Corporate Governance

The Dutch Corporate Governance Code : a full translation to English

8 December 2016

Monitoring Committee

The Dutch

UNOFFICIAL TRANSLATION

 

8 December 2016

secretariat: PO Box 20401

2500 EK The Hague, The Netherlands

www.mccg.nl

The Dutch

Monitoring Committee

 

The Dutch Corporate Governance Code | December 2016 PAGE 5

CONTENTS

Preamble 7

Compliance with the Code 11

Chapter 1. Long-term Value Creation 13

Principle 1.1 Long-term value creation 13

Principle 1.2 Risk management 14

Principle 1.3 Internal audit function 14

Principle 1.4 Risk management accountability 15

Principle 1.5 Role of the supervisory board 15

Principle 1.6 Appointment and assessment of the functioning of the external auditor 16

Principle 1.7 Performance of the external auditor’s work 17

Chapter 2. Effective Management and Supervision 19

Principle 2.1 Composition and size 19

Principle 2.2 Appointment, succession and evaluation 21

Principle 2.3 Organisation of the supervisory board and reports 22

Principle 2.4 Decision-making and functioning 24

Principle 2.5 Culture 25

Principle 2.6 Misconduct and irregularities 26

Principle 2.7 Preventing conflicts of interest 27

Principle 2.8 Takeover situations 28

Chapter 3. Remuneration 31

Principle 3.1 Remuneration policy – management board 31

Principle 3.2 Determination of management board remuneration 32

Principle 3.3 Remuneration – supervisory board 32

Principle 3.4 Remuneration accountability 33

Chapter 4. The General Meeting 35

Principle 4.1 The general meeting 35

Principle 4.2 Provision of information 36

Principle 4.3 Casting votes 37

Principle 4.4 Issuing depositary receipts for shares 38

Chapter 5. One-tier Governance Structure 41

Principle 5.1 One-tier governance structure 41

Entry Into Force 42

Explanatory Notes to the Code 43

Composition Monitoring Committee Corporate Governance Code 50

 

The Dutch Corporate Governance Code | December 2016 PAGE 7

PREAMBLE

Focusing on the governance of listed companies, the Dutch Corporate Governance Code (referred to below

as the Code) provides guidance for effective cooperation and management. Governance is about management and control, about responsibility and influence, and about supervision and accountability. The purpose

of the Code is to facilitate – with or in relation to other laws and regulations – a sound and transparent system

of checks and balances within Dutch listed companies and, to that end, to regulate relations between the

management board, the supervisory board and the shareholders (including the general meeting of shareholders). Compliance with the Code contributes to confidence in the good and responsible management of

companies and their integration into society.

The Code was first adopted in 2003 and was amended once in 2008. At the request of the National

Federation of Christian Trade Unions in the Netherlands (CNV), Eumedion, the Federation of Dutch Trade

Unions (FNV), Euronext NV, the Association of Stockholders (VEB), the Association of Securities-Issuing

Companies (VEUO) and the Confederation of Netherlands Industry and Employers (VNO-NCW), the Code

has been amended by the Corporate Governance Code Monitoring Committee (referred to below as the

Committee). Ongoing developments, the spirit of the times and overlaps with legislation were reasons to

amend the Code. The present Code replaces the 2008 Code.

Scope

The Code applies to:

  1. all companies whose registered offices are in the Netherlands and whose shares, or depositary receipts

for shares, have been admitted to trading on a regulated market or a comparable system; and

  1. all large companies whose registered offices are in the Netherlands (balance sheet value > €500 million)

and whose shares, or depositary receipts for shares, have been admitted to trading on a multilateral

trading facility or a comparable system.

For the purposes of the Code, holders of depositary receipts issued with the cooperation of the company

are equated with shareholders. The Code does not apply to an investment company or an undertaking for

collective investment in transferable securities that is not a manager within the meaning of Section 1:1 of the

Financial Supervision Act (Wet op het financieel toezicht/Wft).

Contents of the Code

The Code contains principles and best practice provisions that regulate relations between the management

board, the supervisory board and the shareholders (including the general meeting of shareholders). The principles and provisions are aimed at defining responsibilities for long-term value creation, risk control, effective

management and supervision, remuneration and the relationship with shareholders (including the general

meeting of shareholders) and stakeholders. The principles may be regarded as reflecting widely held general

views on good corporate governance. The principles have been supplemented in the form of best practice

provisions. These provisions contain standards for the conduct of management board members, supervisory

board members and shareholders. They reflect best practices and supplement the general principles of good

corporate governance. Companies may depart from these best practice provisions, provided that they give

reasons for doing so. The conditions for departures are explained below under ‘Compliance with the Code’

The relationship between the company and its employees (representatives) is regulated by law. This relationship is addressed in the Code in those provisions which relate to culture and the contact between the supervisory board and the employee participation body.

The Dutch Corporate Governance Code | December 2016 PAGE 8

Underlying notions

The Code is based on the notion that a company is a long-term alliance between the various stakeholders of

the company. Stakeholders are groups and individuals who, directly or indirectly, influence – or are influenced

by – the attainment of the company’s objectives: employees, shareholders and other lenders, suppliers,

customers and other stakeholders. The management board and the supervisory board have responsibility for

weighing up these interests, generally with a view to ensuring the continuity of the company and its affiliated

enterprise, as the company seeks to create long-term value.

If stakeholders are to cooperate within and with the company, they need to be confident that their interests

are duly taken into consideration. Good entrepreneurship and effective supervision are essential conditions

for stakeholder confidence in management and supervision. This includes integrity and transparency of the

management board’s actions and accountability for the supervision by the supervisory board. The operation

of the Code is not determined by the extent to which it is complied with to the letter, but rather by the extent

to which all stakeholders are guided by the spirit of the Code.

Shareholders and institutional investors

Shareholders can give priority to their own interests, as long as they act in keeping with the principles of

reasonableness and fairness in relation to the company, its organs and their fellow shareholders. This includes

the willingness to engage with the company and fellow shareholders. The greater the interest which the

shareholder has in a company, the greater is his responsibility to the company, fellow shareholders and other

stakeholders. Institutional investors are responsible to the ultimate beneficiary owners for the careful and transparent assessment of how to exercise their rights as shareholders of companies.

Relation to legislation

The Code was formed by self-regulation. It was made by, and is intended for, the parties addressed by the

Code. Self-regulation means that parties draw up their own rules, without government intervention, to which

they then commit themselves by following, enforcing and updating those rules. Self-regulation supplements

government regulation. The Code should be viewed in the context of Dutch and European legislation and

case law on corporate governance. The particular merit of the Code as an instrument of self-regulation is that

the Code focuses more on the behaviour of management board members, supervisory board members and

shareholders.

The amendments to the Code are based on the applicable legislation and case law on the external and internal relations of companies, and take into account relevant corporate governance trends. When formulating

the principles and best practice provisions, overlaps with legislation have been avoided as much as possible.

For the sake of the Code’s readability and its internal coherence, some overlap between legislation and the

Code is unavoidable, if only because the Code can supplement statutory provisions.

One-tier governance structure

The Netherlands traditionally works with a dualistic governance model (i.e. a two-tier governance structure).

The Code is focused on this model. In companies with a two-tier governance structure, management and

supervision are divided between two company bodies: the management board and the supervisory board.

Chapter 5 pertains to companies with a one-tier governance structure. Companies with a one-tier governance

structure have a single management board comprised of executive and non-executive directors. In this situation, the latter supervise the former, and there is no supervisory board. Non-executive directors and executive

directors have joint management responsibility. It is important that independent supervision by non-executive

directors is sufficiently ensured.

The Dutch Corporate Governance Code | December 2016 PAGE 9

 

The Dutch Corporate Governance Code | December 2016 PAGE 11

COMPLIANCE WITH THE CODE

The management board and the supervisory board are responsible for the corporate governance of the

company and for compliance with this Code. Compliance with the Code is based on the ‘comply or explain’

principle. Unlike legislation, the Code offers flexibility in that it provides room to depart from the principles

and best practice provisions. The management board and the supervisory board account for compliance with

the Code in the general meeting, and provide a substantive and transparent explanation for any departures

from the principles and best practice provisions.

The broad outline of the company’s corporate governance is set out each year in a separate chapter of the

management report or published on the company’s website, partly on the basis of the principles stated in

this Code. Here the company explicitly states the extent to which it complies with the principles and best

practice provisions stipulated in this Code and, where it does not comply with them, why and to what extent

it deviates from them.

Importantly, the explanation of any departures should in any event include the following elements:

  1. how the company departed from the principle or the best practice provision;
  2. the reasons for the departure;

iii. if the departure is of a temporary nature and continues for more than one financial year, an indication of

when the company intends to comply with the principle or the best practice provision again; and

  1. where applicable, a description of the alternative measure that was taken and either an explanation of

how that measure attains the purpose of the principle or the best practice provision or a clarification of

how the measure contributes to good corporate governance of the company.

Shareholders, businesses that specialise in rating the corporate governance of listed companies and persons

who advise on the exercise of voting rights attaching to shares should carefully assess the reason for each and

every departure from the Code’s principles and best practice provisions. Shareholders as well as the management board and supervisory board should be prepared to engage with each other to discuss the reason

why a principle or best practice provision was not applied. It is up to the shareholders to call the management

board and the supervisory board to account for compliance with the Code. The guiding principle here is

that corporate governance requires a tailor-made approach and departures may be justified. Companies and

shareholders share responsibility for good self-regulation according to the ‘comply or explain’ principle so

that it can serve as an effective alternative to legislation.

 

The Dutch Corporate Governance Code | December 2016 PAGE 13

CHAPTER 1.

LONG-TERM VALUE CREATION

Principle 1.1 Long-term value creation

The management board is responsible for the continuity of the company and its affiliated enterprise. The

management board focuses on long-term value creation for the company and its affiliated enterprise, and

takes into account the stakeholder interests that are relevant in this context. The supervisory board monitors

the management board in this.

1.1.1 Long-term value creation strategy

The management board should develop a view on long-term value creation by the company and its affiliated

enterprise and should formulate a strategy in line with this. Depending on market dynamics, it may be necessary to make short-term adjustments to the strategy.

