Objectives of the Supervisory Board with respect to its composition and profile of skills and expertise
According to section 5.4.1 of the German Corporate Governance Code, the Supervisory Board shall specify concrete objectives regarding its composition and prepare a profile of skills and expertise for the entire board. Within the scope of the company-specific situation, the composition of the Supervisory Board shall appropriately reflect the international activities of the enterprise, potential conflicts of interest, the number of independent Supervisory Board members, an age limit to be specified for the members of the Supervisory Board, a regular limit to be specified for the length of Supervisory Board membership, as well as diversity.
General notes on the composition of the Supervisory Board
The Supervisory Board of Merck KGaA currently comprises 16 members, eight of whom represent the shareholders and a further eight who represent the employees. The eight employee representative members are elected by employee delegates pursuant to the provisions of the German Co-determination Act (Mitbestimmungsgesetz – ‟MitbestG”). These consist of six company employees, including a senior executive, as well as two union representatives. The Supervisory Board has no statutory proposal right with respect to electing the delegates or employee representatives. Owing to a delegation right of E. Merck Beteiligungen KG, two of the eight shareholder representatives are specified. The Supervisory Board likewise has no statutory proposal right with respect to exercising this delegation right. The remaining six shareholder representatives are elected by the General Meeting. In accordance with section 124 (3) sentence 1 AktG, the Supervisory Board shall propose to the General Meeting Supervisory Board members for election. These proposals require a majority of the votes of the shareholder representative members of the Supervisory Board. The next scheduled election to the Supervisory Board shall take place at the 2019 General Meeting. The General Meeting is not required to follow the election proposals. The appointment objectives and competency requirements that the Supervisory Board sets forth below therefore do not represent requirements to be met by those eligible to elect or to delegate members. Instead, they are intended to express the objectives pursued by the Supervisory Board in office with regard to its advisory and monitoring functions.
For the Supervisory Board of Merck KGaA, professional qualifications and personal expertise are the two most important prerequisites for appointments to seats on the Supervisory Board. When proposing Supervisory Board candidates for election or delegation, the Supervisory Board will always give top priority to these prerequisites, which are essential for fulfilling its legal duties. Overall, the Supervisory Board’s policy is to optimally meet its monitoring and advisory duties by having diversity among its members. Diversity includes, in particular, internationality as well as different experience backgrounds and career paths. The proportion of women on the Supervisory Board is also considered to be an aspect of diversity. When preparing proposals for election or delegation, due consideration shall be given in individual cases to the extent to which different, yet complementary professional profiles, career and life experiences as well as appropriate representation of both genders can benefit the work of the Supervisory Board. Additionally, the Supervisory Board shall support the Executive Board in its efforts to increase diversity within the company.
Objectives of the Supervisory Board regarding its composition
In accordance with section 5.4.1 (2) of the German Corporate Governance Code, the Supervisory Board has specified the following objectives regarding its composition and reports on the status of implementation below:
The Supervisory Board shall have at least three members with business experience in the main sales markets of Merck KGaA. Currently, the main sales markets of Merck KGaA are Europe, North and Latin America, and Asia-Pacific. The present composition of the Supervisory Board satisfies this objective. More than three Supervisory Board members have entrepreneurial experience in Europe, in a large range of countries. More than three Supervisory Board members have experience in management positions in companies that operate globally.
Women on the Supervisory Board
Six women are currently members of the Supervisory Board of Merck KGaA. Accordingly, women make up 37.5% of the Supervisory Board. When nominating candidates for election to the Supervisory Board or making proposals for delegations, the Supervisory Board shall examine whether the percentage of women can be increased by suitable candidates. The Supervisory Board considers the 37.5% share of women members to be satisfactory at the present time. This applies both owing to the percentage of women in leadership positions at Merck as well as the fact that the supervisory boards of other companies have a comparable percentage of women.
