2. Corporate governance practices

The corporate governance of KION GROUP AG is essentially, but not exclusively, determined by the provisions of the German Stock Corporation Act and the German Codetermination Act. It also follows the recommendations of the GCGC. KION GROUP AG complied with all but two of the GCGC’s recommendations in the reporting period. These fundamental principles are combined with the KION Group’s commitment to sustainable business, taking account of society’s expectations in the markets in which the Company operates.

In 2021, the Executive Board and the Supervisory Board (or its committees) regularly discussed corporate governance issues in accordance with a rolling schedule of topics. This ensured that the key elements of corporate governance within the KION Group were always on the agenda at meetings of the Company’s main decision-making bodies. The Supervisory Board in particular complied with the supervisory duties incumbent upon it under the German Stock Corporation Act. The Supervisory Board’s Audit Committee, which was appointed to support this task, received regular reports on the accounting standards and associated processes, on changes to the regulatory environment and the internal control and risk management systems, and on the audit of financial statements and the effectiveness and quality of this, and then reported back to the Supervisory Board on these matters. Further duties assigned to the Supervisory Board were prepared, and related decisions made, by the other committees (primarily the Executive Committee, Remuneration Committee, and Nomination Committee) where permitted by law.

2.1 Internal control system

KION GROUP AG has an internal control system designed to meet the specific needs of the Company. Its processes are intended to ensure the correctness of the internal and external accounting processes, the efficiency of the Company’s business operations, and compliance with key legal provisions and internal policies. These control processes also include the Company’s strategic planning, where the underlying assumptions and plans are reviewed on an ongoing basis and refined as necessary.

2.2 Accounting-related internal control system

For its accounting process, the KION Group has defined suitable structures and processes as part of its internal control and risk management system and implemented them throughout the Group. Besides defined control mechanisms, it includes, for example, system-based and manual reconciliation processes, clear separation of functions, strict compliance with the double-checking principle, and written policies and procedures. The overarching aim is for the separate financial statements, consolidated financial statements, and combined management report to be fully compliant with the relevant statutory and regulatory requirements and, in particular, the applicable financial reporting standards. Changes to these requirements and standards are analyzed on an ongoing basis and taken into account as appropriate. Details can be found in the risk report, which is part of the combined management report.

2.3 Risk management system

For the Company to be managed professionally and responsibly, the Executive Board must use the risk management system established in the Company to regularly gather information about current risks and how they are evolving, and then report on this to the Supervisory Board’s Audit Committee. The KION Group’s risk management system is documented in a Group risk policy that defines tasks, processes, and responsibilities and sets out the rules for identifying, assessing, reporting, and managing risk. Specific individual risks are then reported by each Group entity using a reporting tool that is tailored to requirements. Reporting on cross-segment risks and groupwide risks is carried out by Controlling and the relevant Group functions. The risks that have been reported are reviewed on a quarterly basis and re-assessed until the reason for reporting a risk no longer exists or the risk has been mitigated.

2.4 Compliance management system

The Executive Board and Supervisory Board of KION GROUP AG consider that adhering rigorously to broad-ranging compliance standards is essential to the Company’s sustained financial success. That is why a detailed compliance program, centering around the KION Group Code of Compliance, has been set up for KION GROUP AG and its Group companies worldwide.

Responsibilities

The Executive Board of KION GROUP AG bears collective responsibility for the functioning of compliance management within the Group; the compliance department reports to the Chief Financial Officer of KION GROUP AG. The performance of compliance-related management duties has been delegated to the Chief Compliance Officer, who is responsible for the compliance organization that has been put in place. The presidents of the Operating Units are responsible for compliance within the operating business, while the functional managers are responsible for core administrative processes in the departments at the Group’s headquarters. The KION compliance department, the KION compliance team, and the KION compliance committee provide operational support to the aforementioned functions. The KION compliance department focuses mainly on preventing compliance violations by providing policies, information, advice, and training. It manages the KION compliance team, in which local and regional compliance officers of the Group are represented.

As part of its work, KION’s compliance department cooperates closely with the legal, internal audit, and human resources departments. The KION compliance committee, which is staffed by the heads of these departments and chaired by the Chief Compliance Officer, operates as a cross-functional committee that primarily advises on and examines reported incidents of non-compliance and, if appropriate, punishes incidents of misconduct.