When developing the strategy, attention should in any event be paid to the following:

  1. the strategy’s implementation and feasibility;
  2. the business model applied by the company and the market in which the company and its affiliated

enterprise operate;

iii. opportunities and risks for the company;

  1. the company’s operational and financial goals and their impact on its future position in relevant markets;
  2. the interests of the stakeholders; and
  3. any other aspects relevant to the company and its affiliated enterprise, such as the environment, social

and employee-related matters, the chain within which the enterprise operates, respect for human rights,

and fighting corruption and bribery.

1.1.2 Involvement of the supervisory board

The management board should engage the supervisory board early on in formulating the strategy for realising

long-term value creation. The management board renders account to the supervisory board of the strategy

and the explanatory notes to that strategy.

1.1.3 Role of the supervisory board

The supervisory board should supervise the manner in which the management board implements the longterm value creation strategy. The supervisory board should regularly discuss the strategy, the implementation

of the strategy and the principal risks associated with it. In the report drawn up by the supervisory board, an

account is given of its involvement in the establishment of the strategy, and the way in which it monitors its

implementation.

1.1.4 Accountability of the management board

In the management report, the management board should give a more detailed explanation of its view on

long-term value creation and the strategy for its realisation, as well as describing which contributions were

made to long-term value creation in the past financial year. The management board should report on both the

short-term and long-term developments.

The Dutch Corporate Governance Code | December 2016 PAGE 14

Principle 1.2 Risk management

The company should have adequate internal risk management and control systems in place. The management board is responsible for identifying and managing the risks associated with the company’s strategy and

activities.

1.2.1 Risk assessment

The management board should identify and analyse the risks associated with the strategy and activities of the

company and its affiliated enterprise. It is responsible for establishing the risk appetite, and also the measures

that are put in place in order to counter the risks being taken.

1.2.2 Implementation

Based on the risk assessment, the management board should design, implement and maintain adequate

internal risk management and control systems. To the extent relevant, these systems should be integrated into

the work processes within the company and its affiliated enterprise it, and should be familiar to those whose

work they are relevant to.

1.2.3 Monitoring of effectiveness

The management board should monitor the operation of the internal risk management and control systems

and should carry out a systematic assessment of their design and effectiveness at least once a year. This

monitoring should cover all material control measures relating to strategic, operational, compliance and reporting risks. Attention should be given to observed weaknesses, instances of misconduct and irregularities,

indications from whistleblowers, lessons learned and findings from the internal audit function and the external

auditor. Where necessary, improvements should be made to internal risk management and control systems.

Principle 1.3 Internal audit function

The duty of the internal audit function is to assess the design and the operation of the internal risk management and control systems. The management board is responsible for the internal audit function. The supervisory board oversees the internal audit function and maintains regular contact with the person fulfilling this

function.

1.3.1 Appointment and dismissal

The management board both appoints and dismisses the senior internal auditor. Both the appointment and

the dismissal of the senior internal auditor should be submitted to the supervisory board for approval, along

with the recommendation issued by the audit committee.

1.3.2 Assessment of the internal audit function

The management board should assess the way in which the internal audit function fulfils its responsibility

annually, taking into account the audit committee’s opinion.

1.3.3 Internal audit plan

The internal audit function should draw up an audit plan, involving the management board, the audit committee and the external auditor in this process. The audit plan should be submitted to the management board,

and then to the supervisory board, for approval. In this internal audit plan, attention should be paid to the

interaction with the external auditor.

1.3.4 Performance of work

The internal audit function should have sufficient resources to execute the internal audit plan and have access

to information that is important for the performance of its work. The internal audit function should have direct

access to the audit committee and the external auditor. Records should be kept of how the audit committee is

informed by the internal audit function.

The Dutch Corporate Governance Code | December 2016 PAGE 15

1.3.5 Reports of findings

The internal audit function should report its audit results to the management board and the essence of its

audit results to the audit committee and should inform the external auditor. The research findings of the internal audit function should, at least, include the following:

  1. any flaws in the effectiveness of the internal risk management and control systems;
  2. any findings and observations with a material impact on the risk profile of the company and its affiliated

enterprise; and

iii. any failings in the follow-up of recommendations made by the internal audit function.

1.3.6 Absence of an internal audit department

If there is no separate department for the internal audit function, the supervisory board will assess annually

whether adequate alternative measures have been taken, partly on the basis of a recommendation issued by

the audit committee, and will consider whether it is necessary to establish an internal audit department. The

supervisory board should include the conclusions, along with any resulting recommendations and alternative

measures, in the report of the supervisory board.

Principle 1.4 Risk management accountability

The management board should render account of the effectiveness of the design and the operation of the

internal risk management and control systems.

1.4.1 Accountability to the supervisory board

The management board should discuss the effectiveness of the design and operation of the internal risk

management and control systems referred to in best practice provisions 1.2.1 to 1.2.3 inclusive with the audit

committee, and render account of this to the supervisory board.

1.4.2 Accountability in the management report

In the management report, the management board should render account of:

  1. the execution of the risk assessment, with a description of the principal risks facing the company in relation to its risk appetite. These risks may include strategic, operational, compliance and reporting risks;
  2. the design and operation of the internal risk management and control systems during the past financial year;

iii. any major failings in the internal risk management and control systems which have been observed in the financial year, any significant changes made to these systems and any major improvements planned, along with a

confirmation that these issues have been discussed with the audit committee and the supervisory board; and

  1. the sensitivity of the results of the company to material changes in external factors.

1.4.3 Statement by the management board

The management board should state in the management report, with clear substantiation, that:

  1. the report provides sufficient insights into any failings in the effectiveness of the internal risk management

and control systems;

  1. the aforementioned systems provide reasonable assurance that the financial reporting does not contain

any material inaccuracies;

iii. based on the current state of affairs, it is justified that the financial reporting is prepared on a going

concern basis; and

  1. the report states those material risks and uncertainties that are relevant to the expectation of the company’s continuity for the period of twelve months after the preparation of the report.

Principle 1.5 Role of the supervisory board

The supervisory board should supervise the policies carried out by the management board and the general

affairs of the company and its affiliated enterprise. In so doing, the supervisory board should also focus on the

effectiveness of the company’s internal risk management and control systems and the integrity and quality of

the financial reporting.

The Dutch Corporate Governance Code | December 2016 PAGE 16

1.5.1 Duties and responsibilities of the audit committee

The audit committee undertakes preparatory work for the supervisory board’s decision-making regarding

the supervision of the integrity and quality of the company’s financial reporting and the effectiveness of the

company’s internal risk management and control systems. Among other things, it focuses on monitoring the

management board with regard to:

  1. relations with, and compliance with recommendations and following up of comments by, the internal

and external auditors;

  1. the funding of the company;

iii. the application of information and communication technology by the company, including risks relating

to cybersecurity; and

  1. the company’s tax policy.

1.5.2 Attendance of the management board, internal auditor and external auditor at audit committee consultations

The chief financial officer, the internal auditor and the external auditor should attend the audit committee

meetings, unless the audit committee determines otherwise. The audit committee should decide whether

and, if so, when the chairman of the management board should attend its meetings.

1.5.3 Audit committee report

The audit committee should report to the supervisory board on its deliberations and findings. This report

must, at least, include the following information:

  1. the methods used to assess the effectiveness of the design and operation of the internal risk management and control systems referred to in best practice provisions 1.2.1 to 1.2.3, inclusive;
  2. the methods used to assess the effectiveness of the internal and external audit processes;

iii. material considerations regarding financial reporting;

  1. the way material risks and uncertainties referred to in best practice provision 1.4.3 have been analysed

and discussed, along with a description of the most important findings of the audit committee.

1.5.4 Supervisory board

The supervisory board should discuss the items reported on by the audit committee as per of best practice

provision 1.5.3.

Principle 1.6 Appointment and assessment of the functioning of the external auditor

The supervisory board should submit the nomination for the appointment of the external auditor to the

general meeting, and should supervise the external auditor’s functioning.

1.6.1 Functioning and appointment

The audit committee should report annually to the supervisory board on the functioning of, and the developments in, the relationship with the external auditor. The audit committee should advise the supervisory board

regarding the external auditor’s nomination for appointment/reappointment or dismissal and should prepare

the selection of the external auditor. The audit committee should give due consideration to the management

board’s observations during the aforementioned work. Also on this basis, the supervisory board should determine its nomination for the appointment of the external auditor to the general meeting.

1.6.2 Informing the external auditor about their functioning

The supervisory board should give the external auditor a general idea of the content of the reports relating to

their functioning.

1.6.3 Engagement

The audit committee should submit a proposal to the supervisory board for the external auditor’s engage-

The Dutch Corporate Governance Code | December 2016 PAGE 17

ment to audit the financial statements. The management board should play a facilitating role in this process. In

formulating the terms of engagement, attention should be paid to the scope of the audit, the materiality to be

used and remuneration for the audit. The supervisory board should resolve on the engagement.

1.6.4 Accountability

The main conclusions of the supervisory board regarding the external auditor’s nomination and the outcomes

of the external auditor selection process should be communicated to the general meeting.

1.6.5 Departure of the external auditor

The company should publish a press release in the event of the early termination of the relationship with the

external audit firm. The press release should explain the reasons for this early termination.

Principle 1.7 Performance of the external auditor’s work

The audit committee and the external auditor should discuss the audit plan and the findings of the external

auditor based on the work the external auditor has undertaken. The management board and the supervisory

board should maintain regular contact with the external auditor.

1.7.1 Provision of information to the external auditor

The management board should ensure that the external auditor will receive all information that is necessary for

the performance of his work in a timely fashion. The management board should give the external auditor the

opportunity to respond to the information that has been provided.

1.7.2 Audit plan and external auditor’s findings

The external auditor should discuss the draft audit plan with the management board before presenting it to

the audit committee. The audit committee should annually discuss with the external auditor:

  1. the scope and materiality of the audit plan and the principal risks of the annual reporting identified by the

external auditor in the audit plan; and

  1. based also on the documents from which the audit plan was developed, the findings and outcomes of

the audit work on the financial statements and the management letter.

1.7.3 Publication of financial reports

The audit committee should determine whether and, if so, how the external auditor should be involved in the

content and publication of financial reports other than the financial statements.

1.7.4 Consultations with the external auditor outside the management board’s presence

The audit committee should meet with the external auditor as often as it considers necessary, but at least once

per year, outside the presence of the management board.

