4.5.13 Evaluation

One of the most important functions of the supervisory board is to carry out forma! evaluations of both the management board members and its own members.1 At least once a year the supervisory board meets, without any management board members present, to discuss the functioning of its own members and its own profile as well as the management board's strengths and weaknesses2 In the US it is common practice to hold separate meetings for non-executives only (confusingly known as "executive sessions") before or after each board meeting. At these meetings one of the topics is nearly always the evaluation of the executives. In the Netherlands some companies are starting to follow this example.

Another question is whether advisors should be involved in the evaluation. Professor Steven Schuit suggests an evaluation by extemal advisors every two years.3 I support this as a best practice suggestion for large companies. The increased use of extemal advisors is discussed also in sub-section 4.4.3.

The nomination committee (also called the selection and appointment committee), consisting of supervisory board members only, is involved in the evaluation of the management and supervisory boards as a whole and of the individual members and reporting this to the supervisory board.4 In practice this is an open discussion where, norrnally, all members are present, including those who are being evaluated. If there is likely to be friction or a possible dispute, the members may consult together beforehand either by telephone or in a smaller group. If the aim is to dismiss a director or obtain his resignation, he will often be asked to briefly leave the room. Subsequently he will have the opportunity to defend himself. The vice-chairman presides over the evaluation of the chairman.5 The task of the remuneration committee is, of course, to express an opinion on the value of each management board member when it advises on that person's remuneration.

In the case of a one-tier board the Act explicitly states that the remuneration of the executive directors is determined not by the whole board but only by the non-executive directors.6

The Monitoring Committee, the committee that monitors and reports on compliance with the Corporate Governance Code, reported in December 2010 that there is room for improvement in the transparency provided by supervisory boards to shareholders and other stakeholders about their evaluation procedures.7