Corporate governance practices

Linde AG has traditionally attached great importance to sound, responsible management and supervision geared towards the creation of sustainable value added. Our success has always been based on close and efficient cooperation between the Executive and Supervisory Boards, consideration of shareholders’ interests, an open style of corporate communication, proper accounting and audit procedures, and a responsible approach to risk and to legal rules and internal Group rules.

Linde upholds high ethical standards. In 2007, the Executive Board developed a corporate philosophy entitled The Linde Spirit and devised a new code of conduct known as the Code of Ethics, launching both throughout the Group. In 2013, a new version of The Linde Spirit brochure was issued in order to highlight the major importance of the core values to which the Group is committed. The Linde Spirit describes the corporate culture which is manifested in the Linde vision and the values and principles that underpin day-to-day activities. The 2013 edition of the brochure reflects how The Linde Spirit is translated into everyday reality. The Code of Ethics sets out the commitment made by all employees in The Linde Group to comply with legal regulations and to uphold and protect the ethical and moral values of the Group. It is based on Linde’s corporate culture and accords with its global values and fundamental principles. The Executive Board has also issued its own guidelines on competition/antitrust law, preventing corruption, the engagement of sales agents, occupational safety, environmental and health protection, quality and procurement. Like the Code of Ethics, these guidelines apply to all employees throughout The Linde Group. A global code of conduct for Linde AG suppliers was also published in 2013, with the aim of making our expectations of our suppliers even more transparent to them. The Healthcare Compliance Guide was adopted and published in 2014. This supplements the global guideline on preventing corruption and, subject to stricter laws at local level, imposes minimum standards governing responsible and ethical cooperation with healthcare professionals and medical establishments, advertising material, cooperation and interaction with patient organisations and the protection of patient data, as well as the setting of rules for clinical studies.

Compliance

To reinforce compliance with both legal regulations and voluntary principles, the Group has a global compliance organisation. Linde’s Group-wide compliance activities are focused in particular on antitrust law, the fight against corruption, export control and data protection. A binding risk analysis process (compliance risk assessment) was introduced in 2014, covering the issues of general compliance, antitrust law and corruption. The full-time employees working in Compliance are affiliated to Group Legal. Compliance officers have been appointed in the divisions, business units and operating segments to support Group-wide observance of the compliance programme. The Chief Compliance Officer coordinates and implements compliance measures. The Executive Board and the Audit Committee of the Supervisory Board are regularly informed about the current state of progress in the compliance organisation, including measures aimed at communicating existing rules of conduct to employees, training employees in those rules and updating the rules as necessary. Training is provided for Linde employees worldwide. Classroom-based courses are supplemented by a Group-wide e-learning programme. By the end of 2014, more than 49,000 e-learning training sessions had been held on the code of conduct, along with some 9,000 e-learning sessions on antitrust law. In addition, more than 15,000 members of staff were provided with training on site by skilled trainers. We thereby create a working environment in which our employees are entirely familiar with our rules and guidelines. Additionally, throughout 2014, more than 5,400 queries relating to compliance issues were handled by the dedicated Compliance Officer.

The Integrity Line reporting system is an important element of the compliance framework at The Linde Group. It enables both internal and external stakeholders to raise issues or report any doubts or suspicions that they might have. In 2014, the Internal Audit, Human Resources, and Group Legal departments and the department for Health, Safety and the Environment carried out around 127 investigations on the basis of information received via the Integrity Line. If an internal investigation reveals that the doubts or suspicions raised were justified, a prescribed process is used within a defined timeframe to determine which measures are required and whether these have been implemented.

All information on Linde’s core values and compliance policy can be found on the company’s website.

Executive Board and Supervisory Board procedures

Linde AG, which has its registered office in Munich, is governed by the provisions of the German Stock Corporation Law (AktG) and the German Codetermination Law (MitbestG), capital market regulations and the rules set out in its articles of association. The Executive Board and Supervisory Board are responsible for the management and supervision functions assigned to them. They cooperate closely in the interests of Linde to ensure the continuation of the Group as a going concern and to create sustainable value added. They must act in the interests of the shareholders and for the benefit of the Group.

