members of the Supervisory Board may not take on any governance function or consulting tasks at significant competitors of the company.
Our stakeholders have the opportunity to report critical issues to the company's highest governance body. All stakeholders, and especially shareholders, have recourse to the Supervisory Board with which they can raise their objections. Our shareholders exercise their voting right at our Annual General Meeting, in particular by determining the members of the Supervisory Board, ratifying the acts of management of the Executive Board and Supervisory Board, adopting the resolution on the appropriation of profit and through their right to ask questions and receive information. In this connection, too, every shareholder is able to directly address questions or comments. Within the framework of our established governance structures, critical concerns – including in relation to sustainability matters – are communicated on an ongoing basis to both the Executive Board and the Supervisory Board. In accordance with the practice adopted by the Supervisory Board and Executive Board, critical concerns are immediately addressed and dealt with at the meetings of the Supervisory Board and its committees.
When appointments are made to the Executive Board and Supervisory Board, Hannover Rück SE is guided by a number of considerations including the principle of diversity. Wide-ranging qualifications, expertise and relevant experience on the part of the members of the Executive Board and Supervisory Board facilitate a nuanced evaluation of the commercial opportunities and risks associated with business operations and enable balanced and professional actions and decisions to be taken on this basis. Due consideration is given to the aspect of diversity when members of the Executive Board and Supervisory Board are appointed. In addition to specialist and personal qualifications (competencies), this aspect encompasses in particular age, gender, education and professional career. With a view to ensuring that the concept of diversity is applied on an ongoing basis, an assessment is made in the context of every new appointment to the Executive Board or Supervisory Board as to whether the envisaged appointment is also in keeping with the diversity concept. We report at length on the concept of diversity in our Group Annual Report 2018 from page 126 onwards.
Our Executive Board is composed of seven members, who are appointed by the Supervisory Board. Along with their qualifications, the Supervisory Board also pays attention to appropriate diversity in the composition of the Executive Board as set out in the diversity concept.
With the appointment of Ms. Silke Sehm as a full member of the Executive Board in March 2019 we achieved the 14% target quota for women on the Executive Board defined in the concept for the period until 2022. Experience in environmental and social matters is taken into consideration as part of the selection process for the Executive Board or Supervisory Board, but is not regarded as a decisive factor.
The Executive Board ensures the elaboration and implementation of a consistent business policy in keeping with the company's strategic objectives. With shareholders in mind, the Executive Board expressly attaches importance to an organisation that facilitates cost-efficient, quick and unbureaucratic decision processes. Open and trusting cooperation geared to the collective interest is the cornerstone of success. In this context, the members of the Executive Board bear joint responsibility for the overall management of business. Irrespective of their shared responsibility, each individual member of the Executive Board leads their assigned area of competence at their own responsibility within the bounds of the resolutions adopted by the Executive Board. When individuals are appointed to the Executive Board, the term of appointment is to be determined such that it expires no later than the end of the month in which the member of the Executive Board turns 65.
For further information on the working practice of our Executive Board please see pages 124 et seq. of our Group Annual Report 2018.
Our Supervisory Board consists of nine members elected by the Annual General Meeting. Pursuant to statutory requirements and the Agreement on the Participation of Employees in Hannover Rück SE, the employees are represented by three members.
A list of the current members is provided in the present report under "Supervisory Board". We would also refer to our website in this regard.
The Rules of Procedure of the Supervisory Board stipulate that the Supervisory Board must have a sufficient number of independent members. Given that members of the Supervisory Board cannot at the same time sit on the Executive Board, a high degree of independence in the oversight of the Executive Board is already ensured by structural means. Currently, the Supervisory Board is of the opinion that of the six shareholder representatives elected by the Annual General Meeting at least three are independent as defined by Item 5.4.2 of the German Corporate Governance Code (DCGK). In its current composition the Supervisory Board largely fulfils the requirements of the German Corporate Governance Code with regard to independence. Necessary divergences are disclosed in the Declaration of Conformity pursuant to § 161 Stock Corporation Act (AktG) regarding compliance with the German Corporate Governance Code and published on our website.
When it comes to selecting the shareholder candidates who are proposed to the General Meeting for election to the Supervisory Board, the Supervisory Board takes care to ensure that the individuals in question have the necessary knowledge, abilities and specialist experience. In addition, the Supervisory Board conducts a self-assessment of its expertise and reviews the efficiency of its work once a year and decides on suitable development and advanced training measures, as necessary. In August 2018, for example, the Supervisory Board received IT training in the context of its deliberations on the company's newly developed digitalisation strategy. At least one member of the Supervisory Board must have technical expertise in the fields of accounting and the auditing of financial statements. This is assured at the present time. The anticipated time that can be invested in a sustainable increase in the value of the company is similarly a central criterion in the selection of candidates. Under certain circumstances the number of seats that may be held on supervisory boards outside the Group is therefore limited.
The principle of diversity is also taken into account by the Supervisory Board in the selection of a candidate. Allowing for the term of appointment of the Supervisory Board, the Supervisory Board has set itself a target quota of 30% for women on the Supervisory Board in the period from 1 July 2017 to 30 June 2022. This target had already been fulfilled at the end of 2017 with a proportion of 33%. The Supervisory Board has thus acted on various requirements contained in Item 5.4.1 of the German Corporate Governance Code (DCGK) regarding the composition of the Supervisory Board. The proportion of women on the Supervisory Board currently stands at 55.6%.
For further information on the working practice of our Supervisory Board and its committees please see pages 124 et seq. of our Group Annual Report 2018.
In accordance with its role, the Supervisory Board appoints the members of the Executive Board and performs its oversight and supervisory functions. The Supervisory Board is kept informed on a regular (at least quarterly) and timely basis of relevant business events. These include the business development, the execution of strategic decisions, material risks and planning as well as relevant compliance issues. The Chairman of the Supervisory Board stays in regular contact with the Chairman of the Executive Board in order to discuss with him significant business occurrences. Our Articles of Association and the Rules of Procedure of the Executive Board define the specific matters that require the consent of the Supervisory Board or its Chairman.
The Supervisory Board of Hannover Rück SE held four regular meetings and two extraordinary meetings in 2018. All nine Supervisory Board members took part in each of the Supervisory Board meetings held in 2018. Two representatives of the Federal Financial Supervisory Authority attended one meeting on a routine basis.