3. Board of Directors

3.1 Members of the Board of Directors

The Board of Directors, which according to the Articles of Association must have at least five members, currently has six. Chantal Balet Emery decided not to stand for re-election at the Annual General Meeting of 27 March 2018. Martin A. Fischer was newly elected to the Board.

None of the Members of the Board of Directors performs an operational management role for Implenia Ltd. or any of its group companies. Neither has any Member of the Board of Directors been part of the Group Executive Board of Implenia Ltd. or any of its Group companies during the last three financial years. No Member of the Board of Directors has any significant business relationships with the Implenia Group.

On 31 December 2018 the Board of Directors had the following members:

3.2 Education, activities and interests

The following list provides the main details of each Board Member’s education, training and professional career. It also details each Board Member’s mandates outside the Group, as well as any other significant activities, such as permanent roles within major interest groups.

3.3 Rules included in the Articles of Association relating to the number of permitted activities allowed under Art. 12 para. 1 clause 1 OaEC

According to Art. 22e of the Articles of Association, the number of mandates that members of the Board of Directors can take in the most senior management and supervisory bodies of legal entities outside the Implenia Group that are registered in the Swiss Commercial Register or similar foreign register is limited to a maximum of 14 mandates, of which no more than four may be at listed companies. If mandates are exercised in different legal entities within one group, or on behalf of one group or legal entity, these are counted altogether as one mandate. A Member can exceed the maximum limits for a short time in line with the provision of the articles mentioned above.

The Articles of Association, containing the precise wording of the provision mentioned above, can be found on Implenia’s website.
http://www.implenia.com/goto/corporategovernance/2018/en/Articles-of-Association-20180327.pdf

3.4 Election and term of office

The term of office of the Members of the Board of Directors is one year. This commences on the date of election and finishes at the end of the subsequent Annual General Meeting, unless the Member resigns or is dismissed before this (Art. 18 para. 3 of the Articles of Association). Members of the Board can be re-elected at any time (Art. 18 para. 4 of the Articles of Association), but are subject to an upper age limit of 70 years. They must leave the Board at the Annual General Meeting birthday (Art. 18 para. 5 of the Articles of Association).

In accordance with the provisions of the Ordinance Against Excessive Compensation at Stock Exchange Listed Companies (OaEC), the Members and Chairman of the Board of Directors and the members of the compensation committee (Nomination and Remuneration Committee) are elected individually by the General Meeting (Art. 9b and Art. 18 para. 2 of the Articles of Association). Also in line with the relevant provisions of the OaEC, the independent proxy is also elected by the General Meeting (Art. 9b of the Articles of Association). Otherwise, the Board of Directors constitutes itself and appoints its own Vice Chairman and Secretary.

With regard to dealing with a vacancy in the Chairmanship of the Board of Directors, or with the Nomination and Remuneration Committee not having sufficient Members, or with the company not having an independent proxy, the Articles of Association do not include any provisions that deviate from Art. 4 para. 4, Art. 7 para. 4 and Art. 8 para. 6 OaEC.

3.5 Internal organisation

3.5.1 Distribution of responsibilities within the Board of Directors

The Board of Directors is responsible for strategic and financial leadership of Implenia and for supervising the operational management team. It takes decisions as the most senior body, except on matters where the law gives responsibility to the General Meeting.

The Chairman of the Board of Directors convenes the Board’s meetings. If the Chairman is indisposed, the Vice Chairman, or if necessary a Member of the Board of Directors nominated by the Board, convenes the meeting. The CEO and CFO regularly attend meetings of the Board of Directors. The Chairman determines the agenda, prepares the meetings and chairs them. He decides on a case-by-case basis whether to involve other people in the Board’s deliberations. Any Member can request that a Board meeting be convened provided they supply an agenda and a brief justification.

The Board of Directors’ duties, powers and working methods, as well as its approach to conflicts of interest, are set out in the OR Implenia and in the Table of Responsibilities of 17 February 2017 (“Table of Responsibilities”).

The OR Implenia (excluding the Table of Responsibilities) can be found on the Implenia website.
http://www.implenia.com/goto/corporategovernance/2018/en/OR-Implenia-20151221.pdf

3.5.2 Committees of the Board of Directors

The Board of Directors has formed two committees, the Audit Committee and the Nomi­nation and Remuneration Committee. It elects a Chairman for each committee. The Audit Committee and the Nomination and Remuneration Committee analyse the areas assigned to them by the Board of Directors and submit reports to the Board of Directors to assist with the preparation of its resolutions and perform its supervisory function. The Chairman of the individual committees inform the Board of Directors about all major points and give recommendations for the decisions that have to be adopted by the full Board of Directors. The committees’ tasks and responsibilities are set out in OR Implenia and in the Table of Responsibilities, as well as in regulations issued by the Board of Directors.