Executive Board

The Executive Board of Linde AG is responsible for managing the company and conducting its business. Its actions and decisions are geared towards the best interests of the Group, taking into consideration the concerns of shareholders, employees, customers and other stakeholder groups. Its aim is to create sustainable value for stakeholders. The Executive Board establishes the strategic direction of the Group, agrees this strategy with the Supervisory Board, ensures it is properly implemented and reviews the progress made during regular discussions with the Supervisory Board. It is also responsible for annual and multi-year business plans, Group financing and the preparation of quarterly, half-yearly, annual and Group financial statements. In addition, the Executive Board ensures that appropriate risk management and risk control systems are in place and provides regular, timely and detailed reports to the Supervisory Board on all relevant Group issues including strategy, medium-term business plans, business trends, the risk situation, risk management and compliance with legal regulations and internal Group guidelines. The Executive Board also takes the necessary measures to facilitate compliance in the Group companies. Given the Group’s extensive reach across international markets and industry sectors, the Executive Board is responsible for ensuring that this diversity is reflected at management level. The goal is to put together the best teams worldwide. The Group’s HR strategy includes the definition, delivery and continuous evolution of Group-wide talent development programmes. Linde supports intercultural diversity by adopting an international human resources policy and making appointments across national borders. Another focus of Linde’s activities in the area of diversity is to increase the proportion of female managers in the Group. In the first half of 2015, Linde is planning to conduct information and communication workshops for senior management personnel on the theme of gender diversity. The Executive Board is also supporting numerous measures to promote women which have been derived from employee initiatives. These include networking events, training programmes for women with management responsibility or leadership potential, and a pilot mentoring scheme. Information on diversity in The Linde Group can be found in the report “Employees and society”.

Key Executive Board activities and transactions require the approval of the Supervisory Board. This applies in particular to the annual capital expenditure programme, major acquisitions, divestments, and defined capital and financial measures. While in office, members of the Executive Board are bound by a detailed restraint clause. Any conflicts of interest must be disclosed immediately to the Supervisory Board, as well as to fellow Board members. No such conflicts of interest arose for any member of the Executive Board during the reporting period.

The procedural rules of the Executive Board govern the work it performs, the allocation of responsibilities to individual members, the issues which must be dealt with by the full Executive Board and the majority required for resolutions to be passed by the Executive Board. The Executive Board passes resolutions at meetings held on a regular basis. A simple majority of the votes cast is sufficient for a resolution to be passed, unless a greater majority is prescribed by law. If the vote is tied, the Chairman has the casting vote. Without prejudice to the collective responsibility of all members of the Executive Board, each member of the Executive Board has individual responsibility for the functions assigned to him when the decisions of the Executive Board are being made. It is incumbent upon the Chairman of the Executive Board to assume responsibility not only for the functions assigned to him, but also to coordinate all areas of responsibility entrusted to the Executive Board in a proper manner. He is the main point of contact between the Executive Board and the Supervisory Board and represents the company in public. At the end of the reporting year, Professor Dr Aldo Belloni, the Executive Board member with responsibility for the Engineering Division, the EMEA gases segment and on-site operations, stepped down from the Executive Board on reaching the prescribed age limit. This provided an opportunity to reorganise the Board members’ remits. Having previously comprised five members as at 31 December 2014, the Linde AG Executive Board has had six members since 1 January 2015. All of the members of the Executive Board are men. Two fall into the over-40 age group, with four in the over-50 category. The appointments to the Executive Board also take into account the international operations of The Linde Group. Sanjiv Lamba is an Indian national and Thomas Blades is from the UK. The composition of the Executive Board is also such that all of the required areas of expertise are covered.

As of the balance sheet date, no member of the Executive Board was a member of more than three supervisory boards of listed companies outside The Linde Group or of comparable supervisory bodies of other business entities. Information about memberships held by members of the Executive Board on other German statutory supervisory boards or comparable German and foreign boards of business entities is given in the Notes to the Group financial statements. See Note [37].

The Executive Board has no committees.

Information on the composition of the Executive Board and on individual Board members, including their responsibilities and duties, may be found in the overview in chapter Executive Board or on the Linde website. The CVs of Executive Board members are available on the Linde website.

