3 Board of Directors
3.1 Members of the Board of Directors
Under the articles of association, the Board of Directors of Allreal Holding AG consists of one or more members. It currently has seven members. For the current composition of the Board and information on individual Board members, refer to pages 18 and 19 of the Annual Report. None of the Board members perform executive duties in the company and, with the exception of Bruno Bettoni, none have performed operational management functions within Allreal in the past.
The Helvetia Group, which holds 10.0% of Allreal Holding AG’s share capital, is represented on the Board of Directors of Allreal Holding AG by Dr Ralph-Thomas Honegger. Allreal works for the Helvetia Group as a general contractor for the realisation of construction projects. These services are provided at arm’s length. During the period under review, the volume of project work completed for the Helvetia Group amounted to CHF 3.2 million.
In addition, insurance contracts are in place between the Helvetia Group and individual Allreal companies which have an annual premium volume of CHF 1.2 million (policies covering buildings, construction and management).
Olivier Steimer is Chairman of the Board of Directors of Banque Cantonale Vaudoise, which has had a business relationship with Allreal going back several years. As in the previous year, there are mortgage-backed loans in the amount of CHF 50.0 million in place as at the balance sheet cut-off date.
Allreal obtains legal consulting services from several law firms, including Meyerlustenberger Lachenal Attorneys at Law, in which Andrea Sieber is a partner. In the 2016 financial year, Allreal was charged fees amounting to CHF 0.057 million.
There are no other business relationships between Allreal and members of the Board of Directors.
3.2 Other activities and vested interests
For details of other work and functions performed by individual members of the Board of Directors outside Allreal see pages 18 and 19 of the Annual Report.
3.3 Articles of association provisions relating to the number of permissible activities
Each member of the Board of Directors may hold a maximum of 15 remunerated mandates outside Allreal, not more than 5 of which may be mandates with publicly owned companies.
3.4 Elections and terms of office
The members of the Board of Directors, the Chairman of the Board of Directors and the members of the Nomination and Compensation Committee are elected individually on an annual basis by the general meeting. Re-election is permitted. The age limit is 70.
Albert Leiser was first elected to the Board of Directors in 2005, Dr Ralph-Thomas Honegger in 2012, Olivier Steimer and Peter Spuhler in 2013, Bruno Bettoni in 2014, Andrea Sieber and Thomas Stenz in 2016.
3.5 Internal organisational structure
The general meeting elected Bruno Bettoni Chairman of the Board of Directors. The Board of Directors constitutes itself and has appointed Dr Ralph-Thomas Honegger to serve as its Vice Chairman. The function of Board Delegate does not exist.
The Board of Directors has a quorum if at least half of its members are present. It passes its resolutions with the majority of the votes cast; the Chairman has a casting vote.
The Board of Directors held four ordinary meetings in the period under review, three of which lasted half a day. The fourth meeting took the form of a strategic appraisal over around one and a half days. Three meetings were attended by all Board members for the full duration of the meetings, while one meeting was attended by five members. Accordingly, each member of the Board of Directors attended at least three meetings during the period under review. These meetings are also attended by members of Group Management for specific agenda items. The Board of Directors also passed resolutions on a number of specific business transactions by circular letter and telephone conferences.
The following key points were addressed at the Board meetings held in 2016:
- Review, isolated adjustment and approval of corporate strategy, medium-term planning for the period from 2017 to 2019 and the annual budget for 2017
- Discussion and examination of the implementation of the two-pillar strategy with backtracing of the specified quantitative targets
- Discussion and approval of the financial statements for each quarter (including liquidity status, debt financing and pending legal disputes), of the variance analysis versus the 2016 budget and of the forecast calculation for 2016 as a whole
- Examination and approval of applications relating to sales of investment properties as well as major investment projects of the Projects & Development division
- Assessment of opportunities and risks of major own projects (development real estate, and investment real estate under construction)
- Discussion of the transaction and rental market and the vacancy situation at individual investment properties within the Real Estate division’s remit as well as of appropriate letting measures
- Discussion of the direction of the Projects & Development division as well as its short- and medium-term capacity utilisation and work in progress
- Detailed analysis of the general market environment plus a peer group comparison, followed by a mandate to Group Management to implement the strategic measures resulting from this analysis
- Discussion and assessment of financing management (interest lock-in periods and credit facilities)
- Resolutions on the termination of interest rate swaps (hedge accounting)
- Deliberations and resolutions in connection with the issue of a bond
- Monitoring of and compliance with the investment and financing guidelines
- Approval of the half-yearly external financial reporting including media releases
- Approval of the proposals of the Risk and Audit Committee and the Nomination and Compensation Committee (including remuneration)
- Deliberations on risk management (risk matrix and catalogue) and the internal control system (ICS)
- Development of the share price and the shareholder structure in relation to compliance with “Lex Koller” requirements
- Discussion and approval of the agenda items to be proposed to the annual general meeting on 15 April 2016.
The Chairman of the Board of Directors assumes special tasks in his capacity as the liaison to the Chief Executive Officer. Performing these tasks usually involves a monthly meeting and frequent telephone contact.
3.6 Board committees
With a view to integrating the specialist expertise and experience of individual Board members into the decision-making process and enabling the Board to produce reports as part of its supervisory duties, the Board of Directors formed two committees as provided for in the organisational regulations. The duties and powers assigned to the Board of Directors in accordance with the organisational regulations and the law remain vested in the full Board of Directors, i.e. the two Committees have no decision-making powers. The Chairmen of the Committees inform the full Board of Directors of the key findings of the Committee meetings and/or present the resulting proposals.
