DAX 30 Supervisory Board Study 2019 Selected results

1 July 2019 Jens-Thomas Pietralla & Dr Thomas Tomkos Board & CEO Practice

Private and Confidential The following assessment and evaluation is based on publicly available biographical data1 on supervisory board members of DAX 30, MDAX and SMI2 companies.

Obviously, the effectiveness of supervisory boards also depends on the board culture, the personalities of their members and their constructive dialog.

1. Data sources: biographies made available by companies, invitations to annual meetings, annual reports, voting results from annual meetings; additional externally available biographical data where necessary 2. SMI: Swiss Market Index: 20 of the largest and most liquid Swiss Performance Index (SPI) large- and mid-cap stocks Private and Confidential 2 Preview...

▪ In the second of two consecutive “super election years” for the DAX 30, 57 re-elections limited the opportunity for far-reaching changes. Only 30 of the 87 shareholder representatives up for election were replaced by new directors. In addition, as a result of the Linde-Praxair merger an eleven person board of directors was established (plus five shareholder representatives). ▪ Ten new digital directors strengthen the DAX 30 supervisory boards (2018: eight). More than two thirds of corporations can now rely on digital expertise on supervisory board level. ▪ The share of women among newly elected shareholder representatives was only 23%. In combination with changes in the DAX 30 composition, the total female quota still increased slightly to 32.3%. ▪ Representation of women in chairperson and committee functions continues to lag behind this overall positive development. Still, there have been improvements year-over-year. For the first time, there are five chairwomen heading their respective DAX 30 and MDAX supervisory boards. ▪ The number of international shareholder representatives increased slightly, driven especially by the Linde-Praxair merger. ▪ Cross-linkages between DAX 30 companies, the previously famous “ Inc.”, continue to decline. There are less non-executive directors with multiple, but also fewer DAX 30 executives with additional supervisory board positions. ▪ The average assessment of DAX 30 supervisory boards, using the German school grading system, improves to 2.0 this year, from 2.2 in 2018. ▪ Daimler, and SAP lead the ranking with a respective overall grade of 1.5.

Private and Confidential 3 Content – Results in the “super election year 2019“...

1. Digital and “New Economy” – in great strides 5

2. Women with influence – slowly, but steadily 9

3. Observations in election year 2019 – expertise, cross-linkage, remuneration 17

4. The 2019 ranking 24

5. Outlook 28

Private and Confidential 4 1. Digital and “New Economy” – in great strides

Private and Confidential 5 Digital & “New Economy” – in great strides

▪ The number of digital directors in DAX 30 supervisory boards continues its fast pace of increase. Currently, two thirds of companies have digital expertise and 17% even multiple digital directors on their boards. ▪ Compared to 2018, newly acquired digital experience is exclusively “male” this year. However, there are two women who rose to the DAX 30 together with Wirecard. ▪ The changing relevance of industrial sectors can be seen in the revised composition of DAX 30 and MDAX. Wirecard replaced in the DAX 30; ten “New Economy” companies and seven from the pharmaceutical, medical and biotech-sector entered the MDAX.

@ www ✓

Private and Confidential 6 Digital directors in DAX 30 over time and compared to the SMI

The number of digital directors in DAX 30 has increased by 65% in the last two years. Most of the new supervisory board members are male. Compared to the SMI, significantly more companies have digital expertise “on board”.

Development of digital director’s numbers in the DAX 30 over time Companies with digital expertise

3355 Total 33 3300 17% 25% 2255 20 men 20% 2200 50% 1155 13 women 10 10 55% 5 33%

0 20122012 20132013 20142014 20152015 20162016 20172017 20182018 20192019 DAX 30 SMI

Two or more digital directors Changes 2019: Wirecard entered index (3 digital directors), Commerzbank left (1); One digital director one replacement at SAP und 6 other digital directors newly elected – net plus 8 No digital director

Private and Confidential 7 Development and composition of DAX 30 and MDAX over the last 12 months

The economic relevance of “New Economy” and the pharmaceutical, medical and biotechnology sectors can clearly be recognized in the changes in index composition.

