Corporate Governance

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3. Board of Directors

We refer to the Articles of Association and Organisational Regulations of Zehnder Group AG set out on our website www.zehndergroup.com/en/investor-relations/corporate-governance.

Skills and expertise of the Board of Directors

In accordance with the Swiss Code of Best Practice for Corporate Governance for a balanced composition of the Board of Directors, the members of the Board of Directors have a broad range of educational backgrounds, professional experience and technical expertise from various branches.

Alongside the diversity of ages, genders and geographic origins, the Board of Directors evaluates its own level of diversity using a competence matrix drawn up by the Nomination and Compensation Committee. This matrix contains the following professional skills and expertise:

International business management (including China and North America);
Corporate governance/compliance/law;
Finance/audit/risk management;
Heating, ventilation, air conditioning (HVAC)/related industries;
Strategy/transformation/M&A;
Information technology/digitalisation, including new business models (driven by digitalisation);
Personnel management and compensation;
Sustainability – environmental, social and governance (ESG).

Evaluation of the Board of Directors’ competence is based on the three most important skills of each member of the Board of Directors. The Nomination and Compensation Committee verifies the composition and balance of the Board of Directors annually by way of self-evaluation on the basis of the features listed above and the strategy of the Zehnder Group, in order to obtain confirmation of whether the Board of Directors remains in possession of the necessary skills and expertise to exercise its duties. The results and any resulting recommendations are discussed within the Board of Directors.

All the skills required are present within the Board of Directors, with the main emphasis being on strategy/transformation/M&A, international business management (including China and North America) and corporate governance/compliance/law and with additional reinforcement required in the area of digitalisation. The Board of Directors therefore proposes to the Annual General Meeting on 7 April 2022 to bring in Sandra Emme as a new, independent member of the Board of Directors. Sandra Emme has wide digitalisation expertise in a global, technological and stock market-quoted environment.

Details of the professional background and education of the individual members of the Board of Directors as of 31 December 2021 are set out as biographical data under the following item 3.1 Members of the Board of Directors.

3.1 Members of the Board of Directors

Dr Hans-Peter Zehnder

Chairman of the Board of Directors

Swiss citizen, born 1954
First elected 1988
Non-executive member since 2019

Professional background and education

1993–31.10.2014 and 5.2.–31.12.2018 Chairman of the Group Executive Committee, CEO of the Zehnder Group, Gränichen (CH)
1988–1992 Vice Chairman of the Group Executive Committee, head of the radiator division of the Zehnder Group, Gränichen (CH)
1985–1988 Member of the Group Executive Committee, head of the instrument division (1986–1988) of the Zehnder Group, Gränichen (CH)
1981–1984 Head of Finance, Gebr. Bühler AG, Uzwil (CH)
1974–1980 Dr. oec. HSG, University of St. Gallen (CH)
Until the end of 2018 he was part of Zehnder Group AG management.
He retains individual directorships of subsidiaries that are being transferred to the CEO Matthias Huenerwadel. Beyond this, he has no significant business relations with Zehnder Group AG or its subsidiaries.

Other activities and vested interests

Chairman of the Board of Directors of R. Nussbaum AG (CH), member of the Board of Directors of AZ Medien AG (CH), CH Media AG (CH) and Lagerhäuser der Centralschweiz AG (CH)
Chairman of the Board of Directors of Graneco AG (CH), which together with its shareholders holds 51.7% of Zehnder Group AG voting rights

Jörg Walther

Vice Chairman of the Board of Directors

Swiss citizen, born 1961
First elected 2016
Non-executive member
Chairman of the Audit Committee

Professional background and education

Since 2010 Business lawyer and partner, Schärer Attorneys at Law, Aarau (CH)
2010–2012 General Counsel and Head Corporate Services, member of the Executive Committee, Resun AG, Aarau (CH)
2001–2009 Senior Corporate Counsel, Global Head Legal M&A and Antitrust, member of the Group Legal Executive Committee, Novartis International AG, Basel (CH)
1999–2001 Group Vice President M&A, ABB Asea Brown Boveri AG, Zurich (CH)
1995–1998 Senior Corporate Counsel, ABB Schweiz AG, Baden (CH)
1991–1995 Legal Counsel/General Counsel and Head Legal Services, Danzas Management AG, Basel (CH)
1999 MBA University of Chicago (USA), Booth School of Business
1997 Advanced Management Programme, University of Oxford (UK)
1993 Post-graduate certificate in European Economic Law, University of St. Gallen (CH)
1990 Admitted to the bar
1989 Lic. iur., University of Zurich (CH)
At no time was he a member of the Group Executive Committee of Zehnder Group AG or of any of its subsidiaries.
Until end of 2020, he provided Zehnder Group AG and its subsidiaries with legal advice on commercial matters. Since then, he has no significant business relations with Zehnder Group AG or with any of its subsidiaries.