Number of independent members/no material conflicts of interest
The Supervisory Board shall have an appropriate number of independent members. Assuming that the status of being an employee representative per se does not justify doubts with respect to the independence criteria within the meaning of section 5.4.2 of the German Corporate Governance Code, as a rule all employee representatives shall be independent within the meaning of the Code. In any case, at least four of the shareholder representatives on the Supervisory Board shall be independent. According to the Articles of Association of Merck KGaA, six members representing the shareholders are to be elected by the General Meeting and two members are to be delegated. Taking this and the special ownership structure of Merck into account, the Supervisory Board considers four shareholder representatives to be an appropriate number of independent members. In the Supervisory Board’s estimation, the objectives concerning independent members are met at the present time. The Supervisory Board considers the following members to be independent: Crocifissa Attardo, Mechthild Auge, Wolfgang Büchele, Gabriele Eismann, Michael Fletterich, Edeltraud Glänzer, Michaela Freifrau von Glenck, Siegfried Karjetta, Albrecht Merck, Dietmar Oeter, Alexander Putz, Helga Rübsamen-Schaeff, Gregor Schulz, Theo Siegert, Tobias Thelen, and Veit Ulshöfer. In particular, the Supervisory Board does not believe that membership of the Board of Partners of E. Merck KG conflicts with independence. The Board of Partners exists complementary to the competencies and the activities of the Supervisory Board. It is not to be expected that this will lead to material and not merely temporary conflicts of interest. It should also be taken into account that due to its substantial capital investment and unlimited personal liability, E. Merck KG has a strong interest in the businesses of Merck KGaA operating efficiently and in compliance with procedures, counteracting from the outset conflicts of interest between E. Merck KG and Merck KGaA and thus also corresponding conflicts of interest between the members of the respective corporate boards. Moreover, no one shall be proposed for election to the Supervisory Board who simultaneously serves on a board of or advises a major competitor of the company, or owing to another function, e.g. advisor to major contract partners of the company, could potentially become involved in a conflict of interest. No Supervisory Board member serves on a board of or advises a major competitor. No Supervisory Board member performs a function that could lead to a lasting conflict of interest.
As a rule, the members of the Supervisory Board shall not exceed the age of 75. This objective is met at the present time.
Regular limit on the length of Supervisory Board membership
The objective of the Supervisory Board regarding its composition is that as a rule, all members belong to the board for an uninterrupted period of no more than 15 years (corresponds to three regular terms of office). With one exception, this objective is also met at the present time.
Profile of skills and expertise
Additionally, in accordance with 5.4.1 (2) of the German Corporate Governance Code, the Supervisory Board has prepared a profile of skills and expertise and reports on the status of implementation below.
In-depth knowledge of the fields relevant to the company
The Supervisory Board shall have at least four members with in-depth knowledge and experience in fields that are important to the company, including at least one expert for the Healthcare and Life Science/Performance Materials sectors, respectively. This requirement is met at the present time. At present, the Supervisory Board has more than four members who have in-depth knowledge and experience of Healthcare and Life Science/Performance Materials sectors. Likewise, more than four Supervisory Board members have leadership experience in companies that also operate or exclusively operate in the Healthcare and/or Life Science/Performance Materials sectors.
The Supervisory Board shall have at least three members who have experience in managing or supervising a medium- or large-sized company. The Supervisory Board has more than three members who have the corresponding experience. This includes both Supervisory Board members who were or still are management board members or directors in such companies, as well as Supervisory Board members who have gained experience in supervisory boards of German and/or foreign companies of this size.
Knowledge of business administration
The Supervisory Board shall have at least four members who have in-depth knowledge of business administration. This requirement is met at the present time.
Experience in other supervisory or control boards
Lastly, the Supervisory Board shall have at least four members who have experience as members of other supervisory or control boards (whereby possible membership of the Board of Partners of E. Merck KG is not taken into account). This requirement is also met at the present time.