Electronic Payment supplanted traditional Banking in DAX 30

“New Economy”

Pharma, Med & Biotech

„Old Economy“ MDAX

Logo sources: Wikipedia Private and Confidential 8 2. Women with influence – slowly, but steadily

Private and Confidential 9 Women with influence – slowly, but steadily

▪ The share of women among newly elected supervisory board members was only 23%. Combined with changes in the DAX 30 composition and fewer women than men leaving, the total female quota still increased slightly to 32.3%. ▪ Again, 75% of newly elected women are current or former top-executives – but only one has DAX 30 experience. ▪ The uneven distribution of power between men and women prevails – measured by chairperson and committee leadership positions. However, for the first time, there are five women chairing DAX 30 and MDAX supervisory boards.

Private and Confidential 10 Development of the share of women

The share of women increased slightly to 32,3% despite a very low share of women among newly elected members. This is made possible by index changes and only five women retiring from their positions in 2019.

+0,7 PP +2,5 PP 30% 30% +0,4 PP +5,0 PP 32,3% +2,5 PP +3,6 PP

+3,8 PP

+3,8 PP

+3,0 PP

7% 50% 37% 34% 34% 39% 46% 41% 33% 23%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Share of woman amongst successors Total share of woman amongst shareholder representatives following annual meetings

Private and Confidential 11 DAX 30 supervisory boards – share of women amongst shareholder representatives, employee representatives and in total

The shares of women amongst shareholder and employee representatives increased further. In total, 35% of supervisory board members are female – a plus of one percentage point.

After the 2019 elections SH Reps Empl. Reps Total After the 2019 elections SH Reps Empl. Reps Total Adidas 25% 38% 31% Infineon Technologies 25% 50% 38% Allianz 33% 33% 33% Linde 27% 27% BASF 33% 33% 33% Merck 38% 38% 38% Bayer 30% 30% 30% Re 40% 50% 45% 33% 17% 25% RWE 30% 30% 30% BMW 30% 40% 35% SAP 44% 56% 50% Continental 30% 30% 30% Siemens 30% 40% 35% Covestro 33% 33% 33% ThyssenKrupp 40% 40% 40% Daimler 30% 30% 30% Volkswagen 30% 30% 30% Deutsche Bank 30% 30% 30% Vonovia 33% 33% Deutsche Boerse 38% 38% 38% Wirecard 50% 50% Deutsche Lufthansa 30% 40% 35% Total 2019 32,3% 37,8% 34,9% Deutsche Post 30% 40% 35% Deutsche Telekom 30% 50% 40% Total 2018 31,6% 36,2% 33,8% E.ON 29% 29% 29% Total 2017 28,7% 34,0% 31,0% Fresenius Medical Care 33% 33% Total 2016 28,7% 32,4% 30,5% Fresenius SE 33% 33% 33% Total 2015 23,7% 29,3% 26,4% HeidelbergCement 33% 50% 42% Total 2014 21,0% 28,0% 24,0% Henkel 25% 50% 38% Total 2013 18,0% 26,0% 22,0%

Private and Confidential 12 Qualification profiles of newly elected women

As in previous years, the majority of newly elected women has top management experience.

Consultants, experts, 23% politicians, managers of 25% 29% 25% substantial holdings

Former top executives 19% 31% 25%

71% Current top executives 56% 46% 50%

2016 2017 2018 2019

Private and Confidential 13 Demographic differences between men and women

Women’s average, current tenure on DAX 30 supervisory boards is two years shorter than their male peers’ and they are five years younger. Newly elected women this year were two years younger than the men.

Tenure average (2019) Age average (2019) Average age when taking office (newly elected members) 62.1 5.7 57.0 60 Men 58 4.6 56

54 Women 52

50

48

46

44 Men Women Men Women 2011 2012 2013 2014 2015 2016 2017 2018 2019

Private and Confidential 14 Chairwomen on DAX 30 and MDAX supervisory boards

Overall, the development at the top of the supervisory boards is encouraging – in the last 12 months, the number of chairwomen has increased by 150%. Three of them are closely tied to anchor investors.

Henkel Telefonica D Dr Simone Bagel-Trah Laura Abasolo Cristina Stenbeck García de Baquedano 2009 Chairperson since 2013 2018 2019

Aareal Bank ThyssenKrupp Representative of major shareholders Marija G. Korsch Martina Merz Independent

Sources: Russell Reynolds Associates; company websites; Stenbeck: gruenderszene.de; Korsch: haufe.de Private and Confidential 15 Representation of women and men amongst chairpersons and in committees

While chairman and committee positions are still dominated by men, there has been an encouraging improvement since last year. On the other hand, the increase of committee chairwomen resulted almost exclusively (five of the six additions) from the election of the second female board chairperson.