Other activities and vested interests

Chairman of the Board of Directors of Proderma AG (CH), Vice Chairman and member of the Audit and Finance Committee of AEW Energie AG (CH), member of the Board of Directors and member of the Audit Committee of HUBER+SUHNER AG (CH) and SFS Group AG (CH), member of the Board of Directors of Immobilien AEW AG (CH) and Kraftwerk Augst AG (CH)
Member of the Board of the swissVR association (CH)

Dr Urs Buchmann

Member of the Board of Directors

Swiss citizen, born 1957
First elected 2010
Non-executive member
Member of the Nomination and Compensation Committee
Member of the Audit Committee

Professional background and education

Since 1985 Long-term career at Credit Suisse in corporate and investment banking in Asia and in servicing institutional customers in the Asia-Pacific region, currently Vice Chairman of Credit Suisse (Hong Kong) Ltd.
1977–1984 Studied law (doctorate) at the University of Bern (CH)
At no time was he a member of the Group Executive Committee of Zehnder Group AG or of any of its subsidiaries.
He has no significant business relations with Zehnder Group AG or with any of its subsidiaries.

Other activities and vested interests

Member of the Board of Directors of Swiss Re Asia Pte. Ltd. (SG)

Riet Cadonau

Member of the Board of Directors

Swiss citizen, born 1961
First elected 2013
Non-executive member
Chairman of the Nomination and Compensation Committee

Professional background and education

2015 until March 2021 CEO, dormakaba Group, Rümlang (CH)
2011–2015 CEO, Kaba Group, Rümlang (CH)
2007–2011 CEO, Ascom Group, Dübendorf (CH)
2005–2007 Managing Director, ACS Europe + Transport Revenue (later a Xerox company), Glattbrugg (CH)
2001–2005 Member of the Executive Board, Ascom Group, Bern (CH), from 2002 Deputy CEO and General Manager of the Transport Revenue Division, which was acquired by ACS in 2005
1990–2001 Various management positions at IBM Switzerland, Zurich (CH), most recently as a member of the Management Board and Director of IBM Global Services
2007 Advanced Management Programme at INSEAD (FR)
1985–1988 Master of Arts in economics and business administration (lic. oec. publ.), University of Zurich (CH)
At no time was he a member of the Group Executive Committee of Zehnder Group AG or of any of its subsidiaries.
He has no significant business relations with Zehnder Group AG or with any of its subsidiaries.

Other activities and vested interests

Chairman of the Board of Directors of dormakaba Group (CH), member of the Board of Directors of Georg Fischer AG (CH) and Logitech International S.A. (CH)

Ivo Wechsler

Member of the Board of Directors

Swiss citizen, born 1969
First elected 2019
Non-executive member
Member of the Audit Committee

Professional background and education

Since 2010 Chief Financial Officer and member of the Executive Group Management, HUBER+SUHNER Group, Herisau (CH)
2008–2010 Head Corporate Controlling, HUBER+SUHNER Group, Herisau (CH)
2001–2007 Head Corporate Controlling and from 2005 in addition Head Corporate Treasury, Ascom Group, Bern (CH)
1998–2000 Controller, from 1999 Head of Controlling & Treasury at Sunrise Communications, Rümlang (CH)
1995–1997 In Corporate Finance at Schweizerische Bankgesellschaft (UBS), Zurich (CH)/London (UK)
1989–1994 Lic. oec. HSG, University of St. Gallen (CH)
At no time was he a member of the Group Executive Committee of Zehnder Group AG or of any of its subsidiaries.
He has no significant business relations with Zehnder Group AG or with any of its subsidiaries.

Other activities and vested interests

No other activities and vested interests

Milva Zehnder

Member of the Board of Directors

Swiss citizen, born 1985
First elected 2016
Non-executive member
Member of the Nomination and Compensation Committee

Professional background and education

Since 2013 Attorney-at-law and notary, Schweiger Attorneys at Law and Notaries, Zug (CH)
2010–2011 Legal intern, Schweiger Attorneys at Law and Notaries, Zug (CH)
2008–2009 Legal assistant, Geissmann Attorneys at Law, Baden (CH)
2012 Admitted to the bar, attorney-at-law and notary in the canton of Zug (CH)
2005–2010 Law studies at University of Lucerne (CH) with a Master of Law degree
2009 Exchange semester at Fordham University, School of Law, New York (USA)
At no time was she a member of the Group Executive Committee of Zehnder Group AG or of any of its subsidiaries.
She has no significant business relations with Zehnder Group AG or with any of its subsidiaries.

