The Importance of Board Independence (IVOR nr. 90) 2012/9.2.4.1:9.2.4.1 Independence from the company and its executive management

The Importance of Board Independence (IVOR nr. 90) 2012/9.2.4.1

9.2.4.1 Independence from the company and its executive management

Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.

Chapter 4 of the SCCG 2010 is dedicated to the size and composition of the board and the exploratory text of this chapter is ‘The board is to have a size and composition that enables it to manage the company’s affairs efficiently and with integrity’. Independence of directors is a part of the code for the purpose of fulfilling this principle. In this respect, the independence of three different parties is distinguished: independence from the (1) executive management, (2) the company and (3) the major shareholders. Rule 4.4 takes the executive management and the company together and prescribes that a majority of the directors elected by the general meeting need to be independent of these two parties. In order to determine whether a director is independent, rule 4.4 provides the following:

‘A director’s independence is to be determined by a general assessment of all factors that may give cause to question the individual’s independence from the company or its executive management. Factors that should be considered include:

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whether the individual is the managing director or has been the managing director of the company or a closely related company within the last five years;

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whether the individual is employed or has been employed by the company or a closely related company within the last three years;

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whether the individual receives a not insignificant remuneration for advice or other services beyond the remit of the board position from the company, a closely related company or a person in the executive management of the company;

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whether the individual has or has within the last year had a significant business relationship or other significant financial dealings with the company or a closely related company as a client, supplier or partner, either individually or as a member of the executive management, amember of the board or a major shareholder in a company with such a business relationship with the company;

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whether the individual is or has within the last three years been a partner at, or has as an employee participated in an audit of the company conducted by, the company’s or a closely related company’s current or then auditor;

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whether the individual is a member of the executive management of another company if a member of the board of that company is a member of the executive management of the company; or

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whether the individual has a close family relationship with a person in the executive management or with another person named in the points above if that person’s direct or indirect business with the company is of such magnitude or significance as to justify the opinion that the board member is not to be regarded as independent.’

This rule defines additionally a closely related company in this context as ‘another company in which the company holds, directly or indirectly, at least ten per cent of the shares, ownership interest or votes, or a financial share that confers an entitlement of at least ten per cent of the yield. If the company owns more than 50 per cent of the shares, ownership interest or votes in another company, it is to be regarded as indirectly holding the latter company’s ownership in other companies.’

The above-mentioned seven circumstances or relationships should be considered in the general assessment of the independence of a director. This rule explicitly mentions that these factors include these seven circumstances and relationships, but leaves room for the fact that there might be more ‘factors that may give cause to question the individual’s independence from the company or its executive management.’ The list is therefore not exhaustive and there might be other factors that the board considers may hamper the independence of the SNED. These rules mean that the SCCG 2010 does not focus solely on independence in form, but also considers other circumstances and addresses the concerns about a lack of independence in fact and in appearance. The corporate organ that or person who should determine the independence is not mentioned explicitly, such as for example in the United Kingdom. However, rule 4.4 SCCG 2010 provides in a footnote that the deliberations of the nomination committee should be reported in accordance with rule 2.6. Based on this statement it can be concluded that the nomination committee must determine the SNED’s independence from the company and the executive management and not the whole board.

Deze functie is alleen te gebruiken als je bent ingelogd.