Supervisory board

The supervisory board (raad van commissarissen) supervises the management board and the general state of affairs of the company and the business connected with it, and advises the management board. In performing its duties, its members must act in the interests of the company and the business connected with it.

The mandate is owed to the company rather than to any particular shareholder, and that is where most disagreements about a supervisory board's conduct begin. A member nominated by an investor carries the same duty as every other member, and a member who follows the instructions of the nominating shareholder against the interest of the company is exposed under article 2:9 DCC. Alongside the supervisory task, the board takes part in the decision-making of the company itself, since it approves the decisions reserved to it by law or by the articles and, where the structuurregime applies, appoints and dismisses the management board.

The appointment process lays the foundations for a supervisory board's effectiveness. That means a written profile describing the competences the board requires, given the company's strategy and risks, rather than a generic list; a succession plan with staggered terms so that the board does not turn over at once; and a considered position on independence. The Dutch Corporate Governance Code sets independence criteria for listed companies, but the underlying question applies to any company with external shareholders: a board composed entirely of shareholder nominees needs to consider how it will maintain independent oversight of a transaction those shareholders want.

Under the structuurregime the works council has an enhanced recommendation right in respect of one third of the seats; both the general meeting and the works council can recommend candidates, and the general meeting can reject the supervisory board's nomination by the statutory majority. Even where the regime does not apply, involving the works council in the profile and the process tends to produce a better appointment and a smoother one.

Two statutory instruments apply and their scopes differ. The growth quota (ingroeiquotum) requires the supervisory board of a Dutch NV admitted to trading on a regulated market to comprise at least one third men and at least one third women. As long as that balance has not been reached, an appointment that does not contribute to it is void, subject to limited exceptions, and the seat remains vacant, without affecting the validity of the supervisory board's decisions. In a company with a one-tier board, this requirement applies to the non-executive directors.

The target figures regime (streefcijfers) applies to companies that qualify as large under the statutory size criteria. A company within scope sets appropriate and ambitious target figures for the gender balance of its management board, its supervisory board and its senior management, adopts a plan to achieve them, and reports annually to the SER, explaining any target that has not been met. The obligation is to set, to plan, to report and to explain rather than to reach a particular number, and in practice it shapes candidate long-lists well before an appointment reaches the general meeting.

An audit committee gives the board a place to interrogate the numbers, the internal control environment and the external auditor without the whole board present, and to meet the auditor without management. A remuneration committee prepares policy and individual packages, which is where conflicts are sharpest. A selection and appointment committee handles profile, succession and evaluation. For smaller boards, committees may not be proportionate, and we advise keeping the work at full board level with dedicated agenda time rather than creating committees that meet only formally.

Each committee should have a charter setting out its mandate, composition, meeting frequency, information rights and reporting line back to the full board. The charter matters most when a committee faces a difficult task, at which point its remit should not be open to debate.

The management board must supply the supervisory board with the information it needs to carry out its task, and must do so in good time rather than only on request. Articles 2:141 and 2:251 DCC require written notice at least once a year of the main lines of strategic policy, the general and financial risks, and the company's administration and control systems. Beyond that statutory minimum, what the board receives is a matter of protocol: a standing reporting calendar, an agreed board pack, and access to internal audit and to the external auditor that does not depend on a decision being taken each time.

The supervisory board carries a duty of its own alongside that obligation, which is to ask for what is missing and to press for answers where the information supplied is incomplete or late. An annual self-evaluation, with an externally facilitated review every three years or so, is the mechanism through which a board keeps that discipline under review. Where oversight is later examined, the question is rarely whether information was withheld, but whether the supervisory board noticed and acted, and the minutes are what answer it.