DAX 30 Supervisory Board Study 2019 Selected results · This year [s increase in international supervisory board members results mainly from the Linde-Praxair merger. The DAX 30significantlylags

Private and Confidential

DAX 30 Supervisory Board Study 2019Selected results

1 July 2019

Jens-Thomas Pietralla & Dr Thomas TomkosBoard & CEO Practice

Private and Confidential 2

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

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.


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 “Germany 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, Lufthansa and SAP lead the ranking with a respective overall grade of 1.5.


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

2. Women with influence – slowly, but steadily

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

4. The 2019 ranking

5. Outlook

Content – Results in the “super election year 2019“...

5

9

17

24

28


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


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 Commerzbank in the DAX 30; ten “New Economy” companies and seven from the pharmaceutical, medical and biotech-sector entered the MDAX.

@www

✓


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

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”.

Companies with digital expertise

33%

55%

50%20%

17%25%

DAX 30 SMI

0

5

10

15

20

25

30

35

2012 2013 2014 2015 2016 2017 2018 2019

Total 33

20 men

13 women

Changes 2019: Wirecard entered index (3 digital directors), Commerzbank left (1); one replacement at SAP und 6 other digital directors newly elected – net plus 8

2012 2013 2014 2015 2016 2017 2018 2019

35

30

25

20

15

10

5

0

Two or more digital directorsOne digital directorNo digital director


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.

Logo sources: Wikipedia

Electronic Payment supplantedtraditional Banking in DAX 30

MDAX

“New Economy”

Pharma,Med &

Biotech

„OldEconomy“


2. Women with influence – slowly, but steadily


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.


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.

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

7%

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

30%

+3,0 PP

+3,8 PP

+3,8 PP

+3,6 PP

+2,5 PP

2010 2013 2014 2015 2016 2017 2018 201920122011

32,3%+5,0 PP

+2,5 PP+0,7 PP

30% +0,4 PP


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

Adidas 25% 38% 31%

Allianz 33% 33% 33%

BASF 33% 33% 33%

Bayer 30% 30% 30%

Beiersdorf 33% 17% 25%

BMW 30% 40% 35%

Continental 30% 30% 30%

Covestro 33% 33% 33%

Daimler 30% 30% 30%

Deutsche Bank 30% 30% 30%

Deutsche Boerse 38% 38% 38%

Deutsche Lufthansa 30% 40% 35%

Deutsche Post 30% 40% 35%

Deutsche Telekom 30% 50% 40%

E.ON 29% 29% 29%

Fresenius Medical Care 33% 33%

Fresenius SE 33% 33% 33%

HeidelbergCement 33% 50% 42%

Henkel 25% 50% 38%

After the 2019 elections SH Reps Empl. Reps Total

Infineon Technologies 25% 50% 38%

Linde 27% 27%

Merck 38% 38% 38%

Munich Re 40% 50% 45%

RWE 30% 30% 30%

SAP 44% 56% 50%

Siemens 30% 40% 35%

ThyssenKrupp 40% 40% 40%

Volkswagen 30% 30% 30%

Vonovia 33% 33%

Wirecard 50% 50%

Total 2019 32,3% 37,8% 34,9%

Total 2018 31,6% 36,2% 33,8%

Total 2017 28,7% 34,0% 31,0%

Total 2016 28,7% 32,4% 30,5%

Total 2015 23,7% 29,3% 26,4%

Total 2014 21,0% 28,0% 24,0%

Total 2013 18,0% 26,0% 22,0%


Qualification profiles of newly elected women

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

56%

71%

46% 50%

19%

29%

31% 25%

25% 23% 25%

2016 2017 2018 2019

Current top executives

Former top executives

Consultants, experts, politicians, managers of

substantial holdings


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) Average age when taking office (newly elected members)

5.7

4.6

Men Women

Age average (2019)

62.1

57.0

Men Women

44

46

48

50

52

54

56

58

60

2011 2012 2013 2014 2015 2016 2017 2018 2019

Women

Men


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.

