What is being proposed?
The principal proposals in the consultation document revolve
around seven themes:
- A greater focus on long-term value creation
- Reinforcement of risk management
- A shift of focus in effective management and supervision
- Introduction of culture as an explicit part of corporate
- Improvement and simplification of the remuneration provisions
in the code
- Shareholders and the general meeting
- Quality requirements for ''comply or explain''
A greater focus on long-term value creation
The committee puts an emphasis on long-term value creation.
Pursuant to a new principle, the management board should focus on
long-term value creation and design and implement a strategy aimed
at this. The consultation document lists a number of aspects to be
taken into account when formulating the strategy, including the
relevant non-financial aspects of running a business.
Reinforcement of risk management
The committee proposes improving the risk management
- The various stages of risk management (risk assessment,
implementation and evaluation) will be developed further in best
- The internal audit function, performing under the management
board's responsibility, will be strengthened and include direct
access to the audit committee and the external auditor.
- The scope of the in-control statement on how the internal risk
management and control systems have functioned, will be extended to
include non-financial risks.
- The in-control statement will include a confirmation that the
company´s continuity is expected to be safeguarded for the
coming 12 months.
- The management board and the external auditor should
immediately inform the audit committee of any material
irregularities relating to the contents of financial statements or
- The roles of the supervisory board and audit committee after
irregularities are identified, will be clarified.
- Their roles in the external auditor's appointment,
dismissal and performance review will also be clarified. The
appointment and dismissal procedure will be brought in line with
existing legislation and with the EU Audit Regulation, which will
enter into force in June 2016.
- The management board and supervisory board in their discussions
with the internal audit function, as well the audit committee in
its discussions with the external auditor, should leave room to
address matters of culture and behaviour at the company.
- The management board and the supervisory board should both
receive the auditor's management letter.
- The audit committee should be informed about any material
changes that the external auditor has made to the draft management
letter or the draft audit report at the request of the management
A shift of focus in effective management and supervision
With a view to recent management and supervision developments,
the committee proposes several changes. The committee also
recommends a further discussion about the impact that these
developments have on checks and balances and on independent
supervision in the company.
The proposed changes do not include specific requirements on the
structure of executive committees. However, a company with an
executive committee should take into account the checks and
balances that are part of a two-tier board system. The management
board should report on why it has opted for an executive committee,
on the executive committee's role and composition, and on how
the interaction between the supervisory board and the executive
committee has been structured.
The committee has not proposed amending the one-tier board
provisions in the code, but it has confirmed that it will prepare a
separate version of the code covering the one-tier board. The
committee aims for both versions of the revised code to be
finalised at the same time.
The diversity provisions in the code have been extended to
managing directors. The committee has emphasised that there should
be a broad discussion on diversity that should also include age,
nationality, expertise, independence and experience. The management
board should clarify the diversity policy in the corporate
governance statement (comply or explain), addressing what the
policy objectives are, how the policy has been implemented and what
the outcome has been in the past financial year.
The general provision on the expertise of supervisory directors
will be extended to managing directors. At least one supervisory
director should have specific expertise in existing and future
technological innovation and business models.
Independent supervisory directors
The committee believes that engaged shareholders contribute to
long-term value creation. To this end, the committee proposes a
change in the independence criteria for supervisory directors: more
than one supervisory director may be dependent as a result of a 10%
stake or more in the company being held by him/her or a relative.
But the majority of the seats on the supervisory board must be held
by independent directors. The supervisory board chairman will have
to be independent.
Terms of appointment
To keep in line with foreign corporate governance codes, the
committee proposes shortening the term of office for supervisory
directors to two four-year periods, from three four-year periods.
Under certain conditions, the term of office (that is, eight years
maximum) may be extended for a further two years, and then again
for another two years. In appointing and reappointing managing
directors the diversity targets have to be taken into
consideration. An early resignation of a managing or supervisory
director should, in line with the guidelines of the Netherlands
Authority for the Financial Markets, be announced in a press
release. The proposals for a revised code provide that the press
release should state the reasons for the resignation.