Other activities and vested interests

Representative of the Zehnder family shareholders

3.2 Other activities and vested interests

Other activities and vested interests are outlined in the short profiles of the members of the Board of Directors under the previous item 3.1 Members of the Board of Directors. Beyond these activities, the members of the Board of Directors do not have any dealings with important institutions, hold ongoing executive or advisory roles for interest groups, or hold any official function or political office.

3.3 Rules in the Articles of Association on the number of permitted activities

Under Article 30 (Other permitted activities) of the Articles of Association, the members of the Board of Directors are permitted to undertake the following additional activities in the supreme management or administrative bodies of legal entities obligated to be listed in the commercial register in Switzerland or an equivalent register in another country and which are not controlled by the company, do not control the company or are not occupational pension schemes subscribed to by employees of the Zehnder Group:

Maximum of 5 mandates as member of the Board of Directors or member of other supreme management or administrative bodies of companies which are public corporations according to Article 727 Para. 1 Item 1 of the Swiss Code of Obligations; as well as

Maximum of 10 mandates as member of the Board of Directors or member of other supreme management or administrative bodies of companies as defined in Article 727 Para. 1 Item 2 of the Swiss Code of Obligations; as well as

Maximum of 15 mandates as member of the Board of Directors or member of other supreme management or administrative bodies of legal entities which do not meet the criteria outlined above.

Mandates with companies which are controlled by the same entity, or which are subject to the same commercial authorisation, are counted as a single mandate.

3.4 Elections and terms of office

Article 20 (Employees and term of office) of the Articles of Association lays down that the Board of Directors is made up of at least three members elected by the Annual General Meeting for a period of one year. Re-election is permissible.

At the Annual General Meeting, there is a separate vote on the election or re-election of each candidate.

For details of the initial election of the individual members of the Board of Directors we refer to the short profiles of the Directors under 3.1 Members of the Board of Directors.

3.5 Internal organisational structure

The Chairman (Dr Hans-Peter Zehnder) or his deputy (Jörg Walther) convenes and chairs the meeting. The Board’s duties are carried out by the entire Board. Managerial and monitoring tasks are delegated to ad hoc Board committees at regular intervals. For each meeting, all Board members receive relevant documentation one to two weeks in advance. In 2021, the Board held seven meetings or conference calls: in February (two), March, June, July, September and December. The meetings lasted between one day and two and a half days, the conference calls between 15 minutes and six hours. The attendance rate averaged 95%.

The members of the Group Executive Committee attended the Board meetings and participated in the conference calls as required. Representatives of the auditors or external consultants are called in to advise on individual items on the agenda. To allow the Board to acquire local information directly, a regular rhythm has been established of holding one of the Board meetings on the premises of an operating company of the Group. Due to the COVID-19 pandemic, no visits were made to any subsidiaries during 2021.

The Board of Directors is supported by a Nomination and Compensation Committee and an Audit Committee.

Nomination and Compensation Committee

The Nomination and Compensation Committee is made up of at least two and not more than four members of the Board of Directors who are each elected annually by the Annual General Meeting. Members are eligible for re-election.

The Nomination and Compensation Committee comprised the following members as of 31 December 2021:

Riet Cadonau, Chairman;
Dr Urs Buchmann, member;
Milva Zehnder, member.

The Nomination and Compensation Committee meets as often as the business requires, generally before the meetings of the full Board of Directors. In 2021, the Committee held four meetings: in February, March, September and December. The meetings lasted two hours each on average. The attendance rate was 100%.

The Nomination and Compensation Committee has its own regulations, which are approved by the Board.

