We believe that workforce diversity and a culture of inclusion lead to greater innovation and better team performance within the company. A good balance between different cultures and nationalities, between different age groups, and between male and female employees is conducive to the company’s success. We have therefore set ourselves the goal of increasing workforce diversity and optimally leveraging this for our business by creating the conditions for each employee to reach their maximum potential. Here, we are focusing our efforts on promoting women in management positions as well as addressing the topics of internationality and demographics.

Ultimate responsibility for diversity lies with Kai Beckmann, who as an Executive Board Member is responsible for Group Human Resources, among other areas. The Chief Diversity Officer (CDO) is responsible for strategic diversity management and reports directly to the Executive Board Member responsible for Group HR.

In 2013, we instituted the Diversity Council, which consists of managers from all businesses as well as select Group functions. In the 2013-2014 period, the Diversity Council revised Merck KGaA, Darmstadt, Germany's diversity and inclusion strategy. The strategy focuses on four areas:

• Attracting the right employees to the company, fostering them and building long-term loyalty
• Fostering efficient collaboration
• Driving innovation and improvements
• Meeting the needs of our diverse customers

The new strategy places a heavier focus on how a diverse workforce can contribute to the success of our business strategy. Clear goals can be derived from each of the four focus areas, such as promoting intercultural understanding in order to improve the performance of global teams, or promoting managers who drive inclusion and innovation within the company. The Diversity Council is responsible for implementing the new strategy within our various businesses and units, as well as for reviewing it. In the first half of 2015, Group Human Resources will be conducting an audit to check whether all HR programs and processes reflect the new approach. In 2015, the Diversity Council will continue to push ahead with the new strategy across the Group.

Monitoring and controlling

Each quarter, the company compiles data on the gender distribution, nationality, and other demographics of its employees for internal evaluation purposes. We analyze this data at the business and Group function level, as well as by key countries and by groups of young professionals and managers. We present select data in both our Annual Report as well as our Corporate Responsibility Report. In 2011, Merck KGaA, Darmstadt, Germany joined together with all other DAX^® 30 companies to sign a voluntary commitment to increase the proportion of management positions held by women. The companies report on their progress at an annual press conference. With support from the Chief Diversity Officer, the Diversity Council is developing specific performance indicators to assess whether the objectives of the 2015 diversity and inclusion strategy are being attained.

Training and educating employees

In September 2014, we presented our new diversity and inclusion strategy to our employees in Darmstadt (Germany) and Billerica (MA, USA) at our Diversity Days event. Members of the Diversity Council discussed the new strategy with several employees, the results of which were then presented at a panel session. In addition, the topics of diversity and inclusion are also featured in all training courses for employees, as well as in all management seminars for employees with managerial responsibility.

Promoting women in management positions

In 2011, we made the strategic decision to increase the percentage of management positions held by women to 25%-30% by 2016. We reached the lower range of this objective by 2013, having achieved 25%. In 2014, the share of management positions held by women increased to 26%. On top of that, 2014 was the first time that two women assumed leadership of two businesses (Biopharmaceuticals and Consumer Health). At the beginning of 2015, Belen Garijo, a native of Spain and previously CEO of the biopharmaceuticals business, joined the Executive Board and took over leadership of our Healthcare business sector.

At local level, we have implemented numerous measures designed to further increase the percentage of women across the entire workforce and to specifically increase the number holding management positions. For one, we facilitate work-life balance for our employees in many countries, such as by offering flexible working hours and childcare options. Furthermore, women benefit from special ongoing training and continuing education programs. These measures also include support from in-house networks initiated by our employees, such as Women at Merck KGaA, Darmstadt, Germany. In order to promote exchange among women in management positions within the Group, we support the internal Women in Leadership network at Global headquarters in Darmstadt, Germany, as well as the Group-wide International Women’s Network. Our Chief Diversity Officer and Kai Beckmann, an Executive Board member, engage these networks in a regular dialogue. In addition, we also support external global networks that work toward diversity and inclusion in the professional world. Since 2012, the company has been a partner in the Healthcare Businesswomen´s Association (HBA ). Thanks to this partnership, women in Darmstadt, Lyon (France) and Boston (MA, USA) can take advantage of the organization's seminars, mentoring programs and conferences. In October 2013, Merck KGaA, Darmstadt, Germany in Darmstadt hosted the HBA's European summit. Among other topics, attendees discussed the development and advancement of leadership skills for professionals in the health industry. In the United States, the company sponsored the 10^th Massachusetts Conference for Women, which took place on December 4, 2014 and was attended by 150 EMD Millipore and EMD Serono employees.