Supervisory Board

Equal numbers of shareholder representatives and employee representatives sit on the Supervisory Board of Linde AG, which comprises, in accordance with the company’s articles of association, the minimum number of members as specified in the relevant regulations. Currently, the minimum number specified by law is twelve. The appointment of the members of the Supervisory Board is also governed by the relevant legal regulations. In accordance with the recommendations of the German Corporate Governance Code, the shareholder representatives were elected individually at the last election to the Supervisory Board at the Annual General Meeting on 29 May 2013. The current term of office of the members of the Supervisory Board ends with the closure of the Annual General Meeting in 2018. The Supervisory Board’s Nomination Committee prepares for the election of shareholder representatives by the General Meeting, as was the case in 2013. When proposing candidates to the Supervisory Board, it takes into account the targets set by the Supervisory Board in terms of its future composition, as well as such criteria as the requirements of the German Stock Corporation Law (AktG), the Corporate Governance Code and the Supervisory Board’s procedural rules. The composition of the Supervisory Board is balanced to ensure that its members collectively possess the knowledge, skills and professional experience necessary to enable them to discharge their duties in a group with global operations in a fit and proper manner. All Supervisory Board members must ensure that they have sufficient time to perform those duties. All members of the Supervisory Board attended all of the Supervisory Board meetings held during their respective periods of office in 2014. One Supervisory Board member, Michael Diekmann, currently still sits on the executive board of a listed company; he holds no more than three supervisory board offices in listed companies outside the Group or in comparable supervisory bodies of other business entities that do not belong to The Linde Group. Linde AG undertakes to support Supervisory Board members as appropriate in the pursuit of any training or professional development necessary for the performance of their duties. New members are provided with comprehensive induction documents and information upon their appointment to the Supervisory Board. Additionally, specialist presentations by internal and external expert speakers are arranged for Supervisory Board members.

In March 2011 the Supervisory Board defined specific targets for its composition in accordance with clause 5.4.1 of the German Corporate Governance Code. These were confirmed in March 2014 and, taking into account the particular situation of the Group, cover the Group’s international reach, potential conflicts of interest, the number of independent Supervisory Board members, an age limit for Supervisory Board members and the need for diversity.

  • International expertise
    With operations in more than 100 countries, The Linde Group has a global footprint. To reflect this, at least five of the Supervisory Board members should have extensive international expertise.
  • Potential conflicts of interest and independence
    At least 75 percent of the Supervisory Board members should have no business or personal ties with the company or its corporate bodies that could constitute a significant and not just temporary conflict of interest. The mere existence of an employment relationship between employee representatives and the company or its affiliated companies does not preclude impartiality as described above. Supervisory Board members should not have management or advisory roles on the executive bodies of the main competitors of The Linde Group. No more than two former Executive Board members should sit on the Supervisory Board.
  • Age limit for Supervisory Board members
    Supervisory Board members should be no older than 72.
  • Diversity
    The Supervisory Board is committed to diversity in its composition and to the fair representation of women in particular. At least two members of the Supervisory Board should be women.

These targets were taken into account during the scheduled elections to the Supervisory Board in 2013, with the current composition of the Board meeting the criteria. The areas of expertise covered by its membership include engineering, law and economics, as well as finance, accounting and financial control.

Thanks to professional experience gained during their careers to date, all of the Supervisory Board members elected by the General Meeting have a particular level of international expertise. No conflicts of interest arose for any member of the Supervisory Board during the 2014 financial year. Where such conflicts of interest do occur, they must be disclosed immediately to the Supervisory Board. No Supervisory Board members currently have management or advisory roles on the executive bodies of any of Linde’s major competitors. Four Supervisory Board members, Anke Couturier, Gernot Hahl, Hans-Dieter Katte and Frank Sonntag, are company employees. No other consultancy, service or work contracts have been concluded between Supervisory Board members and the company. No former members of the company’s Executive Board are currently members of the Supervisory Board. One Supervisory Board member, Dr Manfred Schneider, reached the age limit in the 2010 financial year. At the Annual General Meeting in 2013, the member in question was also re-elected for a five-year term. When proposing candidates for the 2013 elections, the Supervisory Board was aware of the age limit defined in the procedural rules. However, it had good reason for also proposing candidates who had already reached 72 or who would reach this age during their term of office. The appointments were approved at the Annual General Meeting. The Supervisory Board currently has three members in the over-40 age category, four members in the over-50 category, three members in the over-60 category and two members who are over 70. The proportion of women on the Supervisory Board was confirmed during the re-election of the Supervisory Board in 2013. There continue to be two female members: Professor Dr Ann-Kristin Achleitner and Anke Couturier. Women therefore make up 16.7 percent of the Supervisory Board.

The procedural rules of the Supervisory Board include rules regarding the independence of its members. No member of the Supervisory Board is in a personal or commercial relationship with the company or its bodies that could represent a conflict of interests. One member of the Supervisory Board, Michael Diekmann, currently still sits on the executive board of a company with which Linde has a business relationship. Transactions with this company took place under the same conditions as for non-related third parties. These transactions did not affect Michael Diekmann’s independence. Linde AG has no controlling shareholder whose relationship with a member of the Supervisory Board could jeopardise that member’s independence. Consequently, the Supervisory Board is composed exclusively of individuals with a sufficient level of independence.