1.7.5 Examination of discussion points arising between the external auditor and the management board

The supervisory board should be permitted to examine the most important points of discussion arising between

the external auditor and the management board based on the draft management letter or the draft audit report.

1.7.6 External auditor’s attendance of supervisory board meetings

The external auditor should in any event attend the meeting of the supervisory board at which the report of

the external auditor on the audit of the financial statements is discussed.

 

The Dutch Corporate Governance Code | December 2016 PAGE 19

CHAPTER 2.

EFFECTIVE MANAGEMENT AND SUPERVISION

Principle 2.1 Composition and size

The management board and the supervisory board should be composed such that the requisite expertise,

background, competencies and – as regards the supervisory board – independence are present for them to

carry out their duties properly. The size of these two bodies reflects these requirements.

2.1.1 Profile

The supervisory board should prepare a profile, taking account of the nature and the activities of the enterprise affiliated with the company. The profile should address:

  1. the desired expertise and background of the supervisory board members;
  2. the desired diverse composition of the supervisory board, referred to in best practice provision 2.1.5;

iii. the size of the supervisory board; and

  1. the independence of the supervisory board members.

The profile should be posted on the company’s website.

2.1.2 Personal information

The following information about each supervisory board member should be included in the report of the

supervisory board:

  1. gender;
  2. age;

iii. nationality;

  1. principal position;
  2. other positions, in so far as they are relevant to the performance of the duties of the supervisory board

member;

  1. date of initial appointment; and

vii. current term of office.

2.1.3 Executive committee

If the management board works with an executive committee, the management board should take account

of the checks and balances that are part of the two-tier system. This means, among other things, that the

management board’s expertise and responsibilities are safeguarded and the supervisory board is informed

adequately. The supervisory board should supervise this whilst paying specific attention to the dynamics and

the relationship between the management board and the executive committee.

In the management report, account should be rendered of:

  1. the choice to work with an executive committee;
  2. the role, duty and composition of the executive committee; and

iii. how the contacts between the supervisory board and the executive committee have been given shape.

2.1.4 Expertise

Each supervisory board member and each management board member should have the specific expertise

required for the fulfilment of his duties. Each supervisory board member should be capable of assessing the

broad outline of the overall management.

2.1.5 Diversity policy

The supervisory board should draw up a diversity policy for the composition of the management board,

The Dutch Corporate Governance Code | December 2016 PAGE 20

the supervisory board and, if applicable, the executive committee. The policy should address the concrete

targets relating to diversity and the diversity aspects relevant to the company, such as nationality, age, gender,

and education and work background.

2.1.6 Accountability about diversity

The corporate governance statement should explain the diversity policy and the way that it is implemented in

practice, addressing:

  1. the policy objectives;
  2. how the policy has been implemented; and

iii. the results of the policy in the past financial year.

If the composition of the management board and the supervisory board diverges from the targets stipulated

in the company’s diversity policy and/or the statutory target for the male/female ratio, if and to the extent that

this is provided under or pursuant to the law, the current state of affairs should be outlined in the corporate

governance statement, along with an explanation as to which measures are being taken to attain the intended

target, and by when this is likely to be achieved.

2.1.7 Independence of the supervisory board

The composition of the supervisory board is such that the members are able to operate independently and

critically vis-à-vis one another, the management board, and any particular interests involved.

In order to safeguard its independence, the supervisory board is composed in accordance with the following

criteria:

  1. any one of the criteria referred to in best practice provision 2.1.8, sections i. to v. inclusive should be

applicable to at most one supervisory board member;

  1. the total number of supervisory board members to whom the criteria referred to in best practice provision 2.1.8 are applicable should account for less than half of the total number of supervisory board

members; and

iii. for each shareholder, or group of affiliated shareholders, who directly or indirectly hold more than ten

percent of the shares in the company, there is at most one supervisory board member who can be considered to be affiliated with or representing them as stipulated in best practice provision 2.1.8, sections

  1. and vii.

2.1.8 Independence of supervisory board members

A supervisory board member is not independent if they or their spouse, registered partner or life companion,

foster child or relative by blood or marriage up to the second degree:

  1. has been an employee or member of the management board of the company (including associated

companies as referred to in Section 5:48 of the Financial Supervision Act (Wet op het financieel toezicht/

Wft)) in the five years prior to the appointment;

  1. receives personal financial compensation from the company, or a company associated with it, other than

the compensation received for the work performed as a supervisory board member and in so far as this is

not in keeping with the normal course of business;

iii. has had an important business relationship with the company or a company associated with it in the year

prior to the appointment. This includes in any event the case where the supervisory board member, or

the firm of which he is a shareholder, partner, associate or adviser, has acted as adviser to the company

(consultant, external auditor, civil notary or lawyer) and the case where the supervisory board member

is a management board member or an employee of a bank with which the company has a lasting and

significant relationship;

  1. is a member of the management board of a company in which a member of the management board of

the company which he supervises is a supervisory board member;

The Dutch Corporate Governance Code | December 2016 PAGE 21

  1. has temporarily performed management duties during the previous twelve months in the absence or

incapacity of management board members;

  1. has a shareholding in the company of at least ten percent, taking into account the shareholding of natural persons

or legal entities cooperating with him or her on the basis of an express or tacit, verbal or written agreement;

vii. is a member of the management board or supervisory board – or is a representative in some other way – of a

legal entity which holds at least ten percent of the shares in the company, unless the entity is a group company.

2.1.9 Independence of the chairman of the supervisory board

The chairman of the supervisory board should not be a former member of the management board of the

company and should be independent within the meaning of best practice provision 2.1.8.

2.1.10 Accountability regarding supervisory board member independence

The report of the supervisory board should state that, in the opinion of the supervisory board, the independence

requirements referred to in best practice provisions 2.1.7 to 2.1.9 inclusive have been fulfilled and, if applicable,

should also state which supervisory board member(s), if any, it does not consider to be independent.

Principle 2.2 Appointment, succession and evaluation

The supervisory board should ensure that a formal and transparent procedure is in place for the appointment

and reappointment of management board and supervisory board members, as well as a sound plan for the

succession of management board and supervisory board members, with due regard to the diversity policy.

The functioning of the management board and the supervisory board as a collective and the functioning of

individual members should be evaluated on a regular basis.

2.2.1 Appointment and reappointment periods – management board members

A management board member is appointed for a maximum period of four years. A member may be reappointed for a term of not more than four years at a time, which reappointment should be prepared in a timely

fashion. The diversity objectives from best practice provision 2.1.5 should be considered in the preparation of

the appointment or reappointment.

2.2.2 Appointment and reappointment periods – supervisory board members

A supervisory board member is appointed for a period of four years and may then be reappointed once for

another four-year period. The supervisory board member may then subsequently be reappointed again for

a period of two years, which appointment may be extended by at most two years. In the event of a reappointment after an eight-year period, reasons should be given in the report of the supervisory board. In any

appointment or reappointment, the profile referred to in best practice provision 2.1.1 should be observed.

2.2.3 Early retirement

A member of the supervisory board or the management board should retire early in the event of inadequate

functioning, structural incompatibility of interests, and in other instances in which this is deemed necessary

by the supervisory board. In the event of the early retirement of a member of the management board or the

supervisory board, the company should issue a press release mentioning the reasons for the departure.

2.2.4 Succession

The supervisory board should ensure that the company has a sound plan in place for the succession of

management board and supervisory board members that is aimed at retaining the balance in the requisite

expertise, experience and diversity. Due regard should be given to the profile referred to in best practice

provision 2.1.1 in drawing up the plan for supervisory board members. The supervisory board should also

draw up a retirement schedule in order to avoid, as much as possible, supervisory board members retiring

simultaneously. The retirement schedule should be published on the company’s website.

The Dutch Corporate Governance Code | December 2016 PAGE 22

2.2.5 Duties of the selection and appointment committee

The selection and appointment committee should prepare the supervisory board’s decision-making and

report to the supervisory board on its deliberations and findings.

The selection and appointment committee should in any event focus on:

  1. drawing up selection criteria and appointment procedures for management board members and supervisory board members;
  2. periodically assessing the size and composition of the management board and the supervisory board,

and making a proposal for a composition profile of the supervisory board;

iii. periodically assessing the functioning of individual management board members and supervisory board

members, and reporting on this to the supervisory board;

  1. drawing up a plan for the succession of management board members and supervisory board members;
  2. making proposals for appointments and reappointments; and
  3. supervising the policy of the management board regarding the selection criteria and appointment procedures for senior management.

2.2.6 Evaluation by the supervisory board

At least once per year, outside the presence of the management board, the supervisory board should evaluate its own functioning, the functioning of the various committees of the supervisory board and that of the

individual supervisory board members, and should discuss the conclusions that are attached to the evaluation. In doing so, attention should be paid to:

  1. substantive aspects, the mutual interaction and the interaction with the management board;
  2. events that occurred in practice from which lessons may be learned; and

iii. the desired profile, composition, competencies and expertise of the supervisory board.

2.2.7 Evaluation of the management board

At least once per year, outside the presence of the management board, the supervisory board should evaluate both the functioning of the management board as a whole and that of the individual management board

members, and should discuss the conclusions that must be attached to the evaluation, such also in light of

the succession of management board members. At least once annually, the management board, too, should

evaluate its own functioning as a whole and that of the individual management board members.

2.2.8 Evaluation accountability

The supervisory board’s report should state:

  1. how the evaluation of the supervisory board, the various committees and the individual supervisory

board members has been carried out;

  1. how the evaluation of the management board and the individual management board members has been

carried out; and

iii. what has been or will be done with the conclusions from the evaluations.

Principle 2.3 Organisation of the supervisory board and reports

The supervisory board should ensure that it functions effectively. The supervisory board should establish committees to prepare the supervisory board’s decision-making. The foregoing does not affect the responsibility

of the supervisory board as an organ and of the individual members of the supervisory board for obtaining

information and forming an independent opinion.

2.3.1 Supervisory board’s terms of reference

The division of duties within the supervisory board and the procedure of the supervisory board should be laid

down in terms of reference. The supervisory board’s terms of reference should include a paragraph dealing

with its relations with the management board, the general meeting, the employee participation body (if any)

and the executive committee (if any). The terms of reference should be posted on the company’s website.