The committees organise themselves. The Board issues regulations in response to committee proposals. The committees are fundamentally advisory bodies; decision-making power is reserved for the Board of Directors as a whole. The committees only have decision-making power when this is stipulated in the Table of Responsibilities or committee regulations, or by special resolution of the Board of Directors.

The committees are authorised to carry out or commission investigations into all matters relating to their area of responsibility. They can call independent experts. The Board of Directors can appoint ad hoc committees for specific tasks and allocate powers of pre­paration, monitoring and / or decision-making to these committees (Art. 3.1 paras. 1 and 6 OR Implenia). No ad hoc committees were formed during the year under review.

The committees and their members for the year under review are listed in the table below:

3.5.2.1 Audit Committee

The Audit Committee consists of at least two Members of the Board of Directors, who are nominated by the Board of Directors. The Audit Committee deals with all matters of the Board of Directors relating to the monitoring and structuring of the accounting system, financial controlling (internal control system), financial planning and risk management. This includes reporting of (current and impending) lawsuits. The Audit Committee also monitors the Compliance Management System and reports to the Board of Directors. It coordinates and harmonises the work of the internal and external auditors, is responsible for regular communication with the internal and external auditors and formulates instructions for internal and external audits. It has the authority to order special audits (Art. 3.2 OR Implenia).

Please also refer to OR Implenia for details of the Audit Committee’s responsibilities:
http://www.implenia.com/goto/corporategovernance/2018/en/OR-Implenia-20151221.pdf

3.5.2.2 Nomination and Remuneration Committee

The Nomination and Remuneration Committee is made up of between two and four Members
of the Board of Directors, each of whom are elected individually by the General Meeting. The principles governing the tasks and responsibilities of the Nomination and Remuneration Committee in relation to remuneration are determined by the General Meeting pursuant to Art. 21a of the Articles of Association and are described in more detail in the Remuneration Report (see pages 177–179).

Please also refer to OR Implenia for details of the Nomination and Remuneration Committee’s responsibilities:
http://www.implenia.com/goto/corporategovernance/2018/en/OR-Implenia-20151221.pdf

3.5.3 Working method of the Board of Directors and its committees

The Board of Directors and its committees meet as often as business requires, but at least six times a year (Board of Directors), three times a year (Audit Committee), and twice a year (Nomination and Remuneration Committee). Meetings take place at the invitation of the Chairman respectively chair of the committee concerned. Invitations are accompanied by an agenda and meeting documents. In addition, each member is entitled to request that a meeting be convened and can request that items are added to the agenda. Each meeting of the Board of Directors is chaired by the Chairman; the committee meetings by the committee chairs. Meetings are quorate if the majority of members are present. Members who take part in the meeting via telephone or video conference shall be regarded as being present at the meeting.

The Board of Directors and its committees pass resolutions and elect members by simple majority of the votes cast by attending members. Abstentions are not permitted. If votes are tied, the Chairman respectively the person chairing the meeting has the casting vote. The results of discussions and the resolutions made are recorded in the minutes. The CEO and CFO attend meetings of the Board of Directors. Other members of the Group Executive Board and / or Business Unit Heads are invited to attend the meetings as necessary. In accordance with Art. 2.3 lit. c of OR Implenia, the Board of Directors also holds meetings without the participation of the CEO, CFO or Members of the Group Executive Board.

The Chairman of the Board of Directors participates in meetings of the Audit Committee and the Nomination and Remuneration Committee as a standing guest. The Audit Committee’s meetings are generally also attended by the CEO, the CFO, the Head of Corporate Controlling, the Head of Corporate Reporting & Tax, and where necessary by a representative of Internal Audit and one or more representatives of the external auditors and other persons selected by the Chairman. Meetings of the Nomination and Remuneration Committee are generally also attended by the CEO and the Head of Human Resources Group. Guests of the meetings of the Board of Directors and the committees have no voting rights. Furthermore, Members of the Group Executive Board do not attend meetings of the Nomination and Remuneration Committee or of the Board of Directors if their own performances are being assessed, or if their remuneration is being discussed.

The following tables provide an overview of the meetings and conference calls held by the Board of Directors, the Audit Committee and the Nomination and Remuneration Committee in 2018:

3.6 Definition of areas of responsibility

The Board of Directors is responsible by law for the ultimate direction and supervision of the Group. As well as the powers of authority reserved under Art. 716a of the Swiss Code of Obligations, the Board of Directors also takes decisions on the following major areas of business as shown in the Table of Responsibilities:

• Purchases or sales of holdings with an enterprise value of CHF 25 million or more;
• Defining target markets and deciding to enter a market;
• Defining financial policy principles (level of debt and financial indicators);
• Defining the funding concept;
• Obtaining debt capital (credit facilities, bonds, private placements and other capital market transactions, leasing, hire purchase) of more than CHF 50 million;
• Fundamental issues and guidelines relating to the investment of financial resources;
• Issuing group guarantees, warranties, bid, performance and payment bonds etc., other collateral, and contingent liabilities outside regular business activity worth more than CHF 5 million;
• Use of derivative financial products when not deployed exclusively to reduce risks.

The Board of Directors delegates the management of Implenia Group to the CEO to the extent that the law, the Articles of Association, or OR Implenia do not stipulate otherwise, and provided that responsibilities are not delegated to the Group Executive Board or to its individual Members.

The CEO is responsible for operational management and for representing Implenia Group to the extent that these duties are not assigned to other bodies by the law, the Articles of Asso­ciation or the OR Implenia. He is responsible for managing the Group’s business and for representing the Group, and especially for its operational management as well as for the implementation of the strategy. Unless these are reserved for the Board of Directors, he is empowered to arrange or perform the duties and powers of authority assigned to him by OR Implenia, and / or delegate these to qualified subordinate units if he instructs and monitors them accordingly.

The CEO is supported in managing the business by the Members of the Group Executive Board and the Business Unit heads, all of whom report directly to him. The CEO is responsible for reporting to the Chairman of the Board of Directors and to the Board of Directors (Art. 4.1 seq. OR Implenia). The division of powers between the Board of Directors, the CEO and the Group Executive Board is described in detail in the OR Implenia and the Table of Responsibilities.
http://www.implenia.com/goto/corporategovernance/2018/en/OR-Implenia-20151221.pdf

3.7 Information and control instruments vis-à-vis the Group Executive Board

In order to monitor how the CEO and Members of the Group Executive Board perceive the competences assigned to them, the Board of Directors has various information and control instruments at its disposal, including the following:

The MIS (Management Information System) provides monthly reporting on how business is going. The MIS report contains information about turnover, margins, costs and the operating result, plus information about orders on hand, capital spending, invested capital, liquidity and headcount. The relevant documents are submitted to the Group Executive Board and the Board of Directors together with a quarterly updated commentary and an estimate for the year as a whole.

IFRS financial reporting is submitted to the Board of Directors on a quarterly basis. Half-yearly reporting is signed off by the Board of Directors and released for publication.

As part of the budget planning for the following year, the key figures used in the MIS are estimated on the basis of expected economic developments, and defined along with the business goals for each Business Unit. These are then used to prepare the budgeted balance sheet, income statement, cash flow statement and liquidity position. The annual planning for the coming three calendar years (three-year plan) is done in the same way as the budget planning.

Implenia Group’s risk situation is evaluated once a year by the Group Executive Board and Board of Directors. They define the main Group risks and assess these in terms of impact and probability. Evaluation of the risk situation includes an assessment of (current and impending) legal cases. The implementation and effectiveness of defined measures are continously monitored by the Group Executive Board.

The risk map for operating risks and opportunities (such as those arising from projects) are assessed continually per Business Unit by the managers with operational responsibility in collaboration with the finance department. The risks and opportunities recorded are evaluated in quantitative terms as worst / real / best case. The finance department consolidates the identified risks at segment and Group level and monitors the measures taken by the managers with operational responsibility. The risk maps consolidated by segment and by Implenia Group are presented to the Audit Committee and commented on twice a year.

As part of compliance reporting, reports are submitted every six months about the Compli­ance Management System in general, and specifically about compliance cases, the status of investigations, and measures taken.

The internal control system is examined by the external auditor, which reports its findings to the Board of Directors in accordance with the law (Art. 728a para. 1 clause 3 and Art. 728b para. 1 Swiss Code of Obligations). Reports on the individual information tools are prepared and consolidated by the finance department. These are then presented simultaneously to the Board of Directors and Group Executive Board. At meetings of the Group Executive Board and the Audit Committee, the reports are presented and explained by the CFO and Head of Corporate Reporting & Tax.

The CEO, the CFO, the Head of Corporate Controlling and the Head of Corporate Reporting & Tax provide detailed information about the course of business, comment on this and answer questions posed by the Members of the Audit Committee.

The Board of Directors has appointed a recognized audit company to perform the internal audit function. The main focuses of the internal audit are determined by the Audit Committee on the basis of the multi-year audit plan. During the year under review, the focus was on project controlling and compliance, as well as a follow-up to previous audits. The plan for internal audit activities is implemented in consultation with the CFO. The internal auditor prepared reports in line with the audit plan and submitted these to the Audit Committee together with the necessary comments and recommendations. The Internal Audit Unit reports directly to the Audit Committee. The internal auditor’s reports are given to the external auditors without qualification. There is regular exchange of information between the internal and external auditors.