Two female Ten female deputy 17 female committee 70 / 266 committee seats chairpersons of 30 chairpersons of 32 chairpersons of 132 held by women 7% 31% 13% 26% (Previous year 3%) (10/26 empl. reps; 0/6 SH reps) (PY: 8%) (PY 23%)

W 61% (PY 57%) of all women and

M 77% (PY 78%) of all men hold committee position

Aside from deputy chairpersons, only shareholder representatives considered Private and Confidential 16 3. Observations in election year 2019 – expertise, cross-linkage, remuneration

Private and Confidential 17 Observations in election year 2019 – expertise, cross-linkage, remuneration

▪ The assessment of breadth of experience has consistently increased over the years. This reflects the successes achieved by supervisory boards in adding members with key qualifications to the boards. ▪ This year’s increase in international supervisory board members results mainly from the Linde-Praxair merger. The DAX 30 significantly lags behind regarding the share of foreign nationals amongst shareholder representatives, i.e. compared to the SMI. ▪ Cross-linkage between DAX 30 companies through supervisory board members with multiple board seats continues to decline. ▪ With regards to supervisory and executive board compensation, there are still large differences between companies.

Private and Confidential 18 DAX 30: share of supervisory boards meeting key criteria

Overall, the breadth of experience on DAX 30 supervisory boards has developed very positively – the total average fulfillment rate rose from 69% to 71%. However, i.e. top management, S&M and supply chain experience could be improved.

“Digital"Digital director”Director" BConsultant/Valueeratungs-/ Value Cr Creationeation Ex pExpertertise QLateraluerden thinker/expertker / Experten IndependentUnabhängige financialr Finanze xexpertperte MM&A/Integration;&A / Integration; R riskisiko managementmanagement HHRR RLegalecht 2x 2Sales* Sal e&s &marketing Marketin gexperience Erfahrung RR&D/innovation&D / Innovation 2* VIndustryertreter Benvironmentranchenumfe repld (z (i.e..B. K customer,unden, Lie fsupplier)eranten) VertreterCompetitor Wettbewer breper 22* xR Rel.el. O opspera experiencetions Erfahru (purchasing,ng (Einkauf, P production,roduktion, et ...)c.) (Ehem.) CFO (Former)vergleichb CFOarer comparableGrößenordn usizeng 3* (ehem.) C3E×O(Former) vergleich bCEOare rcomparable Größenordn usizeng 50%5 comparable0% vergleich bcurrentare akt .supervisory Aufsichtsrat sboarderfahr exp.ung

0% 20% 40% 60% 80% 100% Trend 2019 0% 20% 40% 60% 80% 100%

Private and Confidential 19 Share of foreigners among shareholder representatives over time

Half of the increase of foreign national’s share amongst DAX 30 supervisory boards is a result of the Linde- Praxair merger. (In the actual evaluation, we also take into account international experience).

35%

30% Rest of the world 25% USA/CAN 20%

15% Other Europe 10%

5% AUT/CH 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Private and Confidential 20 Share of foreign nationals – comparison SMI to DAX 30

The share of non-German native-speaking members is significantly higher on SMI supervisory boards compared to the DAX 30 (almost 50% vs. 20%).

SMI

DAX 30

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

CH GER AUT Other Europe America APAC Africa & Middle East

Private and Confidential 21 Development of cross-linkages between DAX 30 companies

Both indices decline over time – the cross-linkages of DAX 30 companies decrease over time.

Cross-linkages through: 2016 2017 2018 2019 Reasons i.e.: Index NED/NED (multi-supervisory board members) 72 62 53 44 ▪ Supervisory board members reduce Index ED/NED (DAX 30-CxOs) 22 14 20 17 their number of positions with age 100% 2016=100% or due to “over- boarding” 80% -23% ▪ DAX 30 executive board members 60% -39% retire from their full- time ED positions 40% and focus on supervisory board 20% work

0% 2016 2017 2018 2019

Private and Confidential 22 DAX 30 supervisory boards – ranking according to 2018 compensation

On average, supervisory board members are awarded € 191k. CEOs receive 14 times their chairmen’s compensation.

