Corporate governance
- Members of the Schaeffler AG Executive Board include the Group CEO and the Managing Directors of divisions and functions
- The Group Compliance & Risk Committee (GCRC) supports the Schaeffler AG Executive Board with its organizational duties related to compliance and risk management
Governance structure
Part of NFBThe Schaeffler Group is managed by the Schaeffler AG Executive Board, whose members include the Chief Executive Officer (Group CEO) as well as the Managing Directors of the divisions and functions. Its actions and decisions are made in line with the interests of the company, taking into account the interests of shareholders, employees, and other interest groups connected to the company (stakeholders). The aim is sustainable value creation. The members of the Executive Board conduct their business in accordance with regulations, the articles of association, and bylaws. They must reserve consent in accordance with the Supervisory Board’s bylaws. The Executive Board manages the company under its own responsibility, defines its targets and strategic focus and coordinates these with the Supervisory Board, controls implementation of the corporate strategy, and regularly discusses implementation progress with the Supervisory Board. The Chief Executive Officer (Group CEO) coordinates management at the company and in the Schaeffler Group.
In addition to divisions and functions, the matrix organization also includes the Europe, Americas, Greater China, and Asia/Pacific regions, each of which is managed by a regional CEO. The regional CEOs report directly to the Chief Executive Officer and, in combination with the Executive Board, form the Schaeffler Group Executive Board. The management structure therefore reflects the organization structure.
The Supervisory Board is responsible for advising and monitoring the Board of Managing Directors in managing the company. The Board of Managing Directors has to involve the Supervisory Board in any decisions that are fundamental to the company. Specifically, the Supervisory Board’s internal rules of procedure set out which legal transactions and measures taken by the Board of Managing Directors require approval by the Supervisory Board or the executive committee. The Supervisory Board fulfills its responsibilities in accordance with the requirements of the law, the company’s articles of association, and the internal rules of procedure. The internal rules of procedure of the Supervisory Board govern the Board’s organization and activities.
Schaeffler AG Supervisory Board
The Chairman of the Supervisory Board coordinates the work of the Supervisory Board, which consists of 20 members. Half of these members are appointed during the annual general meeting, while the other half are chosen by employees in accordance with the German Codetermination Act. The term of office for the shareholder representatives in the Supervisory Board ends with conclusion of the official 2024 annual general meeting, while the employee representatives’ term of office ends with the official 2025 annual general meeting.
On December 31, 2022, 80% of shareholder members of the Supervisory Board were selected independently. The proportion of women in the Schaeffler AG Supervisory Board was 35% in the fiscal year, consisting of four employee representatives and three shareholder representatives. Schaeffler AG Supervisory Board consists of ten employee representatives and ten shareholder representatives.
The Schaeffler Group’s governance structure
The Group Compliance and Risk Committee (GCRC) represents a key governance component in this regard, increasing transparency in internal structures, the organization, and in responsibilities. The Group Chief Compliance Officer of the Schaeffler Group chairs the GCRC, which consists of the managers responsible for the relevant governance functions (including Compliance, Legal, Risk Management, Internal Control System, and Internal Audit). The GCRC is responsible for assisting the Board of Managing Directors with its organizational responsibilities with respect to compliance and risk management. Among the key objectives of the GCRC are defining and delineating responsibilities and interfaces and preventing redundancies in the process. In addition, it is expected to create a consistent and complete view of the risk situation in the divisions, functions, and regions based on a uniform measurement and prioritization methodology. A further objective of the GCRC is developing and monitoring risk mitigation activities. The Compliance & Risk Working Group consisting of staff representatives from the functions represented on the GCRC provides operational support to the GCRC.
Holistic approach to further integration of governance functions
In the fourth quarter of 2022, the Board of Managing Directors decided to enhance the GCRC. The CEO and CFO will chair the body, which will be named Governance, Risk & Compliance Committee (GRCC) in future, starting in 2023. The GRCC will focus even more closely on further integrating the governance functions in accordance with a comprehensive approach.Part of NFB Ende
Risk management
Part of NFBThe Schaeffler Group’s risk strategy calls for the group to cautiously take on calculated business risks in order to execute the company’s strategy and take advantage of the related opportunities. The aim of the risk management system is to identify these at an early stage and to manage them in line with the risk strategy.
The Schaeffler Group’s report on opportunities and risks in the management report provides comprehensive information on the company’s risk management system as well as on significant risks that have a medium or high damaging effect on the Schaeffler Group’s earnings, financial position, and net assets. The Executive Board defined a € 5 m threshold for incorporating identified and evaluated risks into the risk inventory, which includes risks related to the Schaeffler Group’s business activities, business relationships, and products and services. Climate risks are also a component of the risk management system.
With the integration of the non-financial ESG risks into the top-down risk assessment process of the Schaeffler Group’s risk management system, the non-financial risk impact of the five reportable aspects – in addition to the evaluation of their financial risk impact – is assessed using a similar assessment logic. The risk survey showed that there were no reportable risks in 2022 in accordance with CSR-RUG (Section 289c, paragraph 3, HGB).
As proactive risk management, the Energy, Environment, Health and Safety (EnEHS) management system serves to identify and avoid systematic risks and potential negative impacts from the Schaeffler Group on the environment and occupational health and safety at an early stage.Part of NFB Ende
Opportunities and risks of climate change
Part of NFBIn addition to analyzing the aforementioned non-financial ESG risks, the Schaeffler Group also continues to optimize its analysis of climate-related opportunities and risks in accordance with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
The company analyzes a variety of transitory and physical risks associated with climate scenarios and incorporates these potential developments into its strategy. For the purpose of analysis, the Schaeffler Group selected the International Energy Agency’s “sustainable development scenario” as an optimistic physical climate scenario, and the “RCP 8.5” of the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC) as a pessimistic scenario. The parameters, assumptions, and methods of analysis of each of these were adopted without modification, with the results ultimately serving as a foundation for developing scenario-specific action plans with climate-relevant targets.