Risk and Audit Committee
The Risk and Audit Committee supports the Board in supervising accounting and financial reporting, the auditors and the external real estate valuer and in monitoring compliance with legal requirements.
The tasks include reviewing the structuring of the accounting system in terms of appropriateness, reliability and effectiveness, reviewing the annual financial statements and the other financial information to be published, monitoring corporate risk assessment and reviewing risk management practices and/or the effectiveness of the internal control system (ICS) and periodic reviewing of the insurance cover available to Allreal. The Risk and Audit Committee is also responsible for monitoring business activity for compliance with decisions of the Board of Directors, with internal regulations and guidelines, with corporate policy principles and with relevant legal requirements, in particular those arising from the Stock Exchange Act.
In addition, the Risk and Audit Committee reviews the performance, independence and compensation of the auditors and the external real estate valuer. This includes in particular examining the compatibility of the auditing activities with any consultancy mandates and reviewing overall remuneration. The review reports and the resulting findings and recommendations are discussed in detail with Group Management and the external auditors and consequent measures are formulated. Implementation of these measures is overseen by the Risk and Audit Committee.
The tasks, duties, and powers of the Risk and Audit Committee are defined in the organisational regulations of 2 December 2014. The full Board of Directors is informed of the activities of the Risk and Audit Committee by the latter’s Chairman at the next Board meeting and decides on any resulting proposals.
The Risk and Audit Committee is made up of Albert Leiser (Chairman), Olivier Steimer (member) and Thomas Stenz (member). Meetings are normally attended by the Chief Financial Officer.
In 2016, the Risk and Audit Committee held three meetings. The main focus was on reviewing the 2015 annual financial statement and the 2016 half-yearly financial statement in relation to the above-mentioned tasks. In addition, cooperation with the external auditors and the operational management was assessed in detail. The Chief Financial Officer was present at two of the meetings. A third meeting, dealing with specific accounting matters, was also attended by the Chairman of the Board and the Chief Executive Officer. Representatives of the external auditors and the external real estate valuer were present for individual items on the agenda.
Nomination and Compensation Committee
The Nomination and Compensation Committee supports the Board of Directors with regard to the selection, compensation and training of the members of the Board, Group Management and the management of the Projects & Development division.
Its tasks include managing the selection process for members of the Board of Directors and Group Management and the resulting submission of proposals to the full Board of Directors; in respect of Group Management, this also extends to the submission of proposals relating to the key conditions of their contracts of employment. The Committee is also mandated by the full Board of Directors to prepare a compensation report for submission to the annual general meeting.
Its other tasks include succession planning at the most senior level of management, monitoring management training and reviewing and proposing the salary policy suggested by the Chief Executive Officer for the attention of the full Board of Directors.
The tasks, duties and powers of the Nomination and Compensation Committee are defined in the organisational regulations of 2 December 2014. The Chairman of the Nomination and Compensation Committee briefs the full Board of Directors on the Committee’s activities. The Board decides on the resulting proposals. The Committee does not have any decision-making powers.
The annual general meeting appointed Bruno Bettoni (Chairman) and Dr Ralph-Thomas Honegger (member) to the Nomination and Compensation Committee. The meetings are normally attended by the Chief Executive Officer.
In 2016, the Nomination and Compensation Committee held two meetings, which the Chief Executive Officer also participated in. These meetings were essentially concerned with personal particulars regarding Group Management, with wage policy for the entire company, as well as with remuneration of the members of the Board and Group Management. In connection with the recruitment of a new Chief Financial Officer, the Nomination and Compensation Committee called on the services of consulting external advisors and participated in several candidate interviews. The Committee submitted its proposals regarding these issues to the Board of Directors.
3.7 Definition of areas of responsibility
The principles governing the most senior level of management and the delineation of powers and responsibilities are defined in the organisational regulations of 2 December 2014. While the Board of Directors performs the tasks of supervisory and steering body, Group Management is in charge of the operational business.
At the same time, under the articles of association and the organisational regulations, in particular the following powers and responsibilities are vested in the Board of Directors:
- Ultimate direction of Allreal Group and ultimate oversight of the persons entrusted with management (compliance)
- Defining the organisation and appointment of management and persons authorised to act as proxies
- Determining the organisation of and procedures for accounting, financial controlling and financial planning
- Producing the annual report and annual financial statements, preparing the general meeting and implementing its resolutions
- Defining business policy, including in particular investment and financial policy
- Decisions on major transactions, including in particular investments and divestments.
All other tasks are delegated to Group Management. In particular, the latter also prepares the following for approval by the Board of Directors: medium-term planning over a period of three years, the annual budget and financial statements and proposals for investments or divestments. It conducts operational business.
Allreal has internal auditors, who periodically report directly to the Risk and Audit Committee. Allreal staff conduct regular reviews in order to verify property accounts prepared by external property management companies.
3.8 Information and control instruments vis-à-vis Group Management
In particular, the Board of Directors has the following supervisory and control instruments at its disposal:
- Comparative calculation of the annual budget for medium-term planning and corresponding variance analysis (annually)
- Reporting on the functioning and effectiveness of the internal control system (ICS) for financial reporting (annually)
- Reports on compliance with the investment and financing guidelines based on instruments of simplified liability management (quarterly)
- Quarterly statements with presentation of the financial situation (incl. budget comparison, end-of-year forecast and corresponding variance analysis) and management reports (quarterly)
- Balanced score card relating to Allreal Group and its divisions (quarterly)
- Risk matrix and assessments of specific major projects (quarterly)
- Detailed reports from Group Management on the trend of business in the individual business areas, with lists of the investments and divestments made (management information system/quarterly)