The Nomination and Compensation Committee has the following specific duties pursuant to 4.3 (The Nomination and Compensation Committee) of the Organisational Regulations:

Submission of motions to the full Board of Directors relating to the Group’s remuneration system;
Submission of motions to the full Board of Directors relating to targets set for the Group Executive Committee, the achievement of which has an impact on remuneration paid;
Provision of information to the Board of Directors about all events relevant to the Nomination and Compensation Committee that are not directly within the competence of the Board of Directors;
Submission of motions to the full Board of Directors relating to the specific remuneration paid to the Chairman of the Board of Directors and each of the other members of the Board of Directors;
Submission of motions to the full Board of Directors relating to the specific remuneration paid to the CEO as well as the specific remuneration paid to each of the other members of the Group Executive Committee;
Submission of motions to the full Board of Directors relating to changes to the Articles of Association affecting the remuneration system compensating the members of the Group Executive Committee;
Submission of proposals to the Board of Directors relating to the appropriate size and balanced composition of the Board of Directors and determining the criteria for independence;
Development and presentation of criteria for election or re-election to the Board of Directors or for appointment as a member of the Group Executive Committee;
Evaluating potential members of the Board of Directors on the basis of the defined criteria and making a statement to the Board of Directors regarding their nomination for the attention of the General Meeting;
Assessment of proposals from the CEO to the Board of Directors regarding the appointment or dismissal of members of the Group Executive Committee and, if necessary, submission of a statement to the Board of Directors;
Approval of employment contracts with the CEO and the other members of the Group Executive Committee;
Review of succession and contingency planning at Group Executive Committee level;
Submission of proposals to the entire Board regarding the approval of mandates and other additional occupations of members of the Group Executive Committee.

Further details can be found at item 1.2 Nomination and Compensation Committee of the Compensation Report.

Audit Committee

The Audit Committee consists of at least two members of the Board of Directors. The Board of Directors appoints the members of the Committee each year and designates the Chairperson.

The Audit Committee comprised the following members as of 31 December 2021:

Jörg Walther, Chairman;
Dr Urs Buchmann, member;
Ivo Wechsler, member.

The Audit Committee convenes at the invitation of the Chairman as often as is required by business activities. Audit Committee meetings are attended as guests by the Chairman of the Board of Directors, the Chief Executive Officer, the Chief Financial Officer, the Director Group Controlling, the Head of Internal Audit & Compliance and representatives of the external auditor. Where necessary, the Audit Committee addresses certain items on the agenda solely with representatives of the external auditor and/or internal auditing staff. In 2021, the Audit Committee convened four times: in February, July, September and December. The meetings lasted an average of two hours. The attendance rate was 100%.

Pursuant to 4.2 (The Audit Committee) of the Organisational Regulations, the Audit Committee has the following specific tasks and responsibilities:

Evaluation of external auditors and recommendations for the attention of the Board of Directors regarding selection of an auditor by the Annual General Meeting;
Performance assessment of the incumbent auditor and approval of the remuneration budget for auditing submitted by the external auditor;
Organisation of internal auditing and appointment of the internal auditor; commissioning of work and assessment of performance;
Review and approval of auditing plans from internal auditing and the external auditor;
Approval of any services rendered by the external auditor that are not related to auditing;
Consultation with the Group Executive Committee and the external and internal auditors regarding significant risks, contingencies and other obligations of the Group, as well as evaluation of the measures taken by the Group to deal with them;
Review and discussion of the annual and interim financial statements of the company and of the Group – including significant items not recognised in the balance sheet – with the relevant members of the Group Executive Committee;
Discussion of the results of the annual review with the external auditor and discussion of internal audit reports, as well as issuing of any recommendations or proposals to the Board of Directors;
Evaluation of and ensuring cooperation between the external and internal auditors.

Chairman

The Chairman of the Board of Directors chairs the meetings of the Board of Directors and the Annual General Meeting.

Alongside membership of the Board of Directors, the Chairman's specific remit includes, in particular:

Monitoring the planning and organisation of the Annual General Meeting;
Monitoring the enactment of the resolutions made at the Annual General Meeting and meetings of the Board of Directors;
Monitoring the running of the business together with the Chairman of the Group Executive Committee;
Representing the Company towards shareholders and third parties;
Preparing the meetings of the Board of Directors;
Monitoring the organisation and decision-taking procedures of the Board of Directors.

In extraordinary situations where it is not possible to inform the Board of Directors in advance, further to consultation with the Vice Chairman or, in his or her absence, with another member of the Board of Directors, the Chairman has the authority to make all necessary decisions provided that such decisions are within the framework of existing business policy. The full Board of Directors must be informed of such decisions without delay.

Vice Chairman

The Board of Directors appoints the Vice Chairman. The Vice Chairman supports and advises the Chairman of the Board of Directors in relation to his responsibilities and powers. Together with the Chairman, he promotes balanced management and monitoring within the Group, Board of Directors and Committees. The duties of the Vice Chairman include chairing meetings of the Board of Directors during temporary absence or incapacity of the Chairman. He has the role of Lead Independent Director. Together with the Nomination and Compensation Committee, he is responsible for regular monitoring and an annual assessment of the Chairman of the Board of Directors.