Supervisory board compensation 2018 in ‘000 euros Multiple Fofak CEOtor V compensationergütung VS VS vs.zu Achairperson’sR VS (2018) (2018)

Linde Fresenius SE Linde No data available Fresenius SE MMerckerck LLindeinde ThyssenKrupp E.ON ThyssenKrupp E.ON SSAPAP DeutscheDeutsche BBankank Henkel BMW Henkel BMW HHeidelbergCementeidelbergCement BBASFASF Beiersdorf Siemens Beiersdorf Siemens FFreseniusresenius M Medicaledical CCareare CContinentalontinental Deutsche Boerse Fresenius Medical Care Deutsche Börse Fresenius Medical Care Deutsche Post Volkswagen Deutsche Post Volkswagen Adidas Allianz Adidas Allianz Infineon Technologies Daimler Infineon Technologies Daimler Deutsche Telekom SAP Deutsche Telekom SAP Durchschnitt ×14 Wirecard Average Wirecard Vonovia Bayer Vonovia PY: x15 Bayer Munich Re RWE (ohne TöchRWEter) Munich Re 191 Daimler DurcAveragehschnitt Daimler Deutsche Bank DDeutscheeutsche B oBörseerse Deutsche Bank PY: 178 Volkswagen VVonoviaonovia Volkswagen Bayer AAdidasdidas Bayer Siemens CCovestroovestro Siemens DeutscheDeutsc hTelekome Teleko Rem DDeutscheeutsche L Lufthansaufthansa Allianz DeutscheDeutsche PPostost Allianz E.ON MunichMunich RRee E.ON Covestro BBeiersdorfeiersdorf Covestro InfineonInfineon TTechnologiesechnologies CContinentalontinental HeidelbergCementHeidelbergCement BBASFASF Fresenius SE DeutscheDeutsche LLufthansaufthansa Fresenius SE HHenkelenkel BBMWMW ThyssenKruppThyssenKrupp WWirecardirecard MMerckerck RWE (ohne TöchRWEter) 0 100100 200200 300300 400400 500500 600600 700700 800800 0 10 2020 30 4040 50 6060 70 8080 Lowest Average NiedHighestrigste Durchschnitt Höchste

Shareholder and employee representatives; full year; sorted by average compensations Private and Confidential 23 4. The 2019 ranking

Private and Confidential 24 The 2019 ranking

▪ The total average grade improves to 2.0, compared to 2.2 in 2018 ▪ Daimler, Lufthansa and SAP lead the ranking with average grades of 1.5 ▪ For the first time, all companies achieve an evaluation of better than 3.0

Private and Confidential 25 DAX 30 assessment: Method and average grades over time

For the first time, the overall average grade reaches 2.0. The positive trend continues.

Gender percentages Nationalities/experience Russell Reynolds Associates supervisory board analysis: Average grade of all DAX 30 companies over time ✓ ✓ (applying a scoring system similar to that used in ✓ German schools3) ✓ Diversity ✓ 10% 10% 1 2 2.9 Age distribution Tenure 2.7 2.6 2.4 2.3 2.4 2.3 40 45 50 55 60 65 2.2 x x x x 2.0

10% 10%

Breadth of experience2 40%

Position burden 20% 2011 2012 2013 2014 2015 2016 2017 2018 2019 1. Toughening of requirements in ‘breadth of experience’ starting 2016. Without this change the average grades from 2016 on would be lower by 0.2 2. Additionally, doubling of the weight of ‘range of experience’ (minimal implications on average, but several changes in grades of specific boards) 3. Grading scale: 1=best … 6=worst Private and Confidential 26 DAX 30 supervisory boards: Ranking based on available biographical data of supervisory board members

