Board of Directors (BoD)

The duties and responsibilities of the BoD of dormakaba Holding AG are defined by the Swiss Code of Obligations, the Articles of Incorporation and the company’s Organizational Regulations.

BoD members

The BoD of dormakaba Holding AG has ten members. Other than Riet Cadonau, all members are non-executive. None of the non-executive BoD members have sat on the Executive Committee (EC) of dormakaba Holding AG, Kaba Group or Dorma Group at any time in the last five financial years. Riet Cadonau has been CEO of dormakaba Group since 2015 (and from 2011 to 2015 CEO of Kaba Group) and was elected as BoD Chair in 2018.

Other than Riet Cadonau, no BoD members have significant business relations with dormakaba Holding AG. The maximum number of mandates that BoD members are allowed to take on the governing bodies of legal entities outside dormakaba is regulated in section 27 of the Articles of Incorporation. The following table lists the name, year of birth, date of joining the BoD, gender and nationality of the individual BoD members.

BoD members as of 30 June 2019

Elections and terms of office

The BoD of dormakaba Holding AG is elected by the General Meeting, with each member standing for election individually. The Articles of Incorporation state that the BoD shall have between five and ten members. Prospective members shall be elected for a one-year term of office up to the conclusion of the next AGM. BoD members can be re-elected. The Organizational Regulations provide that when they reach 70 years of age, BoD members shall resign at the next AGM.

Subject to his re-election as Chair of the BoD by the upcoming AGM in October 2019, Riet Cadonau will continue to serve in a dual role as Chair and CEO, remaining CEO for a period of one to maximum two years. During this period, he will not be a member of any Board committees of the company and will not receive any compensation for his role on the BoD. The BoD intends to re-nominate Hans Hess as the Vice-Chair and Lead Independent Director subject to his re-election as BoD member at the upcoming AGM. This measure will continue to ensure that the BoD exercises independent control and supervision.

Internal organization

According to the Swiss Code of Obligations and dormakaba Holding AG’s Articles of Incorporation and Organizational Regulations, the main responsibilities of the BoD are:

• The strategic direction and management of dormakaba Group;
• Structuring the accounting system, the financial controls, and the financial planning;
• Appointing and dismissing members of the EC;
• Overall supervision of business activities;
• Preparation of the Annual Report, preparation of the General Meeting, and implementation of its resolutions;
• Approving the signing authority of dormakaba Holding AG representatives;
• Approving the purchase and sale of companies, business areas or other assets worth more than CHF 10 million;
• Approving investments, purchases, and disposals of real estate worth more than CHF 10 million.

The relevant decisions are taken by the whole BoD. The CEO and CFO regularly participate in meetings of the BoD in an advisory capacity. Other EC members are brought in to advise on individual items of the agenda. The BoD held seven meetings during the 2018/19 financial year; these lasted around six hours on average. All BoD members attended each meeting except four Directors who were excused for one meeting each and three Directors who were each partly excused for one meeting. In addition, the Board’s committees met 14 times in total. The agendas for Board meetings are defined by the Chair following consultation with the Lead Independent Director. Each BoD member may propose agenda items. BoD members always receive documentation prior to Board meetings so they can prepare for discussion of each item on the agenda. The BoD holds discussions with the company’s managers and visits one or more dormakaba Group locations, usually on an annual basis.

Committees

The BoD has formed an Audit Committee, a Compensation Committee, and a Nomination Committee. Members of the Compensation Committee are elected at each AGM. Each committee has written terms of reference that define its tasks and responsibilities. The chairs of these committees are elected by the BoD. The committees meet regularly and are obliged to produce minutes as well as recommendations to the regular Board meetings. Committee meeting agendas are defined by the committee chair. Members of the committees receive documentation prior to the meetings so they can prepare for discussion of agenda items.

