Report of the Supervisory Board

  • Dr. Manfred Bischoff, Chairman of the Supervisory Board.

Dr. Manfred Bischoff,Chairman of the Supervisory Board.

Dear Shareholders, the Supervisory Board dealt in detail with the strategic and operational development of the Daimler Group in nine meetings during the 2014 financial year.

In the year 2014, the Supervisory Board performed its tasks as defined by the law, the Articles of Incorporation and the rules of procedure, and continually advised and supervised the Board of Management on the management of the company. It examined whether the annual company financial statements, the annual consolidated financial statements, the combined management report for the Company and the Group, and the other financial reporting were in conformance with the applicable requirements. In addition, the Supervisory Board passed resolutions on numerous business matters for which its consent was required following careful reviews and consultations. Those matters included investment planning, capital changes at companies of the Group, investments, divestments and the conclusion of contracts with particular importance for the Group. The Board of Management informed the Supervisory Board about a large number of transactions not requiring the Supervisory Board’s consent and the two boards discussed those matters together, for example the further development of strategic programs in the various divisions and the status of various cooperation projects. Together with the Board of Management, the Supervisory Board held intensive and detailed discussions on the information and assessments that were material for its decisions and recommendations.

During the reporting period, the Board of Management regularly informed the Supervisory Board about all significant key financials of the Group and the divisions. In addition, it continually provided information to it on important topics such as return on equity and the Group’s liquidity situation, the development of sales and procurement markets, the general economic situation in the main sales markets and developments in the area of financial services. The Supervisory Board dealt in detail also with the share-price development and its causes as well as with the expected effects of strategic projects on the share-price development. Additional topics included the further development of the product portfolio and securing the Group’s long-term competitiveness. Furthermore, the Supervisory Board dealt with fundamental questions of corporate planning including financial, investment, sales and personnel planning, current developments at companies of the Group, revenue development, the situation of the Company and the divisions, and the ongoing implementation of measures to secure future-oriented, sustainable mobility.

The positive results of the growth strategy implemented by the Board of Management and expressly supported by the Supervisory Board increasingly became very apparent: Daimler successfully continued along its path of profitable growth in financial year 2014. The newly presented products were extremely well received by the market and the broad geographical spread of our activities had a very positive and stabilizing effect, especially in the commercial vehicles business. Daimler made further good progress also in the important Chinese market. The Group’s unit sales and revenue reached new historic records. As announced in early 2014, earnings from the ongoing business increased significantly. This was due also to the successful implementation of the efficiency programs at all the divisions, which significantly improved the cost position. In addition, the adjustment of the investment portfolio with the sale of the equity interests in Rolls-Royce Power Systems Holding GmbH and Tesla Motors, Inc. resulted in substantial capital gains and cash inflows, which were applied to further strengthen the Group’s core business.

Cooperation between the Supervisory Board and the Board of Management. The meetings of the Supervisory Board featured intensive and open exchanges of information and opinions. The Supervisory Board arranged an executive session in each of its meetings to be able to discuss topics in the absence of the Board of Management. No member of the Supervisory Board attended fewer than half of the meetings in the past financial year.

The members of the Supervisory Board regularly prepared for upcoming resolutions on the basis of documentation that had been provided in advance by the Board of Management. They were supported by the relevant committees and intensively discussed the actions and transactions upon which decisions were to be taken with the Board of Management. The members of the Supervisory Board attended such courses of training and further training regarded as necessary for the performance of their tasks. In this context, the meetings of the Supervisory Board dealt with issues of fundamental importance for the Group such as the macroeconomic situation of key sales markets or new products and forward-looking technologies. In addition, the Supervisory Board meetings were regularly prepared in separate discussions with the members of the Board of Management of the members representing the employees and the members representing the shareholders.

The Board of Management informed the Supervisory Board with the use of monthly reports and risk reports about the most important indicators of business development and existing risks, and submitted the interim financial reports to the Supervisory Board. Deviations from the planning were explained in detail to the Supervisory Board. The Supervisory Board was kept fully informed of specific matters also between its meetings. In addition, the Chairman of the Board of Management informed the Chairman of the Supervisory Board in regular discussions about important developments and about those matters that were to be submitted to the Supervisory Board to pass resolutions on or to take note of.