Daimler, Lufthansa and SAP share the top spot. For the first time, all companies achieve an overall grade of better than 3.0. 2019 Details Avg Avg ▪ All assessments according Ranking Ranking Ranking Ranking Age Range of Position Change grade grade Diversity to German school scoring Company 2019 2018 2017 2016 Tenure experience burden 2019 2019 2018 system (1=best .. 6=worst) Daimler 1 2 5 3 1,5 1,7 2 1,5 1 2 2 Deutsche Lufthansa 1 1 16 10 1,5 1,5 1 2,5 1 2 2 ▪ Data sources: company SAP 1 16 10 5 1,5 2,2 1,5 2 1 2 2 websites, online available Munich Re 4 3 3 15 1,6 1,8 3 1 1 2 1 Infineon Technologies 5 5 10 15 1,7 1,9 1,5 3 1 2 NA CVs and biographical data Bayer 6 3 5 10 1,8 1,8 1,5 1,5 2 2 2 ▪ Diversity includes gender Continental 6 8 9 5 1,8 2,0 1,5 2,5 1 3 3 Deutsche Post 6 16 21 10 1,8 2,2 2,5 2,5 1 2 3 percentages (left arrow) E.ON 6 8 3 5 1,8 2,0 3 2 1 2 NA and internationality (right Linde 6 16 16 23 1,8 2,2 1 3 1 3 2 arrow) Siemens 6 5 1 1 1,8 1,9 1,5 1,5 2 2 NA Allianz 12 8 16 15 1,9 2,0 3 2,5 1 2 NA ▪ “Range of experience“ BASF 12 25 21 27 1,9 2,5 2 2,5 1 3 3 weighted double Deutsche Bank 12 5 1 2 1,9 1,9 3 2,5 1 2 NA Deutsche Telekom 12 8 10 15 1,9 2,0 2 2,5 1 3 2 ▪ “Change 2019” takes into ThyssenKrupp 12 27 27 27 1,9 2,6 1,5 2 2 2 2 account missed Wirecard 12 1,9 2 1,5 2 2 3 opportunities for Covestro 18 20 NA NA 2,0 2,3 3,5 2,5 1 2 NA Vonovia 18 13 10 10 2,0 2,1 2,5 2,5 1 3 NA improvement due to BMW 20 20 21 23 2,1 2,3 3 2,5 1 3 2 reelections Fresenius Medical Care 21 13 10 15 2,3 2,1 3 2,5 2 2 3 Fresenius SE 21 25 19 23 2,3 2,5 2 3,5 2 2 NA Henkel 23 20 19 10 2,4 2,3 2 3 2 3 NA Beiersdorf 24 20 25 23 2,5 2,3 3 2,5 3 1 4 Deutsche Boerse 24 16 27 21 2,5 2,2 2 1,5 3 3 4 Arrow indicates Volkswagen 24 24 21 15 2,5 2,4 2 2,5 3 2 3 tendency resulting Merck 27 30 26 21 2,6 3,0 2 3 3 2 5 from change between Adidas 28 13 10 3 2,7 2,1 2 2,5 3 3 4 2019 and 2018 RWE 28 28 27 29 2,7 2,7 1,5 3 3 3 NA HeidelbergCement 30 28 27 30 2,8 2,7 3,5 3,5 2 3 4

Private and Confidential 27 5. Outlook

Private and Confidential 28 Road ahead: Institutional investors set emphasis

Institutional investors name five governance focus areas for the following years1.

Board Quality Board Oversight of Investors Limiting and Composition Corporate Culture Shareholder Primacy

Gender diversity, relevant director skills, Investors are keen to learn how boards go about The role of corporations in many countries is composition refreshment, and board evaluations understanding corporate culture and how they evolving to include meeting the needs of a are key indicators of board quality. engage with management on the topic. broader set of stakeholders.

Environmental, Social and Governance Activist (ESG) Risk Investing

The priority for investors will be linking Activist investors are using various strategies to sustainability to long-term value creation and achieve their objectives. The question is no longer balancing ESG risks with opportunities. if, but when and why, an activist gets involved.

1. Based on 40 Russell Reynolds Associates interviews with globally leading institutional investors Private and Confidential 29 Author information

Jens-Thomas Pietralla leads the firm’s Board & CEO Practice in Europe and serves as Global Head of the Industrial & Natural Resources Sector. In this capacity, he leads the firm’s business with clients in aerospace & defense, automotive, capital and electrical goods, chemicals, energy, and industrial services. Jens-Thomas helps companies build superior boards and advises his clients on leadership matters, succession planning, and strategy. Recent work includes searches for a number of CEO, CFO, and other CxO positions, as well as assignments for chairmen and non- executive directors at listed and private equity-owned companies around the globe. He is based in Munich.

Thomas Tomkos leads the firm’s German Board & CEO Practice, the European CFO Practice and also heads the Aviation, Aerospace and Defense practice in Europe. Previously, he led the firm’s German operations as country manager for more than seven years. Thomas conducts high-profile searches for board members, presidents and CEOs of public, privately-held, and family-owned companies and recruits members for advisory/supervisory boards in various sectors. He also leads board effectiveness projects and leadership assessments in development and M&A environments in a broad range of industries. He is based in .

Private and Confidential 30