Einde inhoudsopgave
The One-Tier Board (IVOR nr. 85) 2012/4.5.14
4.5.14 Term of office, re-election, dismissal of supervisory board members and non-executive directors
Mr. W.J.L. Calkoen, datum 16-02-2012
- Datum
16-02-2012
- Auteur
Mr. W.J.L. Calkoen
- JCDI
JCDI:ADS601852:1
- Vakgebied(en)
Ondernemingsrecht (V)
Voetnoten
Voetnoten
Frijns Code 111.3.5. Management board members too are appointed for four years at a time, without a maximum, Frijns Code 11.1.1. Article 2:161/271(2) DCC also gives a statutory 4-year maximum for supervisory board members in `structure regime' companies.
Prof. Auke de Bos and Dr. Mijntje Likkerath-Rovers, Gedragscode voor Commissarissen en Toezichthouders: Discussiedocument (2009) ('De Bos and L0ckerath (20091D)'), mention that this tradition is not conducive to good standards of conduct; see also Schuit (2010), p. 73 and Van Manen (1999), p. 292.
Open letter in the Financial Times of 16 July 2010 from Hermes Equity Ownership Services, Railpen Investments and Universities Superannuation Scheme, in which they argue that annual re-election promotes short-termism and refer to the Stewardship Code for Institutional Investors of 2 July 2010 and to the opinion of the chairman of the Association of FTSE Companies.
4% of the largest 100 companies, 25.2% of Fortune 500 companies and 41.9% of the NYSE companies have staggered boards. See the commercial database of Shark Repellant. This was also confirmed to me by Adam Emmrick, partner in Wachten Lipton, by e-mail of 10 August 2010. Examples of corporations with staggered boards are Airgas, Air Products, Bank of America, Barnes & Noble, Baxter, Blackrock, Dole, Eastman, Fidelity National Financial, Hertz, Huntsman, Kellogg's, McDonalds, Metlife, Mousanto, NRG, Sysco, Estée Lauder, Westem Union, US Airways, Visa and Westera Refining.
Monitoring Report (2010), p. 49.
The term of office for supervisory board members is four years and can be repeated three times.1 It is considered unusual in the Netherlands if a supervisory board member does not complete the full twelve years. This tendency to remain firmly ensconced in one's seat is seen by many as a drawback of the Dutch tradition of consensus-seeking consultation among people who are for the most part members of the old boy's network and are, above all, keen not to upset the apple cart.2
One way of avoiding painful dismissals of supervisory board members or routine renewal of their term of office after the standard four years would be to have them re-elected at shorter intervals. One-year intervals have been mentioned. The UK Corporate Governance Code of 1 July 2010 gives annual re-election as a best practice rule. However, in an open letter in the Financial Times three important pension funds have objected to this annual re-election rule, arguing that it promotes short-termism.3
Interestingly, the opinion of the UK pension funds has been used as an argument in the US too against appointing directors for short terras. In the US a majority of listed companies have annual elections, but a large minority 4 have boards with staggered three-year terras. I agree with the argument of the UK pension funds about the dangers of short-termism onder a regime of annual re-elections and would favour three- or four-year terras, but it seems that Dutch directors themselves have decided to move on more quickly. The Monitoring Report of December 2010 informs us that 43% of the supervisory board members withdraw after their first term of four years.5 What is said above about terras of office also applies to non-executive directors of a one-tier board.
As regards the maximum total term, the Frijns Code mentions twelve years whereas the UK codes suggest nine years for chairmen and six years for executive directors. Generally, it could be argued that a six- or nine-year maximum would be preferable in these busy and fast-moving times.