5. Diversity

One of the main concerns of good corporate governance is to ensure that appointments to the Supervisory Board, the Executive Board, and the two management levels below the Executive Board are appropriate to the specific needs of the business. To ensure this, the Executive Board and Supervisory Board of KION GROUP AG developed a joint diversity concept in 2017 and last amended it at the beginning of 2022.

Key criteria in this regard include, on the one hand, the professional and personal skills and qualifications of the members of the Supervisory Board, the Executive Board, and the two management levels below the Executive Board and, on the other hand, diversity in the composition of these two boards and two management levels – including an appropriate degree of female representation – and the independence of the Supervisory Board. In detail, this means that:

Composition of the Supervisory Board

Objectives for the composition of the Supervisory Board

In 2017, the Supervisory Board laid down specific requirements and objectives for its composition in recognition of the responsibilities and obligations assigned to it and taking into account the business needs of KION GROUP AG. These determinations were last reviewed and adjusted in February 2022. Besides having the minimum professional skills required to be a Supervisory Board member, as specified by law and the highest courts, all members of the Supervisory Board of KION GROUP AG should meet the following criteria:

• Identification with the fundamental values and beliefs of KION GROUP AG: integrity, collaboration, courage, and excellence
• Positive attitude toward the basic principles of responsible corporate governance
• Personal integrity and a responsible approach to dealing with potential conflicts of interest
• Ability to devote the expected amount of time required and compliance with the limit on the number of mandates that may be held at any one time

Other targets set by the Supervisory Board with regard to its composition are a standard age limit of no more than 70 at the time of appointment / election.

All of the current Supervisory Board members meet these requirements.

Profile of skills and expertise for the Supervisory Board

In connection with the objectives for its composition, the Supervisory Board also defined a profile of skills and expertise for itself in 2017. This profile is regularly reviewed as part of the Supervisory Board’s self-assessment. It was most recently reviewed in February 2022 and adjusted in line with the Company’s current requirements: Expertise and experience in environmental, social, and corporate governance (ESG) matters and expertise in alternative energies have been added to the profile with effect from 2022. The expertise area ‘in-depth understanding of the markets in Asia’ has been made more specific, and such expertise is now required to include an in-depth understanding of the Chinese market.

In the Supervisory Board’s opinion, when there is an objective of ensuring diversity in the composition of a board, there should be a focus on the skills and expertise of individual members and the balanced combination geared towards the company requirements of the personal qualities, experience, qualification, and knowledge represented in the Supervisory Board. Against this backdrop, the Supervisory Board developed a profile of skills and expertise. Accordingly, the following skills and expertise should be represented in the form of knowledge acquired through practically acquired experience and / or professional / academic training and knowledge (expertise):

In its current composition, the Supervisory Board covers the profile of skills and expertise.

Independence of the Supervisory Board members

In 2020, the Supervisory Board defined what it considers to be an adequate number of independent Supervisory Board members. Accordingly, five shareholder representatives on the Supervisory Board should be independent of the Company and Executive Board (see recommendation C.7 of the GCGC). Dr. Macht, Mr. Ring, Dr. Reuter, Ms. Behrendt, Ms. Xu, and Dr. Dibelius are currently independent of the Company and Executive Board. Ms. Xu does not have any business and / or personal relationships with KION GROUP AG or any of its subsidiaries; the Supervisory Board views her role as an advisor to the anchor investor Weichai (through Weichai Power (Luxembourg) Holding S.à r.l., Luxembourg, a subsidiary of Weichai Power Co., Ltd., Weifang, People’s Republic of China) as unproblematic in this context. Dr. Dibelius has been a member of the Supervisory Board of KION GROUP AG since 2007, but the Supervisory Board still considers him to be independent. He has no business or financial ties to the Company or Executive Board.

Two shareholder representatives on the Supervisory Board should also be independent of the controlling shareholder (see recommendation C.9 of the GCGC). The Supervisory Board considers four shareholders to currently be independent of the anchor investor Weichai: Mr. Ring, Dr. Reuter, Ms. Behrendt, and Dr. Dibelius.

As regards the employee representatives, the Supervisory Board believes their role as representatives of the employees does not, per se, compromise their independence.

Diversity of the Supervisory Board

As 31.25 percent of the Supervisory Board members were female (five of the 16 members), the Supervisory Board met the statutory requirements regarding gender representation on supervisory boards pursuant to section 96 (2) AktG in 2021.

The shareholder representatives and the employee representatives are agreed that attaining the objectives in relation to diversity, in particular the objectives relating to the involvement of women and people from different cultural backgrounds, is considered to be in the interests of KION GROUP AG and a task that forms part of the collective responsibility of the entire Supervisory Board. The Supervisory Board therefore supports the inclusion of additional female members and members from different cultural backgrounds who meet the above criteria insofar as the skills requirements are met.

Nomination of Supervisory Board members

In the process to nominate suitable candidates for the Annual General Meeting’s election of four shareholder representatives to the Supervisory Board, the Nomination Committee and the Supervisory Board took all of the aforementioned targets, the profile of skills and expertise, and the diversity concept into consideration so that they were all covered. When proposing candidates to the Annual General Meeting in the future, the Nomination Committee and Supervisory Board will again take all of the aforementioned targets and the diversity concept into account and strive to ensure that the profile of skills and expertise is still achieved.

The Nomination Committee and Supervisory Board have no influence on the composition of the group of employee representatives on the Supervisory Board because the employees in Germany are free to choose whom they elect.