The Dutch Corporate Governance Code | December 2016 PAGE 23

2.3.2 Establishment of committees

If the supervisory board consists of more than four members, it should appoint from among its members an

audit committee, a remuneration committee and a selection and appointment committee. Without prejudice

to the collegiate responsibility of the supervisory board, the duty of these committees is to prepare the decision-making of the supervisory board. If the supervisory board decides not to establish an audit committee, a

remuneration committee or a selection and appointment committee, the best practice provisions applicable

to such committee(s) should apply to the entire supervisory board.

2.3.3 Committees’ terms of reference

The supervisory board should draw up terms of reference for the audit committee, the remuneration committee and the selection and appointment committee. The terms of reference should indicate the role and

responsibility of the committee concerned, its composition and the manner in which it discharges its duties.

The terms of reference should be posted on the company’s website.

2.3.4 Composition of the committees

The audit committee or the remuneration committee should not be chaired by the chairman of the supervisory board or by a former member of the management board of the company. More than half of the members of

the committees should be independent within the meaning of best practice provision 2.1.8.

2.3.5 Committee reports

The supervisory board should receive from each of the committees a report of their deliberations and findings. In the report of the supervisory board it should comment on how the duties of the committees were

carried out in the financial year. In this report, the composition of the committees, the number of committee

meetings and the main items discussed at the meetings should be mentioned.

2.3.6 Chairman of the supervisory board

The chairman of the supervisory board should in any case ensure that:

  1. the supervisory board has proper contact with the management board, the employee participation body

(if any) and the general meeting;

  1. the supervisory board elects a vice-chairman;

iii. there is sufficient time for deliberation and decision-making by the supervisory board;

  1. the supervisory board members receive all information that is necessary for the proper performance of

their duties in a timely fashion;

  1. the supervisory board and its committees function properly;
  2. the functioning of individual management board members and supervisory board members is assessed

at least annually;

vii. the supervisory board members and management board members follow their induction programme;

viii. the supervisory board members and management board members follow their education or training

programme;

  1. the management board performs activities in respect of culture;
  2. the supervisory board recognises signs from the enterprise affiliated with the company and ensures that any

(suspicion of) material misconduct and irregularities are reported to the supervisory board without delay;

  1. the general meeting proceeds in an orderly and efficient manner;

xii. effective communication with shareholders is assured; and

xiii. the supervisory board is involved closely, and at an early stage, in any merger or takeover processes.

The chairman of the supervisory board should consult regularly with the chairman of the management board.

The Dutch Corporate Governance Code | December 2016 PAGE 24

2.3.7 Vice-chairman of the supervisory board

The vice-chairman of the supervisory board should deputise for the chairman when the occasion arises.

2.3.8 Delegated supervisory board member

A delegated supervisory board member is a supervisory board member who has a special task. The delegation may not extend beyond the responsibilities of the supervisory board itself and may not include the

management of the company. Its purpose is more intensive supervision and advice and more regular consultation with the management board. The delegation should be of a temporary nature only. The delegation may

not detract from the duties and powers of the supervisory board. The delegated supervisory board member

continues to be a member of the supervisory board and should report regularly on the execution of his special

duty to the plenary supervisory board.

2.3.9 Temporary management board function of a supervisory board member

A supervisory board member who temporarily takes on the management of the company, where the management board members are absent or unable to fulfil their duties, should resign from the supervisory board.

2.3.10 Company secretary

The supervisory board should be supported by the company secretary. The secretary:

  1. should ensure that the proper procedures are followed and that the statutory obligations and obligations

under the articles of association are complied with;

  1. should facilitate the provision of information of the management board and the supervisory board; and

iii. should support the chairman of the supervisory board in the organisation of the affairs of the supervisory

board, including the provision of information, meeting agendas, evaluations and training programmes.

The company secretary should, either on the motion of the supervisory board or otherwise, be appointed and

dismissed by the management board, after the approval of the supervisory board has been obtained.

If the secretary also undertakes work for the management board and notes that the interests of the management board and the supervisory board diverge, as a result of which it is unclear which interests the secretary

should represent, the secretary should report this to the chairman of the supervisory board.

2.3.11 Report of the supervisory board

The annual statements of the company include a report by the supervisory board. In this report, the supervisory board should render account of the supervision conducted in the past financial year, reporting in any

event on the items referred to in best practice provisions 1.1.3, 2.1.2, 2.1.10, 2.2.8, 2.3.5 and 2.4.4 and, if

applicable, the items referred to in best practice provisions 1.3.6 and 2.2.2.

Principle 2.4 Decision-making and functioning

The management board and the supervisory board should ensure that decisions are made in a balanced and

effective manner whilst taking account of the interests of stakeholders. The management board should ensure

that information is provided in a timely and sound manner. The management board and the supervisory board

should keep their knowledge and skills up to date and spend sufficient time on their duties and responsibilities. They should ensure that, in performing their duties, they have the information that is required for effective

decision-making.

2.4.1 Stimulating openness and accountability

The management board and the supervisory board are each responsible for stimulating openness and accountability within the organ of which they form part, and between the different organs within the company.

The Dutch Corporate Governance Code | December 2016 PAGE 25

2.4.2 Other positions

Management board members and supervisory board members should report any other positions they may

have to the supervisory board in advance and, at least annually, the other positions should be discussed at the

supervisory board meeting. The acceptance of membership of a supervisory board by a management board

member requires the approval of the supervisory board.

2.4.3 Point of contact for the functioning of supervisory board and management board members

The chairman of the supervisory board should act on behalf of the supervisory board as the main contact for

the management board, supervisory board members and shareholders regarding the functioning of management board members and supervisory board members. The vice-chairman should act as contact for individual

supervisory board members and management board members regarding the functioning of the chairman.

2.4.4 Attendance at supervisory board meetings

Supervisory board members should attend supervisory board meetings and the meetings of the committees

of which they are a part. If supervisory board members are frequently absent from these meetings, they

should be held to account on this. The report of the supervisory board should state the absenteeism rate from

supervisory board and committee meetings of each supervisory board member.

2.4.5 Induction programme for supervisory board members

All supervisory board members should follow an induction programme geared to their role. The induction

programme should in any event cover general financial, social and legal affairs, financial reporting by the

company, any specific aspects that are unique to the relevant company and its business activities, the

company culture and the relationship with the employee participation body (if any), and the responsibilities of

a supervisory board member.

2.4.6 Development

The management board and the supervisory board should each conduct an annual review for their own

organ to identify any aspects with regard to which the supervisory board members and management board

members require training or education.

2.4.7 Information safeguards

The management board should ensure that internal procedures are established and maintained which safeguard that all relevant information is known to the management board and the supervisory board in a timely

fashion. The supervisory board should supervise the establishment and implementation of these procedures.

2.4.8 Supervisory board members’ responsibility for obtaining information

The supervisory board and each individual supervisory board member have their own responsibility for

obtaining the information from the management board, the internal audit function, the external auditor and

the employee participation body (if any) that the supervisory board needs in order to be able to carry out its

duties as a supervisory organ properly.

2.4.9 Obtaining information from officers and external parties

If the supervisory board considers it necessary, it may obtain information from officers and external advisers

of the company. The company should provide the necessary means to this end. The supervisory board may

require that certain officers and external advisers attend its meetings.

Principle 2.5 Culture

The management board is responsible for creating a culture aimed at long-term value creation for the

company and its affiliated enterprise. The supervisory board should supervise the activities of the management board in this regard.

The Dutch Corporate Governance Code | December 2016 PAGE 26

2.5.1 Management board’s responsibility for culture

The management board should adopt values for the company and its affiliated enterprise that contribute to a

culture focused on long-term value creation, and discuss these with the supervisory board. The management

board is responsible for the incorporation and maintenance of the values within the company and its affiliated

enterprise. Attention must be paid to the following, among other things:

  1. the strategy and the business model;
  2. the environment in which the enterprise operates; and

iii. the existing culture within the enterprise, and whether it is desirable to implement any changes in this.

The management board encourages behaviour that is in keeping with the values, and propagates these

values through leading by example.

2.5.2 Code of Conduct

The management board should draw up a code of conduct and monitor its effectiveness and compliance

with this code, both on the part of itself and of the employees of the company. The management board

should inform the supervisory board of its findings and observations relating to the effectiveness of, and compliance with, the code. The code of conduct will be published on the company’s website.

2.5.3 Employee participation

If the company has established an employee participation body, the conduct and culture in the company and

its affiliated enterprise should also be discussed in the consultations between the management board, the

supervisory board and such employee participation body.

2.5.5 Accountability regarding culture

In the management report, the management board should explain:

  1. the values and the way in which they are incorporated in the company and its affiliate enterprise; and
  2. the effectiveness of, and compliance with, the code of conduct.

Principle 2.6 Misconduct and irregularities

The management board and the supervisory board should be alert to indications of actual or suspected

misconduct or irregularities. The management board should establish a procedure for reporting actual or

suspicion of misconduct or irregularities, and take appropriate follow-up action on the basis of these reports.

The supervisory board monitors the management board in this.

2.6.1 Procedure for reporting actual or suspicion of misconduct or irregularities

The management board should establish a procedure for reporting actual or suspected irregularities within

the company and its affiliated enterprise. The procedure will be published on the company’s homepage. The

management board should ensure that employees have the opportunity to file a report without jeopardising

their legal position.

2.6.2 Informing the chairman of the supervisory board

The management board should inform the chairman of the supervisory board without delay of any signs of

actual or suspected material misconduct or irregularities within the company and its affiliated enterprise. If the

actual or suspected misconduct or irregularity pertains to the functioning of a management board member,

employees can report this directly to the chairman of the supervisory board.

2.6.3 Notification by the external auditor

The external auditor should inform the chairman of the audit committee without delay if, during the performance of his duties, he discovers or suspect an instance of misconduct or irregularity. If the actual or suspected misconduct or irregularity pertains to the functioning of a management board member, the external

auditor should report this directly to the chairman of the supervisory board.

The Dutch Corporate Governance Code | December 2016 PAGE 27

2.6.4 Oversight by the supervisory board

The supervisory board monitors the operation of the procedure for reporting actual or suspected misconduct

or irregularities, appropriate and independent investigations into signs of misconduct or irregularities, and,

if an instance of misconduct or irregularity has been discovered, an adequate follow-up of any recommendations for remedial actions.

