Corporate Governance

In deviation from Section C.1 DCGK 2020, the Supervisory Board has not specified any specific targets to its composition. The Supervisory Board has not defined a competency profile for the entire body and accordingly has not published a qualification matrix or a status of implementation in the Declaration on Corporate Governance. The Supervisory Board believes that the composition of the board should be geared, first and foremost, to the interests of the Company, and should guarantee efficient support and monitoring of the Management Board. Accordingly, when appointing the Supervisory Board of Carl Zeiss Meditec AG, the priority shall therefore be to ensure that the members have the necessary capabilities, skills and specialist qualifications to properly fulfill their duties, and that they are independent. The Supervisory Board believes that the necessary competencies of the entire body been adequately considered.

Contrary to Section D.6, the members of the Management Board attend the meetings of the Supervisory Board in accordance with the Supervisory Board’s rules of Procedure, unless the Chairman of the Supervisory Board specifies otherwise. The Management Board provides the Supervisory Board with regular, up-to-date, comprehensive information, particularly about corporate strategy and planning, the development of business, the risk situation and management, compliance, the focus of innovation and about any deviations of business development from original planning, as well as important business transactions of the Company and major subsidiaries of the Group. The Supervisory Board uses its meetings for regular, detailed exchange with the Management Board. For certain issues, the Supervisory Board convenes alone during the plenary session.

According to the current state of discussions, the Management Board remuneration system resolved by the Annual General Meeting on 27 May 2021 and to be applied for all new Management Board contracts deviates from the following recommendations of the DCGK 2022:

Section G.4 states that in order to assess the customary practice within the Company, the Supervisory Board should consider the relationship of the remuneration of the Management Board to the remuneration of senior management and the workforce as a whole and also consider how this has developed over time. Contrary to this, the new remuneration system does not provide for any comparison of the remuneration of the Management Board with the remuneration of senior management and the workforce as a whole. As the remuneration of the Management Board is capped, its appropriateness in terms of the remuneration structure is not called into question. In the view of the Supervisory Board, a vertical comparison can therefore be dispensed with. In addition, the Supervisory Board does not consider a comparison with the compensation of senior executives and the workforce as a whole to be sufficiently meaningful. Due to the international nature of the Company, its various locations worldwide and the associated regional differences, salary structures are very different, which would not provide any meaningful transparency if compared with the remuneration of the Management Board.

According to Section G.6, the variable remuneration, which is determined based on the achievement of long-term objectives, should exceed the proportion of remuneration arising from short-term objectives. Contrary to this, under Carl Zeiss Meditec AG’s remuneration system, the inflow of funds from the Short-Term Incentive Program (STI) shall generally be higher than that from the Long-Term Incentive Program (LTI). However, the maximum amount achievable under the LTI may exceed the STI amount. The LTI and fixed remuneration as well as the selection of key performance indicators (KPIs) to be applied create and thus ensure a long-term incentive effect. In the Supervisory Board’s view, the current system has proved successful in the past.

Pursuant to Section G.8, a subsequent amendment of the targets or comparative parameters should be excluded. Although the principle is taken into account in the new remuneration system when adjusting the personal variable remuneration (STI component) during the year, it deviates in the STI financial targets and LTI parameters. It should be possible to adjust these components during the year due to special economic circumstances. In the view of the Supervisory Board, this option is appropriate in rare exceptional cases, as exceptional economic circumstances are always also made transparent in good time on the capital market and taken into account in the company forecast.

Contrary to Section G.10, under the remuneration system, variable remuneration amounts granted shall not be predominantly invested in shares of the Company or granted on a share basis, taking the respective tax burden into account. In addition, there is to be no uniform regulation that stipulates that the Management Board member may not access the long-term variable amounts granted until after four years. The Supervisory Board does not consider a share-based remuneration to be an improvement for a long-term incentive compared with the measurement of the sustainable value-added created in the Management Board objectives based on Economic Value Added (EVA®) and Free Cash Flow (FCF). The long-term incentive is sustainable through the LTI and the selection of KPIs. In the view of the Supervisory Board, the current system has proven successful in the past. The long-term variable remuneration is currently fixed for 3 years. This period is considered sufficient in terms of longevity and sustainability and is in line with the Company’s medium-term planning horizon in budget planning.

Section G.12 recommends, in the event of the termination of a Management Board contract, that the outstanding variable remuneration components attributable to the time remaining until the end of the contract be paid out in accordance with the originally agreed objectives and comparative parameters and in accordance with the due dates or holding periods specified in the contract. Contrary to Section G.12 and in the interest of simplifying the processing of early contract terminations, the inclusion of an average variable remuneration component should, in principle, be compensated with the severance payment under the remuneration system.

The Carl Zeiss Meditec Group practices responsible corporate governance geared to creating sustainable value.

This is based on the strong conviction that sustainable economic success is inextricably linked to compliance with laws and legislation and internal policies.

The close and efficient cooperation between the Management Board and Supervisory Board, open corporate communication and proper accounting also play an important role.

