Corporate Governance. We discussed the implementation of the requirements of the German Corporate Governance Code and the American Sarbanes-Oxley Act at several of the meetings of the Supervisory Board and of the Chairman’s Committee and Audit Committee. These discussions led to a series of changes in the Terms of Reference for the Supervisory Board and its committees. In July, the consultant commissioned by the Supervisory Board presented the results of the appraisal of the efficiency of the activities of the Supervisory Board, which we discussed at length. As a result, several of the initial recommendations have already been implemented. The Declaration of Conformity pursuant to §161 of the German Stock Corporation Act, which the Supervisory Board and Board of Managing Directors issued for the first time in October 2002, was adjusted in July 2003 in accordance with the resolutions of the General Meeting concerning Supervisory Board compensation. In October 2003, the declaration was revised and adjusted to the new version of the German Corporate Governance Code issued on May 21, 2003. Since the bank’s Corporate Governance Principles matched the recommendations of the German Corporate Governance Code with only one exception relating to the directors and officers’ liability insurance policy, a decision was taken to repeal the bank’s own set of principles.
Together with the Board of Managing Directors we agreed on a procedure, as required by the Sarbanes-Oxley Act, for the receipt of complaints regarding accounting.
A comprehensive presentation of the bank’s corporate governance, including the text of the Declaration of Conformity issued on October 29, 2003, can be found on the following pages and on our website in the Internet at http://www.deutsche-bank.com
The Committees of the Supervisory Board. The Chairman’s Committee met four times during the reporting period. At its meetings, the Committee handled not only issues relating to the Board of Managing Directors, but also those concerning the appraisal of the efficiency of the Supervisory Board, the amendment of the remuneration of the Supervisory Board, the bank’s Corporate Governance Principles, succession planning for the Board of Managing Directors and the process of selecting new Supervisory Board members.
At its six meetings, the Credit and Market Risk Committee discussed exposures subject to mandatory approval under German law and the Articles of Association and all major loans and loans entailing increased risks. Where necessary, the Committee gave its approval. Apart from credit, liquidity, country and market risks, the Committee also discussed legal and reputational risks extensively. Furthermore, global industry portfolios were presented according to a specified plan and discussed at length.
The Audit Committee met five times in 2003. Representatives of the bank’s auditor also attended its meetings. Subjects covered were the audit and approval of the Annual Financial Statements and Consolidated Financial Statements, the Form 20-F for the SEC in the USA, the quarterly financial statements, relations with the auditor, the proposal for the election of the auditor for the business year 2003, the auditor’s remuneration and the audit mandate, including certain focal points for the audit as well as the control of the auditor’s independence. As in the year 2002, the Committee extensively discussed the effects of the Sarbanes-Oxley Act on the Audit Committee’s working procedures. Between the regularly scheduled meetings, reports on the regulatory requirements, especially on those in New York, were presented by video conference. The Audit Committee had reports submitted to it regularly on the work of Internal Audit as well as on legal and reputational risks and was able to convince itself that the auditor had no conflicts of interest.
Meetings of the Mediation Committee, established pursuant to the regulations of the Co-Determination Act, were not necessary in 2003.
The Supervisory Board received regular reports on the work of its committees.
Conflicts of Interest and their Handling. Dr. Breuer did not participate in approving the resolution by the Chairman’s Committee on the compensation of the members of the Board of Managing Directors for the year 2002, as this involved his own proportional compensation for that year.
As a party involved, Dr. Breuer did not participate in the discussion and approval of the resolution by the Chairman’s Committee and the Supervisory Board, in accordance with the resolution of the Board of Managing Directors, that the investigative proceedings against members and former members of the Board of Managing Directors and bank’s staff members due to allegations of aiding and abetting tax evasion be discontinued in exchange for payment of an association fine and an administrative fine as well as the assumption of the costs of the proceedings.
The Credit and Market Risk Committee dealt with the loan approvals required pursuant to § 15 of the German Banking Act. Supervisory Board members, who were also members of the supervisory board of the borrowing company when the resolutions were taken, did not participate in this.
The Supervisory Board was kept informed regularly on Dr. Kirch’s lawsuit against Deutsche Bank and Dr. Breuer and discussed courses of action. The Chairman’s Committee resolved, without Dr. Breuer participating in the voting, to approve the resolution of the Board of Managing Directors that the costs of the trial, including those caused by the trial against Dr. Breuer, will be covered by the bank. Furthermore, the Supervisory Board also resolved, without Dr. Breuer participating in the voting, to commission an external attorney to advise the Supervisory Board in all matters of relevance for the Supervisory Board arising from this trial.
