CORPORATE GOVERNANCE REPORT.

Transcription

1 CORPORATE GOVERNANCE REPORT. At Diebold Nixdorf, responsible, transparent business management and control centered on the creation of sustained added value is considered an essential basis for commercial success. Indeed, corporate governance has been an integral element of management for many years. The Board of Directors and the Supervisory Board have issued the statutory statement of compliance in accordance with Section 161 AktG (German Stock Corporation Act), stating that, with the exceptions specified therein, Diebold Nixdorf complies with all the recommendations of the German Corporate Governance Code. Adherence to this Code is monitored by the Board of Directors and the Supervisory Board. Issued annually, the statement of compliance is permanently available to all shareholders on the Internet at us/company/investorrelations/dieboldnixdorfag/corporate governance/corporate governance. Close collaboration between Board of Directors and Supervisory Board. A relationship based on close collaboration and mutual trust exists between the Board of Directors and the members of the Supervisory Board. The Board of Directors reports regularly, promptly, and comprehensively to the Supervisory Board on the progress of business. There is also an ongoing and constructive dialogue concerning strategy, corporate planning, company profitability, risk status, risk management, and compliance. For further details, please refer to the Supervisory Board report. The Supervisory Board convened eight meetings in the fiscal year under review. The report prepared by the Supervisory Board contains further details of board meetings convened over the course of the fiscal year. The Supervisory Board has established four committees: a Mediation Committee, pursuant to Section 27 (3) MitbestG (German Co Determination Act); a Personnel Committee, responsible for preparing the essential elements of staff decisions to be made by the Supervisory Board in respect of the Board of Directors as well as with regard to the compensation structure; a Nominations Committee, responsible for preparing the candidate proposals put forward by the Supervisory Board to the Annual General Meeting for the subsequent Supervisory Board elections; and an Audit Committee. There were no conflicts of interest among members of the Board of Directors or the Supervisory Board, with the exception of those conflicts of interest that are an inherent element of the relationship between the board members of Diebold Nixdorf Inc. and Diebold Nixdorf AG but are regulated by the control (also referred to as "domination") and profit transfer agreement. Transparency and compliance. Internal and external transparency. Diebold Nixdorf is committed to providing comprehensive, continuous, and prompt information in its communications with the Company's shareholders. As regards the coming Annual General Meeting of Shareholders (AGM), we will again appoint a proxy vote representative so that shareholders not attending the AGM can be given the opportunity to exercise their voting rights. Shareholders will be able to issue their instructions via the Internet prior to the AGM. With a view to ensuring prompt and open communication with the public, we provide detailed documents and information on our website. This includes AGM information, financial reports, current ad hoc announcements, and press releases. Our online content also includes the Company's Articles of Association, the Code of Conduct, and information on Directors' Dealings pursuant to Section 15a WpHG (German Securities Trading Act).

2 A list of all third party entities in which Diebold Nixdorf AG holds an interest deemed to be not of minor significance has been included in the annual financial statements of Diebold Nixdorf AG. The annual financial statements of Diebold Nixdorf AG have been published, among other places, on the Company's website. As was the case in the previous year, Diebold Nixdorf AG will be included in the consolidated financial statements of Diebold Nixdorf, Incorporated, headquartered in North Canton, Ohio, USA, as of December 31, Compliance. Corporate values and culture. For Diebold Nixdorf, a corporate and management culture that not only acknowledges the need to abide by statutory regulations but also embraces values such as integrity and fair competition is an essential prerequisite for a fully functioning compliance management system. Lawful conduct is a precondition for stable and enduring business relationships as well as sustained success with regard to the Company's commercial performance. The Board of Directors therefore regards compliance as a fundamental management task and has pledged to respect the law, while expressly acknowledging the importance of lawful, social, and ethical conduct. For the Company's employees, a functioning compliance management system offers a framework within which they can act and operate even in difficult situations. It thus helps not only to protect our Company against the detrimental effects of unlawful or non compliant behavior but also to cement its reputation and enhance its long term competitiveness. With this in mind, Diebold Nixdorf is committed to refining its compliance management system on a continual basis in order to adapt it to the changing statutory and commercial factors that are of relevance to its global business activities. Following the business combination of Diebold and Wincor Nixdorf, the compliance management system of Diebold Nixdorf was integrated into the existing compliance program of the Diebold Nixdorf Incorporated organization, which includes the adaptation of applicable statutory provisions and organizational measures. Compliance management system. Building on its understanding of compliance, Diebold Nixdorf has established a compliance management system tailored to the requirements of a Group operating at an international level. This system encompasses prevention, detection/control, and response. The focus of compliance management is on a preventative approach in support of a corporate culture that addresses the issue of potential misconduct before it arises by sensitizing and educating employees. Against this background, considerable importance is attached to regular compliance training, which is conducted in the form of attended seminars as well as online sessions. Additionally, the compliance communication program and the personal support provided by the Corporate Compliance Office help to build awareness among the workforce of the issue of compliance and any associated risks. Code of Ethical Conduct for employees and suppliers. At the heart of Diebold Nixdorf's compliance management system is the Code of Business Ethics. Reflecting the values led corporate culture embraced by the Group, it is binding for all employees. It is complemented by various guidelines such as the Gifts, Travel and Entertainment Policy, which provides personnel with an overview of how to deal with gifts, invitations, and corporate hospitality in general. The Group also has a guideline on the prevention of conflicts of interest. It is aimed at raising awareness of this topic within the workforce and offering help and advice on how to deal with such instances. Another key element is the Code of Conduct for Diebold Nixdorf Suppliers. It forms an integral part of the purchasing process and is fully incorporated in the purchase agreements.

