Corporate Governance in the Netherlands

Foreword 5
Introduction to the history, background and operation of the Code 13

1 Sustainable long-term value creation 21
1.1 Sustainable long-term value creation 21
1.1.1 Strategy for sustainable long-term value creation 24
1.1.2 Involvement of the supervisory board 27
1.1.3 Role of the supervisory board 27
1.1.4 Reporting by the management board 29
1.1.5 Dialogue with stakeholders 32
1.2 Risk management 34
1.2.1 Risk assessment 37
1.2.2 Implementation 40
1.2.3 Monitoring of design and operation 42
1.3 Internal audit function 42
1.3.1 Appointment and dismissal 45
1.3.2 Assessment of the internal audit function 45
1.3.3 Internal audit plan 46
1.3.4 Performance of work 48
1.3.5 Report of findings 49
1.3.6 Absence of an internal audit department 50
1.4 Risk management accountability 51
1.4.1 Accountability to the supervisory board 52
1.4.2 Reporting on risk management 53
1.4.3 Statement by the management board 55
1.5 Role of the supervisory board 58
1.5.1 Duties and responsibilities of the audit committee 59
1.5.2 Attendance of the management board, internal auditor and external auditor at audit committee consultations 62
1.5.3 Audit committee report 63
1.5.4 Supervisory board 65
1.6 Appointment and assessment of the functioning of the external auditor 65
1.6.1 Functioning and appointment 66
1.6.2 Informing the external auditor about its functioning 67
1.6.3 Engagement 68
1.6.4 Accountability 69
1.6.5 Departure of the external auditor 69
1.7 Performance of the external auditor’s work 70
1.7.1 Provision of information to the external auditor 71
1.7.2 Audit plan and external auditor’s findings 71
1.7.3 Publication of financial reports 73
1.7.4 Consultations with the external auditor outside the management board’s presence 73
1.7.5 Examination of discussion points arising between the external auditor and the management board 74
1.7.6 External auditor’s attendance of supervisory board meetings 75

2 Effective management and supervision 77
2.1 Composition and size 77
2.1.1 Profile 79
2.1.2 Personal information 80
2.1.3 Executive committee 81
2.1.4 Expertise 84
2.1.5 Policy on Diversity and Inclusion (D&I policy) 85
2.1.6 Reporting on the D&I policy 89
2.1.7 Independence of the supervisory board 91
2.1.8 Independence of supervisory board members 94
2.1.9 Independence of the chairman of the supervisory board 98
2.1.10 Accountability regarding supervisory board member independence 99
2.2 Appointment, succession and evaluation 100
2.2.1 Appointment and reappointment periods – management board members 101
2.2.2 Appointment and reappointment periods – supervisory board members 103
2.2.3 Early retirement 105
2.2.4 Succession 107
2.2.5 Duties of the selection and appointment committee 108
2.2.6 Evaluation by the supervisory board 109
2.2.7 Evaluation of the management board 112
2.2.8 Evaluation accountability 113
2.3 Organisation of the supervisory board and reports 114
2.3.1 Supervisory board’s terms of reference 115
2.3.2 Establishment of committees 116
2.3.3 Committees’ terms of reference 118
2.3.4 Composition of the committees 118
2.3.5 Committee reports 120
2.3.6 Chairman of the supervisory board 121
2.3.7 Vice-chairman of the supervisory board 124
2.3.8 Delegated supervisory board member 125
2.3.9 Temporary management board function of a supervisory board member 126
2.3.10 Company secretary 128
2.3.11 Report of the supervisory board 130
2.4 Decision-making and functioning 130
2.4.1 Stimulating openness and accountability 132
2.4.2 Other positions 133
2.4.3 Point of contact for the functioning of supervisory board and management board members 134
2.4.4 Attendance at supervisory board meetings 135
2.4.5 Induction programme for supervisory board members 136
2.4.6 Development 136
2.4.7 Information safeguards 137
2.4.8 Supervisory board members’ responsibility for obtaining information 138
2.4.9 Obtaining information from officers and external parties 140
2.5 Culture 140
2.5.1 Management board’s responsibility for culture 143
2.5.2 Code of conduct 146
2.5.3 Employee participation 147
2.5.4 Reporting on culture 148
2.6 Misconduct and irregularities 150
2.6.1 Procedure for reporting actual or suspected misconduct or irregularities 151
2.6.2 Informing the chairman of the supervisory board 152
2.6.3 Notification by the external auditor 153
2.6.4 Notification by the internal audit function 154
2.6.5 Oversight by the supervisory board 155
2.7 Preventing conflicts of interest 156
2.7.1 Preventing conflicts of interest 157
2.7.2 Terms of reference 158
2.7.3 Reporting 159
2.7.4 Accountability regarding transactions: management board and supervisory board members 163
2.7.5 Accountability regarding transactions: majority shareholders 165
2.7.6 Personal loans 166
2.8 Takeover situations 167
2.8.1 Supervisory board involvement 168
2.8.2 Informing the supervisory board about a request for inspection by a competing bidder 170
2.8.3 Management board’s position on a private bid 171

