2. Corporate governance practices

The corporate governance of KION GROUP AG is essentially determined by the provisions of the German Stock Corporation Act and the German Codetermination Act. It also follows the recommendations and suggestions of the GCGC. KION GROUP AG complied with all but one of the GCGC’s recommendations in the reporting period.

Another aspect of key importance besides these fundamental principles is the KION Group’s own understanding of transparent, responsible, and sustainable corporate governance, taking account of the societal expectations of all stakeholders in each of the markets in which the Company operates. One of the KION Group’s objectives under its KION 2027 strategy is to use the resources available to it in the individual parts of the Company responsibly and sustainably. The KION Group’s actions are therefore guided by environmental, social, and economic considerations. Details of the KION Group’s sustainability strategy and non-financial Group report as required by law can be found in the 2023 sustainability report, which will be published at www.kiongroup.com/sustainability.

2.1  Human rights

The KION Group is committed to respecting human rights worldwide. Within the scope of its corporate responsibility and sphere of influence, the KION Group wants to play its part in promoting and protecting such rights, for example in the way that it treats its employees, suppliers, and customers. The KION Group adheres to external standards and adopts its own policies and guidelines in order to prevent violations of human rights. In its employment and commercial relationships – and therefore both internally and in the supply chain – the KION Group views human rights as the minimum standard to be upheld as a matter of course. It follows the definition set out in the United Nations’ Guiding Principles on Business and Human Rights, i.e. in the Universal Declaration of Human Rights (available on the UN website), as codified by the signatory states in the International Covenant on Civil and Political Rights (ICCPR), the International Covenant on Economic, Social and Cultural Rights (ICESCR), and the principles and rights at work prescribed in the eight fundamental conventions of the International Labour Organization (ILO) (available from the ILO website).

Details of the processes used by the KION Group to protect human rights can be found in the 2023 sustainability report, which will be published at www.kiongroup.com/sustainability, and on the KION Group website, under ‘Sustainable development goals’.

2.2  Compliance, risk management, and internal control system

The KION Group builds its long-term success on the application of a set of practices and processes that are standardized across the Group and are based on the compliance management system, a risk-oriented internal control system, and proactive risk management.

Compliance management system

As a company with operations around the world, the KION Group has corporate social responsibility toward its customers, suppliers, employees, financial backers, other business partners, and the general public. This corporate social responsibility requires the KION Group, everywhere and at all times, to comply with all applicable laws and internal policies – some of which go further than the law – and to respect ethical values and act as sustainably as possible. To help it to do this, the KION Group has put in place a comprehensive compliance management system (CMS), centering around the KION Group Code of Compliance. The CMS provides a methodological, structured framework for the performance of early-warning, risk control, advisory, and monitoring tasks.

Details of the compliance management system can be found in the section ‘Compliance’, which is part of the combined management report.

Internal control system

The KION Group 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 financial reporting, the efficiency of the Company’s business operations, and compliance with key legal provisions and internal policies.

For its accounting process, the KION Group has defined appropriate structures and processes as part of its internal control and risk management system that are required to be implemented throughout the Group. The accounting-based internal control and risk management system includes written policies and procedures, compliance with the double-checking principle, and approval procedures. Another particularly important aspect, the separation of functions, has been integrated into processes and systems. 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 of the key features of the internal control system can be found in the ‘Risk report’, which is part of the combined management report.

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 risks that have been recorded are managed on an ongoing basis, reviewed quarterly, and reassessed after action to mitigate them has been taken.

The procedures governing the KION Group’s risk management system are laid down in a groupwide risk management policy. This policy defines the tasks, processes, and responsibilities and sets out the rules for identifying, assessing, reporting, and managing risk. The risk management policy features a comprehensive risk catalog, which also covers environmental, social, and corporate governance (ESG) risks. Specific individual risks are then reported by each Group entity. Reporting on cross-segment risks and groupwide risks is carried out at Group level by the central Risk Management function and the relevant Group functions.