Audit Committee

The Audit Committee is composed of three non-executive BoD members, who have professional or other experience of financing and accounting:

• Daniel Daeniker (Chair)
• Hans Gummert
• Hans Hess

The BoD has specified that members of the Audit Committee must meet certain requirements with regard to independence and skills and that they must not be EC members. The term of office is until the conclusion of the next AGM; members may be re-elected. The Audit Committee meets at least twice a year but will be convened by the chair as often as business requires. During the 2018/19 financial year, the Audit Committee held six meetings lasting between one hour to three hours. All members of the Audit Committee attended each meeting. The CFO takes part in the meetings in an advisory capacity, as do, where necessary, the CEO, representatives of the audit firm, representatives of Internal Audit and of the Accounting Department, and the General Counsel. In the 2018/19 financial year, representatives of the audit firm participated in three meetings, external consultants, representatives of Internal Audit and the General Counsel in four, and representatives of the Accounting Department in six. The Audit Committee minutes the deliberations and decisions taken during meetings. The principal responsibilities of the Audit Committee are to evaluate risk management and accounting processes, monitor financial reporting and internal auditing, and assess external audits. With regard to external audits, the Audit Committee has the following responsibilities:

• Approval of the audit priorities;
• Acceptance of the audit report and of any recommendations made by the auditors prior to the submission of the annual accounts (individual and consolidated financial statements) to the whole BoD for approval;
• Proposing to the whole BoD which external auditor should be recommended to the AGM;
• Assessing the external auditor’s performance, pay, and independence, and checking that audit activities do not clash with any consultancy mandates.

The Audit Committee’s tasks relating to internal audits include:

• Approving the rules on internal audit’s organization and responsibilities;
• Approving audit plans;
• Checking the results of the audits and implementing the recommendations of the internal or external auditor;
• Transferring (if necessary) internal auditing activities to third parties or to the external auditor in an expansion of its audit activities;
• Monitoring the existing Internal Control System (ICS). Compliance with Management Information System guidelines, compliance with guidelines on limiting legal risk, and optimizing the risk profile through insurance. In individual cases, external specialist auditors may be brought in to help;
• Auditing the compliance report;
• Monitoring outstanding legal proceedings;
• Evaluating and monitoring business and financial risks.

The risk management system periodically records legal, operational, financial, and business risks. Legal risks include current or potential legal disputes; operational risks include scenarios such as operational failures and natural disasters; whereas business risks include for instance payment defaults or general negative market developments. Risks are quantified and weighted with regard to their likelihood and their possible financial and/or business impact. Preventative measures that have been planned or already implemented are also subject to review. Risks are recorded if they have a potential financial impact of CHF 2.5 million or more. The Audit Committee regularly reports to the BoD as a whole about its activities, and it notifies the BoD immediately about important matters.

Nomination Committee

The Nomination Committee consists of three non-executive BoD members:

• Hans Hess (Chair)
• Rolf Dörig
• Hans Gummert

The term of office for each member is until the conclusion of the next AGM; members may be re-elected. The Nomination Committee meets at least once a year. During the 2018/19 financial year, the Nomination Committee met four times, such meetings lasting approximately one hour each. All members of the Nomination Committee attended each meeting, except one member who was excused for one meeting. The CEO and the Senior Vice President Group Human Resources usually take part in the meetings in an advisory capacity. The Nomination Committee sets out the principles for appointing and re-electing BoD members and submits proposals to the BoD about its composition. The Nomination Committee also recommends the appointment and de-selection of EC members; the final decisions on appointments and de-selections are taken by the BoD as a whole. The Nomination Committee minutes its deliberations and decisions and regularly reports to the whole BoD.

Compensation Committee

The organization and members of the Compensation Committee as well as the details of the compensation policy of dormakaba are set out in the Compensation Report. During the financial year 2018/19, the Compensation Committee held four meetings of approximately one hour to two hours each. All members of the Compensation Committee attended each meeting.

Powers and responsibilities

Management organization

The BoD has the highest responsibility for business strategy and supervises management of dormakaba. It has the highest decision-making authority and sets the strategic, organizational, financial planning, and accounting rules that dormakaba must follow. The BoD has delegated management of ongoing business to the EC under the leadership of the CEO. Therefore, the CEO is responsible for overall management of dormakaba. The powers and functions of the EC are set out in the Organizational Regulations of dormakaba Holding AG. The CFO, the COOs, the CTO (Chief Technology Officer), and the CMO (Chief Manufacturing Officer) report to the CEO, who is responsible for overall management and for alignment between segments and functions. These roles have a seat on the EC.