Climate-relevant risks are included in the Schaeffler Group’s risk management system, which applies to all climate-related risk categories that have a strategic, operational, financial, or legal impact on the Schaeffler Group and exceed the threshold. “Strategic” refers to climate-related risks associated with a change in the market situation (e.g., the transition to E-Mobility). “Legal” refers to, for example, climate-related risks connected to current and future requirements. “Operational” refers to acute physical risks that result in production losses. Every six months, the evaluated risks and opportunities are updated in the risk management tool within a binding structure that ensures a consistent approach. A quality assessment is required when the degree of monetary damage cannot be determined – for example, damage to reputation is qualitatively evaluated on the basis of relevance for public interest (e.g., low, medium, high). The corresponding risk class is selected: “low”, “medium”, or “high”. Risks in the “medium” and “high” risk classes have a significant strategic impact.
Risk reaction refers to all measures designed to reduce the effects of the risk, including risk termination (risk is eliminated by refraining from the risky business or process), risk mitigation (suitable measures are introduced to reduce scope or likelihood of damage), risk transfer (risk is transferred to a third party), and risk acceptance (all of the risks that cannot be terminated, mitigated, or transferred to a third party must be tolerated as business risks).
Regulations |
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Emissions trading systems and CO2 prices and taxes could lead to increasing costs for energy, transport services, or raw materials – and thus increasing manufacturing costs. |
Market |
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Different mechanical components will no longer be necessary in the future. The climate-related supply and corresponding demand are observed within the context of a defined risk catalog with a particular focus on OEMs – in some cases, using scenario analyses. |
Technology |
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The switch to low-emission technologies requires an increase in the development and manufacture of products and system solutions – for example, for electrifying the powertrain. |
Legal framework |
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Despite increasing regulations worldwide, in most cases, the Schaeffler Group is not directly affected by climate-relevant regulations and requirements at present. The Schaeffler Group’s relevant departments pay very close attention to regulatory developments at all times. |
Reputation |
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Growing awareness of the many different aspects of climate change has also led to increased stakeholder expectations such as improved CO2 efficiency and CO2 neutrality. Unfulfilled expectations can potentially damage the reputation with an impact on stock prices, profits, and balance sheets – and possibly even with effects that are more difficult to measure such as continuous brand deterioration. |
Acute and chronic physical climate risks |
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Increased severity and frequency of extreme weather events such as hurricanes and flooding can affect operations or the supply chain. Chronic, physical risks are relevant especially in regions with high water stress in India, Mexico, China, and Romania. Other plants in Germany, South Africa, Spain, and the US will likely experience high water stress in the decades to come. For the Schaeffler Group, this will result in increased need for adaptation (investments), new requirements, and technological changes – e.g., for water usage or recycling. |
In the context of global climate change and as a result of climate policy, worldwide demand for renewable energy is growing. The Schaeffler Group supports the expansion of renewable energy generation with the necessary components and solutions. Primarily the Schaeffler Group’s innovative bearing solutions for wind turbines help make wind turbines more reliable and reduce the cost of generating renewable energy. Opportunities for the product portfolio or Schaeffler Group employees are covered in the corresponding chapters.Part of NFB Ende
Responsible tax strategy
Part of NFBFor the Schaeffler Group, compliance with all national and international tax laws is part of Sustainable Corporate Leadership. The tax strategy therefore relies on the lawful, tax-optimized handling of all issues both domestically and abroad, including prevention of double taxation. The Schaeffler Group pays taxes wherever it generates value, meaning it does not pursue any inappropriate tax planning strategies such as shifting profits from one country to another or using tax havens to minimize tax payments. The pricing for intra-group activities is consistent with the arm’s length principle1).
The Schaeffler AG Executive Board is aware of the company’s social responsibility and the necessity of appropriate government funding. The Schaeffler Group contributes to tax revenue on the basis of its performance both domestically and abroad, promoting open dialog with the tax authorities. The Corporate Directive Tax defines the tasks and tax responsibilities of the people who interact with tax authorities on behalf of the Schaeffler Group, tax-related processes, the integration of the Group tax department into Schaeffler Group processes, and reporting and documentation obligations.
The Schaeffler Group’s risk management system is an integral part of the management structure and covers tax opportunities and risks. The Schaeffler AG Executive Board is in charge of the risk management system. It regularly reports to the Audit Committee and ensures that the necessary risk control measures are adopted.
The Schaeffler AG Executive Board has also introduced a Tax Compliance Management System (Tax CMS) based on loss prevention and risk control, which is designed to ensure compliance with tax requirements throughout the company and conforms with the Schaeffler Group’s governance model. In 2020, an independent auditing company confirmed the appropriateness and implementation of the Tax CMS of Schaeffler AG and its domestic companies, the majority of whose interests are held indirectly or directly by Schaeffler AG. The audit was carried out in accordance with the IDW AsS 980 standard for auditing compliance management systems as well as the IDW Practice Statement 1/2016: “Design of and Assurance Engagements Relating to Tax Compliance Management Systems in Accordance with IDW AsS 980”.
A globally accessible whistleblowing system for identifying potential misconduct enables anonymous reporting of alleged violations.
In 2022, € 328 m (prior year: € 348 m) was paid in income taxes, which can be allocated among the four Schaeffler regions as follows:
Overview of income taxes paid in 2022 by region in € millions
1) The arm’s length principle ensures that the amount that one related party charges another for a product or service is the same as the amount charged between unrelated parties.