3 The compliance organization. Diebold Nixdorf's compliance organization is headed by the Chief Compliance Officer (CCO), who reports directly to the Board of Directors and the Audit Committee of the Supervisory Board. The CCO is responsible for implementing and evolving the compliance management system throughout the Group. He is supported by a Group wide compliance officer system that consists of Regional Compliance Officers, Area Compliance Officers, and Local Compliance Officers. They ensure that the compliance management system is applied correctly in their respective areas of responsibility. A central Compliance Office coordinates all compliance activities throughout the Group and advises employees on key issues. Risk management system for value led corporate management. Responsible corporate governance is dependent on a properly functioning risk management system. The risk management system implemented by Diebold Nixdorf is geared toward meeting the practical requirements of our business. It is designed to highlight opportunities and risks at an early stage and to help avoid or limit risks where they occur. Further details are provided in the Group Management Report in the section entitled Risk Report. Exceptions to the Corporate Governance Code. Under Section 161 AktG (German Stock Corporation Act), the Board of Directors and the Supervisory Board of exchange listed companies are obliged to issue a declaration each year stating that the recommendations of the Code of the Government Commission on German Corporate Governance, as published by the German Federal Ministry of Justice in the official section of the Federal Gazette (electronic version), have been and are being met. This declaration must also specify which recommendations have not been or are not being applied and reasons for not applying them. Exceptions to the Corporate Governance Code. In accordance with Section 161 AktG (German Stock Corporation Act), the Board of Directors and the Supervisory Board of Diebold Nixdorf AG issued a new declaration of compliance on December 20, Since its last declaration of compliance on November 23, 2016, in the amended versions of February 15, 2017, and March 30, 2017, Diebold Nixdorf Aktiengesellschaft has complied and will continue to comply with the recommendations of the Code of the Government Commission on German Corporate Governance, in the version dated May 5, 2015 (published in the Federal Gazette on June 12, 2015), and with the recommendations of the version of the Code that came into force on February 7, 2017 (published in the Federal Gazette on April 24, 2017), with the seven exceptions detailed below: 1. The D&O insurance policy agreed by Diebold Nixdorf Aktiengesellschaft does not feature a policy deductible for the Supervisory Board (Section 3.8 Paragraph 3 GCGC). Reasons: The D&O insurance policy agreed by Diebold Nixdorf Aktiengesellschaft does not feature a policy deductible for the Supervisory Board, in particular no such deductible of at least 10% of the damage up to at least one and a half times the fixed annual remuneration. The D&O insurance policy was taken out for a significant number of management staff across the entire Diebold Nixdorf Group, at home and abroad, including members of the