As a company of the ZEISS Group, Carl Zeiss Meditec AG is subject to the provisions of globally applicable Code of Conduct adopted back in 2007, in its current version dated April 2020, which stipulates and explains the basic rules for various areas of business activity. You will find this information on our website at https://www.zeiss.com/meditec-ag/investor-relations/declaration-on-corporate-management.html.

Carl Zeiss Meditec AG therefore strives not only to consistently achieve its best performance in technological terms but is also committed to adhering to the highest of standards in terms of abiding by the "rules" of good and fair conduct in competition and in dealing with employees and customers.

This Code of Conduct sets out the fundamental ethical principles and values of good conduct which govern the actions of both management and employees in their day-to-day work at the Company. The confidence of business partners, customers, shareholders, authorities and the general public, as well as our competitors in responsible, law-abiding conduct and moral integrity from all of the Group's and employees is of the utmost importance for the image and economic success of the Carl Zeiss Meditec Group and the appeal of the ZEISS brand.

As a company of the ZEISS Group, Carl Zeiss Meditec AG has a whistleblower system in place. A compliance case management process has been set up throughout the Group in order to be able to report compliance violations in a protected manner. In principle, reports should first be addressed to the manager, HR department or the responsible compliance officer. Alternatively, violations can be reported anonymously via an online portal called Integrity Line. Managers, HR managers and the compliance team take every report seriously. A systematic approach ensures that every report is processed.

Pursuant to Art. 19 MAR, members of the Management Board or Supervisory Board of Carl Zeiss Meditec AG must inform the Company and the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) about the purchase and sale of shares of Carl Zeiss Meditec AG.

At its meeting on 14 January 2013 the Supervisory Board passed the following resolution: In order to ensure a uniform position concerning shares of the Company held by members of the Supervisory and Management Board, to enable them to decide independently on personal investment matters and at the same time to prevent possible speculative action in the capital market, the Supervisory Board, in agreement with the Management Board, recommends that Supervisory and Management Board members and related individuals (persons with a close link as per Section 15a (3) WPHG) do not build up holdings of shares in the Company in the future. Concerning the existing share holdings of members of the Supervisory and Management Board and related individuals it is recommended that they sell these holdings in the medium term subject to the insider trading rules.

At the current time, no Company shares are held by members of the Management Board of Carl Zeiss Meditec AG. Shareholdings by members of the Supervisory Board amount to less than 0.1% of the outstanding share capital.

A key instrument of corporate governance at Carl Zeiss Meditec AG is its risk management system. This is a systematic process which enables the management uses to identify, evaluate and control risks and opportunities early on. The management uses the risk management system to identify unfavorable developments and their effects at an early stage and makes them transparent. This enables appropriate countermeasures to be introduced in a targeted and timely manner and also allows opportunities to be exploited efficiently at the same time. The risk and opportunity management system is continuously being improved and developed. Further information on the subject of risk and opportunity management can be found in Annual Report of Carl Zeiss Meditec AG on page 54.

The main responsibilities of the Management Board include strategy development and implementation. It is therefore responsible for operative business and ensures efficient risk management. The Management Board coordinates key decisions with the Supervisory Board. It also regularly provides the Supervisory Board with information about the Company, its environment, strategy and business growth.

The last vote on the new remuneration system for members of the Management Board was held by the Annual General Meeting on 27 May 2021, which approved the compensation system with 95.91%. The resolution on the confirmation of the remuneration and on the remuneration system for the members of the Supervisory Board was approved by 99.97%.

The remuneration of the members of the Management Board and the Supervisory Board is described in the remuneration system. This can be found on the following website: https://www.zeiss.com/content/dam/meditec-ag/financial-communication/hauptversammlung-2020-21/7_afx_agm_agenda_2021.pdf.

The full remuneration report for fiscal year 2021/22 can be found in our Annual Report 2021/22 on pages 74 et seqq.

The General and Personnel Committee deals with issues concerning the Company's strategic orientation and drafts the personnel-related resolutions of the Supervisory Board. The General and Personnel Committee is chaired by Dr. Karl Lamprecht. Other committee members are Renè Denner, Dr. Christian Müller and Dr. Christian Münster.

The Audit Committee is particularly concerned with auditing the accounting, monitoring the accounting process, the effectiveness of the internal control system, the risk management system and the internal auditing system, as well as the audit and its quality, and compliance. By resolution of the Supervisory Board meeting on 22 March 2023, Peter Kameritsch was elected Chairman and Torsten Reitze, Heike Madan and Renè Denner were elected members of the Audit Committee. Due to his work as Chief Financial Officer, Peter Kameritsch brings with him the necessary knowledge and experience in both accounting and auditing. In addition, Torsten Reitze's many years of experience as commercial director and currently as managing director also make him an expert in the field of accounting and auditing.

In the event of the appointment of new Supervisory Board members, the Nominating Committee proposes suitable candidates to the Supervisory Board for its candidate proposals to the Annual General Meeting. The Chairman of the Nominating Committee is Dr. Christian Müller. Other committee members are Dr. Karl Lamprecht and Isabel De Paoli.