KION Group Code of Compliance

The KION Group Code of Compliance, which is available in all of the main languages relevant to the KION Group companies, and the more detailed internal policies provide all employees, managers, and executives with clear and practical guidance on how to conduct the KION Group’s business in accordance with sound values and ethics and in compliance with the law. The principles of conduct laid down in the KION Group Code of Compliance are binding for all employees, managers, and executives worldwide. They form the basis of the KION Group’s compliance program. The KION Group Code of Compliance can be found online at www.kiongroup.com/compliance.

Compliance program

KION’s compliance program is made up of systemic management and control measures, specifically:

• The KION Group Code of Compliance
• The KION anti-bribery and anti-corruption policy, supplemented by anti-bribery and anti-corruption rules in the KION donations and sponsorship policy, the KION procurement policies, and the KION policy on conflicts of interest
• The KION policy on compliance with antitrust law
• Instructions on conduct in specific circumstances (e.g. how to deal with invitations and gifts at Christmas, how to act in respect of current fraud cases)
• Training plans and training courses prepared for specific risk groups, training courses for specific circumstances, on-demand training courses
• E-learning courses on the content of the KION Group Code of Compliance and on anti-corruption, anti-discrimination, data protection, KION’s values, and compliance with antitrust law
• Review of business partners
• Compliance due diligence in connection with M&A activities
• Request / help-desk management
• Descriptions for the reporting and handling of suspected infringements of the KION Group Code of Compliance; punishment of violations in the rules of procedure for the KION compliance committee

Compliance training

The training courses provide employees, managers, and executives with practical guidance on how to independently make professional decisions in compliance with internal and external rules and in line with the KION Group’s fundamental ethical values. The compliance training courses are offered in many different languages to ensure that participants understand them properly.

The KION Group’s compliance training concept takes a two-pronged approach consisting of e-learning and classroom-based training. As well as a general e-learning course on the content of the KION Group Code of Compliance, which is mandatory for every new employee, a new e-learning course on the anti-bribery and anti-corruption policy was rolled out in September 2020, followed by an e-learning course on respectful conduct in the workplace / anti-discrimination in April 2021. The anti-corruption e-learning course is aimed at all employees with access to a PC, for whom it is mandatory. Other mandatory training courses cover data protection, anti-discrimination, managerial conduct and, from 2022, conflicts of interest, anti-money laundering, competition law, special fraud matters, and trade compliance.

Classroom-based training has a range of target groups: employees without access to a PC, who attend a general training course on the content of the KION Group Code of Compliance, and certain groups of employees who are exposed to particular objective compliance risk due to the nature of their work, for example those exposed to heightened corruption risk because they have a lot of contact with customers. Classroom-based training is offered to employees depending on their level of risk. The frequency of classroom-based training depends on the particular risk group.

Whistleblowing system

A key component of the KION Group’s compliance management system is a whistleblowing system that employees and third parties can use to confidentially report actual or suspected cases of unlawful or inappropriate conduct. The KION Group offers a variety of reporting channels to internal and external whistleblowers in order to facilitate the identification of potential compliance breaches.

Actual or suspected incidents of non-compliance can therefore be reported anonymously or otherwise by contacting an external 24-hour compliance hotline, via web intake form, by sending an email or letter, by calling an internal KION Group hotline, or by contacting a compliance officer directly. The precise contact details can be found online at www.kiongroup.com/whistleblowing.

2.5 Audit of the financial statements

The Company’s independent auditors, which are appointed by means of a resolution of the Annual General Meeting, audit the separate financial statements prepared by the Executive Board of KION GROUP AG, the consolidated financial statements, and the combined management report. Since 2021, Mr. Stefan Dorissen has been the global lead service partner at the appointed independent auditors, Deloitte GmbH Wirtschaftsprüfungsgesellschaft (Deloitte). The separate financial statements, consolidated financial statements, combined management report, and non-financial report are discussed by the Audit Committee and then reviewed and approved by the Supervisory Board.

The independent auditors review the condensed consolidated interim financial statements and condensed interim group management report in the half-year financial report. They also review the non-financial report. The Executive Board discusses the two quarterly statements and the half-year financial report with the Audit Committee before they are published.

