4.5.20 Summary of roles of supervisory board members/non-executive directors

In a two-tier system the management board formulates and implements strategy. The supervisory board supervises both aspects. Under the Act, the non-executive directors in a one-tier board join the executive directors in formulating and developing strategy. The Act leaves open exactly what role the non-executives will have in developing strategy: actively challenging as in the US or jointly developing as in the UK. US and UK examples of boardroom practices with regard to strategy development and regular discussion about strategy are worthwhile, as is the early, on-site information UK and US board members receive. Also useful are the possibility of free access by board members to middle management and the US and UK practice of holding more executive sessions before or after each meeting, frequent discussions about evaluation and succession of board members and middle management. I have proposed in sub-sections 4.5.5 and 4.5.17 that the committee monitoring the Frijns Code should put these points on the agenda in its next report and recommend that the one-tier board or, in the case of a two-tier system, the management and supervisory boards should discuss annually how they will deal in their meetings with strategy, early and on-site information, access to middle management, executive sessions, evaluation and succession.

There are three important differences between two-tier and one-tier systems for supervisory board members and non-executive directors; first, whether or not they are involved in decision making; second, the time when they receive information; and third, whether or not they receive on-site business information and have access to middle management. The other side of the coin is that supervisory board members are said to be more independent than non-executive directors.

Representing the company is a power formally reserved to executive directors in the Netherlands. Registration of powers of representation in the trade register is essential.

The role of the chairman is rapidly increasing in both one-tier and two-tier boards. Generally, the UK practice whereby the chairman acts as team leader of the whole board deserves to be followed, although a Dutch chairman should be slightly less hands on and may not have to have an office in the company building or talk to shareholders about strategy on his own. He should stay closer to the typical US chairman. These are among questions that can be discussed as suggested in sub-section 4.5.11. It is advisable to confirm the division of roles between the chairmen and the CEO in writing and to work out extensive contacts with all outside directors.

There is convergence with the UK and the US in that Dutch outside directors are now working harder and are more independent. In addition, in all three countries there are separate non-CEO chairmen of the boards, committee work plays an important role and the chairmen usually chair the nomination committee. In the area of risk management there is convergence with the US and UK in ideas of "tone from the top" and the responsibilities of CEOs, CROs and risk committees.