2009 2013 2018 2019

Sources: Russell Reynolds Associates; company websites; Stenbeck: gruenderszene.de; Korsch: haufe.de

HenkelDr Simone Bagel-Trah

ThyssenKruppMartina Merz

ZalandoCristina Stenbeck

Telefonica DLaura Abasolo

Garcia de Baquedano

Aareal BankMarija G. Korsch

Independent

Representative of major shareholders

Chairperson since


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.

Aside from deputy chairpersons, only shareholder representatives considered

61% (PY 57%) of all women and

77% (PY 78%) of all men hold committee positionM

W

Two female chairpersons of 30

Ten female deputy chairpersons of 32

17 female committee chairpersons of 132

70 / 266 committee seats held by women

7%(Previous year 3%)

31%(10/26 empl. reps; 0/6 SH reps)

26%(PY 23%)

13%(PY: 8%)


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


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.


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 director”

Consultant/Value Creation Expert

Lateral thinker/expert

Independent financial expert

M&A/Integration; risk management

HR

Legal

2x Sales & marketing experience

R&D/innovation

Industry environment rep (i.e. customer, supplier)

Competitor rep

2x Rel. ops experience (purchasing, production, ...)

(Former) CFO comparable size

3× (Former) CEO comparable size

50% comparable current supervisory board exp.

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

50% vergleichbare akt. Aufsichtsratserfahrung

3* (ehem.) CEO vergleichbarer Größenordnung

(Ehem.) CFO vergleichbarer Größenordnung

2* Rel. Operations Erfahrung (Einkauf, Produktion, etc.)

Vertreter Wettbewerber

2* Vertreter Branchenumfeld (z.B. Kunden, Lieferanten)

R&D / Innovation

2* Sales & Marketing Erfahrung

Recht

HR

M&A / Integration; Risikomanagement

Unabhängiger Finanzexperte

Querdenker / Experten

Beratungs-/ Value Creation Expertise

"Digital Director"


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).

0%

5%

10%

15%

20%

25%

30%

35%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

AUT/CH

Other Europe

USA/CAN

Rest of the world


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%).

DAX 30

SMI

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

CH GER AUT Other Europe America APAC Africa & Middle East


Development of cross-linkages between DAX 30 companies

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

Reasons i.e.:

▪ Supervisory board members reduce their number of positions with age or due to “over-boarding”

▪ DAX 30 executive board members retire from their full-time ED positions and focus on supervisory board work

Cross-linkages through:

Index NED/NED (multi-supervisory board members)

Index ED/NED (DAX 30-CxOs)

2016

72

22

2017

62

14

2018

53

20

2019

44

17

0%

20%

40%

60%

80%

100%

2016 2017 2018 2019

2016=100%

-23%

-39%


0 20 40 60 80

RWE (ohne Töchter)

Wirecard

BMW

Fresenius SEBASF

Continental

Covestro

E.ON

Allianz

Deutsche Lufthansa

Siemens

Bayer

Volkswagen

Deutsche Bank

Daimler

Munich Re

Vonovia

Durchschnitt

Deutsche Telekom

Infineon Technologies

Adidas

Deutsche Post

Deutsche Boerse

Fresenius Medical Care

Beiersdorf

HeidelbergCement

Henkel

SAP

ThyssenKrupp

Merck

Linde

Faktor Vergütung VS VS zu AR VS (2018)

0 100 200 300 400 500 600 700 800

Merck

ThyssenKrupp

HenkelDeutsche Lufthansa

HeidelbergCementInfineon Technologies

Beiersdorf

Munich ReDeutsche Post

Deutsche Telekom

Covestro

Adidas

Vonovia

Deutsche Boerse

Durchschnitt

RWE (ohne Töchter)

Bayer

Wirecard

SAP

Daimler

Allianz

Volkswagen

Fresenius Medical Care

Continental

Siemens

BASF

BMW

Deutsche Bank

E.ON

Linde

Fresenius SE

Niedrigste Durchschnitt Höchste

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 of CEO compensation vs. chairperson’s (2018)

