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Cabinet adopts amended corporate governance code
The Cabinet supports the updated corporate governance code proposed by the Frijns Commission in December 2008. The Code anticipates social developments that also involve corporate governance and it corresponds well with the measures taken and to be taken by the Cabinet itself in order to stimulate good corporate governance.
The Cabinet will statutorily assign the Code as the code of conduct to be complied with to replace the Tabaksblat Code of 2003. The Code includes valuable additions in the fields of executive pay, risk management in listed companies, the diversity of members of supervisory boards, the shareholders' responsibility, take-overs and socially sound entrepreneurship. The updated Code puts in further details of the accountability of management boards, of supervisory boards and of shareholders of listed companies and pays more attention to the stimulation of "desired behaviour".
The most important points of the new Code are:
- Listed companies have to lay more emphasis on integral risk management. The supervisory boards have to be closely involved in it. Operational risks arising from the executive pay have to be part of this risk management.
- Supervisory boards are given more tools to keep the executive pay within reasonable limits both beforehand and afterwards, for instance by way of scenario analyses, the test of reasonableness and the claw-back clause.
- When the executive pay is being set, the company has to take into account the internal pay relations. There has to be a suitable ratio between fixed pay and variable pay. Variable pay has to be based on long-term targets that are not exclusively financial.
- For the first time, listed companies have to strive for more diversity and be accountable for it. Supervisory boards have to have concrete targets for diversity and be yearly accountable in their annual accounts.
- For the first time, the management board and supervisory board will be held to pay explicit attention in the performance of their duties to socially responsible business practices relevant to the company.
- Shareholders are deemed to act according to the standards of reasonableness and fairness. For example, they will timely involve the management board before using the right to have issues placed on the agenda.
- Supervisory boards have to be closely and timely involved in takeover processes.
In the near future, the Cabinet will oblige all institutional investors to report on compliance with the provisions of the Code applying to them. In accordance with the recommendation made by the Frijns Commission, the Cabinet will view in addition whether it is possible to adapt the Dutch tender rules such that a potential bidder has to let it be known within a certain period whether or not it will proceed to make a public offer. If it states not to offer, a temporary prohibition to make a public offer on the company in question will be imposed on it ('put up or shut up').
As from 1 January 2010, listed companies will have to be accountable for the compliance with the Code in the previous financial year for the first time. The Cabinet is of the opinion that compliance with the Code should not be free of obligation and therefore has to be monitored properly. In order to stimulate this, the Cabinet will appoint a new Commission as the successor of the Frijns Commission in the months to come.