As required in individual cases, for example in cases of special urgency, the members were requested to pass resolutions in writing, following consultation with its Chairman. For the preparation of such proposed resolutions, comprehensive and conclusive documentation was distributed to the members of the Supervisory Board. Furthermore, the members of the Board of Management were available for a bilateral exchange of opinions and to answer any questions.

Topics discussed at the Supervisory Board meetings in the year 2014. In the meeting of the Supervisory Board held on January 28, 2014, the personnel changes in the Board of Management explained later on this page were discussed and decided upon.

In a meeting attended by the external auditors in early February 2014, the preliminary key figures of the annual company and consolidated financial statements for 2013 and the dividend proposal to be made at the 2014 Annual Shareholders’ Meeting were discussed. The preliminary key figures for the year 2013 and the proposal on the appropriation of profit were announced at the Annual Press Conference on February 6, 2014.

In the Supervisory Board meeting held on February 18, 2014, the Supervisory Board first decided on the personnel changes in the Board of Management described later on this page. Subsequently, it dealt with the annual company financial statements, the annual consolidated financial statements and the combined management report for Daimler AG and the Daimler Group, each of which had been issued with an unqualified audit opinion by the external auditors, as well as with the reports of the Audit Committee and the Supervisory Board, the corporate governance report, the remuneration report and the proposal on the appropriation of profit. In preparation, the members of the Supervisory Board were provided with comprehensive documentation. The Audit Committee and the Supervisory Board dealt with those documents in detail and discussed them intensively in the presence of the external auditors. Following the final results of the review by the Audit Committee and its own review, the Supervisory Board declared its agreement with the results of the audit carried out by the external auditors, determined that no objections were to be raised, and approved the financial statements and the combined management report as presented by the Board of Management. The company financial statements of Daimler AG for the year 2013 were thereby adopted. On this basis, the Supervisory Board consented to the proposal made by the Board of Management on the appropriation of distributable profit. In addition, the Supervisory Board approved the Report of the Supervisory Board, the Corporate Governance Report and the Remuneration Report, as well as its proposed decisions on the items of the agenda for the 2014 Annual Shareholders’ Meeting.

Also in the meeting on February 18, 2014, the Supervisory Board received detailed information on the topic of “Future Mobility.” Some of the main aspects of this topic were urbanization, demographic developments, the digital revolution and autonomous driving. Furthermore, the Supervisory Board approved a capital increase for the Group subsidiary Daimler India Commercial Vehicles. Finally, it dealt with aspects of Board of Management remuneration and approved the other board memberships and sideline activities of the members of the Board of Management as presented in the meeting.

On March 7, 2014, the Supervisory Board discussed and approved the transfer to the partner Rolls-Royce Holdings plc. of the 50% equity interest held by Daimler AG in Rolls-Royce Power Systems Holding GmbH.

One of the items on the agenda of the Annual Shareholders’ Meeting held on April 9, 2014 was the election of three members of the Supervisory Board representing the shareholders. In its constitutive meeting straight after the Annual Shareholders’ Meeting, the Supervisory Board elected Joe Kaeser as a member of the Audit Committee. This and other decisions on the composition of the committee are presented later on this page under “Personnel changes in the Supervisory Board.”

In another meeting at the end of April 2014, the Supervisory Board consented to the expansion of the cooperation with Nissan in the compact-car segment. Amongst other things, it approved investments in a joint production facility with Nissan in Mexico. Subsequently, the Supervisory Board decided on the successor to Erich Klemm in the positions of Deputy Chairman of the Supervisory Board and member of the committees of the Supervisory Board. Details are provided later on this page under “Personnel changes in the Supervisory Board.”

In June, the Supervisory Board passed a resolution in written circulated form on the provision of health care for the active and retired employees of a US company of the Group, Daimler Trucks North America.

Following discussion of the course of business and the results of the second quarter, in its meeting in July, the Supervisory Board received detailed information on the current development of Daimler in China and subsequently consented to a capital increase at the Chinese subsidiary Mercedes-Benz Auto Finance Ltd. In this meeting, the Supervisory Board also discussed an extension of the strategic cooperation with Renault-Nissan and approved that project. The Supervisory Board also dealt with the agenda of its strategy workshop in 2014.

