Consultation updated Dutch Corporate Governance Code

Proposed changes to the Code

On 21 February 2022 the Corporate Governance Code Monitoring Committee published its proposal for a revision of the current Dutch Corporate Governance Code. Click here for the proposal.

The main themes of the Code that have been updated in this proposal are: long-term value creation, diversity & inclusion, and the role of shareholders. Other updates relate to subjects as remuneration and the response time. A number of changes proposed by the Monitoring Committee are briefly listed below.

Long-term value creation

• Companies should develop an ESG-strategy as part of their strategy for long-term value creation
• When developing the company’s strategy, attention should also be paid to a balanced contribution to societies in which the company operates, through payment of taxes, and to the ESG-related impact of the company including the effects throughout the chain in which it operates
• In its management report the management board accounts for (a) the ESG-strategy, actions and results in that respect and (b) the company’s culture and values, and explains how these contribute to long-term value creation
• Shareholders, institutional investors included, should recognize the importance of a strategy focused at long-term value creation
• The management board should take into account the interests of all relevant stakeholders in determining the ESG-strategy and establish a stakeholder dialogue policy

Diversity & inclusion

• The composition of management board, supervisory board and executive committee reflects a proper balance between expertise, experience, capability, individual qualities, age, gender identity, nationality, (cultural) background and – in respect of the supervisory board – independency
• The supervisory board report refers to gender identity (instead of sex)
• A diversity & inclusion policy should be established for the company and its business as a whole, which takes into account all aspects and personal characteristics in which people differ from each other, such as gender identity, age, ethnicity, occupational disabilities and sexual orientation
• The corporate governance statement should reflect on the diversity & inclusion policy, in particular on the results thereof and to the extent possible provide an insight into the inflow, outflow and throughput of diverse talent in the company’s organization

Role of shareholders

• The dialogue between the company and its shareholders should be stimulated
• Shareholders should exercise their voting rights following their own insights but on a well-informed basis
• Institutional investors that use proxy-advisors should stimulate them to have a constructive dialogue with the company about their voting policies and voting guidelines
• Institutional investors should establish a commitment policy and report annually on the implementation thereof (which report includes a general description of their voting behavior as well as an explanation on the most important items voted and the use of proxy advisors)
• Shareholders should not vote when having a short position in shares of the company that is bigger than their long position
• In case of stock lending, a shareholder should revoke the shares lend prior to the record date of a general meeting, if significant items (i.e. items of economic or strategic interest, controversial items or items the shareholder disagrees with the advice of the management board) are scheduled for that meeting

Remuneration

• In respect of the objectives for the strategy for the implementation of long-term value creation, that should be taken into consideration when formulating the remuneration policy in particular attention should be paid to the integration of ESG-objectives
• Further explanation is provided by the Committee on the pay ratios within the company and its affiliated enterprise, that should be taken into consideration when formulating the remuneration policy: reference should be made to the ratio between (i) the total annual remuneration of the CEO, and (ii) the average annual remuneration of the employees of the company and its group companies of which the accounts are consolidated in the annual accounts of the company

Response time

• Although a statutory reflection period of up to 250 days is in force in Dutch law since 1 May 2021, the response time of up to 180 days of the Code remains unchanged inter alia because although these mechanisms can be invoked in similar situations, the response time may be invoked at an earlier stage and also in other matters than covered by the statutory reflection period
• The only proposed change to the response time provision of the Code is that it states explicitly that the response time cannot be invoked for a matter if the statutory reflection period has already at an earlier stage been invoked for the same matter

What’s next?

The consultation period ends on Monday 17 April 2022. The Monitoring Committee intends to adopt a revised Code at the end of 2022, which then enters into force for financial years starting on or after 1 January 2023.