In order to safeguard the independence of the investigation in cases where the management board itself is

involved, the supervisory board should have the option of initiating its own investigation into any irregularities

that have been discovered and to coordinate this investigation.

Principle 2.7 Preventing conflicts of interest

Any form of conflict of interest between the company and the members of its management board or supervisory board should be prevented. To avoid conflicts of interest, adequate measures should be taken. The

supervisory board is responsible for the decision-making on dealing with conflicts of interest regarding management board members, supervisory board members and majority shareholders in relation to the company.

2.7.1 Preventing conflicts of interest

Management board members and supervisory board members are alert to conflicts of interest and should in

any case refrain from the following:

  1. competing with the company;
  2. demanding or accepting substantial gifts from the company for themselves or their spouse, registered

partner or other life companion, foster child or relative by blood or marriage up to the second degree;

iii. providing unjustified advantages to third parties at the company’s expense;

  1. taking advantage of business opportunities to which the company is entitled for themselves or for their

spouse, registered partner or other life companion, foster child or relative by blood or marriage up to the

second degree.

2.7.2 Terms of reference

The terms of reference of the supervisory board should contain rules on dealing with conflicts of interest,

including conflicting interests between management board members and supervisory board members on

the one hand and the company on the other. The terms of reference should also stipulate which transactions

require the approval of the supervisory board. The company should draw up regulations governing ownership of, and transactions in, securities by management or supervisory board members, other than securities

issued, by the company.

2.7.3 Reporting

A conflict of interest may exist if the company intends to enter into a transaction with a legal entity:

  1. in which a member of the management board or the supervisory board personally has a material financial

interest; or

  1. which has a member of the management board or the supervisory board who is related under family law

to a member of the management board or the supervisory board of the company.

A management board member should report any potential conflict of interest in a transaction that is of

material significance to the company and/or to such management board member to the chairman of the

supervisory board and to the other members of the management board without delay. The management

board member should provide all relevant information in that regard, including the information relevant to

the situation concerning his spouse, registered partner or other life companion, foster child and relatives by

blood or marriage up to the second degree.

A supervisory board member should report any conflict of interest or potential conflict of interest in a transaction that is of material significance to the company and/or to such supervisory board member to the chairman

of the supervisory board without delay and should provide all relevant information in that regard, including

The Dutch Corporate Governance Code | December 2016 PAGE 28

the relevant information pertaining to his spouse, registered partner or other life companion, foster child and

relatives by blood or marriage up to the second degree. If the chairman of the supervisory board has a conflict

of interest or potential conflict of interest, he should report this to the vice-chairman of the supervisory board

without delay.

The supervisory board should decide, outside the presence of the management board member or supervisory board member concerned, whether there is a conflict of interest.

2.7.4 Accountability regarding transactions: management board and supervisory board members

All transactions in which there are conflicts of interest with management board members or supervisory board

members should be agreed on terms that are customary in the market. Decisions to enter into transactions in

which there are conflicts of interest with management board members or supervisory board members that are

of material significance to the company and/or to the relevant management board members or supervisory

board members should require the approval of the supervisory board. Such transactions should be published

in the management report, together with a statement of the conflict of interest and a declaration that best

practice provisions 2.7.3 and 2.7.4 have been complied with.

2.7.5 Accountability regarding transactions: majority shareholders

All transactions between the company and legal or natural persons who hold at least ten percent of the

shares in the company should be agreed on terms that are customary in the market. Decisions to enter into

transactions with such persons that are of material significance to the company and/or to such persons should

require the approval of the supervisory board. Such transactions should be published in the management

report, together with a declaration that best practice provision 2.7.5 has been complied with.

2.7.6 Personal loans

The company should not grant its management board members and supervisory board members any personal loans, guarantees or the like unless in the normal course of business and on terms applicable to the personnel as a whole, and after approval of the supervisory board. No remission of loans should be granted.

Principle 2.8 Takeover situations

In the event of a takeover bid for the company’s shares or for the depositary receipts for the company’s shares,

in the event of a private bid for a business unit or a participating interest, where the value of the bid exceeds

the threshold referred to in Section 2:107a(1)(c) of the Dutch Civil Code, and/or in the event of other substantial changes in the structure of the organisation, both the management board and the supervisory board

should ensure that the stakeholder interests concerned are carefully weighed and any conflict of interest for

supervisory board members or management board members is avoided. The management board and the supervisory board should be guided in their actions by the interests of the company and its affiliated enterprise.

2.8.1 Supervisory board involvement

When a takeover bid for the company’s shares or for the depositary receipts for the company’s shares is being

prepared, in the event of a private bid for a business unit or a participating interest, where the value of the

bid exceeds the threshold referred to in Section 2:107a(1)(c) of the Dutch Civil Code, and/or in the event

of other substantial changes in the structure of the organisation, the management board should ensure that

the supervisory board is involved in the takeover process and/or the change in the structure closely and in a

timely fashion.

2.8.2 Informing the supervisory board about request for inspection by competing bidder

If a takeover bid has been announced for the shares, or depositary receipts for shares, in the company, and

the management board receives a request from a competing bidder to inspect the company’s records, the

The Dutch Corporate Governance Code | December 2016 PAGE 29

management board should discuss this request with the supervisory board without delay.

2.8.3 Management board’s position on a private bid

If a private bid for a business unit or a participating interest has been made public, where the value of the bid

exceeds the threshold referred to in Section 2:107a(1)(c) of the Dutch Civil Code, the management board of

the company should as soon as possible make public its position on the bid and the reasons for this position.

 

The Dutch Corporate Governance Code | December 2016 PAGE 31

CHAPTER 3.

REMUNERATION

Principle 3.1 Remuneration policy – management board

The remuneration policy applicable to management board members should be clear and understandable,

should focus on long-term value creation for the company and its affiliated enterprise, and take into account

the internal pay ratios within the enterprise. The remuneration policy should not encourage management

board members to act in their own interest, nor to take risks that are not in keeping with the strategy formulated and the risk appetite that has been established. The supervisory board is responsible for formulating the

remuneration policy and its implementation.

3.1.1 Remuneration policy proposal

The remuneration committee should submit a clear and understandable proposal to the supervisory board

concerning the remuneration policy to be pursued with regard to the management board. The supervisory

board should present the policy to the general meeting for adoption.

3.1.2 Remuneration policy

The following aspects should in any event be taken into consideration when formulating the remuneration policy:

  1. the objectives for the strategy for the implementation of long-term value creation within the meaning of

best practice provision 1.1.1;

  1. the scenario analyses carried out in advance;

iii. the pay ratios within the company and its affiliated enterprise;

  1. the development of the market price of the shares;
  2. an appropriate ratio between the variable and fixed remuneration components. The variable remuneration component is linked to measurable performance criteria determined in advance, which are predominantly long-term in character;
  3. if shares are being awarded, the terms and conditions governing this. Shares should be held for at least

five years after they are awarded; and

vii. if share options are being awarded, the terms and conditions governing this and the terms and conditions subject to which the share options can be exercised. Share options cannot be exercised during the

first three years after they are awarded.

3.1.3 Remuneration – executive committee

If the management board works with an executive committee, the management board should inform the

supervisory board about the remuneration of the members of the executive committee who are not management board members. The management board should discuss this remuneration with the supervisory board

annually.

The Dutch Corporate Governance Code | December 2016 PAGE 32

Principle 3.2 Determination of management board remuneration

The supervisory board should determine the remuneration of the individual members of the management

board, within the limits of the remuneration policy adopted by the general meeting. The remuneration committee should prepare the supervisory board’s decision-making regarding the determination of remuneration.

The inadequate performance of duties should not be rewarded.

3.2.1 Remuneration committee’s proposal

The remuneration committee should submit a proposal to the supervisory board concerning the remuneration of individual members of the management board. The proposal is drawn up in accordance with the remuneration policy that has been established and will, in any event, cover the remuneration structure, the amount

of the fixed and variable remuneration components, the performance criteria used, the scenario analyses that

are carried out and the pay ratios within the company and its affiliated enterprise.

3.2.2 Management board members’ views on their own remuneration

When drafting the proposal for the remuneration of management board members, the remuneration committee should take note of individual management board members’ views with regard to the amount and structure of their own remuneration. The remuneration committee should ask the members of the management

board to pay attention to the aspects referred to in best practice provision 3.1.2.

3.2.3 Severance payments

The remuneration in the event of dismissal should not exceed one year’s salary (the ‘fixed’ remuneration

component). Severance pay will not be awarded if the agreement is terminated early at the initiative of the

management board member, or in the event of seriously culpable or negligent behaviour on the part of the

management board member.

Principle 3.3 Remuneration – supervisory board

The supervisory board should submit a clear and understandable proposal for its own appropriate remuneration to the general meeting. The remuneration of supervisory board members should promote an adequate

performance of their role and should not be dependent on the results of the company.

3.3.1 Time spent and responsibility

The remuneration of the supervisory board members should reflect the time spent and the responsibilities of

their role.

3.3.2 Remuneration of supervisory board members

Supervisory board members may not be awarded remuneration in the form of shares and/or rights to shares.

3.3.3 Share ownership

Shares held by a supervisory board member in the company on whose supervisory board they serve should

be long-term investments.

The Dutch Corporate Governance Code | December 2016 PAGE 33

Principle 3.4 Accountability for implementation of remuneration policy

In the remuneration report, the supervisory board should render account of the implementation of the remuneration policy in a transparent manner. The report should be posted on the company’s website.

3.4.1 Remuneration report

The remuneration committee should prepare the remuneration report. This report should in any event describe, in a transparent manner, in addition to the matters required by law:

  1. how the remuneration policy has been implemented in the past financial year;
  2. how the implementation of the remuneration policy contributes to long-term value creation;

iii. that scenario analyses have been taken into consideration;

  1. the pay ratios within the company and its affiliated enterprise and, if applicable, any changes in these

ratios in comparison with the previous financial year;

  1. in the event that a management board member receives variable remuneration, how this remuneration

contributes to long-term value creation, the measurable performance criteria determined in advance

upon which the variable remuneration depends, and the relationship between the remuneration and

performance; and

  1. in the event that a current or former management board member receives a severance payment, the

reason for this payment.

3.4.2 Agreement of management board member

The main elements of the agreement of a management board member with the company should be published on the company’s website in a transparent overview after the agreement has been concluded, and

in any event no later than the date of the notice calling the general meeting where the appointment of the

management board member will be proposed.