During the two-day strategy workshop at the Mercedes-Benz plant in Bremen, as in the previous strategy meetings, the Supervisory Board received information on the strategic goals of Daimler AG and the divisions, as well as on the stage of their implementation so far. The starting point was an assessment of the markets and the automotive environment in the year 2025. The Supervisory Board dealt in detail with the expected changes in structural conditions, in particular in the areas of geopolitics and industrial policy, emission legislation and sustainability in the automotive industry. Other important subjects for discussion included connectivity, autonomous driving, big data and the challenges of so-called Industry 4.0. On the basis of the future scenario deemed to be likely, the Supervisory Board then dealt with the Group’s objective for the year 2025 and – derived from that – the objectives of the various divisions. The main points for discussion included the objectives of the divisions Daimler Trucks and Daimler Buses as well as Mercedes-Benz Cars. In connection with Daimler Trucks and Buses, the topics discussed were model policy, production network, new competitors from the emerging markets, opportunities in new sales markets and emission-free driving for city buses. With regard to Mercedes-Benz Cars, the discussions focused on the product portfolio and platform strategy, the global production network, material-cost efficiency and supplier quality, innovation strategy and the Best Customer Experience program.

In October 2014, the Supervisory Board consented in written circulated form to the termination of the hedge of the price of the shares held in Tesla and to the sale of those shares. In another resolution passed in written circulated form in October, the Supervisory Board decided on the basis of a recommendation by the Audit Committee on the restructuring of the real-estate portfolio in Germany and consented to the planned project.

In the meeting held in December 2014, the Supervisory Board first decided on the changes in the Board of Management described later on this page. Subsequently, the Supervisory Board dealt in detail on the basis of comprehensive documentation with the operational planning for the years 2015 and 2016. This included discussion of existing opportunities and risks as well as the Group’s risk management. Subsequently, the Supervisory Board dealt with the optimization of the sales network and the structure of Daimler’s own sales-and-service centers in Germany, and consented to the sale of some of those centers. In addition, the Supervisory Board approved contributions to the German pension fund assets to secure the employees’ retirement benefits.

Also in the meeting in December, on the basis of a recommendation by the Nomination Committee, the members of the Supervisory Board representing the shareholders decided to propose to the Annual Shareholders’ Meeting that Dr. Paul Achleitner be reelected to the Supervisory Board with effect as of the end of the Annual Shareholders’ Meeting held on April 1, 2015 and until the end of the Annual Shareholders’ Meeting that decides on ratification of the actions in the year 2019. Other topics dealt with in the December meeting were corporate governance, as detailed below, and Board of Management remuneration in light of the recommendations of the German Corporate Governance Code. Finally, the Supervisory Board dealt with the probable main topics of the year 2015.

Corporate governance. During the year 2014, the Supervisory Board was continually occupied with standards of good corporate governance.

The Supervisory Board is convinced that effective work in the Supervisory Board in terms of good corporate governance requires two things: On the one hand, its members must have high levels of specialist expertise. On the other hand, diversity amongst the members in terms of internationality, gender, experience and cultural background must reflect the Group’s size and internationality. Both of these requirements are fulfilled at Daimler. For the purpose of appropriate participation by women and to secure appropriate internationality amongst its members, the Supervisory Board has set itself targets in accordance with the recommendations of the German Corporate Governance Code, which the Nomination Committee takes into consideration with its recommendations to the Supervisory Board as does the Supervisory Board itself with the election proposals that it makes to the Annual Shareholders' Meeting. Details of the Supervisory Board's targets and of the stage of target achievement are presented in the Corporate Governance Report.

The members of the Supervisory Board of Daimler AG are obliged to disclose conflicts of interest – especially those that might arise due to an advisory or board function for a customer, supplier or creditor of Daimler or for other third parties – to the entire Supervisory Board. In fulfilment of the relevant recommendations of the German Corporate Governance Code, the Supervisory Board provides information on any conflicts of interest that occur and on how they were dealt with in its report to the Annual Shareholders’ Meeting.

There were no indications of any actual conflicts of interest in 2014. Purely as a precaution, in light of her well-known membership of the board of directors of General Electric Company, Andrea Jung did not participate on March 7, 2014 in the consultations and resolution on the sale to the partner Rolls-Royce Holdings plc. of Daimler’s 50% equity interest in Rolls-Royce Power Systems Holding GmbH, in order to avoid any possible conflict of interest. Apart from that, there were no indications of any potential conflicts of interest during the reporting period.