Composition of the Executive Board

Against the background of the aforementioned diversity considerations as well as demographic requirements and strategic operating challenges, the Supervisory Board strives for diversity at Executive Board level. This particularly includes appropriate female representation, but also a broad range of experience, skills, expertise, cultural backgrounds, internationality and personality.

When implementing these objectives during the process of appointing successors or recruiting for a new position, the Supervisory Board draws up a shortlist of candidates who appear to be suitable for the Company as a result of their strategic management experience, expertise, skills, and qualifications. Demographic criteria (including the standard retirement age of 65 for Executive Board members) and diversity criteria are then also taken into account.

In 2017, the Supervisory Board set the target for the minimum proportion of women on the Executive Board of KION GROUP AG at 0 percent, to be achieved by December 31, 2021. The specification of this type of target is required by the German Act on the Equal Participation of Women and Men in Leadership Positions in the Private and Public Sectors (FührposGleichberG). In 2021, one of the six Executive Board members was female (Ms. Anke Groth). The proportion of women on the Executive Board of KION GROUP AG was therefore 16.67 percent as at December 31, 2021, which meant that the target was achieved.

As the other five members of the Executive Board were male in fiscal year 2021, KION GROUP AG complies with the statutory minimum shareholding requirement set out in section 76 (3a) of the AktG, which stipulates that in a listed company with a supervisory board on which shareholders and employees are equally represented, the executive board must have at least one woman and one man as members if it has more than three members in total.

Long-term succession planning for the Executive Board

When required, the Executive Committee examines – sometimes in consultation with the Chief Executive Officer – the long-term succession planning for the Executive Board (section 7 (4) of the rules of procedure for the Supervisory Board). The Executive Committee holds four regular meetings per year. When required, long-term succession planning is included on the agenda for Executive Committee meetings. Under this agenda item, the committee discusses general parameters, such as the planning horizon, the identification of required skills and qualifications, and the internal talent pool. An external consultancy assists the Executive Committee with long-term succession planning where required.

In the year under review, the Executive Committee – with support from an external consultancy – dealt extensively with the succession planning for the Chief Executive Officer Gordon Riske, who resigned from the Executive Board with effect from the end of December 31, 2021 because he would be reaching the standard retirement age. In August 2021, Dr. Richard Robinson Smith was appointed to take over as the new Chief Executive Officer of KION GROUP AG with effect from January 1, 2022.

Appointments to management positions below the level of the Executive Board of KION GROUP AG

When selecting candidates for senior management levels, the Executive Board generally considers that it is under an obligation to make such selections on the basis of diversity, capability, character, and experience. As regards the number of women appointed to senior management positions in the Company, the Executive Board is striving in its implementation of the new KION 2027 strategy to increase the proportion of women in management positions. Going forward, the KION Group intends to fill more management positions internationally in order to better fulfill the continually growing requirements placed on the Company.

Target achievement as at December 31, 2021

In June 2017, the Executive Board set a target of 10 percent for the first management level below the Executive Board of KION GROUP AG and of 30 percent for the second management level, to be achieved by December 31, 2021.

At the end of 2021, by which date these targets had to be achieved, two of the 17 executives at the first management level (11.8 percent) and 20 of the 99 executives at the second management level (20.2 percent) were female. This means that the target for the first management level was reached, but the target for the second management level was not.

The main reason for not achieving the target at the second management level was the small proportion of women coming up through the ranks within the Group. Another reason was that there was only a low number of qualified female applicants for vacancies that were filled with external candidates. Management positions are predominantly filled with talented employees who are recruited from within the Group and, to this end, have received support and skills training. This enables the Group to offer long-term development prospects to its employees. As around half of the senior roles call for a technical background, recruiting female candidates from within the Group is challenging because the shortage of women with a university degree in a technical subject means that the development pipeline from junior through to more senior levels can only be filled to a very limited extent by hiring or promoting women.

New targets for the period up to December 31, 2026

The Executive Board is maintaining its targets and, in November 2021, set a target of 10.5 percent (two female managers) for the first management level below the Executive Board of KION GROUP AG and of 29.2 percent (27 female managers) for the second management level for the period January 1, 2022 to December 31, 2026.

Action to increase the proportion of women

The Executive Board continues to believe in supporting the development of talented female employees but, based on past experience, sees it as a particular challenge to recruit them in the heavily male-dominated applicant market, particularly in disciplines with a strong technical focus. As this market is not expected to change fundamentally, the Company intends to step up its employer branding in order to make the KION Group more attractive to talented external female candidates who have not previously been particularly interested in technology-oriented companies.

A range of instruments is used for the development of high-potential employees within the Group. The structure and supervision of these instruments prevent potential discrimination against female employees or systematically help women to build on their personal strengths. The main instruments in the first category are the annual Organization Capability Talent Review (OCTR) and structured employee development programs, such as the KION Transition to Management Program (KTMP). The latter include the Female Mentoring Program, in which the Company’s high-potential female employees are systematically coached by managers from the highest management level in the Company. A greater focus on the next generation of talented female employees is underpinned by the selection process for KION’s management trainee program and the targeting of talented external female candidates in the recruitment process. Finally, ‘diversity and inclusion’ has been explicitly added to the KION Group’s HR strategy as a focus topic for the years ahead.

KION GROUP AG is also an active member of the initiative ‘Chefsache. Drive the Change – For Men and Women’, in which it is actively represented by Ms. Anke Groth. This network of companies and leaders from industry and science, the public sector, and the media advocates equal opportunities for women and men. By participating in this initiative, KION GROUP AG’s ambition and objective is to promote the change of mindset that is required throughout society by exploring new concepts and approaches.