2.6 Avoiding conflicts of interest

Conflicts of interest between the governing bodies and other decision-makers in the Company or significant shareholders go against the principles of good corporate governance and may be harmful to the Company. KION GROUP AG and its governing bodies therefore adhere strictly to the GCGC’s recommendations on this subject. The employees of KION GROUP AG and its subsidiaries are made aware of the problem of possible conflicts of interest as part of compliance training and are bound by rules on how to behave in the event of actual or potential conflicts of interest.

Every Executive Board member must disclose potential conflicts of interest to the chairman of the Supervisory Board and the Chief Executive Officer immediately and must also inform the other Executive Board members. All transactions between KION GROUP AG and Executive Board members or related parties must be concluded on an arm’s-length basis.

The Company attaches high priority to preventing the risk of possible conflicts of interest from occurring in the first place. This is especially important given that Weichai Power Co., Ltd., Weifang, People’s Republic of China, indirectly holds a stake of 45.2 percent in KION GROUP AG. The Company achieves these aims by avoiding business scenarios or personnel structures that could give the impression of a possible conflict of interest and by taking transparent steps and issuing clear communications.

The Company’s former Chief Executive Officer, Mr. Gordon Riske, was appointed a non-executive director of Weichai Power Co., Ltd., with effect from June 24, 2013. On June 28, 2021, the term of his appointment was extended to June 27, 2024. The Supervisory Board had previously given its consent to this appointment. Appropriate precautions were taken to ensure that this role at a parent company of the Company did not create a conflict of interest relating personally to Mr. Riske, who was the Chief Executive Officer of KION GROUP AG up to and including December 31, 2021. Formal processes were put in place to ensure that Mr. Riske, in his role as a non-executive director of Weichai Power Co., Ltd., was not involved in transactions that could give rise to a conflict with the interests of the KION Group. Nor was Mr. Riske involved in transactions relating to the exercise of voting rights by Weichai Power Co., Ltd. or its subsidiaries at the Annual General Meeting of KION GROUP AG. It was ensured at all times that Mr. Riske maintained a strict separation between his duties as a non-executive director of Weichai Power Co., Ltd., and his duties as Chief Executive Officer of KION GROUP AG and fulfilled all of his legal obligations in the interests of the Company.

2.7 Directors’ dealings

Under the EU Market Abuse Regulation, the members of the Executive Board and Supervisory Board, and persons closely associated with them, are obliged to notify both KION GROUP AG and the German Federal Financial Supervisory Authority (BaFin) without delay of the transactions that they carry out involving shares or debt instruments of KION GROUP AG or related derivatives or other related financial instruments. Such a notification is always required as soon as the value of the purchase and / or sale transactions of the individual member exceeds the sum of €20 thousand within a calendar year. These notifications are published on the KION Group’s website at www.kiongroup.com/managers-transactions.

KION GROUP AG was notified of the following transactions in 2021:

As far as KION GROUP AG is aware, the only member of the Supervisory Board with shares in KION GROUP AG as at December 31, 2021 was Mr. Martin Fahrendorf. There is no voluntary undertaking for Supervisory Board members to purchase shares in KION GROUP AG.

2.8 Corporate communications and transparency

Shareholders, financial analysts, and other capital market participants, relevant media, and members of the public with an interest in the Company receive regular and timely information about the KION Group’s situation. The separate financial statements of KION GROUP AG, the consolidated financial statements of the KION Group and the combined management report are published within 90 days of the end of the financial year to which they relate. The half-year financial report and the quarterly statements of the KION Group are published within 30 days of the end of the quarter to which they relate. The KION Group makes further information available at the Annual General Meeting, during regular conference calls for analysts and investors, in press releases, on the Company’s website, and on social media. Company news with relevance for the share price is published as an ad hoc disclosure to ensure that all capital market participants are treated equally.

The KION Group’s website also includes a financial calendar, which is kept updated with the dates of significant publications and events, such as annual reports, half-year financial reports, and quarterly statements, Annual General Meetings, financial statements press conferences, and analysts’ meetings. The updated financial calendar is available on the KION Group’s website.