Why German companies should embrace the role of lead independent director An important addition to the governance framework Most importantly, the role should not be a substitute for the We believe the role of LID can add significant value in chairperson. Rather, it exercises a complementary set of the German system of two-tier, co-determined boards. powers and responsibilities in the interests of the company It should be an independent role that complements the and its investors. Once nominated, investors would chair of the supervisory board. The LID should always expect the two roles of chairperson and LID to establish chair the nominating committee but could also chair a constructive and practical division of responsibility that a combined nominating and governance committee supports the distribution of tasks required of the two with responsibility not only for succession planning and positions and helps them to exercise their roles effectively. shareholder concerns, but also for broader governance Clear disclosure is required on the role and responsibilities and litigation issues. of LIDs to assure investors about the scope of these tasks. The two-tier board structure typical in Germany – Supervisory body Reports to – Review and approve financial statements Supervisory – Shareholder and employee representatives – if subject Board to co-determination Annual – Typically includes audit committee, nominating committee, Elects shareholder shareholder and remuneration/compensation committee representatives meeting and ratifies Reports Appoints, to and oversees The two boards ecisions ta­en on areas informs and work together such as the advises closely to benefit supervisory the company – appropriation of net board income – ratification of the acts of the members of the managing and supervisory boards – the appointment of – Top management body Reports to independent auditors Managing – ecisions on basic issues of business policy, Board corporate strategy and annual and multi-year plans – reparation of financial statements Ratifies Source llian lobal nvestors To read more in our Stewardship Principles series, visit our corporate home page: https://www.allianzgi.com/en/ 3