Employee networks

In order to promote dialogue on diversity, the company supports various employee networks, such as networks for women in management positions (see “Promoting Women in Management Positions”), networks for international employees, and the Rainbow Network for homosexual, bisexual and transsexual employees. Through their involvement in these networks, employees can advance and hone their leadership and organizational skills. In addition to this, in 2014 we launched a project designed to systematically foster individual network members and to better leverage the networks' potential for our business activities. In 2015, these networks will be developing objectives for future planned activities as well as expanding their scope regionally and internationally.

Promoting internationality

Being an international global player, one of our fundamental principles is to recruit employees from the countries in which we operate and offer them career development opportunities. The company currently employs people from 122 different countries, 27% of which come from Germany. Altogether, our managerial staff includes representatives of 67 nationalities. In the 2013-2014 period, 61% of our management positions were held by non-German employees. The Diversity Council is working on a concrete goal for increasing the percentage of managers who come from emerging markets.

In order to promote the internationality of our workforce, we pursue two goals when hiring people for new positions: one, to increase the number of local employees at sites outside of Germany, across all hierarchical levels; and two, to offer our employees international development opportunities. In addition to this recruitment approach, we also require employees in upper management to have acquired international work experience. Furthermore, we help our employees to acquire intercultural competencies. For this purpose, we promote intercultural training courses and international teamwork throughout the entire company. We offer special cultural immersion courses to managers working outside their home countries, which include language courses and international networks.

Demographic change

In Germany, Switzerland, several other EU countries, Japan, and the United States, demographic change is already underway. At our sites in industrialized countries, the average age of our employees is already more than 40, and we expect this to continue rising in the coming years. In Germany, the company has implemented various programs to respond to demographic change. For instance, we are fostering the employability of our workforce and working to build employee loyalty. This includes adapting workplaces to the needs of older employees and establishing a health management program to maintain their health, as well as their ability to do their job. Take for example the health intervention program that we are running in cooperation with the company health insurance fund at our facility in Darmstadt, Germany. When they resume exercising and sports activities, employees older than 40 receive special support in the form of the "Leben nach Herzenslust" (Living Life to the Fullest) program. Furthermore, the Darmstadt site offers courses specifically for employees over 40 and for employees over 50, such as the "Dranbleiben - aber wie? Learning 40+" course ("How to stay sharp - Learning at 40+").

On top of this, health counseling sessions between managers and employees also help reinforce healthy behaviors and promote good health. In training sessions on healthy leadership, we educate managers on the connection between management culture, managerial conduct and employee stress. In addition, in 2014 we issued our "Group Health Policy", which promotes and maintains employee health as well as their ability to perform.

Preventing discrimination

Our commitment to diversity also means that we do not tolerate discrimination anywhere within our company – whether based on gender, age, ethnicity, skin color, nationality, religion, sexual orientation, or disability – a stance that is mandated by our Code of Conduct . If an employee feels they have been discriminated against, they can report the issue via various channels. Their first point of contact is their manager, but they can also contact Group Human Resources, Legal, or Compliance. If an employee prefers to anonymously report their case, they can call our free hotline from anywhere in the world. Our compliance organization is responsible for processing suspected cases. Confirmed cases of discrimination can lead to disciplinary action or consequences stipulated by labor law. In 2013 and 2014, one suspected case of discrimination was reported via the SpeakUp Line. After thoroughly examining the case, legal steps were taken.