The Mediation Committee is a committee to be established by law. Pursuant to Section 31 (3) of the German Co-Determination Act (MitbestG), it submits proposals to the Supervisory Board if a two-thirds majority is not achieved for the appointment or dismissal of Management Board members. The Committee meets only when required. The Mediation Committee is chaired by Dr Karl Lamprecht. The other committee members are Renè Denner, Jeffrey Marx and Torsten Reitze.

Pursuant to Section C.6 of the German Corporate Governance Code 2022 (DCGK 2022), there should be a certain number of independent members on the shareholder side that shareholders deem appropriate; the ownership structure should be taken into account. In its own estimation, the Supervisory Board has an adequate number of independent members with Isabel De Paoli, Peter Kameritsch and Tania von der Goltz, also taking the ownership structure of Carl Zeiss Meditec AG into consideration, in which Carl Zeiss AG directly and indirectly holds a share of around 59.1%, who have no business or personal relationship with Carl Zeiss Meditec AG or the Management Board or Carl Zeiss AG as controlling shareholder.

Pursuant to C.7 DCGK 2022 more than half of the shareholder representatives are independent from the Company and from the Management Board. Members of the Supervisory Board who have no personal or business relationship with the Company or the Management Board that could give rise to a material and not merely temporary conflict of interest are deemed to be independent. When assessing the independence of Supervisory Board members from the company and its Management Board, shareholder representatives shall particularly take into consideration the following aspects; whether the respective Supervisory Board member – or a close family member:

• was a member of the company's Management Board in the two years prior to appointment;
• whether he/she currently is maintaining (or has maintained) a material business relationship with the company or one of the entities dependent upon the company (e.g. as customer, supplier, lender or advisor) in the year up to his/her appointment, directly or as a shareholder, or in a leading position of a non-group entity;
• whether he/she is a close family member of a Management Board member; or,
• whether he/she has been a member of the Supervisory Board for more than twelve years.

Taking into account the indicators set out in C.7 DCGK 2022, all members of the Supervisory Board are independent on the shareholder side. Although Dr. Karl Lamprecht and Dr. Christian Müller are members of the Management Board of the controlling shareholder, they are considered independent within the meaning of C.7 GCGC 2022. This also applies to Torsten Reitze, who holds the position of Managing Director at an affiliated company of Carl Zeiss Meditec AG.

Pursuant to C.10 DCGK 2022, the Chairman of the Supervisory Board, the Chairman of the Audit Committee and the Chairman of the committee responsible for the remuneration of the Management Board should also be independent from the Company and the Management Board. In addition, the Chairman of the Audit Committee should be independent from the controlling shareholder. The Audit Committee is chaired by Peter Kameritsch, who is independent of Carl Zeiss AG. The Chairman of the whole Supervisory Board as well as the General and Personnel Committee, and therefore Chairman of the committee responsible for the remuneration of the Management Board, is Dr. Karl Lamprecht.

There were no conflicts of interest on the Supervisory Board in fiscal year 2021/22.

The Supervisory Board is also responsible for long-term succession planning for the Management Board. The Chairman of the Supervisory Board holds regular meetings with the Chairman of the Management Board to discuss this. The subject is also discussed by the General and Personnel Committee of the Supervisory Board. They deliberate on the contract terms and renewal options for current members of the Management Board and advise on potential candidates for succession. When filling positions, both external and internal candidates are considered. Particular attention is paid to filling the positions with internal candidates who have the necessary qualifications and experience. Succession planning extends internally to potential candidates throughout the ZEISS Group.

The basic eligibility criteria for selecting candidates for a Management Board position are accordingly based on the knowledge required to fulfill the tasks for the area of responsibility to be taken over, professional qualifications, personality, integrity, management qualities and previous achievements and knowledge about the Company.

The Supervisory Board decides which person should be appointed to a specific position on the Management Board in the interests of the Company and taking all circumstances of the individual case into consideration. In summary, the Supervisory Board considers in particular the following aspects:

• The members of the Management Board should have many years of management experience, also in the international field
• The Management Board as a whole should have many years of experience in the field of medical technology
• The Management Board as a whole should have many years of experience within Carl Zeiss Meditec and the Zeiss Group
• The Supervisory Board has stipulated an age limit of 65 years for the members of the Management Board in its Rules of Procedure

The Supervisory Board regularly assesses the effectiveness of its committees and of the Supervisory Board as a whole. During the past fiscal year, the Supervisory Board conducted a self-assessment, to evaluate the efficiency of its activities. This took the form of a questionnaire, in which the members of the Supervisory Board gave their appraisal of the effectiveness of the work of the Supervisory Board and its committees and suggested possibilities for improvement.

The questionnaire contains questions about the following topics, among others: Quality of meeting preparation, running of Supervisory Board meetings, communication between the members of the Supervisory Board, input from the committees, number of committees and frequency of their meetings.

After evaluating the questionnaires, the results and the possibilities for improvement were discussed at the next regular plenary session. Specific recommendations for action for the work of the Supervisory Board were defined and scheduled. Compliance with these specific recommendations for action shall be reviewed at certain dates.

Further information on the cooperation of the Management Board and Supervisory Board, the composition and method of working of the committees can be found in the Report of the Supervisory Board and the notes accompanying the consolidated financial statements in the 2021/22 Annual Report.