4 Company s boards. When the policy agreement was signed, it did not appear proper to differentiate between Board members and other management staff; equally there was no legal requirement to do so. Effective from July 1, 2010, only insurance policies for members of the Board of Directors were to be amended pursuant to Section 93 (2) Sentence 3 AktG (German Stock Corporation Act) in conjunction with Section 23 (1) Sentence 1 EGAktG (Introductory Act to the Stock Corporation Act). There is no stipulation in the legislation (Section 116 Sentence 1 AktG) of a mandatory policy deductible for the Supervisory Board; indeed, the Supervisory Board is specifically exempted from such a mandatory policy deductible. Given the nature of the role of the Supervisory Board, which is also evident from that Board's different remuneration structure, this distinction in the treatment of the Board of Directors and the Supervisory Board appears commensurate, especially since the insurance policies have not been changed for other senior managers. Consequently, it does not appear proper to extend the policy deductible in the D&O insurance policy held by Diebold Nixdorf Aktiengesellschaft to members of the Supervisory Board. 2. The amount of compensation of the members of the Management Board is with respect to its longterm variable compensation components and therefore overall not capped (Section Paragraph 2 Sentence 6 GCGC). Reasons: In the course of the conversion and adaption of the long term variable remuneration system, the Members of the Management Board now receive a stock based remuneration component under the Diebold Nixdorf, Incorporated long term incentive program. While the amount of shares potentially to be granted is restricted, a further limitation with regard to the share price of the shares in Diebold Nixdorf, Incorporated does not exist. A reduction of the stock based remuneration component in the event of a particular increase in the stock price does not seem appropriate since this would reduce the synchronization of the interests of the Management Board Members and the shareholders. 3. A retroactive change of the performance targets or the comparison parameters is not excluded (Section Paragraph 2 Sentence 8 GCGC). Reasons: Following the registration of the domination and profit and loss transfer agreement with the Diebold Holding Germany Inc. & Co. KGaA, the Supervisory Board decided to offer the Members of the Management Board to exchange their outstanding stock options under the stock option program of Diebold Nixdorf Aktiengesellschaft for a long term incentive remuneration component relating to Diebold Nixdorf, Incorporated stock price. This offer was granted to incentivise the Members of the Management Board in order to achieve a sustainable success of the group enterprises as well as in light of the registration of the profit and loss transfer agreement and potential speculations with Diebold Nixdorf Aktiengesellschaft shares that cause the share price to not any more appropriately reflect the business operations of the company. 4. Payments made to a Management Board member on premature termination of his/her contract can in particular case compensate more than the remaining term of the employment contract (Section Paragraph 4 sentence 1 GCGK).

5 Reasons: In light of the conversion of the remuneration program, certain members of the Management Board will be included in the Diebold Nixdorf, Incorporated severance program ( Severance Plan ). Since US American companies do usually not enter into temporary contracts with their executives which could have a remainder of a term, potential severance payments relate to fixed parameters considering the mutually agreed remuneration. In no event, however, severance payments will exceed two times total compensation. 5. A profile of skills and expertise for the entire Supervisory Board has not been prepared (Section Paragraph 2 Sentence 1 GCGK). Reasons: In light of the shareholder structure of the company and the fact that in the opinion of the Supervisory Board its members collectively already have all the skills and expertise required, no profile of skills and expertise shall be prepared. 6. In setting the level of remuneration paid to members of the Supervisory Board, no account is taken of chairmanship of any committee other than the Audit Committee, or of membership of any of the Supervisory Board committees (Section Paragraph 1 Sentence 2 GCGC). Reasons: Remuneration for mere membership of a committee is deemed unnecessary. As regards the activities of the Supervisory Board, practice has shown that the vast majority of committee meetings are scheduled to coincide closely with meetings of the Supervisory Board itself. Chairmanship of the Audit Committee is remunerated separately due to the additional time and effort required by the role. 7. Interim reports respectively mandatory interim financial information are not publicly accessible within 45 days of the end of the reporting period (Section Sentence 3 GCGC). Reasons: Diebold Nixdorf Aktiengesellschaft did not publish its interim reports respectively mandatory interim financial information within 45 days of the end of the individual reporting period. This in particular results from the requirement to establish additional sets of financial figures in accordance with US American accounting standards (US GAAP) for group reporting purposes of Diebold Nixdorf, Incorporated due to the completed business combination. Objectives of the Supervisory Board in relation to its composition and current state of implementation. According to Section Sentence 5 GCGC, the Corporate Governance Report should contain details of the specific objectives of the Supervisory Board in relation to its composition and with due regard for the organization's international activities, potential conflicts of interest, the number of independent Supervisory Board members considered adequate by the Supervisory Board, the stipulation of an age limit for members of the Supervisory Board, and specification of a general limit