In its meetings in July and December, the Supervisory Board slightly updated the wording of the rules of procedure of the Supervisory Board and its committees, and in December approved the 2014 declaration of compliance with the German Corporate Governance Code pursuant to Section 161 of the German Stock Corporation Act (AktG). With the exceptions explained in the declaration, all the recommendations of the Code have been complied with and continue to be complied with.

The Supervisory Board arranged for an externally moderated efficiency review to be carried out in 2014, thus fulfilling the requirements of its rules of procedure and of the German Corporate Governance Code. The results of the efficiency review, with which the Supervisory Board dealt intensively in its meeting in mid-February 2015, confirm that there is very good and constructive collaboration within the Supervisory Board and with the Board of Management.

Corporate Governance at Daimler is described in detail in the Corporate Governance Report and in the Remuneration Report of this Annual Report.

Report on the work of the committees

The Presidential Committee convened five times last year. It dealt primarily with corporate governance topics and questions of remuneration, as well as with personnel matters of the Board of Management. As in previous years, compliance targets constituted part of the individual target agreements of the members of the Board of Management. Once again, additional non-financial targets were also included as criteria in the target agreements. For the past financial year, they were in the areas of employee and customer satisfaction, diversity, and the further development and permanent establishment of integrity.

The Audit Committee met six times in 2014. Details of those meetings are provided in a separate report of that committee.

The Nomination Committee convened once in 2014. Among other matters, it prepared a recommendations for the Supervisory Board’s proposals to the Annual Shareholders’ Meeting 2015 on the candidate for election. The election proposal gives due consideration not only to the defined qualifications for the specific position, but also to the recommendations of the German Corporate Governance Code. The Nomination Committee had already made its recommendations in 2013 for the election proposals to be made to the Annual Shareholders’ Meeting in 2014.

As in previous years, the Mediation Committee, a body required by the provisions of the German Codetermination Act (MitbestG), had no occasion to take any action in 2014.

The chairmen of the committees informed the members of the Supervisory Board about the activities of the committees and their decisions, in each case in the Supervisory Board meeting following such decisions.

Personnel changes in the Supervisory Board. With effect as of the end of the Annual Shareholders’ Meeting on April 9, 2014, Gerard Kleisterlee, Lloyd G. Trotter and Dr. Bernhard Walter stepped down from the Supervisory Board. The Annual Shareholders’ Meeting elected Dr. Bernd Bohr, Joe Kaeser and Dr. Bernd Pischetsrieder as members of the Supervisory Board representing the shareholders until the end of the Annual Shareholders’ Meeting that decides on ratification of the actions for the year 2018. The election proposals made by the Supervisory Board to the Annual Shareholders’ Meeting were based on recommendations made by the Nomination Committee.

After the departure of Dr. Bernhard Walter as a member and the longstanding Chairman of the Audit Committee, in its constitutive meeting straight after the Annual Shareholders’ Meeting, the Supervisory Board elected Joe Kaeser as a member of the Audit Committee representing the shareholders. Furthermore, the members of the Audit Committee elected Dr. Clemens Börsig as the Chairman of that Committee.

On April 30, 2014, Erich Klemm stepped down from his positions as a member and Deputy Chairman of the Supervisory Board. Ergun Lümali had already been elected to replace Erich Klemm in the election of members of the Supervisory Board representing the employees held in 2013. Ergun Lümali therefore became a member of the Supervisory Board as of May 1, 2014 without the need for another election or resolution. Due to the departure of Erich Klemm, his successors in the positions of Deputy Chairman and member of the committees had to be elected. Effective as of May 1, 2014, the Supervisory Board elected Michael Brecht as its Deputy Chairman. Michael Brecht succeeds to Erich Klemm also as a member and Deputy Chairman of the Mediation Committee and the Presidential Committee. The Supervisory Board elected Dr. Sabine Maaßen to the Audit Committee as Erich Klemm’s successor representing the employees with effect as of May 1, 2014. The members of the Audit Committee elected Michael Brecht as the Chairman of that Committee.

Jürgen Langer stepped down from the Supervisory Board as of December 31, 2014. With effect as of January 1, 2015 Michael Bettag was appointed by the court to the Supervisory Board as his successor representing the employees.

