Why German companies should embrace the role of lead independent director

Stewardship Principles Why German companies allianzgi.com should embrace the role of lead independent director July 2022 Recent examples of German supervisory boards adding the role of lead independent director (LID) are useful role models for their peers. A LID can help strengthen trust and improve communication between boards and investors. Additionally, it should foster independent, transparent and well-communicated succession planning, which can be lacking among German companies. Antje Stobbe From a governance perspective, we favour Head of Stewardship a clear division of responsibility at the top Key takeaways of companies and a system of checks and – A LID provides an independent point balances on the board. Furthermore, we see of contact for other board members, value in having more than one channel of company executives, investors and communication and engagement between other stakeholders who may be boards and investors. unable or unwilling to raise issues The 2021 voting season saw the start in directly with the chairperson the German market of what could prove a – Within Germany’s existing two-tier new development across the country: two system of corporate governance there listed companies installed lead independent is a place for a LID, which does not directors (LIDs) on their supervisory boards2. conflict with the deputy chairperson As is typical in Germany, both have a two-tier position typically nominated by board structure and in both cases the existing employees chairperson was considered non-independent. – The LID should ideally chair the 1 One case was Siemens Energy whose new nominating committee and lead chairperson was a former CEO of its parent the process of appointing the company. In the other firm – Fresenius Medical chairperson’s successor, which Care – the chairperson had been a member of includes consultations with investors the board for more than 20 years3. 1 Nominating and governance committees are a group of board members who are responsible for the selection of board members as well as ensuring good governance practices. 2 The supervisory board and management board are the two-tiers of board structure predominantly observed with German companies. 3 Disclaimer: issuer companies are named for illustrative purposes only, this shall not be deemed an offer to sell or a solicitation of an offer to buy any security, strategy, investment product or services nor shall this constitute investment advice or recommendation. Value. Shared.