Fresenius SELindeE.ON

Deutsche BankBMWBASF

SiemensContinental

Fresenius Medical CareVolkswagen

AllianzDaimler

SAPWirecard

BayerRWE

AverageDeutsche Börse

VonoviaAdidas

CovestroDeutsche Telekom Re

Deutsche PostMunich ReBeiersdorf

Infineon TechnologiesHeidelbergCement

Deutsche LufthansaHenkel

ThyssenKruppMerck

5004003002001000 600 700 800

LindeMerck

ThyssenKruppSAP

HenkelHeidelbergCement

BeiersdorfFresenius Medical Care

Deutsche BörseDeutsche Post

AdidasInfineon Technologies

Deutsche TelekomAverageVonovia

Munich ReDaimler

Deutsche BankVolkswagen

BayerSiemens

Deutsche LufthansaAllianz

Continental

E.ONCovestro

BASFFresenius SE

WirecardRWE

BMW

50403020100 60 70 80

191PY: 178

×14PY: x15

AverageLowest Highest

Shareholder and employee representatives; full year; sorted by average compensations

No data available


4. The 2019 ranking


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


Breadth of experience2

DAX 30 assessment: Method and average grades over time

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

1. Toughening of requirements in ‘breadth of experience’ starting 2016. Without this change the average grades from 2016 on would be lower by 0.22. 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

40x

45 50x

55x

60 65x

20%

Gender percentages

Age distribution

Position burden

Nationalities/experience

Tenure

40%

10%

10% 10%

10%

Diversity

2011 2012 2013 2014 2015 2016 2017 2018 2019

1 2

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)

2.92.7 2.6

2.4 2.3 2.4 2.3 2.2

2.0

✓

✓✓

✓

✓


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.

Arrow indicates tendency resulting from change between 2019 and 2018

▪ All assessments according to German school scoring system (1=best .. 6=worst)

▪ Data sources: company websites, online available CVs and biographical data

▪ Diversity includes gender percentages (left arrow) and internationality (right arrow)

▪ “Range of experience“ weighted double

▪ “Change 2019” takes into account missed opportunities for improvement due to reelections

2019 Details

Company

Ranking 2019

Ranking 2018

Ranking 2017

Ranking 2016

Avggrade 2019

Avggrade 2018

AgeTenure

DiversityRange of

experiencePosition burden

Change2019

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

SAP 1 16 10 5 1,5 2,2 1,5 2 1 2 2

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

Bayer 6 3 5 10 1,8 1,8 1,5 1,5 2 2 2

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

E.ON 6 8 3 5 1,8 2,0 3 2 1 2 NA

Linde 6 16 16 23 1,8 2,2 1 3 1 3 2

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

BASF 12 25 21 27 1,9 2,5 2 2,5 1 3 3

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

ThyssenKrupp 12 27 27 27 1,9 2,6 1,5 2 2 2 2

Wirecard 12 1,9 2 1,5 2 2 3

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

BMW 20 20 21 23 2,1 2,3 3 2,5 1 3 2

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

Volkswagen 24 24 21 15 2,5 2,4 2 2,5 3 2 3

Merck 27 30 26 21 2,6 3,0 2 3 3 2 5

Adidas 28 13 10 3 2,7 2,1 2 2,5 3 3 4

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


5. Outlook


Road ahead: Institutional investors set emphasis

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

Board Quality and Composition

Board Oversight of Corporate Culture

Investors Limiting Shareholder Primacy

Environmental, Social and Governance (ESG) Risk

Activist Investing

1. Based on 40 Russell Reynolds Associates interviews with globally leading institutional investors

Gender diversity, relevant director skills, composition refreshment, and board evaluations

are key indicators of board quality.

Investors are keen to learn how boards go about understanding corporate culture and how they

engage with management on the topic.

The role of corporations in many countries is evolving to include meeting the needs of a

broader set of stakeholders.

The priority for investors will be linking sustainability to long-term value creation and

balancing ESG risks with opportunities.

Activist investors are using various strategies to achieve their objectives. The question is no longer

if, but when and why, an activist gets involved.


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 Hamburg.

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DAX 30 Supervisory Board Study 2019 Selected results · This year [s increase in international supervisory board members results mainly from the Linde-Praxair merger. The DAX 30significantlylags