Company: ELSE
Filing Date: 2025-03-19
Form Type: DEF 14A
Source: 0000897101-25-000161
Chunk: 5

Company: ELECTRO SENSORS INC
Filing Date: 2025-03-19
Form: DEF 14A
Chunk 5
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<div align='center'>CORPORATE GOVERNANCE</div>

The business affairs
of the Company are conducted under the direction of the Board in accordance with the Minnesota Business Corporation Act and our
Articles of Incorporation and Bylaws. The Board of Directors currently has five members: David L. Klenk, Jeffrey D. Peterson, Joseph
A. Marino, Scott A. Gabbard, and Michael C. Zipoy. Members of the Board are informed of our business through discussions with management,
by reviewing materials provided to them and by participating in meetings of the Board and its committees, among other activities.
The corporate governance practices that we follow are summarized below.

Board Leadership Structure and Risk Management

The Board believes
that independent director Joseph A. Marino is best suited to serve as Chairman of the Board due to his extensive familiarity with
the Company’s business and industry as well as his proven track record of leading dynamic and growing organizations. Additionally,
the Board believes Mr. Marino is most capable of effectively identifying strategic priorities and leading the discussion and execution
of strategy. The Board believes having an independent director as chairman provides for good governance and effectively balances
the roles of internal and external directors. Mr. Marino and the Company’s other independent directors bring experience,
oversight and expertise from outside the Company and industry, while Mr. David L. Klenk, as President, Chief Executive Officer
and Chief Financial Officer, brings company-specific experience and expertise. The Board believes that Mr. Klenk’s participation
on the Board in his role of Chief Executive Officer promotes strategy development and execution, and facilitates information flow
between management and the Board, which are essential to effective governance.

One key Board responsibility is to hold management accountable for the execution of strategy once it is developed. The Board believes
that its independent directors work together effectively to serve this oversight function, with no individual director serving
as a “lead” independent director.

The Board believes
that oversight of the Company’s risk management efforts is another key responsibility that is shared by the entire Board.
The Board regularly reviews risk management information regarding the Company’s liquidity, operations, and cybersecurity.
Board members receive regular financial statements, which are discussed at quarterly meetings of the Board. In addition,
Mr. Klenk frequently has informal discussions with Board members regarding key business issues and risk management.

<div align='center'>2</div>

Independence

The Board of Directors
has determined that Messrs. Gabbard, Marino, Peterson