Further details on the risk management system can be found in the ‘Risk report’, which is part of the combined management report.

Appropriateness and effectiveness

The Executive Board of KION GROUP AG has created a framework based on three systems – the internal control system, the risk management system, and the compliance management system – that is designed to make internal control and risk management and the measures implemented under the systems both appropriate and effective. In addition, the systems are subject to regular monitoring and reviews by third parties. External audits are carried out, as are reviews by the Internal Audit function, which reports on its findings to the Executive Board and the Supervisory Board’s Audit Committee.

The internal control system and the risk management system are dynamic systems that are adapted on an ongoing basis, for example to reflect changes to the business model, the nature and scope of business transactions, and the allocation of responsibilities. Furthermore, the need to improve the systems’ appropriateness and effectiveness in certain areas is identified during the annual assessments conducted by those in charge of the control functions, during the analyses conducted by Internal Audit, and in connection with the auditor’s audit work.

The complex internal process and system landscape and the ever-changing statutory requirements mean that the internal control system for non-financial aspects is less well developed than the accounting-related internal control system. As part of its work on fulfilling the reporting requirements in the Corporate Sustainability Reporting Directive (CSRD) regarding sustainability management, the Company is planning to take steps to formalize the system and develop it further in the coming year. One of the steps planned for risk management from 2024 onward is to increase the focus on latent risk and measures to manage it.

Based on the examination of internal control and risk management and on Internal Audit’s reporting, there were no indications for the Executive Board of KION GROUP AG in 2023 that the internal control system and the risk management system are, overall, not appropriate or not effective, taking the Company’s business activities and risk position into consideration. Nonetheless, restrictions that are inherent in any control and risk management system must be taken into account. A system that is judged to be appropriate and effective, for example, does not guarantee that all risks that materialize will have been identified beforehand. Nor does it guarantee that risks that are identified beforehand will not materialize.

2.3  Financial reporting and the audit of the financial statements

Pursuant to section 315e (1) HGB, the KION Group’s financial reporting is based on International Financial Reporting Standards (IFRS) as adopted by the European Union. KION GROUP AG’s separate financial statements are prepared in accordance with the requirements of German law, taking German accounting standards into consideration.

The Company’s independent auditor, which is appointed by means of a resolution of the Annual General Meeting, audits the separate financial statements prepared by the Executive Board of KION GROUP AG, the consolidated financial statements, and the combined management report.

As required by law, the auditor is appointed by the Annual General Meeting. A new auditor was appointed for the 2023 financial year: At the Annual General Meeting on May 17, 2023, KPMG AG Wirtschaftsprüfungsgesellschaft (KPMG), Berlin, was appointed to audit the separate and consolidated financial statements for 2023 and to review the condensed consolidated financial statements and interim group management report for the first half of 2023 (initial appointment in 2023). Dr. Stephanie Dietz has been the KPMG lead auditor since 2023. In 2022, the lead auditor from Deloitte GmbH Wirtschaftsprüfungsgesellschaft had been Stefan Dorissen.

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 auditor reviews the condensed consolidated interim financial statements and condensed interim group management report in the half-year financial report. It also reviews 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.

2.4  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. Even the mere appearance of such a conflict of interest must be avoided. 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 without undue delay and must also inform the other Executive Board members. Members of the Executive Board may only take on other posts, especially on supervisory boards at companies outside the KION Group, with the approval of the Supervisory Board. All transactions between KION GROUP AG and Executive Board members or related parties must be disclosed and concluded on an arm’s-length basis.

Every Supervisory Board member must disclose potential conflicts of interest to the chairman of the Supervisory Board without undue delay; the chairman of the Supervisory Board must disclose such conflicts of interest to the chairman of the Audit Committee without undue delay. Where a conflict of interest is material and not merely temporary, the Supervisory Board member in question must resign.