 

The Dutch Corporate Governance Code | December 2016 PAGE 35

CHAPTER 4.

THE GENERAL MEETING

Principle 4.1 The general meeting

The general meeting should be able to exert such influence on the policies of the management board and the

supervisory board of the company that it plays a fully-fledged role in the system of checks and balances in the

company. Good corporate governance requires the fully-fledged participation of shareholders in the

decision-making in the general meeting.

4.1.1 Supervisory board supervision

The supervisory board’s supervision of the management board should include the supervision of relations

with shareholders.

4.1.2 Proper conduct of business at meetings

The chairman of the general meeting is responsible for ensuring the proper conduct of business at meetings

in order to promote a meaningful discussion at the meeting.

4.1.3 Agenda

The agenda of the general meeting should list which items are up for discussion and which items are to be

voted on. The following items should be dealt with as separate agenda items:

  1. material changes to the articles of association;
  2. proposals relating to the appointment of management board and supervisory board members;

iii. the policy of the company on additions to reserves and on dividends (the level and purpose of the addition to reserves, the amount of the dividend and the type of dividend);

  1. any proposal to pay out dividend;
  2. resolutions to approve the management conducted by the management board (discharge of management board members from liability);
  3. resolutions to approve the supervision exercised by the supervisory board (discharge of supervisory

board members from liability);

vii. each substantial change in the corporate governance structure of the company and in the compliance

with this Code; and

viii. the appointment of the external auditor.

4.1.4 Proposal for approval or authorisation

A proposal for approval or authorisation by the general meeting should be explained in writing. In its explanation the management board should deal with all facts and circumstances relevant to the approval or authorisation to be granted. The notes to the agenda should be posted on the company’s website.

The Dutch Corporate Governance Code | December 2016 PAGE 36

4.1.5 Shareholder’s explanation when exercising the right to put items on the agenda

If a shareholder has arranged for an item to be put on the agenda, he should explain this at the meeting and, if

necessary, answer questions about it.

4.1.6 Placing of items on the agenda by shareholders

A shareholder should only exercise the right to put items on the agenda after they have consulted with the

management board on this. If one or more shareholders intend to request that an item be put on the agenda

that may result in a change in the company’s strategy, for example as a result of the dismissal of one or several

management board or supervisory board members, the management board should be given the opportunity

to stipulate a reasonable period in which to respond (the response time). The opportunity to stipulate the

response time should also apply to an intention as referred to above for judicial leave to call a general meeting

pursuant to Section 2:110 of the Dutch Civil Code. The relevant shareholder should respect the response time

stipulated by the management board, within the meaning of best practice provision 4.1.7.

4.1.7 Stipulation of the response time

If the management board stipulates a response time, this should be a reasonable period that does not exceed

180 days from the moment the management board is informed by one or more shareholders of their intention

to put an item on the agenda to the day of the general meeting at which the item is to be dealt with. The management board should use the response time for further deliberation and constructive consultation, in any

event with the relevant shareholder(s), and should explore the alternatives. At the end of the response time,

the management board should report on this consultation and the exploration to the general meeting. This

should be monitored by the supervisory board.

The response time may be stipulated only once for any given general meeting and should not apply to an item

in respect of which the response time had been previously stipulated, or to meetings where a shareholder

holds at least three-quarters of the issued capital as a consequence of a successful public bid.

4.1.8 Attendance of members nominated for the management board or supervisory board

Management board and supervisory board members nominated for appointment should attend the general

meeting at which votes will be cast on their nomination.

4.1.9 External auditor’s attendance

The external auditor may be questioned by the general meeting in relation to his report on the fairness of

the financial statements. The external auditor should for this purpose attend and be entitled to address this

meeting.

4.1.10 General meeting’s report

The report of the general meeting should be made available, on request, to the shareholders no later than

three months after the end of the meeting, after which shareholders should have the opportunity to react to

the report in the following three months. The report should then be adopted in the manner provided for in

the articles of association.

Principle 4.2 Provision of information

The management board and the supervisory board should ensure that the general meeting is adequately

provided with information.

4.2.1 Substantiation of invocation of overriding interest

If the management board and the supervisory board decide not to provide the general meeting with all

information desired with the invocation of an overriding interest on the part of the company, they must give

reasons for this.

The Dutch Corporate Governance Code | December 2016 PAGE 37

4.2.2 Policy on bilateral contacts with shareholders

The company should formulate an outline policy on bilateral contacts with the shareholders and should post

this policy on its website.

4.2.3 Meetings and presentations

Analyst meetings, analyst presentations, presentations to institutional or other investors and press conferences should be announced in advance on the company’s website and by means of press releases. Analysts’

meetings and presentations to investors should not take place shortly before the publication of the regular

financial information. All shareholders should be able to follow these meetings and presentations in real time,

by means of webcasting, telephone or otherwise. After the meetings, the presentations should be posted on

the company’s website.

4.2.4 Posting information in a separate section of the website

The company should post and update information which is relevant to the shareholders and which it is required to publish or submit pursuant to the provisions of company law and securities law applicable to it in a

separate section of the company’s website.

4.2.5 Management board contacts with press and analysts

The contacts between the management board on the one hand and the press and financial analysts on the

other should be handled and structured carefully and with due observance of the applicable laws and regulations. The company should not do anything that might compromise the independence of analysts in relation

to the company and vice versa.

4.2.6 Outline of anti-takeover measures

The management board should outline all existing or potential anti-takeover measures in the management

report and should also indicate in what circumstances and by whom these measures may likely be used.

Principle 4.3 Casting votes

Participation of as many shareholders as possible in the general meeting’s decision-making is in the interest of

the company’s checks and balances. The company should, in so far as possible, give shareholders the opportunity to vote by proxy and to communicate with all other shareholders.

4.3.1 Voting as deemed fit

A shareholder should vote as he sees fit. A shareholder who makes use of the voting advice of a third party is

expected to form his own judgment on the voting policy or the voting advice provided by this adviser.

4.3.2 Providing voting proxies or voting instructions

The company should give shareholders and other persons entitled to vote the possibility of issuing voting

proxies or voting instructions, respectively, to an independent third party prior to the general meeting.

4.3.3 Cancelling the binding nature of a nomination or dismissal

The general meeting of shareholders of a company not having statutory two-tier status (structuurregime)

may pass a resolution to cancel the binding nature of a nomination for the appointment of a member of the

management board or of the supervisory board and/or a resolution to dismiss a member of the management

board or of the supervisory board by an absolute majority of the votes cast. It may be provided that this majority should represent a given proportion of the issued capital, which proportion may not exceed one-third.

If this proportion of the capital is not represented at the meeting, but an absolute majority of the votes cast is

in favour of a resolution to cancel the binding nature of a nomination, or to dismiss a board member, a new

meeting may be convened at which the resolution may be passed by an absolute majority of the votes cast,

regardless of the proportion of the capital represented at the meeting.

The Dutch Corporate Governance Code | December 2016 PAGE 38

4.3.4 Voting right on financing preference shares

The voting right attaching to financing preference shares should be based on the fair value of the capital

contribution.

4.3.5 Publication of institutional investors’ voting policy

Institutional investors (pension funds, insurers, investment institutions and asset managers) should post annually, in any event on their website, their policy on the exercise of the voting rights for shares they hold in listed

companies.

4.3.6 Report on the implementation of institutional investors’ voting policy

Institutional investors should report annually, on their website and/or in their management report, on how

they implemented their policy on the exercise of the voting rights in the relevant financial year. In addition,

they should report on their website at least once per quarter on whether and, if so, how they have voted as

shareholders at general meetings. This report will be posted on the website of the institutional investor.

Principle 4.4 Issuing depositary receipts for shares

Depositary receipts for shares can be a means of preventing a majority (including a chance majority) of

shareholders from controlling the decision-making process as a result of absenteeism at a general meeting.

Depositary receipts for shares should not be issued as an anti-takeover protective measure. The board of the

trust office should issue voting proxies under all circumstances and without limitations to all depositary receipt

holders who request this. The holders of depositary receipts so authorised can exercise the voting right at

their discretion. The board of the trust office should have the confidence of the holders of depositary receipts.

Depositary receipt holders should have the possibility of recommending candidates for the board of the trust

office. The company should not disclose to the trust office information which has not been made public.

4.4.1 Trust office board

The board of the trust office should have the confidence of the holders of depositary receipts and operate

independently of the company that has issued the depositary receipts. The trust conditions should specify in

what cases and subject to what conditions holders of depositary receipts may request the trust office to call a

meeting of holders of depositary receipts.

4.4.2 Appointment of board members

The board members of the trust office should be appointed by the board of the trust office, after the job

opening has been announced on the website of the trust office. The meeting of holders of depositary receipts

may make recommendations to the board of the trust office for the appointment of persons to the position of

board member. No management board members or former management board members, supervisory board

members or former supervisory board members, employees or permanent advisers of the company should

be a member of the board of the trust office.

4.4.3 Board appointment period

A person may be appointed to the board of the trust office for a maximum of two four-year terms, followed by

a maximum of two two-year terms. In the event of a reappointment after an eight-year period, reasons should

be given in the report of the board of the trust office.

4.4.4 Attendance of the general meeting

The board of the trust office should attend the general meeting and should, if desired, make a statement

about how it proposes to vote at the meeting.

4.4.5 Exercise of voting rights

In exercising its voting rights, the trust office should be guided primarily by the interests of the depositary

The Dutch Corporate Governance Code | December 2016 PAGE 39

receipt holders, taking the interests of the company and the enterprise affiliated with it into account.

4.4.6 Periodic reports

The trust office should report periodically, but at least once per year, on its activities. The report should be

posted on the company’s website.

4.4.7 Contents of the reports

The report referred to in best practice provision 4.4.6 should, in any event, set out:

  1. the number of shares for which depositary receipts have been issued and an explanation of changes to

this number;

  1. the work carried out in the financial year;

iii. the voting behaviour in the general meetings held in the financial year;

  1. the percentage of votes represented by the trust office during the meetings referred to under iii.;
  2. the remuneration of the members of the board of the trust office;
  3. the number of meetings held by the management and the main items dealt with in them;

vii. the costs of the activities of the trust office;

viii. any external advice obtained by the trust office;

  1. the (other) positions held by the board members of the trust office; and
  2. the contact details of the trust office.

