10.1 Introduction

1. The board structures available to the company

The unitary board structure with a distribution of tasks between executive directors and NEDs is the standard board structure in the United Kingdom.

The dual board structure is the standard board structure in the Netherlands. For companies that fall within the ambit of the structure regime, a dual board structure is mandatory. For other companies it was already possible to establish a unitary board structure. A new act makes it possible for all companies to establish a unitary board structure.

In principle, Sweden has a unitary board structure. However the board of directors consists solely or primarily of NEDs. Only one member of the executive management is allowed to have a position on the board, which may be the managing director. The managing director is a separate corporate entity, which receives instructions from the board of directors.

2. The appointment of supervisors

Appointment of a director (executive or non-executive) takes place through the adoption of an ordinary resolution by a simple majority of the general meeting. The company’s articles of association may require a higher majority or unanimity and can provide that the other directors may appoint a director.

Normally, the appointment of supervisors is a task of the general meeting. Supervisors in companies that fall within the ambit of the structure regime are appointed by the general meeting on the nomination and proposal of the supervisory board itself or the NEDs themselves. However, the general meeting and the works council have an enhanced right of recommendation for one third of the supervisory board.

The general meeting appoints the members of the board. The articles of association may provide that a part of the board is appointed in another manner, such as by the government or a large shareholder. However, more than half of the board should be appointed by the general meeting. Furthermore, employees are entitled to appoint two (small companies) or three (large companies) employee representatives to the board.

3. The removal or suspension of supervisors

Removal of a director takes place through the adoption of an ordinary resolution by a simple majority of the general meeting.

Normally, the removal or suspension of supervisors takes by the general meeting. Supervisory directors in companies within the ambit of the structure regime may not be removed or suspended individually. The general meeting can adopt a motion of no confidence for the entire supervisory board with immediate effect of dismissal. The Enterprises Division of the Court of Appeal in Amsterdam can remove a single supervisory director upon application by the entire supervisory board.

A board member may be removed by the general meeting through the adoption of an ordinary resolution.

4. The independence criteria and their application

The independence criteria are listed in subsection 7.2.4. They focus on seven relationships and circumstances, which cover employment, business relationship, additional payments, family relationships, cross-directorships, share-ownership and long tenure.At least half of the board, excluding the chairman, should comprise independent NEDs.

The independence criteria are listed in subsection 8.2.4. They focus on eight relationships and circumstances, which cover family relationships, employment, additional payments, business relationship, cross-directorships, share-ownership and temporary management tasks.At most one supervisory director may be non-independent.

The SCCG distinguishes independence from the company and its executive management and independence from major shareholders. The independence criteria are listed in subsection 9.2.4. The criteria for independence of the company and its executive management focus on seven relationships and circumstances, which cover (previous) managing directorship, employment, additional payments, business relationship, auditing relationship, cross-directorships, and family relationship. The independence criteria for independence from major shareholders focus on stakes of at least ten per cent in the capital of the company.A majority of the board members elected by the general meeting should be independent of the company and its executive management, of which two board members should be independent of major shareholders.

5. Other parts of law or regulations that influence the independence of supervisors

A supervisor’s duty is to avoid conflicts of interests, declare interests in proposed transactions and not to accept benefits from third parties. The board should evaluate its own performance and that of its board committees and members annually. The evaluation should be externally facilitated every three years. A statement about the evaluation should be made in the annual report. Diversity should be considered when directors are appointed. Future code provisions require the inclusion in the annual report of the company’s policy on diversity, including gender.

Persons employed by the company or a dependent company or officers and persons employed by an employees’ organisation may not hold a position as supervisor in companies that fall within the ambit of the structure regime. In case of conflicts of interest in a transaction, the supervisor may not be involved in the decision on that particular transaction. The supervisory board should annually evaluate its own performance and that of its board committees and members. A statement about the evaluation should be made in the annual report. Companies should consider diversity in their outline profile of the supervisory board. Companies that fall within the ambit of the structure regime must have at least 30 per cent men and at least 30 per cent women on their (supervisory) board.

Board members are not allowed to participate in decision-making on agreements in which conflicts of interest may arise. Evaluation of the board should be conducted annually and the results must be disclosed to the nomination committee. The board should strive for equal gender distribution.