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 46.5 percent (as at December 31, 2023) 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 setting internal rules for communications. All business partnerships, for example for procurement purposes, are formed solely on arm’s-length terms. Every year, the Executive Board also publishes a dependency report in line with the relevant requirements that is reviewed by the Supervisory Board and the statutory auditor. The report contains information on all legal transactions and activities conducted in the reporting year between KION GROUP AG and Weichai Power Co., Ltd., as well as their subsidiaries, and on any requirement to compensate for disadvantages that have arisen.

In the reporting year, the members of the Executive Board and Supervisory Board did not have any conflicts of interest that they would have needed to disclose to the Supervisory Board without undue delay. There were also no consultancy contracts or other service contracts or contracts for work that had been entered into between the members of the Supervisory Board and the Company. The posts that the members of the Executive Board and Supervisory Board hold on supervisory boards that are required to be formed by law and on comparable supervisory bodies of commercial enterprises in Germany and abroad are listed in the notes to the separate financial statements of KION GROUP AG. Related party disclosures are made in the notes to the KION Group’s consolidated financial statements under ‘Related party disclosures’.

2.5  Managers’ transactions

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 2023:

As far as KION GROUP AG is aware, the only members of the Supervisory Board with shares in KION GROUP AG as at December 31, 2023 were Mr. Martin Fahrendorf and Mr. Jan Bergemann. Members of the Supervisory Board have not entered into any commitment to purchase shares in KION GROUP AG.

2.6  Corporate communications and transparency

Transparent corporate governance has a high priority for the Executive Board and Supervisory Board. Regular and timely information about the KION Group’s situation and results, as well material changes to its business, is provided to shareholders, shareholders’ groups, all capital market participants, financial analysts, relevant media, members of the public with an interest in the Company, and employees. 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. KION GROUP AG makes further information available at the financial statements press conference and 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 also uses the internet for reporting purposes. It publishes extensive information on the Group at www.kiongroup.com, including the rules of procedure for the Supervisory Board, KION GROUP AG’s articles of association, and all press releases. 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.

2.7  Shareholders and Annual General Meeting

The shareholders of KION GROUP AG exercise their rights during the Annual General Meeting, i.e. their right to speak and their right to vote. Every shareholder is entitled to participate in the Annual General Meeting.

Each share confers one vote in the voting at the Annual General Meeting. Shareholders can either exercise their voting rights themselves or appoint a third party to exercise their voting rights for them. The Executive Board is authorized to determine that shareholders can cast their votes in writing or by means of electronic communication (absentee voting). Resolutions of the Annual General Meeting require a simple majority of the votes cast, unless stipulated otherwise by mandatory provisions of law.

The Annual General Meeting, at which the Executive Board and Supervisory Board give an account of the previous year, is held in the first eight months of each financial year. The German Stock Corporation Act also states that an Extraordinary General Meeting can be held in special cases. The chairman of the Supervisory Board chairs the Annual General Meeting. The notice and agenda for the Annual General Meeting, including the reports and documents required for the Annual General Meeting by law, are published on the Company’s website from the day on which notice is given.

The Annual General Meeting votes on all matters set out in the agenda on which it is required by law to vote, primarily the appropriation of profit, the election of Supervisory Board members, formal approval of the acts of the Supervisory Board and Executive Board members, the appointment of the independent auditor, changes to the Company’s articles of association, and corporate actions. It also decides on whether to approve the Executive Board remuneration system presented by the Supervisory Board, on the remuneration of the Supervisory Board, and on whether to approve the remuneration report prepared by the Executive Board and Supervisory Board.

For the first time since the coronavirus pandemic, the Annual General Meeting was held as an in-person event in accordance with statutory requirements in 2023. KION GROUP AG’s shareholders were able to submit recommendations or other opinions by letter or email or by presenting them in person. The Executive Board and/or Supervisory Board responded directly during the Annual General Meeting. Shareholders were also able to shape proceedings at the Annual General Meeting by submitting countermotions or requests for additions to the agenda.