Information about the members of the Supervisory Board and their memberships of other legally prescribed German supervisory boards and/or comparable German or foreign boards of business entities is given in the Notes to the Group financial statements. See Note [37]. The CVs of Supervisory Board members are available on the Linde website.

The Supervisory Board appoints the Executive Board and monitors and advises the Executive Board in the running of its business operations. Executive Board decisions that are of fundamental importance to the Group require the approval of the Supervisory Board. With regard to the composition of the Executive Board, the Supervisory Board considers diversity in addition to the appropriate professional qualifications of candidates.

The Chairman of the Supervisory Board, Dr Manfred Schneider, coordinates the work of the plenary Supervisory Board and chairs its meetings. He is responsible for ensuring that resolutions passed by the Supervisory Board and its committees are duly executed and he is authorised to issue the statements on behalf of the Supervisory Board required to implement the resolutions of the Supervisory Board and its committees. The Chairman of the Supervisory Board maintains close contact with the Executive Board and the Chairman of the Executive Board in particular throughout the year, sharing information and ideas.

Supervisory Board committees

The Supervisory Board has four committees, which lay the groundwork for the plenary Supervisory Board. If it is permitted by law and laid down in the procedural rules of the Supervisory Board, decision-making powers may in individual cases be delegated by the Supervisory Board to these committees. The Chairman of the Supervisory Board chairs all the committees with the exception of the Audit Committee. The committee chairmen report back to the Supervisory Board on the work of their committees, doing so at the first plenary Supervisory Board meeting following the committee meeting.

The Standing Committee, which comprises three shareholder representatives and two employee representatives, advises the Supervisory Board in particular on the appointment and removal of members of the Executive Board and on decisions regarding the remuneration system for the Executive Board, including the terms and conditions of employment contracts, pension contracts and any other contracts pertinent to the remuneration of Executive Board members, and the total remuneration of individual Executive Board members. Moreover, the Standing Committee is responsible for approving transactions with Executive Board members and related parties, as well as for approving other activities of the Executive Board members, especially the holding of positions on supervisory boards and comparable boards of business entities that are not part of The Linde Group. It also provides advice on long-term succession planning for the Executive Board and reviews the efficiency of the work of the Supervisory Board on a regular basis. After preparatory work by the Standing Committee, the full Supervisory Board discusses the results of the efficiency review, identifies improvements that can be made and stipulates appropriate measures.

The Audit Committee similarly comprises three shareholder representatives and two employee representatives. It lays the groundwork for the decisions of the Supervisory Board regarding the adoption of the annual financial statements and the approval of the Group financial statements, taking account of the auditor’s reports, and makes arrangements with the auditors. It supports the Supervisory Board in the execution of its supervisory duties and monitors, in particular, the accounting process and the effectiveness of the internal control system, risk management system and internal audit system, as well as the statutory audit. It also deals with compliance issues. Moreover, it discusses the interim and half-year financial reports with the Executive Board prior to publication. The Audit Committee also makes a recommendation to the plenary Supervisory Board regarding the proposal for the election of the company’s auditors. The Chairman of the Audit Committee, Dr Clemens Börsig, is an independent financial expert and, in common with Professor Dr Ann-Kristin Achleitner and Dr Manfred Schneider, has specialist knowledge and many years’ experience of financial reporting and the application of accounting principles and internal control systems.

The Nomination Committee comprises the Chairman of the Supervisory Board, the Second Deputy Chairman of the Supervisory Board and one other shareholder representative. It makes recommendations to the Supervisory Board on proposed candidates for the election of shareholder representatives at the Annual General Meeting.

The Mediation Committee, formed under the provisions of the German Codetermination Law (MitbestG), comprises the Chairman of the Supervisory Board, the Deputy Chairman of the Supervisory Board (elected by the employee representatives on the Supervisory Board), one shareholder representative and one employee representative. It makes suggestions to the Supervisory Board regarding the appointment of Executive Board members if the required majority of two-thirds of the votes cast by Supervisory Board members is not obtained in the first ballot.

The Supervisory Board and its committees pass resolutions at meetings which are convened on a regular basis.

The names of those sitting on the Supervisory Board and on the Supervisory Board committees when the annual financial statements were being prepared are given on in chapter Supervisory Board or may be consulted on the Internet. Information about the activities of the Supervisory Board and its committees and about the work it has done with the Executive Board in the 2014 financial year is provided in the Report of the Supervisory Board.