Dear Shareholders,
After entering 2010 with cautious optimism, the adidas Group can now look back on a year characterised by recovery and success. For the adidas Group, this was a year of major sports events such as the FIFA World Cup and the Olympic Winter Games. Furthermore, thanks to innovative products and marketing campaigns, all of our brands met with a very positive response among our consumers. The Group grew in almost all regions. The positive effects of the new organisational structure also contributed to the significant improvement of the Group’s results in 2010.
Supervision and advice in dialogue with the Executive Board
In the past financial year, we regularly advised the Executive Board on the management of the company and carefully and regularly supervised its activities. In particular, we examined the legality, expediency and regularity of the Executive Board’s management.
The Executive Board informed us regularly, extensively and in a timely manner through oral and written reports, both at Supervisory Board meetings and in the periods between our meetings. This information covered the Group’s business policy as well as all relevant aspects of business planning, including finance, investment and personnel planning. We were also kept up-to-date on the course of business, the operational position of adidas AG and the Group (including the risk situation and risk management), the Group’s financial position and profitability, as well as all major decisions and business transactions.
We were directly involved in all of the Group’s fundamental decisions. After in-depth consultation and examination of the detailed information submitted to us by the Executive Board, we approved transactions requiring Supervisory Board approval and in cases where, in our opinion, review by the Supervisory Board was necessary in the best interest of the Group.
We held five Supervisory Board meetings in 2010, one of them in the form of a conference call. In individual cases, we passed written circular resolutions. In addition, we held a meeting in February 2011, at which we discussed matters relating to the 2010 financial year. Apart from one meeting which one member was unable to attend due to an urgent business appointment that could not be postponed, all Supervisory Board members attended all meetings in the year under review. The same applies to the committee meetings. The external auditor, KPMG AG Wirtschaftsprüfungsgesellschaft (KPMG), attended four meetings of the Supervisory Board and all meetings of the Audit Committee. The Supervisory Board Chairman and the Audit Committee Chairman, an independent financial expert as defined by the German Stock Corporation Act, also maintained regular contact with the Chief Executive Officer and the Chief Financial Officer between the Supervisory Board meetings and informed themselves on the current developments of the business situation and major business transactions. The Executive Board regularly provided us with detailed reports for the preparation of our meetings. After in-depth examination and consultation, we resolved upon the Executive Board’s resolution proposals.
Main topics discussed and examined by the entire Supervisory Board
The development of sales and earnings, the employment situation as well as the financial position of the Group and the business development of individual markets were presented to us in detail by the Executive Board at all but one of our meetings and were subsequently discussed together. Other Supervisory Board agenda items included numerous individual topics, which we discussed in depth with the Executive Board. These discussions did not give rise to any doubt as to the legality, expediency or regularity of the Executive Board’s management in carrying out its duties.
At our February 10, 2010 meeting, which the Executive Board did not attend, we discussed in detail and resolved upon the 2010 Performance Bonus Plan for the Executive Board including the relevant criteria and targets as proposed by the General Committee. Furthermore, we amended the wording of the Rules of Procedure of the Executive Board, to be in line with the German Corporate Governance Code, and aligned the business allocation plan to the new segmental reporting. Subsequently, we resolved upon the Declaration of Compliance which had been prepared in detail by the Audit Committee at its previous meeting.
The main topic on the agenda of the March 2, 2010 financial statements meeting was the review of the consolidated financial statements and the adidas AG annual financial statements as well as the respective Management Reports for the year ending December 31, 2009, as certified by KPMG. We also reviewed the Executive Board’s proposal regarding the appropriation of retained earnings. Following initial Audit Committee examination and consultation, we discussed material aspects of these financial statements with the Executive Board and KPMG. Both the Executive Board and KPMG provided us with detailed responses to all of our questions. After having carefully considered adidas AG’s financial position and the expectations of shareholders and the capital market, we approved the proposal submitted by the Executive Board regarding the appropriation of retained earnings. Following the discussion and resolution on the agenda items for the 2010 Annual General Meeting, we dealt comprehensively with the budget and investment plan for 2010, which we subsequently approved.
At our May 5, 2010 meeting, the Executive Board reported in detail on the current business development and the financial situation of the Group after the first quarter of 2010. Furthermore, we discussed the method and scope of the upcoming efficiency examination of the Supervisory Board. Additionally, we dealt with the economic situation and the potential for development of the Retail segment and the eCommerce distribution channel. Following a detailed presentation by the Executive Board and subsequent discussion of this topic, we approved the transfer of shares held in FC Bayern München AG from adidas International B.V. to adidas AG.
The main focus of our August 3, 2010 meeting were the results of the first half year, which were well above market expectations, as well as the anticipated development of business for the remainder of 2010. Moreover, the Executive Board extensively reported on the IT strategy of the Group and we dealt in detail with the new provisions of the German Corporate Governance Code which came into force in July 2010. Furthermore, we renewed Erich Stamminger’s mandate as Executive Board member and approved the conclusion of his new service contract prepared by the General Committee.
At our Supervisory Board meeting held on November 3, 2010, discussions centred on the report for the first nine months of the year and the outlook for the remainder of the 2010 financial year. Following the Executive Board’s detailed presentation of the strategic business plan “Route 2015” for the years 2011 to 2015, we focused on the medium-term business development of the Group. Furthermore, the Executive Board informed us about the growth potential of the adidas Outdoor category. Another major point of focus was the report of the Audit Committee Chairman on the key contents of the Audit Committee meetings held on September 29, 2010 and November 2, 2010, which dealt with the Audit Committee’s examination of the effectiveness of the updated risk management system, the internal control system and the compliance system. The Audit Committee, to which we have delegated monitoring of the effectiveness of these systems, explained that the systems comply with statutory regulations.
At our meeting on February 9, 2011, at which the Executive Board was present only part of the time, we discussed and approved the budget and investment plan for 2011 based on the detailed presentations provided by the Executive Board. Following a comprehensive report by the Executive Board, we furthermore approved the sale of Herzo Base real estate. We subsequently focused on the objectives for the future composition of the Supervisory Board and, in addition, we also resolved upon the content of the 2011 Declaration of Compliance. Furthermore, we resolved upon the General Committee’s proposal concerning the amount of the 2010 Performance Bonus to be granted to each member of the Executive Board.
Report from the committees
In order to perform our tasks in an efficient manner, we have five Supervisory Board standing committees and also the project-related Committee for Real Estate Projects, which was established ad hoc in 2009. These committees not only have the task of preparing topics and resolutions of the Supervisory Board, they partly also make decisions on behalf of the Supervisory Board.
The committees’ work in the year under review is summarised as follows: