December 2016

The influential networks behind Germany`s largest listed companies (DAX-30) *

Dr Murat Ünal, M.B.A, LL.M. (Chief Executive SONEAN)

Nishtha Jolly, B.A., Math. (Hons), M.Sc., SNA Lab Member & Researcher

* Our thanks go to our colleagues and SNA Lab members who were involved in the comprehensive research (in alphabetical order) and thus contributed to its quality greatly: Jakob Andres, Cancan Demir, Nicholas Fruneaux, August Hjorth, Cem Kaya, Lukas Macner, Selma Peters, Eric Strauch, Nicholas Strauch, and Sekip Topcu. A special thanks goes to Nishtha Jolly who has been mainly involved in the data preparation and analytics process, also as part of her Master Thesis in relation to this topic, together with Dr Murat Ünal.

Bringing The Social Network Perspective Into Decision Making December 2016 Page 2

Introduction well as other institutional ties (foundations, associations, lobby groups, governments, military, clubs, NGOs, standard setters, and other relevant Our latest research examines the influential social networks that connect organizational links). executive managers and non-executive directors in Germany`s largest 30 listed companies. We provide detailed insights into the institutions driving the executive networks among DAX-30 companies but also about the organizational We hereby analyze 4500+ social ties that connect 395 managers and networks behind the boards (i.e. non-executive directors). directors (not including employee representatives in the non-executive board), uncovering unique insights about the social fabric of the DAX-30 A special focus is dedicated to the role of network diversity, i.e. the organizations, and the relevant people as well as institutions (core unique ties that executive (managers) and non-executive directors bring actors) connecting these entities. to the company and thus provide greater social capital. We hereby also We follow a multiple tie approach, researching and analyzing not just highlight the unique ties by company and their executive managers as school or university related ties (where did these people go to school or well as non-executive directors and show that the diversity discussion, study?) but also include their professional career (where did they work which is currently being led by policy makers, investors, and shareholders in the past and which companies connect them with their peers?) as alike, needs to go well beyond traditional measures such as gender, age,

Chart 1 – Market capitalization of DAX-30 companies as of 28 November 2016

SIEMENS AG 9,93 SAP 8,90 BASF SE 8,49 BAYER AG 8,43 ALLIANZ SE 7,87 DAIMLER AG 7,40 DEUTSCHE TELEKOM AG 5,36 DEUTSCHE POST AG 3,18 MUNICH REINSURANCE COMPANY 3,18 FRESENIUS SE AND CO KGAA 3,10 LINDE AG 3,05 BAYERISCHE MOTORENWERKE AG BMW 3,05 ADIDAS AG 2,96 VOLKSWAGEN AG (PFD NON-­‐VTG) 2,63 DEUTSCHE BANK AG 2,33 HENKEL AG & CO KGAA PREF 2,17 INFINEON TECHNOLOGIES AG 2,07 CONTINENTAL AG 2,04 FRESENIUS MEDICAL CARE AG 1,80 VONOVIA SE 1,52 DEUTSCHE BOERSE AG 1,44 HEIDELBERGCEMENT AG 1,43 MERCK KGAA 1,42 E.ON N 1,37 THYSSENKRUPP AG 1,06 BEIERSDORF AG 0,88 COMMERZBANK AG 0,80 PROSIEBEN SAT.1 MEDIA N 0,80 DEUTSCHE LUFTHANSA AG 0,68 RWE AG 0,65

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Since 2013 SONEAN has analyzed the social ties that connect executive managers and non-­‐executive directors in Europe`s largest companies. Our paper “The Social Dependence of Independent ors Direct in Europe`s largest Companies” see ( http://www.sonean.com/research -­‐publications/#c48 ), showed not only how independent directors were socially dependent but also s gave unique insight into the largest 50 European companies and the network dynamics behind Bringingthose organizations The Socialthat ultimately Network affect Perspective shareholders Into Decision and stakeholders Making alike.

In this latest research we looked at Germany`s largest listed 30 companies (DAX 30). Based on our prior data, and over a period of 6 months, a team of very well trained analysts researched the multiple ties that each -­‐ of the executive and non executive directors hold, and the institutions they are connected . to Hereby we identified 395 people, unique executive and non-­‐executive directors of the DAX 30 companies (not considering the employee representatives on the board for various reasons) and researched in great detail their past and existing y ties to organizations (universities the went to, trustee boards hey t sit on, associations or foundations they are linked to, lobby groups, prior jobs, government related advisory roles, board positions they hold and many other). As you can see below for the executives we identified 1446 ties and for non-­‐executive directors 3131 connections. What was immediately obvious is that on average non-­‐executive directors tend to have almost double the amount of connections and in line with prior research span boundaries between institutions.

Women held 10. only 71 % of the ve executi positions, and more striking is that none of the women holds a CEO or CFO position (by the end of October 2016). Furthermore the majority of their positions are in human resources (41%). Overall, if you disregard employee representatives on the non-­‐executive board, women will hold 28.14% -­‐ of non executive positions and 20,79% of all positions (including management and board positions).

It is striking to see the absence of women in executive boards (only 10.71% of positions are occupied ) by women , and e mor importantly despite this absence, women typically pursue non -­‐CEO and non -­‐CFO functions which tend to be less influential. CEO and CFO positions reserved are mainly for men at this stage.

No. of management and board seats occupied by women 95 20,79% No. of management and board seats occupied by men 362 79,21% No of management (executive) positions held by women 21 10,71% No of board (non-­‐executive) positions held by women 74 28,14% No of management (executive) positions held by men 175 89,29% No of board (non-­‐executive) positions held by men 189 71,86% No of executive (manager ) positions including men and women 196 No of non-­‐executive (director) positions including men and women 263 No of organizations that executives are linked to 1446 No of unique organizations that executives are linked to 1079 Page 3 December 2016

and e.g. ethnicity. Diversity of social ties is crucial when it comes to inno- socially dependent but also gave unique insights into the largest 50 vativeness as well as performance of the company. European companies and the network dynamics behind those organiza- tions that ultimately affect shareholders and stakeholders alike. Particular attention is paid to women serving executive management and non-executive boards of the DAX-30 companies. Our data reveals In this latest research we looked at Germany`s largest listed 30 compa- some significant findings about these women and shows that prior and nies (DAX-30). Based on our prior data, and over a period of 6 months, existing social ties between male and their female decision makers are a a team of very well trained researchers analyzed the multiple ties that potentially a crucial reason for hiring women into the job. The research each of the executive and non-executive directors hold, and the institu- further unveils some clear patterns about women`s roles. tions they are connected to. Hereby we identified 395 unique people, executive and non-executive directors of the DAX-30 companies (not considering the employee representatives on the board for various rea- sons) and researched in great detail their past and existing ties to organi- Background zations (universities they went to, trustee boards they sit on, associations or foundations they are linked to, lobby groups, prior jobs, government The DAX-30 companies overall related advisory roles, board positions they hold and many other). As Chart 1 on page 2 shows relative market capitalizations of DAX-30 you can see below in table 1 for the executives we identified 1446 ties companies (their weights in the DAX-30) as of 28 November 2016. and for non-executive directors 3131 connections. What was immedi- These 30 companies are the basis of our social network related study. ately obvious is that on average non-executive directors tend to have According to this overview Siemens is the largest position in the DAX-30 almost double the amount of connections and in line with prior research representing 9,93 % of the index. span boundaries between institutions.

Since 2013 SONEAN has analyzed the social ties that connect execu- Women held only 10.71 % of the executive positions, and more tive managers and non-executive directors in Europe`s largest compa- striking is that none of the women holds a CEO or CFO position nies. Our paper “The Social Dependence of Independent Directors in (by the end of October 2016). Furthermore the majority of their Europe`s largest Companies” (see http://www.sonean.com/research- positions are in human resources (41 %). Overall, if you disregard publications/#c48), showed not only how independent directors were employee representatives on the non-executive board, women will

Table 1 – Descriptive statistics related to executive and non-executive directors in the DAX-30

No. of management and board seats occupied by women 95 20,79 %

No. of management and board seats occupied by men 362 79,21 %

No. of management (executive) positions held by women 21 10,71 %

No. of board (non-executive) positions held by women 74 28,14 %

No. of management (executive) positions held by men 175 89,29 %

No. of board (non-executive) positions held by men 189 71,86 %

No. of executive (manager) positions including men and women 196

No. of non-executive (director) positions including men and women 263

No. of organizations that executives are linked to 1446

No. of unique organizations that executives are linked to 1079

No. of organizations that non-executives are linked to 3131

No. of unique organizations that non-executives are linked to 2689

Average unique ties that executive managers hold 5,61

Average unique ties that non-executive directors hold 10,48

Bringing The Social Network Perspective Into Decision Making December 2016 Page 4

hold 28.14% of non-executive positions and 20,79 % of all posi- boards. The more ties women have to existing male managers and non- tionsNo of (including organizations management that non-­‐executives are and linked board to positions). 3131 executive directors the higher the likelihood seems that they will receive No of unique organizations that non-­‐executives are linked to 2689 a job. Ideally though, it should be the women who fit the job best that It is striking to see the absence of women in executive boards (only Average unique ties that executive managers hold 5,61 receive the positions and not necessarily the ones connected, and who 10.71Averag e % unique of positions ties that non-­‐areexecutive occupieddirectors by hold women), and more importantly10,48 are potentially mere extensions of male networks. despite this absence, women typically pursue non-CEO and non-CFO An important aspect is also the selection of women into the executive and non-­‐executive boards. We analyzed the past end existing connections of the functions which tend to be less influential. CEO and CFO positions are Regulators, investors, and market participants should be aware of these women in the DAX-­‐30 companies and identified that at least 62% of the executive and non-­‐executive positions are occupied by women prior who have and mainlyexisting reserved multiple for ties men at that this stage. connect them to the . male board members We say at dynamics. least as there is probability that we might have overlooked existing links (missing ties) and that the real number is much higher. This gives us the impression that most women are extensions of male networks and that the selection An important aspect is also the selection of women into the executive process is not necessarily an objective one but very much dependent th on the level of connectivity e women in management and on . boards The more ties Unique ties of executive managers andwomen non-executive have to boards. existing We analyzed male managers -­‐ and nontheexecutive past end directors existing the con - higher the likelihood seems that they will receive a job. Ideally though, it should be nectionsthe women of the who the fit women job best in that thereceive DAX-30 the companiesositions p and and not identified necessarily When the you , ones connected analyze and who thepotentially are unique mere ties that extensions individual of managers male networks. bring to thatRegulators, at least investors, 62 % of the and executive market and participants non-executive should positions be are aware of these dynamics. the executive management of the respective companies then you will occupiedUnique ties by women of executive who have managers prior and existing multiple ties that find large differences between the individual organizations. Hereby we connectWhen you them analyze to the male the board unique ties that individual members. We managers say at least bring as there to the have executive focused on management unique organizational of the ties respective that managers companies then you will find large bring to the isdifferences probability between that we might the have individual overlooked organizations. existing links Hereby focused we have (missing ties) on unique organizational board, and whichties that are complementary managers bring and to not overlapping the board, and which are with other complementary and not overlapping with other executive`s existing and prior connections. A BMW executive e.g. on average only holds 3 unique ties (based and that the real number is much higher. This gives us the impression on prior education, jobs or other institutional links) while on Daimler executives average executive`s hold 5.63 existing unique and ties prior (the connections. data is A normalized BMW executive by the size of e.g. on thatexecutive most women management). are extensions This of can male have networks many reasons: and that the selec- average only holds 3 unique ties (based on prior education, jobs or other tion1) People process is at not necessarily BMW have an objective more company one but specific very much ties, depend - having institutional worked at links) BMW while Daimler for a executives long time, and are less connected outside the BMW on network average hold 5.63 unique ent2) on The ties the level that of executives connectivity of at the BMW women hold in management are more and overlapping on ties (therefore (the data is not normalized unique) by the making size of them the more alike, i.e. homogeneous than e.g. their executive peers management). at Daimler. Network heterogeneity has a value as people are able to tap into more social capital, are less inward looking, less homogeneous, and potentially more Chartinnovative. 2 – No. The of unique list connections shows the that executive differences managers-­‐ among the DAX 30 companies bring to their in DAX-30 relation companies to this very relevant metric:

Deutsche Börse 10,60 RWE 9,67 BASF 8,13 E.ON 8,00 Volkswagen 7,22 Allianz 6,67 SAP 6,50 Bayer 6,43 Siemens 6,29 Luqhansa 6,00 Linde 6,00 Prosieben 5,86 Vonovia 5,75 Thyssenkrupp 5,75 Daimler 5,63 Deutsche Bank 5,55 Merck 5,50 HeidelbergCement 5,43 Deutsche Telekom 4,86 Beiersdorf 4,83 Adidas 4,20 Fresenius SE 4,17 Conpnental 4,11 Munich Re 4,00 Fresenius Medical Care 4,00 Henkel 3,83 Deutsche Post 3,60 Commerzbank 3,43 Infineon 3,25 BMW 3,00

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Unique ties non of -­‐executive directors

When you consider the average unique -­‐ ties that a non executive director brings to the board and thus its unique and complementary networks, BASF is Bringingcertainly leading The Social the Network way with Perspective 15.83 unique Into ties per board-­‐member Decision complementing Making his/her Beiersdorf peers. on the other hand has non a less diverse -­‐ executive board which in the previous case (mentioned when we discussed executive managers) can have similar reasons. Here being a family driven company can also lead to less diversity as people on the board will have similar backgrounds and networks thus potentially reduce diversity. Page 5 December 2016

This can have many reasons: board-member complementing his/her peers. Beiersdorf on the other hand has a less diverse non-executive board which in the previous case 1) People at BMW have more company specific ties, having worked (mentioned when we discussed executive managers) can have similar at BMW for a long time, and are less connected outside the BMW reasons. Here being a family driven company can also lead to less diver- network sity as people on the board will have similar backgrounds and networks 2) The ties that executives at BMW hold are more overlapping (there- and thus potentially reduce diversity. (See chart 3 below) fore not unique) making them more alike, i.e. homogeneous than e.g. their peers at Daimler. The Top 30 institutions behind the DAX-30 executives Network heterogeneity has a value as people are able to tap into more When you look at the DAX-30 management boards (see chart 4 on social capital, are less inward looking, less homogeneous, and poten- page 6) from a network perspective, i.e. consider the organizational ties tially more innovative. The list shows the differences among the DAX-30 that connect executive/managers (i.e. where they have worked before companies in relation to this very relevant metric. (See chart 2 on page 4) or where they studied), the weighting of the DAX-30 gets a different dynamic. Daimler e.g. is dominating the DAX-30, which means that in Unique ties of non-executive directors most cases DAX-30 executives will have a Daimler connection. Why is When you consider the average unique ties that a non-executive direc- this relevant? Well when executives have worked or are connected to tor brings to the board and thus her/his exclusive and complementary a company like Daimler e.g. through a board membership their learning networks, BASF is certainly leading the way with 15.83 unique ties per and social ties will very much affect Daimler`s business success. As Daimler

Chart 3 – No. of unique connections that non-executive directors bring to their DAX-30 companies

BASF 15,83 Munich Re 15,00 Deutsche Bank 14,30 Deutsche Börse 13,13 E.ON 12,67 Deutsche Telekom 12,60 SAP 12,33 Conpnental 12,30 Daimler 12,00 Siemens 12,00 Linde 11,83 Bayer 11,80 Prosieben 11,56 Merck 10,63 RWE 10,40 Henkel 10,38 Thyssenkrupp 9,70 Luqhansa 9,60 Commerzbank 9,00 Allianz 9,00 BMW 8,90 Volkswagen 8,90 Deutsche Post 8,90 Fresenius SE 8,33 Fresenius Medical Care 8,33 Vonovia 7,83 Adidas 7,50 HeidelbergCement 7,17 Infineon 6,50 Beiersdorf 6,00

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Bringing The Social Network Perspective Into Decision Making

The Top 30 institutions behind the DAX 30 executives

When you look at the DAX-­‐30 management boards from a network perspective, i.e. consider the organizational ties that connect executive/managers (i.e. where they have worked or before where they studied), the weighting -­‐ of the DAX 30 gets a different dynamic. Daimler e.g. is dominating the DAX-­‐30, which means that most in cases DAX-­‐30 executives will have a Daimler connection. Why is this relevant? Well when executives have worked or are connected to a company like Daimler e.g. through a board membership their learning and social ties will success. very much affect Daimler`s business As Daimler provides a dominant network of people this will -­‐ affect other DAX 30 companies’ potential o c -­‐operations with Daimler or even their attitude n towards Daimler. A important example is McKinsey which know as you is “not” a DAX-­‐30 company but has a strong among alumni base DAX-­‐30 organizations as prior employees today run DAX-­‐30 companies are and part of their executive management. Being part -­‐ of the DAX 30 network provides McKinsey a considerable advantage over its competitors such as BCG or Deloitte/Monitor as the boards literally speak their language, i.e. ex McKinsey people run these boar executive ds, and have a higher likelihood to bring on McKinsey . in respective projects December 2016 Page 6

Chart 4 – What are the institutions that connect DAX-30 executives?

Universität zu Köln* 0,54% E.ON 0,58% Karlsruhe University / KIT* 0,58% PROSIEBENSAT.1 MEDIA AG 0,85% BEIERSDORF AG 0,89% Deutsche Post 0,93% INFINEON 0,97% McKinsey & Company* 1,04% DEUTSCHE LUFTHANSA 1,08% MERCK 1,12% DEUTSCHE TELEKOM 1,12% ADIDAS 1,20% COMMERZBANK 1,20% Fresenius 1,20% RWE 1,28% Deutsche Börse 1,35% LINDE 1,58% Munich Re 1,58% AXA* 1,62% CONTINENTAL 1,66% BAYER 1,78% SAP 1,82% Volkswagen 1,82% BMW 2,13% DEUTSCHE BANK 2,32% Henkel 2,63% ALLIANZ 2,90% Siemens 2,98% BASF 3,17% DAIMLER 4,44%

0,00% 0,50% 1,00% 1,50% 2,00% 2,50% 3,00% 3,50% 4,00% 4,50% 5,00%

provides a dominant network of people this will affect other DAX-30 executives were trained. A very important vehicle to connect exe­cu­ companies’ potential co-operations with Daimler or even their attitude tives is their roles in the “Baden Badener Unternehmer Gespräche e. V.” towards Daimler. An important example is McKinsey which as you know and as you can see the non DAX-30 networks also include players such as the Bertelsmann Group which has people that ultimately joined is “not” a DAX-30 company but has a strong alumni base among DAX-30 organizations as prior employees today run DAX-30 companies and are DAX-30 institutions but also other lobby groups such as the Bundesver- The Top non 30 -­‐DAX 30 institutional networks behind the DAX 30 executives part of their executive management. Being part of the DAX-30 network band der Deutschen Industrie (BDI) e. V. providesIf you McKinsey leave out a -­‐ the DAXconsiderable30 companies advantage and focus over its only competitors on the non-­‐DAX30 institutions such The that overview executive connect also reveals managers the in top the training DAX-­‐30 you institutions, will see among that the execu- asMcKinsey BCG or is Deloitte/Monitor clearly the as largest the boards identifiable literally speak network behind non-­‐ DAX their language, 30 companies tives followed with most by having educational been trained institutions at Karlsruhe such University as KIT, Cologne University which had (Universität zu Köln), and RWTH re Aachen whe executives were trained. A very important vehicle to connect executives is their roles in the “Baden Badener i.e. ex McKinsey people run these executive boards, and have a higher merged with Karlsruhe Institute of Technology (KIT), followed by the Unternehmer Gespräche ” e.V. and as you can see the non DAX-­‐30 networks also include players such as the Bertelsmann Group which has people that likelihood­ to bring on McKinsey in respective projects. (See chart 4 ultimately joined DAX-­‐30 institutions but also other lobby groups such University as the of Köln Bundesverband (as stated(BDI) der Deutschen Industrie earlier),e.V. RWTH Aachen, LMU Munich, TU above) Munich, University of Göttingen, University of Nürnberg, University of The overview also reveals the top training institutions, among the executives with Bonn, most Frankfurt having University, been trained and University at Karlsruhe of Mannheim. University which had merged with So the top Karlsruhe Institute of Technology (KIT), followed by the University of Köln (as stated Munich, earlier), RWTH Aachen, LMU Munich, TU University of Göttingen, The Top 30 non-DAX-30 institutional networks behind ten universities behind the DAX-30 executives (where they have been University of Nürnberg, University of Bonn, Frankfurt University, and University of Mannheim. So the top ten universities behind the DAX-­‐30 executives the DAX-30 executives trained) are entirely German. (See chart 5 on page 7) (where they have been trained) are entirely German. If you leave out the DAX-30 companies and focus only on the non- DAX-30 institutions that connect executive managers in the DAX-30 you Top 30 institutions in the DAX-30 based on non-executive directors’ prior and existing networks will see that McKinsey is clearly the largest identifiable network behind non-DAX-30 companies followed by educational institutions such as If you look at the DAX-30 from the network perspective behind non- KIT, Cologne University (Universität zu Köln), and RWTH Aachen where executive directors controlling the companies it is surprising to see how

Bringing The Social Network Perspective Into Decision Making Page 7 December 2016

Chart 5 – What are the non-DAX-30 institutions that connect DAX-30 executives

Porsche Group 0,23% Fraunhofer Insptute 0,27% UBS 0,27% University of Mannheim 0,27% Hanson plc 0,27% Bayerische Rückversicherung AG 0,27% Deutsches Akpeninsptut e.V. 0,27% Generali 0,31% Zurich Group 0,31% Procter & Gamble 0,31% NOVARTIS 0,31% Robert Bosch 0,31% Johann Wolfgang Goethe-­‐Universität Frankfurt am Main 0,31% Nestlé Group 0,35% Colgate Palmolive 0,35% Universität Bonn 0,35% Sanofi 0,35% Friedrich-­‐Alexander-­‐Universität Erlangen-­‐Nürnberg 0,35% GM Group 0,35% Bundesverband der Deutschen Industrie e.V. 0,35% Delphi 0,39% Bertelsmann Group 0,43% Georg-­‐August-­‐Universität Göxngen 0,43% Technical University of Munich 0,46% Baden-­‐BadenerUnternehmer Gespräche e.V. 0,46% Ludwig-­‐Maximiliam-­‐University Munich 0,50% Rheinisch-­‐Weswälische Technische Hochschule Aachen 0,50% Universität zu Köln* 0,54% Karlsruhe University / KIT* 0,58% McKinsey & Company* 1,04%

0,00% 0,20% 0,40% 0,60% 0,80% 1,00% 1,20%

the dominant networks change. While non-executive directors with companies, the same is true for family owned companies such as e.g. existing and former Allianz ties dominate the boards, existing and former Haniel. Auditors such as KPMG, which seems to be better connected at LufthansaTop 30 institutions employees have in carved the out DAX a-­‐ 30 based on non executive nice niche directors’ for themselves prior and the existing non-executive networks board level than its auditing peers (the other Big-4 and providing the fourth largest network behind the DAX-30. Thus If you look at -­‐ the DAX 30 from the twork ne perspective behind -­‐ non executive directors members), controlling will potentially the companies profit from it its is network surprising in the DAX-30. to see how the dominant evennetworks if Lufthansa change. plays While a -­‐ nonminorexecutive role in directors terms of with market existing capitalization and of former Allianz ties dominate the boards, existing and former Lufthansa employees have What is very surprising at the non-executive level is still the dominance DAX-30carved companies, out a nice its existing niche and for prior themselves executives and providing the fourth have largest a thorough network the behind DAX-­‐30. Thus even if Lufthansa plays a minor role in terms of of LMU Munich (Ludwig Maximilian University) and TU München (Tech- networkmarket capitalization in the non-executive of DAX-­‐30 companies, boards of DAX-30 its existing companies. and The prior same executives have a thorough network in the non-­‐executive boards of DAX-­‐30 companies. The same is true for Robert Bosch which is not a DAX-­‐30 company but constitutes nische a Universität major network behind DAX-­‐München)30 organizations. graduates Surprisingly which gives both Accenture training is also institu- is true for Robert Bosch which is not a DAX-30 company but constitutes more present at the non-­‐executive board level of DAX-­‐30 companies while it is literally absent at the executive management level where McKinsey dominates tions considerable presence among both executives (as seen earlier) and aas major a network consultant. behind DAX-30 organizations. Surprisingly Accenture is also more present at the non-executive board level of DAX-30 com­ the non-executive board of German companies. University of St.Gallen panies while it is literally absent at the executive management level is literally ranked no.3 and the first international school in the network, where McKinsey dominates as a consultant. (See chart 6 on page 8) followed by University of Mannheim, University of Münster, University of Göttingen, Harvard University, University of Bonn, and University of Top non-DAX-30 institutions in the DAX-30 based Cologne (Köln). on non-executive directors’ prior and existing networks Lobby Groups such as the Bundesverband der Deutschen Industrie (BDI), As stated earlier Robert Bosch (executives in the DAX-30 with prior and ACATECH are also main sources of potential non-executive directors. and existing ties to Robert Bosch) is a relevant network behind DAX-30 (See chart 7 on page 9)

Bringing The Social Network Perspective Into Decision Making December 2016 Page 8

Chart 6 – What are the institutions that connect DAX-30 non-executive directors?

MERCK 0,53% DEUTSCHE BÖRSE 0,55% NOVARTIS 0,55% CONTINENTAL AG Schäffler 0,55% University of Mannheim 0,57% Porsche 0,57% Munich RE 0,59% Deutsche Telekom 0,63% ThyssenKrupp 0,66% RWE 0,72% Haniel Group 0,74% ROYAL DUTCH SHELL 0,76% Universität St. Gallen 0,76% DAIMLER 0,78% TU München 0,80% BASF 0,82% Fresenius 0,91% DEUTSCHE BANK 0,97% E.ON 0,97% Commerzbank 1,04% Ludwig Maximilian University of Munich 1,12% Accenture 1,21% BAYER 1,25% Henkel 1,27% Siemens 1,27% Robert Bosch 1,35% Luqhansa 1,67% BMW 1,84% SAP 2,35% Allianz 2,56%

0,00% 0,50% 1,00% 1,50% 2,00% 2,50% 3,00%

The Top 30 institutions behind the DAX-30 executives – dominating these boards followed by players such as SAP AG, BMW, a network perspective Lufthansa or even non-DAX-30 companies such as Robert Bosch. Tie proximity, i.e. the closeness of companies to each other is also an indica- The network graph no.1 on page 9 nicely shows how the DAX-30 companies are connected with each other through their executives (pink tion of overlapping non-executives which link those institutions to each anonymous circles). As stated earlier McKinsey is quite central at the other. (See network graph no. 2 on page 10) executive level and former employees now dominate respective boards. Again,Top non the-­‐DAX pink30 circles institutions represent in the the anonymous DAX executives 30 based on non-­‐executive connecting directors’ prior and existing networks the organizations with each other seamlessly. The proximity of nodes/ dotsAs stated also gives er earli Robert an indication Bosch about (executives which companies in -­‐ the DAX 30 with are close prior to each and existing Summary ties to Robert Bosch) is a relevant network behind DAX-­‐30 companies, the same is true for family owned companies such as e.g. Haniel. Auditors such as KPMG, which seems to be better ed connect at the non-­‐executive board level other based on similar ties. This can e.g. be seen nicely in the case of than its auditing peers (the other -­‐ Big 4 members), will potentially profit from Investors its network and-­‐ in the DAX 30. shareholders alike should consider social network related Henkel Group that has solid ties to Adidas or Volkswagen which is What is very surprising at the non-­‐executive level is still the dominance data of when LMU it comes Munich to decision (Ludwig Maximilian University) and making, TU and München complement (Technische financial as linked to Daimler based on executives who worked for both institutions. Universität München) graduates which gives both training institutions well as considerable non-financial factors presence (such among as both executives (as seen earlier) environmental, and the -­‐ non executive social and govern- (Seeboard network of German graph no. companies. 1 on page University 9) of St.Gallen d is literally ranke no.3 and the first international school in the network, followed by University of ance related ones) with network related data when taking decisions. This Mannheim, University of Münster, University of Göttingen, Harvard University, University of Bonn, and University of Cologne . (Köln) will help them to move away from an isolated perspective when looking TheLobby Top Groups 30 institutions such as behind the the Bundesverband DAX-30 der Deutschen non-executives Industrie (BDI), at and companies ACATECH and are see them also and main their sources of potential non-­‐executive people as directors. part of a broader ecosys- (directors) – a network perspective tem in which they are embedded, and thus get the big picture. Focusing Network graph 2 on page 10 gives you a nice overview of the non- on the people behind institutions helps to anticipate their moves but executives (anonymous red circles) connecting the organizations at the also understand their interdependence, and how existing as well as prior board level. As mentioned earlier former and existing Allianz people are ties can shape entire strategies and decisions taken by large organiza-

Bringing The Social Network Perspective Into Decision Making Page 9 December 2016

Chart 7 – What are the non-DAX-30 institutions that connect DAX-30 non-executive directors?

GDF SUEZ Group 0,32% ACATECH Deutsche Akademie der Technikwissenschaqen 0,34% IBM Group 0,34% University of Cologne 0,34% Goldman Sachs Group 0,36% Max-­‐Planck-­‐Gesellschaq and Insptute 0,36% BP Europe 0,38% Bertelsmann Group 0,38% NOKIA Group 0,40% HSBC Group 0,40% Qatar related Insptupons 0,40% Hewle}-­‐Packard Group 0,42% University of Bonn 0,42% Dresdner Bank Gruppe 0,42% Harvard University 0,44% Bundesverband der Deutschen Industrie (BDI) 0,44% NESTLÉ Group 0,49% KPMG 0,49% University of Göxngen 0,51% Universität Münster 0,51% NOVARTIS 0,55% University of Mannheim 0,57% Porsche 0,57% Haniel Group 0,74% ROYAL DUTCH SHELL 0,76% Universität St. Gallen 0,76% TU München 0,80% Ludwig Maximilian University of Munich 1,12% Accenture 1,21% Robert Bosch 1,35% 0,00% 0,20% 0,40% 0,60% 0,80% 1,00% 1,20% 1,40% 1,60%

Network graph 1 – The executive managers that connect DAX-30 companies

The Top 30 institutions behind the DAX 30 executives – a network perspective

The below network graph nicely shows how the DAX-­‐30 companies are cted conne with each other through their executives (pink anonymous circles). As stated earlier McKinsey is quite central at the executive level and former employees now dominate respective . boards Again, the pink circles represent the anonymous executives connecting the organizations with each other seamlessly. The proximity of nodes/dots also gives an indication about which companies are close to each other based on similar ties. This can e.g. be seen nicely in the case of Henkel Group that has solid ties to Adidas or Volkswagen which is linked to Daimler based on executives who worked for both institutions.

Bringing The Social Network Perspective Into Decision Making December 2016 Page 10

Network graph 2 – The non- executive directors that connect DAX-30 companies

tions (whether related to hiring of executive and non-executive direc- executive boards, and shows that the current diversity discussion has to tors, M&A activities, creation of new businesses, corporate governance, go well beyond traditional diversity measures to really understand the strategic alliances etc.). Thus social network related data is crucial and dynamics and influential factors behind organizations. People are ulti- complements existing financial and non-financial data. This latest DAX-30 mately social animals and not considering the social networks in which paper shows the importance of considering the social ties that bind they are embedded will create inferior results when it comes to decision people, even when it comes to the role of women in executive and non- making and setting the framework for a sound and sustainable system.

About SONEAN Disclaimer Decision makers like executive and non-executive directors, investors or creditors The vast information which forms the basis of this paper has been obtained from e.g. face a world inherently defined by complexity and continuous change, where multiple public sources (publications, social media, trade registries, and many uncertainty is prevalent, volatility the norm and ambiguity omnipresent. other ones) believed to be reliable and was extensively verified, cross checked and validated. SONEAN however does not warrant its accuracy or completeness. The Today, they need to rely on a breadth of dynamic and actionable intelligence; sharp opinions represent our judgement based on data collected until 30 October 2016 insights from vast amounts of data which are systematically connected in a meaning­ ­ and are subject to change without notice in line with ongoing developments. ful way, analyzed and interpreted to identify, contextualise and reveal the implica- tions of relevant developments in their competitive and external environment. Copyright 2016 SONEAN GmbH

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Bringing The Social Network Perspective Into Decision Making