Corporate Governance Report

This section is structured in accordance with the corporate governance guidelines of the SIX Swiss Exchange. For some items, reference is made to the consolidated financial statements from Page 56 of the Annual Report, and in particular to the additional corporate governance information in the annex to the consolidated financial statements from Page 85 of the Annual Report. This section is based on the Organizational Regulations of CPH Chemie + Papier Holding AG, which are available for download here.

For further details of the capital structure, please see the additional corporate governance information on Page 85.

The CPH Group comprises three autonomous divisions. The Group is led by the Group CEO; the divisions are headed by the Divisional CEOs. Group Executive Management consists of the Group CEO, the Group CFO and the Divisional CEOs. The Group CEO reports directly to the Chairman of the CPH Board of Directors. CPH Chemie + Papier Holding AG (the holding company) is domiciled in Perlen/Root, Switzerland. For an overview of the subsidiaries included in the conso­lidated financial statements, see Page 90 of the Annual Report.

The Board of Directors of CPH Chemie + Papier Holding AG is entrusted with the overall management of the company. The Board is responsible in particular for determining the company’s strategic alignment and thrust, defining its accounting and financing principles, assessing business opportunities and risks and appointing and supervising Group Executive Management. In full compliance with the relevant legal provisions and the company’s Articles of Incorporation, the Board of Directors has delegated the management of the company to Group Executive Management, headed by the Group CEO (see above). The delimitation of authorities here and the collaboration among the Board, its committees, Group Executive Management and the Group’s three divisions are laid down in detail in the Organizational Regulations of CPH Chemie + Papier Holding AG.

The members of the Board of Directors are elected individually by the Ordinary General Meeting to serve for a one-year period. They may be re-elected. In accordance with the Organizational Regulations, a Board member’s mandate will end at the latest at the Ordinary General Meeting of the year in which their 70th birthday falls.

The Chairman of the Board and the members of its Personnel & Compensation Committee are elected from the Board’s ranks by the Ordinary General Meeting. Apart from these appointments, the Board is self-constituting, and elects from its ranks a Deputy Chairman, the members of its Finance & Auditing Committee and the chairs of its two committees. The Board consisted of six members as of 31 December 2018. No Board member currently serves the company in an executive capacity or has done so in the past three years.

The Board of Directors has formed two permanent committees: Finance & Auditing and Personnel & Compensation. The committees take no decisions themselves: they primarily perform a preparatory and advisory function, helping the full Board to conduct its meetings more efficiently and take swift and well-founded decisions. Their duties are laid down in separate Descriptions of Duties.

The two board committees are currently composed as follows:

The Finance & Auditing Committee consists of Kaspar Kelterborn (chair), Peter Schaub and Manuel Werder. The Group CEO and CFO also attend all committee meetings as permanent guests. The committee’s tasks comprise in particular:

The committee met for three half-day deliberations and conducted one telephone conference in 2018.

The Personnel & Compensation Committee comprises Mauro Gabella (chair), Tim Talaat, Christian Wipf and Peter Schaub (personnel affairs only). The Group CEO also attends all committee meetings as a permanent guest, unless his own compensation or other topics relating to him are being discussed. The committee’s tasks comprise in particular:

The committee met for three half-day deliberations in 2018.

The Board of Directors met seven times in 2018: for three half-day meetings, three full-day meetings and a two-day strategy meeting. One of these meetings was held at the Group’s Müllheim (Germany) operating site. The Board of Directors also toured the Group’s new Utzenstorf and Rüti sites in Switzerland following Board meetings, and further undertook a one-and-a-half-day trip to visit the new Zvornik facility.

The Group CEO and the CFO are permanent guests at all Board meetings unless topics relating directly to them (such as their compen­sation) are being discussed. Its own internal issues are discussed by the Board in separate preliminary in-camera meetings.

The current and future development of each division are discussed in depth at dedicated annual half-day meetings. These are also attended by the full Divisional Management of the division concerned.

The Board’s two-day strategy meeting is devoted to strategic issues and the medium-term development of the CPH Group and its divisions. The meeting is also attended by the full Group Executive Management and − for specific topics − members of the Divisional Management teams.

The Chairman of the Board is in regular contact with the Group CEO to support him in his duties and in the implementation of business strategy.

The Board of Directors supervises Group Executive Management through structured reporting and controlling processes. The Board receives a comprehensive monthly written report on current business trends, financial results, market developments, emerging risks and other key events. The Group CEO also reports on the latest business trends and performance and all further issues of relevance to the Group at every Board meeting.

Risk management is practised in accordance with principles laid down by the Board of Directors and Group Executive Management under which the strategic and operational business risks, the hedging of currency exchange rate, interest rate, market, credit and liquidity risks and the Internal Control System (ICS) are regularly analyzed and reappraised. These risks are summarized in an annual Risk Report which is submitted to the Board of Directors. Further details of the ICS will be found in the annex to the consolidated financial statements on Page 88 of the Annual Report.

The external auditor supports the Board of Directors and its Finance & Auditing Committee as part of the statutory audit mandate by checking the existence of the internal control system (ICS).

Group Executive Management is CPH’s supreme executive body, and is charged with the Group’s operational management. Group Executive Management is tasked primarily with implementing the strategy defined by the Board of Directors, applying corporate policy and managing and coordinating the activities of the Group’s business divisions. The members of Group Executive Management are appointed by the Board of Directors. Group Executive Management generally meets once a month. It also conducts an annual two-day retreat; and a further one-and-a-half-day management meeting is held every year together with the full managements of the Group’s three business divisions.

For the remuneration paid to the Board of Directors and Group Executive Management, please see the Remuneration Report here.

Shareholders’ rights and change-of-control clauses will be found in the additional corporate governance information on Page 86 of the Annual Report.

PricewaterhouseCoopers AG, Zurich First elected: 1971 Current term: the 2018 financial year

Thomas Illi (since 2016)

The remuneration paid to the external auditor is shown on Page 87 of the Annual Report. The Board of Directors’ Finance & Auditing Committee examines the reports of the external auditor and assesses its work. The Committee then reports on this to the full Board. All the meetings of the Finance & Auditing Committee in 2018 were also attended by representatives of the external auditor.