Personnel changes in the Board of Management. In the Supervisory Board meeting held on January 28, 2014, the appointment of Andreas Renschler as a member of the Board of Management was terminated by mutual agreement. Andreas Renschler was released of his duties as of that date. Also in that meeting, the Supervisory Board decided that responsibility for the area of Manufacturing and Procurement Mercedes-Benz Cars in the Board of Management of Daimler AG would be transferred until further notice to its Chairman, Dr. Dieter Zetsche, in his position as Head of the Mercedes-Benz Cars division. Responsibility for the Mercedes-Benz Vans division was allocated to Wilfried Porth.

In the Supervisory Board meeting on February 18, 2014, Bodo Uebber’s appointment as the member of the Board of Management of Daimler AG with responsibility for Finance & Controlling and Daimler Financial Services was extended for a further five years as of January 1, 2015.

In its meeting on December 11, 2014, the Supervisory Board decided to expand the Board of Management and to appoint Ola Källenius as a new member with responsibility for Sales Mercedes-Benz Cars for a period of three years with effect as of January 1, 2015, and to adjust the schedule of responsibilities accordingly.

In the Supervisory Board meeting on February 13, 2015, Hubertus Troska was reappointed as a member of the Board of Management of Daimler AG with responsibility for «Greater China» for a further five years with effect as of January 1, 2016.

Audit of the 2014 company and consolidated financial statements. The financial statements of Daimler AG and the combined management report for the Company and the Group for 2014 were duly audited by KPMG AG, Wirtschaftsprüfungsgesellschaft, Berlin, and were given an unqualified audit opinion. The same applies to the consolidated financial statements for 2014 prepared according to IFRS.

In a meeting in early February 2015 attended by the external auditors, the Supervisory Board discussed the preliminary key figures of the annual company and consolidated financial statements for 2014 and the dividend proposal to be made at the 2015 Annual Shareholders’ Meeting. The preliminary key figures for the year 2014 were announced at the Annual Press Conference on February 5, 2015.

In the meeting on February 13, 2015, the Supervisory Board dealt with the annual company financial statements, the annual consolidated financial statements and the combined management report for Daimler AG and the Daimler Group, each of which had been issued with an unqualified audit opinion by the external auditors, as well as with the reports of the Audit Committee and the Supervisory Board, the corporate governance report, the remuneration report and the proposal on the appropriation of profit. In preparation, the members of the Supervisory Board had been provided with comprehensive documentation including the Annual Report with the consolidated financial statements according to IFRS, the combined management report for Daimler AG and the Daimler Group, the corporate governance report and the remuneration report, the annual company financial statements of Daimler AG, the proposal of the Board of Management on the appropriation of profit, the audit reports of KPMG on the annual company financial statements of Daimler AG and the consolidated financial statements, each including the combined management report, as well as drafts of the reports of the Supervisory Board and of the Audit Committee.

The Audit Committee and the Supervisory Board dealt with those documents in detail and discussed them intensively in the presence of the responsible external auditors, who reported on the results of their audit and were available to answer supplementary questions and to provide additional information. Following the final results of the review by the Audit Committee and its own review, the Supervisory Board declared its agreement with the results of the audit by the external auditors; it determined that no objections were to be raised and approved the financial statements and the combined management report as presented by the Board of Management. The company financial statements of Daimler AG for the year 2014 were thereby adopted. On this basis, the Supervisory Board consented to the proposal made by the Board of Management on the appropriation of distributable profit. Furthermore, it approved the report of the Supervisory Board, the corporate governance report and the remuneration report, as well as its own proposed decisions on the items of the agenda for the 2015 Annual Shareholders’ Meeting.

Appreciation. The Supervisory Board thanks all of the employees and the management of the Daimler Group for their personal contributions to the successful year 2014. With all best wishes for the future, the Supervisory Board also expresses its warmest thanks to the departed members Gerard Kleisterlee, Erich Klemm, Jürgen Langer and Lloyd G. Trotter. With great sadness and gratitude, the Supervisory Board bids farewell to Dr. Bernhard Walter as the longstanding Chairman of the Audit Committee, who passed away in January 2015. Dr. Bernhard Walter has had a lasting positive impact on the Company through his work. Special thanks for his great commitment to the benefit of the Company are also due to Erich Klemm as the Deputy Chairman of the Supervisory Board and its committees.

Stuttgart, February 2015

The Supervisory Board

Dr. Manfred Bischoff
Chairman