3 Remuneration 173
3.1 Remuneration policy – management board 173
3.1.1 Remuneration policy proposal 176
3.1.2 Remuneration policy 178
3.1.3 Remuneration – executive committee 188
3.2 Determination of management board remuneration 189
3.2.1 Remuneration committee’s proposal 190
3.2.2 Management board members’ views on their own remuneration 191
3.2.3 Severance payments 192
3.3 Remuneration – supervisory board 194
3.3.1 Time spent and responsibility 197
3.3.2 Remuneration of supervisory board members 197
3.3.3 Share ownership 198
3.4 Accountability for the implementation of remuneration policy 199
3.4.1 Remuneration report 201
3.4.2 Agreement of management board member 204

4 The general meeting 207
4.1 The general meeting 207
4.1.1 Supervisory board supervision 209
4.1.2 Proper conduct of business at meetings 210
4.1.3 Agenda 212
4.1.4 Proposal for approval or authorisation 215
4.1.5 Shareholder’s explanations when exercising the right to put items on the agenda 216
4.1.6 Placing of items on the agenda by shareholders 217
4.1.7 Stipulation of the response time 221
4.1.8 Attendance of members nominated for the management board or supervisory board 222
4.1.9 External auditor’s attendance 223
4.1.10 Report of the general meeting 225
4.2 Provision of information 226
4.2.1 Substantiation of invocation of overriding interest 227
4.2.2 Contacts and dialogue with shareholders 228
4.2.3 Meetings and presentations 231
4.2.4 Posting information in a separate section of the website 231
4.2.5 Management board contacts with the press and analysts 232
4.2.6 Outline of anti-takeover measures 233
4.3 Casting votes 233
4.3.1 Voting as deemed fit 235
4.3.2 Providing voting proxies or voting instructions 236
4.3.3 Cancelling the binding nature of a nomination or dismissal 237
4.3.4 Voting rights on financing preference shares 238
4.3.5 Publication of institutional investor’s engagement policy 240
4.3.6 Report on the implementation of the institutional investors’ engagement policy 241
4.3.7 Abstaining from voting in the event of larger short position than long position 243
4.3.8 Share lending 243
4.4 Recognising the importance of company strategy 245
4.5 Issuing depositary receipts for shares 245
4.5.1 Trust office board 247
4.5.2 Appointment of board members 248
4.5.3 Board appointment period 249
4.5.4 Attendance of the general meeting 250
4.5.5 Exercise of voting rights 250
4.5.6 Periodic reports 251
4.5.7 Contents of the reports 251
4.5.8 Voting proxies 253

5 One-tier governance structure 255
5.1 One-tier governance structure 255
5.1.1 Composition of the board of directors 260
5.1.2 Chairman of the board of directors 261
5.1.3 Independence of the chairman of the board of directors 261
5.1.4 Composition of committees 262
5.1.5 Reporting on supervision by non-executive directors 263

6 Full text of the Dutch Corporate Governance Code