Evaluation and additional directorships
The proposals include further provisions on the supervisory
board's evaluation of its own performance. The committee also
recommends that the management board evaluates at least once a year
how it and the individual managing directors have performed. This
is in addition to the supervisory board's evaluation of the
Managing and supervisory directors should notify the supervisory
board in advance if they intend to accept an additional position.
Additional positions should be discussed in a joint meeting of the
management and supervisory boards at least once a year. All
supervisory positions held by managing directors are subject to the
supervisory board's approval.
Special committee takeover situations
The management board and the supervisory board should set up a
special committee to prepare decision-making in specific takeover
situations. The special committee comprises both managing and
supervisory directors, and the supervisory board chairman chairs
this special committee. If one or more supervisory directors
serving on the special committee qualify as dependent, the chairman
must carefully assess whether it is opportune for these supervisory
directors to be involved in the decision-making process on the
takeover. The monitoring committee may extend the possibility of
installing a special committee to stress situations in general,
depending on the consultation feedback.
Introduction of culture as explicit part of corporate
The committee considers that the Code should focus more on
culture as one of the driving forces behind effective corporate
- The management board, under the supervision of the supervisory
board, should implement a culture aimed at the company's
long-term value creation.
- Both the management board and the supervisory board should
stimulate a culture of openness and responsiveness at the
- The management board should inform the chairman of the
supervisory board about signs and suspicions of material
- The management board is responsible for embedding culture in
the company, taking into account factors such as the company's
business model and commercial environment.
- The management board should also discuss behaviour and culture
during consultations with the works council.
- The management report should explain how a culture aimed at
long-term value creation is encouraged at the company.
Improvement and simplification of the remuneration provisions
in the code
Based on legislative developments in executive remuneration and
given that remuneration structures are usually designed in a
complex manner, the committee proposes simplifying the principles
and best practice provisions on executive remuneration.
- The remuneration policy should be simple and transparent, and
it should stimulate the company's long-term value
- The supervisory board, in consultation with the management
board, determines the supervisory board's responsibilities
regarding the remuneration of the executive committee. These
responsibilities are set out in the rules of the remuneration
- The remuneration policy should specify the parameters for
claw-back of variable remuneration.
- To encourage managing directors to be more involved in their
own remuneration, the remuneration committee should take into
account the views of individual managing directors on the amount
and structure of their remuneration.
Supervisory board remuneration
The committee acknowledges that the position of supervisory
directors is becoming more professional. The committee proposes a
new best practice provision that the remuneration of supervisory
directors should reflect the responsibilities and time spent by the
supervisory board. The committee proposes allowing supervisory
directors to be paid in shares. This should be subject to strict
conditions to ensure the focus on long-term value creation.
Shareholders and the general meeting
Given the current debate on and developments in shareholder
rights and obligations, the committee wants to limit the revision
of provisions concerning the company's relationship with the
general meeting and individual shareholders. The committee suggests
reorganising the relevant best practice provisions and where
possible deleting text to avoid overlap with Dutch legislation.
- Managing directors and supervisory directors nominated for
appointment should attend the general meeting where their
appointment is dealt with.
- The 180-day response period will be maintained and the
reference to "a change of strategy" is clarified as
an important change in the identity or character of the company
(section 2:107a BW).
- After the end of the response period the management board must
report to the general meeting on how it has applied the
- Information must be provided to the general meeting in English
and may, in addition, be provided in Dutch.
The committee believes that the issue of depositary receipts for
shares (certificering) should be allowed as an
anti-takeover measure, but only if it supports the creation of
long-term value. In this connection, the committee proposes
removing the principle in the code that the issue of depositary
receipts be used as a tool to prevent absenteeism and random
majorities. The committee also wants to remove the trust
office's obligation to give a voting proxy to holders of
depositary receipts at all times. This obligation is provided for
by law and is subject to a number of exceptions.
Quality requirements for 'comply or explain'
In the revised code the committee provides more guidance on the
use of the 'comply or explain' principle. In connection
with an earlier recommendation of the European Commission, the
committee provides a framework for companies on how to explain a
deviation from the code.