Alongside membership of the Board of Directors, the Chairman's specific remit includes, in particular:

Ensuring readiness at all times to act as deputy to the Chairman of the Board of Directors;
Overseeing the management and development of key strategic projects;
Acting as contact person (alternatively to the Chairman of the Board of Directors) for important shareholders, investors and proxy advisers;
Conducting the annual performance evaluation of the Chairman of the Board of Directors as well as the self-assessment of the entire Board of Directors;
Chairing ad hoc committees of the Board of Directors in matters that do not fall within the remit of the Chairman of the Board of Directors;
Supporting the Chairman of the Board of Directors in the management of the company, in particular during special situations and in crisis situations;
Approving the appointment of contact persons for external consultants who report directly to the Board of Directors;
Conducting a preliminary review, together with or as an alternative to the Chairman of the Board of Directors, of the documents made available to the full Board of Directors;
Attending meetings of Board committees as chair, member or guest.

As an alternative to the Chairman of the Board of Directors, particularly in case of his absence or incapacity, the Vice Chairman is the point of contact for corporate governance and risk management, and also represents the Company in respect of shareholders and other external groups of stakeholders.

3.6 Definition of areas of responsibility

The allocation of the areas of responsibility between the Board of Directors and the Group Executive Committee is based on the law (Swiss Code of Obligations), on the company’s Articles of Association and on its Organisational Regulations.

Insofar as provision to the contrary has not been made in law, in the Articles of Association or in its Organisational Regulations, the Board of Directors delegates management of the business completely to the Group Executive Committee.

The Board of Directors is responsible for the overall management of the company, supervision and control of the Group Executive Committee. It issues guidelines for business policy and is kept regularly informed of the course of business.

The Board of Directors is the supreme authority in the context of the management structure of the Group. Insofar as is permitted by law, the Board of Directors has the right of initiative, power of oversight and ultimate decision-making authority over the Group companies.

3.7 Information and control instruments vis-à-vis the Group Executive Committee

The Board of Directors is regularly informed of the activities of the Group Executive Committee and business units via various channels.

Management information system (MIS)

As part of regular reporting practice, the Board of Directors receives monthly reports (income statement, key figures, commentary) and quarterly reports (expanded to include balance sheet, cash flow statement, investments, etc.). In addition, the Board members receive a quantified medium-term plan and a detailed budget analysis. The Group Executive Committee members attend the meetings of the Board of Directors and also the conference calls depending on requirements, reporting to the Board of Directors.

Risk management process

Operating under the guidance of the CFO, the Zehnder Group has a structured risk management process which has been approved by the Board of Directors and systematically monitors risks to the business. In this process, strategic and operational risks are identified every year, including all the sites and function areas, and analysed in terms of both probability of occurrence and severity, and key risks are defined. Appropriate measures for minimising and monitoring these risks are then set out. The Board of Directors reviews and approves the risk report once a year. Each member of the Group Executive Committee is responsible for implementation of the measures in his or her area of responsibility. The Audit Committee supports the Board of Directors in the monitoring of business risks and the assessment of measures introduced by the Group Executive Committee. The Board of Directors is informed periodically of significant changes to the risk assessment as well as being kept abreast of risk management activities that have been undertaken.

The financial risks are monitored by the Treasury department of the Zehnder Group under the guidance of the CFO. Risk management focuses on identifying, analysing and mitigating currency, interest, liquidity and counterparty risks, in order to limit the extent to which they can impair cash flow and net profit.

Internal audit

Internal auditing is an independent and objective auditing and advisory activity which is aimed at evaluating and improving the efficiency of the corporate management, risk management and internal controlling. It is undertaken by the Head of Internal Audit & Compliance, who reports to the Chairman of the Board of Directors and with regard to this role reports directly to the Audit Committee.

Based on the audit plan approved by the Audit Committee, the Group companies are audited at regular intervals for general and specific issues on the basis of ongoing risk assessment. During the year under review 12 internal audits were carried out. The audit reports agreed with the managements of the audited companies or the responsible functions are distributed to the Chairman of the Board of Directors, the Audit Committee, the Group Executive Committee and the external auditors . The Head of Internal Audit & Compliance ensures that the points brought up are dealt with and sustainable adjustments made under the responsibility of the line organisation. He attends the meetings of the Audit Committee. Any material findings resulting from internal audits are presented and discussed.