4.4.8 Voting proxies

The board of the trust office should issue voting proxies under all circumstances and without limitations to all

depositary receipt holders who request this. Each depositary receipt holder may also issue binding voting

instructions to the trust office in respect of the shares which the trust office holds on his behalf.

 

The Dutch Corporate Governance Code | December 2016 PAGE 41

CHAPTER 5.

ONE-TIER GOVERNANCE STRUCTURE

Principle 5.1 One-tier governance structure

The composition and functioning of a management board comprised of both executive and non-executive

directors must be such that the supervision by non-executive directors is properly carried out, and independent supervision can be assured.

5.1.1 Composition of the management board

The majority of the management board is made up of non-executive directors. The requirements for independence stipulated in best practice provisions 2.1.7 and 2.1.8 apply to the non-executive directors.

5.1.2 Chairman of the management board

The chairman of the management board chairs the meetings of the management board. The chairman of the

management board should ensure that the management board as a collective, as well as the management

board’s committees, have a balanced composition and function properly.

5.1.3 Independence of the chairman of the management board

The chairman of the management board should not be an executive director or former executive director of

the company, and should be independent within the meaning of best practice provision 2.1.8.

5.1.4 Composition of committees

The committees referred to in best practice 2.3.2 should be comprised exclusively of non-executive directors.

Neither the audit committee nor the remuneration committee can be chaired by the chairman of the management board or by a former executive director of the company.

5.1.5 Accountability for supervision by non-executive directors

The non-executive directors render account of the supervision exercised in the past financial year. They

should, as a minimum, report on the items referred to in best practice provisions 1.1.3, 2.1.2, 2.1.10, 2.2.8,

2.3.5 and 2.4.4 and, if applicable, the items referred to in best practice provisions 1.3.6 and 2.2.2.

The Dutch Corporate Governance Code | December 2016 PAGE 42

ENTRY INTO FORCE

  1. This Code will come into force as of the financial year starting on or after 1 January 2017. The

Committee recommends that companies submit to the general meeting, as a separate agenda item

in 2018, a chapter in the report of the management board broadly outlining the corporate governance structure and compliance with this Code.

  1. Where principles or best practice provisions in this Code, compared with the Code adopted in

2008, require changes to rules, regulations, procedures or other written records, a company will be

deemed to be compliant with this Code if such changes have been implemented no later than 31

December 2017.

  1. The term of appointment for supervisory board members stipulated in best practice provision 2.2.2 has

changed compared with the Code adopted in 2008. Best practice provision 2.2.2 does not apply:

  1. to supervisory board members who, as of the date of the entry into force of this Code, have

already held office for more than eight years, provided that best practice provision III.3.5 of the

Code adopted in 2008 is being complied with; and

  1. to supervisory board members who are to be nominated for reappointment for a third four-year

term at a general meeting in 2017, provided that best practice provision III.3.5 of the Code

adopted in 2008 is being complied with.

The Dutch Corporate Governance Code | December 2016 PAGE 43

EXPLANATORY NOTES TO THE CODE

Preamble – Scope of the Code

The Code does not apply to investment institutions or undertakings for collective investment in transferable

securities (UCITS) which are members of a group under central management, where this central management

falls within the scope of the Code.

1.1 Long-term value creation

Management board members and supervisory board members are expected to act in a sustainable manner

by focusing on long-term value creation in the performance of their work. Long-term sustainability is the key

consideration when determining strategy and making decisions, and stakeholder interests are taken into

careful consideration. Long-term value creation also requires awareness and anticipation of new developments in technology and changes to business models. Maintaining a sufficient level of awareness of the wider

context in which the enterprise affiliated with the company operates, contributes to continuing success, and is

therefore in line with the company’s interests.

There may be situations in which a focus on the long term is no longer relevant for a company – for example in

the event of a bankruptcy or takeover – and the company’s reason for existing ceases. In these situations, the

company should comply with the Code by explaining why long-term value creation is not, or is no longer, a

priority to be pursued.

1.1.1 Strategy for long-term value creation

The examples of relevant aspects of doing business specified in best practice provision 1.1.1, section vi reflect

the topics listed in the EU Directive on disclosure of non-financial and diversity information.1

In addition to the

topics listed in the Directive, section vi includes ‘the chain within which the enterprise operates’. The OECD

Guidelines for Multinational Enterprises provide guidance for companies with international operations in

fulfilling their supply chain responsibility.

1.1.2 Involvement of the supervisory board

‘Formulating the strategy’ also encompasses making material changes to the strategy.

1.2 Risk management

The risks to be identified and managed under Principle 1.2 comprise both internal and external risks, including the remuneration structure for management board members and employees.

The internal risk management and control systems must be tailored to the company in question. This makes it

possible for smaller listed companies to use less extensive procedures.

1.3.6 Absence of an internal audit department

The basic principle is that companies should establish their own internal audit department to undertake the

internal audit function. In the event of a departure from this principle, for example if the size of the company

is not suited to this, outsourcing may be an appropriate alternative. In case of outsourcing, the supervisory

board and the audit committee will remain involved in the execution of the internal audit function, as stipulated in best practice provisions 1.3.1 to 1.3.5, inclusive.

1 Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU

as regards disclosure of non-financial and diversity information by certain large undertakings and groups (OJEU 2014, L 330).

The Dutch Corporate Governance Code | December 2016 PAGE 44

1.4.2 Accountability in the management report

Pursuant to best practice provision 1.4.2, the management board describes, in the management report, the

design and operation of the internal risk management and control systems. Pursuant to section i, the company’s annual report must include a description of the main risks it encounters in carrying out its tasks. Rather

than providing an exhaustive list of all possible risks, the company should identify the main risks it faces. The

description of the main risks in section i is in keeping with the risk section prescribed in Section 2:391 of the

Dutch Civil Code and the description of essential risks under Section 5:25c of the Financial Supervision Act

(Wet op het financieel toezicht/Wft).

As regards best practice provision 1.4.2, section ii, it would be logical for the management board to indicate

in the description of the design and operation of the internal risk management and control systems what

framework or criteria (e.g. the COSO framework for internal control) were used in assessing the internal risk

management and control system.

1.4.3 Statement by the management board

Pursuant to best practice provision 1.4.3, the management board should make a statement confirming that it has

provided sufficient insight into the risks, including risks that are foreseen in the future that will be relevant to the

continuity of the company. This includes both material shortcomings that have been identified and material risks

and uncertainties that can reasonably be foreseen at the time at which the statement is being issued.

1.5.1 Duties and responsibilities of the audit committee

The majority of the audit committee’s duties already arise out of the relevant legislation, and are not repeated

in the Code. Specific reference is made to Article 39 of the EU Statutory Audits Directive (Directive 2006/43/

EC).2

This article will be implemented in Dutch legislation: Article 2:2 of the Decree of 26 July 2008.3

The

requirements for the composition and available expertise in relation to the preparation and auditing of the

financial statements will also be included in Article 2 of this decree.

In some cases, especially for companies operating in the financial sector, a risk committee is established in

addition to the audit committee. Article 39, paragraph 4 of the above-mentioned Directive stipulates that, if

another body has been designated to perform the functions of the audit committee, the management report

must state which body carries out those functions and how that body is composed.

2.1.3 Executive committee

The term ‘executive committee’ refers to a committee which is closely involved in the decision-making of

the management board, and which, in addition to members of the management board, may also include

members of senior management.

Best practice provision 2.1.3 and those other provisions that mention the term executive committee also apply in

cases where a term other than ‘executive committee’ is being used, but the function is essentially the same.

2.1.4 Expertise

It is important that sufficient expertise is available within the management board and the supervisory board to

identify opportunities and risks that may be associated with innovations in business models and technologies

in a timely manner.

2 Directive 2006/43/EC of the European Parliament and of the Council of the European Union of 17 May 2006 on statutory

audits of annual accounts and consolidated accounts, amending Council Directives 78/660/EEC and 83/349/EEC and repealing Council Directive 84/253/EEC (OJEU L 157 of 9 June 2006, p. 87). Directive 2006/43/EC was last amended by Directive

2014/56/EU of 16 April 2014 (OJEU 2014, L 158).

3 Decree of 26 July 2008 implementing Article 41 of Directive 2006/43/EC of the European Parliament and of the Council of

the European Union of 17 May 2006 on statutory audits of annual accounts and consolidated accounts, amending Council Directives 78/660/EEC and 83/349/EEC and repealing Council Directive 84/253/EEC (Bulletin of Acts and Decrees 2008, 323).

The Dutch Corporate Governance Code | December 2016 PAGE 45

The requirement for financial expertise within the supervisory board is provided for in law. Pursuant to the EU

Statutory Audits Directive (Directive 2006/43/EC),4

at least one member of the audit committee must have

competence in the preparation and auditing of the financial statements. This article will be implemented in

Dutch legislation: Section 2:3 of the Decree of 26 July 2008.5

2.1.5 Diversity policy & 2.1.6 Accountability about diversity

Diversity is also addressed in the EU Directive on disclosure of non-financial and diversity information.6

This

Directive will be implemented in Dutch legislation. However, the Code goes further than the Directive. Best

practice provision 2.1.5 stipulates that companies must explain what measures have been and will be taken

in the event that the diversity policy’s objectives are not achieved. In addition, the scope of the Directive is

limited to large companies, while the Code is applicable to all companies.

The legal target figure of at least 30% male/female diversity in the management board and the supervisory

board lapsed as of 1 January 2016. Legislation is currently pending to once again establish the legal target

figure in Section 2:166 of the Dutch Civil Code until 2020.7

2.1.7 Independence of the supervisory board

Best practice provision 2.1.7, section ii, stipulates that a majority of the supervisory board members should

be independent. This requirement may not be undermined by voting ratios within the supervisory board if

an arrangement is being used that allows for multiple voting rights under Section 2:140(4) of the Dutch Civil

Code.

2.2.2 Appointment and reappointment periods – supervisory board members

The effectiveness of the supervisory board is determined by its composition, with the size, expertise, diversity

and independence of the supervisory board being decisive factors. When reappointing supervisory board

members, a critical assessment will be made as to whether the relevant supervisory member maintains an

appropriate distance in undertaking their supervisory activities, and whether the required knowledge and

expertise are represented within the supervisory board. The basic principle is that supervisory members are

appointed for two four-year periods. Any subsequent reappointment must be accounted for in the report of

the supervisory board.