Lead Independent Director

Together with the dual role of BoD Chair and CEO, the BoD established the role of Lead Independent Director (LID) in year 2018. This role is specifically designed to ensure the independence of the BoD from the BoD Chair and CEO and is equipped with competencies that are defined in the Organizational Regulations. The LID

• has a say in the agenda of the Board meetings
• leads private sessions without the participation of the BoD Chair and CEO at each BoD meeting
• chairs in matters related to the BoD Chair and CEO and in case of potential conflicts of interest of the BoD Chair and CEO
• has direct access to all EC members
• can mandate independent reviews by external experts when required.

Chief Executive Officer (CEO)

The CEO manages dormakaba. He is responsible for all the things that are not allocated to other company bodies by law, by the Articles of Incorporation or by the Organizational Regulations. After consulting with the EC, the CEO submits the strategy, the long- and medium-term objectives and the management guidelines for dormakaba to the BoD for approval. In response to a proposal by the CEO, the BoD decides on the annual budget and the medium-term plan, which covers a three-year period, individual projects, and the consolidated financial statements of dormakaba. The CEO submits recommendations to the Nomination Committee about personnel issues at the EC level. The CEO also makes proposals to the Compensation Committee regarding the remuneration of EC members (including allocation of shares from the share allocation plans). The CEO regularly reports to the BoD about business performance, anticipated important business issues and risks, as well as about changes in management at the operating segment level. BoD members may request and examine further information. The CEO must inform the LID immediately about any important unexpected developments.

Information from and control over the EC

The Management Information System of dormakaba works as follows: monthly, quarterly, semi-annual, and annual financial statements (balance sheet, income statement and cash flow statement) are prepared based on the Group’s individual reporting units. These figures are consolidated for each segment and for the Group as a whole. The financial figures are compared with the prior year and the budget. The achievability of the budget, which shows the first year of the medium-term plan for each reporting unit, is assessed against the monthly financial statements and in the form of quarterly forecasts. The CEO and CFO submit monthly written financial reports to the BoD about progress against the budget and comparisons with the prior year. At monthly meetings (monthly performance reviews) the segment heads (COOs) inform the CEO and the CFO about business performance and notable events based on written reports about e.g. achievement of budget targets. At BoD meetings, a summary of these reports is discussed and assessed with the CEO and the CFO.

Skills and expertise of the BoD

In line with the guideline of the Swiss Code of Best Practice for Corporate Governance for a well-balanced representation, the BoD members have a broad spectrum of educational background, professional skills and expertise as well as personal qualities from a range of industries.
In addition to age, gender, geographic and tenure diversity, the BoD assesses its level of diversity based on a skills matrix established by its Nomination Committee:

The skills matrix includes the following professional skills/expertise:

• Executive leadership experience
• Corporate governance/compliance skills
• Strategic industry and technology skills
• Financial skills
• Digital business model experience

as well as several personal attributes.

All required competencies are represented in the BoD with emphasis on executive leadership experience as well as strategic industry and technology skills. The BoD intends to further strengthen its competence in the digital transformation area in the future.

For details on age, gender, geographic and tenure diversity, we refer to the table ‘BoD members as of 30 June 2019’. For details on the range of business sectors represented by the Board members, we refer to their biographies.

The Nomination Committee annually reviews the composition of the BoD and the Board committees based on the abovementioned characteristics of its members as well as on dormakaba’s strategy, business profile, risks, and opportunities in order to determine the need to propose changes to the AGM.

Events after balance sheet day

On 27 June 2019, dormakaba announced that it had signed an agreement to acquire Alvarado Manufacturing Co. Inc., based in Chino (CA/USA). Alvarado is a leading manufacturer of physical access solutions in North America. The transaction was concluded on 31 July 2019.