6 to the length of time that members may serve on the Supervisory Board, as well as diversity, the latter especially in terms of achieving the involvement of women at a level equivalent to at least 30%. The report should also evaluate the state of implementation of these objectives. In this context, the Supervisory Board has set out the following objectives: As required by the German Co Determination Act, the Supervisory Board of Diebold Nixdorf AG is made up of six shareholder representatives and six employee representatives. A ballot to elect the six employee representatives on the Supervisory Board was held on November 12, 2015, without the Supervisory Board or the Company having influenced the nominations in any way; the result of this ballot was that the end of their terms of office will coincide with the end of the Annual General Meeting responsible for approving the actions of the Supervisory Board for fiscal The Supervisory Board or, at a preliminary stage, its Nomination Committee may only exert an influence on the election of the six shareholder representatives through its right to propose candidates to the Annual General Meeting. Objectives: The specific objectives for the composition of our Supervisory Board are therefore limited to the composition of the six shareholder representatives: a) With regard to the international activities of the Company. The international activities of Diebold Nixdorf AG have previously been taken into account in the composition of the shareholder representatives on the Supervisory Board and will continue to be taken into account when the Supervisory Board submits candidate proposals to the Annual General Meeting. The key factors here are a knowledge of spoken and written English, professional experience (either in management or on another supervisory body) gained from working at other German or foreign companies of a comparable size with an international presence, and an understanding of global economic issues in relation to manufacturing, sales, or services. This requirement for candidates to have an international profile does not necessarily mean that the Supervisory Board should include one or more foreign nationals. German citizens can also provide the desired international experience, e.g., as a result of time spent working in another country. However, a solid command of English, both written and spoken, is considered a key prerequisite. b) Avoiding potential conflicts of interest. Potential conflicts of interest are avoided at an early stage when the Supervisory Board submits its proposed candidates to the Annual General Meeting. Since the Annual General Meeting held on January 21, 2013, no former member of the Diebold Nixdorf Board of Directors or former Diebold Nixdorf General Manager has served on the Supervisory Board as a shareholder representative. In the opinion of the Supervisory Board, there are no potential conflicts of interest arising from the control and profit transfer agreement in respect of Supervisory Board members who maintain personal or business relations with controlling shareholder Diebold Nixdorf Inc. and/or its subsidiaries. When it submits the names of proposed candidates to the Annual General Meeting, the Supervisory Board ensures that the candidates in question do not perform a managerial, advisory, or supervisory role on behalf of one of the Company's competitors, suppliers, lenders, or customers. This avoids conflicts of interest from the outset. In the event that a conflict of interest arises during the period of office of a member of the Supervisory Board, the person in question is required to disclose that conflict to the Supervisory Board via the Chairperson and, provided the conflict of interest is significant and not just temporary, to stand down.

7 c) Number of independent Supervisory Board members considered adequate by the Supervisory Board. According to the recommendation set out in the Code, a Supervisory Board member is not to be considered independent if he/she has personal or business relations with the company, its executive bodies, a controlling shareholder, or an enterprise associated with the latter that may cause a substantial and not merely temporary conflict of interests. Based on this definition, it is the Supervisory Board's opinion that, at the very least, Dr. Barth as a shareholder representative on the Supervisory Board can be considered independent within the meaning of Section of the German Corporate Governance Code. Given the shareholder structure of the Company and the existing control and profit transfer agreement, the Supervisory Board considers it adequate that only one member of the Supervisory Board representing shareholders should be independent within the meaning of the German Corporate Governance Code. d) Stipulation of an age limit. The age limit, i.e., the expiry of a serving member's term of office at the end of the Annual General Meeting after which that person reaches the age of 70, is already stipulated in the Company's Articles of Association (Article 7 Paragraph 6). e) Specification of a general limit to the length of time that members may serve on the Supervisory Board. In accordance with the recommendation set out in Section GCGC, the Supervisory Board has introduced a general limit to the length of time that members may serve on the Supervisory Board. The general limit has been specified as four terms in office. f) Consideration for diversity, including an involvement of women equivalent to at least 30%. Due regard must be given to issues of diversity in the composition of the Supervisory Board. At present, the Supervisory Board is made up of four female and eight male members. Diversity is reflected in the varying professional careers and activities of shareholder representatives and with regard to the Board's international profile the track record of experience within the Supervisory Board. In cases where male and female candidates are equally qualified and suitable, due regard is given to the appointment of a female candidate. As regards German legislation on equal opportunities for women and men in executive positions, which came into force on January 1, 2016, the composition of the Supervisory Board complies with statutory provisions specifying female representation of at least 30%. State of implementation of objectives. Details of the current state of implementation of the objectives presented above under a) to f) for the composition of the Supervisory Board are given below: The objectives relating to a) "With regard to the international activities of the Company," b) "Avoiding potential conflicts of interest," c) "Adequate number of independent Supervisory Board members," d) "Stipulation of an age limit," e) "Specification of a general limit to the length of time that members may serve on the Supervisory Board", and f) "Diversity, including an involvement of women equivalent to at least 30%" have already been met. Statutory auditor. The Group financial statements of Diebold Nixdorf AG for the fiscal year ended September 30, 2017, have been prepared in accordance with International Financial Reporting Standards (IFRS) as applicable in the European Union, supplemented by the statutory requirements laid out in Section 315a (1) HGB (German Commercial Code). At the Annual General Meeting held on January 23, 2017,

8 KPMG AG Wirtschaftsprüfungsgesellschaft was elected as the auditor for the separate and consolidated financial statements of Diebold Nixdorf AG as proposed by the Supervisory Board. The person responsible for auditing fiscal 2016/2017 is German Public Auditor Carsten Nölgen.