2.2.3 Early retirement

This provision does not change the fact that, in the case of companies not having statutory two-tier status

(structuurregime), the general meeting may suspend or dismiss supervisory board members at any time.

Under the provisions on companies having statutory two-tier status, the general meeting of such companies

may pass a resolution of no confidence in the entire supervisory board. The adoption of such a resolution

implies the immediate dismissal of all the members of the board.

2.2.6 Evaluation of the supervisory board & 2.2.7 Evaluation of the management board

The aim of the reviews is to assess the functioning of the members of the supervisory board and management board. A periodic review can enhance the quality of the functioning of the supervisory board and the

management board, and help to ensure that the right choices are made when preparing appointments or

reappointments of supervisory and management board members, for example where the appropriate composition of the boards, or the appropriate levels of diversity in their composition are concerned. The manner

in which the review is carried out is a matter for the company and may therefore differ from one company

4 Ibid. footnote 2.

5 Ibid. footnote 3.

6 Ibid. footnote 1.

7 Parliamentary Papers II 2015–2016, 34 435, No. 2.

The Dutch Corporate Governance Code | December 2016 PAGE 46

to another. The review can take place collectively, on an individual basis between the chairman and each

member separately, or through the input of an external adviser. Each supervisory board member and management board member should be able to confidentially express their views during the review.

2.3.5 Committee reports

These reports provide the content on the main items discussed at the committee meetings.

2.4 Decision-making and functioning

Management board members are required to actively provide information to the supervisory board. By the

same token, supervisory board members are required to actively gather the information they need in order to

be able to perform their supervisory role effectively.

2.5 Culture

‘Culture’ can be defined as the values that implicitly and explicitly inform employees’ actions and the resulting

behaviour. Culture is a frame of reference on the basis of which one’s own actions and those of others are

reviewed. A healthy culture helps to prevent misconduct and irregularities.

The Code addresses culture, but is not prescriptive as to exactly what the culture is or should be. It is up to the

management board to create the company’s culture. When doing so, the existence of different subcultures

within the enterprise should be taken into account.

2.6 Misconduct and irregularities

Principle 2.6 and the associated best practice provisions deal with the reporting of suspicion of misconduct

or irregularities. Pursuant to the House for Whistleblowers Act (Wet huis voor klokkenluiders), an employer

who usually employs at least fifty people is obliged to establish a procedure for dealing with reports of suspected misconduct within their organisation. This act is applicable to suspected misconduct that jeopardises

a social interest.8

The scope of the principle and the best practice provisions in the Code is wider, as these

also deal with the reporting of irregularities.

The opportunity to file reports applies to all parts of the enterprise affiliated with the company, regardless of

whether the enterprise’s activities take place in the Netherlands or abroad.

2.7 Preventing conflicts of interest

Book 2 of the Dutch Civil Code9

defines a conflict of interest as being a situation in which, in a process of consultation and decision-making, the direct or indirect personal interests of a management board member or supervisory board member conflict with the interests of the company. The term ‘conflict of interest’ in the Code

is aimed at preventing conflicts of interest in general, regardless of whether consultation or decision-making

is being undertaken. In addition, the legal provisions on conflicts of interest have been developed in greater

detail in the Code.

2.8.3 Management board’s position on a private bid

A private bid is not deemed to be ‘serious’ if it is clear that the bidder does not have sufficient financial

resources to finance the bid or if no right-thinking and sensible shareholder would wish the

management board to accept the bid, for example because the bid price does not reflect the true value

or the market value of the business unit or the participating interest.

8 Section 1(d), House for Whistleblowers Act.

9 Article 2:129, paragraph 6 of the Dutch Civil Code and Article 2:140, paragraph 5 of the Dutch Civil Code.

The Dutch Corporate Governance Code | December 2016 PAGE 47

3.1.2 Remuneration policy & 3.2.1 Remuneration committee’s proposal

‘Scenario analyses’ are defined as analyses, conducted by the supervisory board when formulating the remuneration policy and before determining the remuneration of individual management board members, of the

possible results of the variable remuneration components and the way in which this affects the remuneration

of the management board members. The supervisory board will establish whether the scenario analyses result

in appropriate levels of remuneration, and whether measures are required to limit the remuneration.

3.2.2 Management board members’ views on their own remuneration

The management board members’ views on their own remuneration are intended for the remuneration committee, and should not form part of the account given of the implementation of the remuneration policy.

3.4.1 Remuneration report

The legal requirements for the remuneration report are stipulated in Section 2:383c to Section 2:383e, inclusive of the Dutch Civil Code. Best practice provision 3.1.4, section iv stipulates that information about the pay

ratios within the company and its affiliated enterprise should form part of the remuneration report. The ratio

between the remuneration of the management board members and that of a representative reference group

determined by the company must be stated, along with whether there have been any changes in these ratios

compared to the previous financial year.

Material benefits awarded in exceptional cases should also be included in the remuneration report.

4.1.9 External auditor’s attendance

The chairman of the general meeting should ensure that there is an opportunity to question the external

auditor. The presence of the external auditor at the general meeting does not detract from the general duty

of the management board and the supervisory board to render account to the general meeting or their duty

to provide all requested information to the general meeting (unless there is an important reason for not doing

so). The external auditor can be questioned only in respect of his audit and audit report. Primary responsibility

for the content of the financial statements rests with the management board. It follows that the external

auditor should participate in the preparation of the general meeting. Reference is made to NBA (Royal

Netherlands Institute of Chartered Accountants) Practice Note 1118 on the position of the external auditor in

the general meeting.

4.2.1 Substantiation of invocation of overriding interest

Section 2:107(2) of the Dutch Civil Code stipulates that the management board and the supervisory board

must provide the general meeting with all the information desired, unless this is contrary to an overriding

interest on the part of the company. In addition to this, best practice provision 4.2.1 stipulates that reasons for

the invocation of an overriding interest must be given.

4.3.1 Voting as deemed fit

In so far as a shareholder uses the services of a voting adviser before exercising his voting right, it is

logical that he should check that the adviser provides balanced advice based on fair consideration of all the

issues.

4.3.4 Voting right on financing preference shares

Best practice provision 4.3.4 is intended to apply to future issues of financing preference shares. However,

the management board and supervisory board may agree with the holders of the existing financing preference shares to adjust the present control of the financing preference shares.

The Dutch Corporate Governance Code | December 2016 PAGE 48

5.1 One-tier governance structure

The Code is focused on companies with a two-tier governance structure, but also applies to companies with

a one-tier governance structure. In addition to Chapters 1 to 4 inclusive, Chapter 5 contains one principle and

five best practice provisions which apply specifically to companies with a one-tier governance structure.

Those provisions in the Code which pertain to supervisory board members also apply to non-executive directors, without prejudice to the other responsibilities these non-executive directors may have. Where this is not

possible, the ‘comply or explain’ principle applies.

5.1.1 Composition of the management board

The independence requirements for supervisory board members apply in full to non-executive directors. Best

practice provision 2.1.8, section i stipulates that a supervisory board member is not independent if, in the

five years prior to the appointment, they have been an employee or member of the management board. For

companies with a one-tier management structure, ‘management board member’ means ‘executive director’.

5.1.2 Chairman of the management board

Those duties which in Chapters 1 to 4 inclusive of the Code were specifically allocated to the chairman of the

supervisory board, in a company with a one-tier governance structure fall within the remit of the chairman of

the management board.

5.1.4 Composition of committees

It is important that a well-considered choice is made with regard to the reporting lines of the committees.

5.1.5 Accountability for supervision by non-executive directors

The account rendered by non-executive directors can form part of the management report, or be included in

a separate report. The report is published as an appendix to, or at the same time as, the financial statements.

The Dutch Corporate Governance Code | December 2016 PAGE 49

The Dutch Corporate Governance Code | December 2016 PAGE 50

Members

prof. dr. B.E. Baarsma

Director of knowledge Development Rabobank

Professor of market mechanism and competitive economy at the

University of Amsterdam

Crown-appointed member of the Social and Economic Council of

the Netherlands (SER)

drs. E.F. Bos

Chief executive officer at PGGM

Member of the supervisory council at Nederlandse Opera & Ballet

Non-executive director at Sustainalytics Holding BV

  1. P.J. Gortzak

Head of Policy Group Strategie en Beleid APG

Member of the supervisory council at CFK

Member of the committee Evaluatie Politiewet

Member supervisory council at Nationaal Register

Member of the board at NL Sporter

  1. S. Hepkema

Chairman of the supervisory board at Wavin NV

Member of the supervisory board at SBM Offshore NV

Member of the board at VEUO

R.J. van de Kraats RA

CFO & vice chairman at Executive Board Randstad Holding NV

Non-executive Director at OCI NV

Member of the supervisory board at Schiphol Group

prof. mr. H.M. Vletter-van Dort

Professor of Financial Law and Governance at Erasmus School of Law

Chairman of the supervisory board at Intertrust NV

Member of the supervisory board at NN Group NV

Chairman of the SRB’s Appeal Panel

Member of the board at IVO Center for Financial Law &

Governance

COMPOSITION

MONITORING COMMITTEE

CORPORATE GOVERNANCE CODE

Chairman

prof. dr. J.A. van Manen

Partner at Strategic Management Centre

Vice Chairman of the supervisory board at De Nederlandsche Bank NV

Member of the supervisory board at Bornet Groep Rotterdam BV

Member of the board at Stichting Maatschappij en Veiligheid

Member of the board at Stichting Endowment Museum Boijmans

Van Beuningen

Secretariat

  1. I.L.J.M. Heemskerk

Ministry of Economic Affairs, Directorate of Entrepreneurship

  1. van Kalleveen, MA

Ministry of Economic Affairs, Directorate of Entrepreneurship

  1. C.M. Molkenboer

Ministry of Economic Affairs, Directorate of Entrepreneurship

Advisors

  1. dr. M. Meinema en mr. L.D.V.M. Kompier

Directorate of Legislation, Ministry of Security and Justice

  1. M. Rookhuijzen, LLM

Directorate of Financial Markets, Ministry of Finance

The Dutch Corporate Governance Code | December 2016 PAGE 51

www.mccg.nl