The role of the administrative, management and supervisory bodies (GOV-1)

The following table shows the composition and diversity of the members of the administrative, management and supervisory bodies. In our company, this includes the Executive Board and the Supervisory Board of Merck KGaA, Darmstadt, Germany, as well as the Board of Partners of E. Merck KG, Darmstadt, Germany:

Due to specifics of the corporate structure of Merck KGaA, Darmstadt, Germany, there are no executive or non-executive members in the relevant bodies but only members as such. All members have comparable rights and duties. The board’s gender diversity ratio reflects the average ratio of female to male board members.

The following table shows the share of members of administrative, management and supervisory bodies broken down by gender:

The following table shows the share of members of administrative, management and supervisory bodies broken down by age group:

Supervisory Board and the associated Audit Committee

Our Supervisory Board has 16 members and performs a monitoring function. It is composed of eight shareholder representatives and eight employee representatives.

The Audit Committee is part of the Supervisory Board and is composed of three representatives each of shareholders and employees, who are responsible for monitoring IROs. The committee is generally responsible for accounting and audit matters. Its other tasks include auditing the Annual Financial Statements, the Consolidated Financial Statements and the respective reports of the auditor as well as the half-year financial report and the quarterly financial statements. The tasks also include monitoring sustainability reporting. The Audit Committee is informed about the risk report at least once a year and about the status report on risk management at least twice a year. In addition, the committee informs the Supervisory Board about the Sustainability Statement at least once a year. Further meetings are convened as and when necessary. Regular updates and reports are to be provided using trend descriptions and benchmark values to show both the status quo and progress. In this way, the Supervisory Board and/or the Audit Committee monitor the sustainability goals and their achievement.

The Supervisory Board aims to optimally fulfill its control function through the diversity of its members. Their expertise covers aspects including various sustainability topics and is determined annually through a self-assessment of relevant criteria for Supervisory Board members using a qualification matrix. The latest self-assessment revealed that 15 members of the Supervisory Board have sustainability-related expertise. In the self-assessment, four members stated that they have good to very good knowledge in the field of sustainability, which is essentially based upon training courses, memberships in relevant associations and substantial practical experience in committees dealing with sustainability matters. These members possess specific expertise in topics such as climate change, social issues and corporate governance. This indicates that the Supervisory Board as a body has the appropriate skills and expertise to monitor sustainability aspects.

Executive Board

The Executive Board is made up of five members, whose areas of responsibility are listed in detail in the responsibility distribution plan of the Executive Board. The members of the Executive Board are jointly responsible for the management of the company. They work together on specialist matters and regularly brief one another on important matters in their areas of responsibility. This shared responsibility applies in particular to the areas of sustainability and risk management. As part of the individual management responsibilities defined in the responsibility distribution plan, the sustainability aspects of the company were assigned to the CEO until September 30, 2024, and have been the responsibility of the CEO of Healthcare since October 1, 2024. The Chief Financial Officer is responsible for the company’s risk management.

The Executive Board provides the Supervisory Board and its Audit Committee regularly, promptly and comprehensively about all company-relevant issues concerning strategy, planning, business development, the risk situation, risk management, and compliance. The rules of procedure of the Executive Board and of the Supervisory Board govern the further details and ensure that the Supervisory Board is kept adequately informed by the Executive Board.

The Executive Board has extensive knowledge of the key industries and business sectors in which the company operates. For each of the business sectors, Life Science, Healthcare and Electronics, there is at least one member of the Executive Board with in-depth expertise in accordance with the diversity concept. The Executive Board covers the full range of necessary industry experience. Furthermore, the Executive Board has a wealth of knowledge regarding the company’s main markets in Europe, North America and Asia-Pacific region and possesses management experience in Denmark, Malaysia, Singapore, Spain, the United Kingdom, and the United States. There are detailed reporting obligations below the Board level for senior executives who are specifically responsible for governance processes, procedures and controls.

The Executive Board exchanges information in regular meetings. At least once a year, members are informed about the work of the Human Rights Officer and the results of the human rights risk analysis. They also meet once a year to update the Group-wide policy statement on respecting human rights. Regular reporting monitors our targets and the achievement of the targets.

When identifying potential members for the Executive Board and when they are subsequently appointed by E. Merck KG, Darmstadt, Germany, we take into account, among other things, sustainability-related skills and expertise such as in-depth knowledge and experience regarding the requirements for the transformation toward climate-neutral business models and industry-specific expertise.

Board of Partners

The Board of Partners of E. Merck KG, Darmstadt, Germany, complements the competencies and activities of the Supervisory Board and, like the latter, fulfills an independent advisory and controlling function toward the Executive Board. It has three committees to which individual tasks can be delegated: the Personnel Committee, the Finance Committee and the Research and Development Committee. The whole of the Board of Partners is involved in the annual corporate planning, including the corporate strategy, where sustainability aspects such as IROs are taken into account.

In our company, unlike in joint stock companies, it is not the Supervisory Board but the Board of Partners of E. Merck KG, Darmstadt, Germany, that is responsible for the design and review of the remuneration system and for the level and composition of the remuneration of the Executive Board members. The Board of Partners has delegated this task to its Personnel Committee. In addition, the Board of Partners has to monitor the management performance of the Executive Board. It informs itself about the affairs of Merck KGaA, Darmstadt, Germany, and may inspect and examine the company’s accounts, other documents and assets for this purpose. Regular updates and reports, including a status quo report, are used to monitor the progress toward targets. The Board of Partners therefore monitors the targets and their achievement.

When appointing members of the Board of Partners, the Family Board of E. Merck KG, Darmstadt, Germany, takes into account competencies and expertise in relation to sustainability matters. With regard to the current members of the Board of Partners, expertise is largely based on internal and external training courses on sustainability matters as well as long-term experience from membership of relevant boards and committees. With regard to industry and product knowledge, the Board of Partners complements the expertise, experience and activities of the Supervisory Board with members who have in-depth expertise and experience in the Life Science, Healthcare and Electronics sectors as well as strong management and leadership abilities.

When selecting the administrative, management and supervisory bodies described above, we take into account sustainability-related expertise and competencies that are relevant to our identified IROs. Their expertise in this regard is available to the Group through knowledge transfer in the form of discussions, training and expert meetings.

Further information on the respective bodies can be found under “Statement on Corporate Governance” (content is not audited).