3.7 Overview of the 2010 Dutch status quo on corporate governance and CSR

1. The Frijns Code acknowledges CSR as belonging to the core corporate strategy. It indicates that the management board is expected to formulate a CSR policy and to submit their CSR policy to the supervisory board for approval.

2. The Frijns Code explicitly records that the supervisory board's responsibilities include the supervision and approval of the management's CSR policy.

3. Both the DCC and the Frijns Code prescribe that the main elements of the company's CSR strategy are to be included in the annual report, thereby informing the shareholders but also other stakeholders. It is however unclear to which reporting standard the Frijns Code refers.

4. An initiative bill is currently under preparation requiring large companies to include full information on their CSR policies and conduct in their annual report ( ' report or explain'). Furthermore, a proposal is considered to designate the GRI G3 reporting guidelines as a code of conduct for large companies ( ' comply or explain'). Both initiatives aim to make information published by companies on CSR more complete, uniform and comparable, thereby enhancing the usefulness of ESG information for outside stakeholders including banks and institutional investors.

5. The Frijns Code prescribes that the supervisory board's composition should be well balanced, also from a gender perspective. In a more indirect way, also the composition of the management board is considered a concern of the supervisory board.

6. A Bill has been adopted in the Lower House requiring that the composition of the management board and the supervisory board of large companies (> 250 employees) reflects a gender balance, i.e. comprising at least 30 per cent females and 30 per cent males.

7. The works council can exert an influence on the board's composition because it will have a right to communicate its position in the general meeting regarding the appointment of directors; it already has a right to propose candidates in certain large companies (article 2:158/268 concerning structure' companies); and it is entitled to advise on proposals for new managing directors (article 30 DWCA).

8. The Frijns Code states that the supervisory board has the duty to maintain relations between the company and its stakeholders such as the shareholders, the works council and others.

9. According to the Frijns Code and the DCC, the supervisory board shall be guided by the interests of the company and the enterprise, and shall take into account the relevant interests ofthe company's stakeholders. It might be assumed that interests refer to long-term interests. In the case of conflicts, the supervisory board must weigh the interests of the different stakeholders against each other.

10. A new Bill dictates that a request made by shareholders to place an item on the agenda must be substantiated, and may no longer be refused by the management board because of important company interests'. Disputes need to be solved using the standard of reasonableness and fairness', which guidance is already provided for in article 2:8 DCC. The same standard was suggested in the Frijns Code for solving disputes with shareholders.

11. A new Bill will improve the cross-border exercise of shareholders' rights in listed companies including voting and proxy voting.

12. The Frijns Code stipulates that the fact that shareholders are bound by the principle of reasonableness and fairness includes the willingness to enter into a dialogue with the company and fellow shareholders.

13. Transparency will be increased concerning the voting policies of institutional investors as the Frijns Code stipulates that - as an obligation to their beneficiaries, and to the listed companies in which they invest - institutional investors must decide in a careful and transparent manner whether they wish to exercise their voting rights, and if so, how they have voted.

14. Despite the Freshfields Report and its sequel, Fiduciary II, the Frijns Code did not follow the suggestion of the Burgmans Report to require institutional investors to be transparent as to whether and to which extent they take ESG factors into account. Eumedion, the Dutch corporate governance forum, recommends institutional investors to integrate ESG factors into the investment process, and explores whether a Dutch code for institutional investors should be drafted.

15. Pursuant to a new Bill which introduces new rights for works councils, they will be involved in the decision-making process in the general meeting. The works council will be able to share its opinion and to speak at the general meeting on (i) key board resolutions that need shareholder approval as referred to in article 2:107a DCC, (ii) resolutions to appoint, suspend and dismiss managing directors and supervisory directors, and (iii) the directors' remuneration policy.

16. The works councils in certain large companies were already entitled to propose supervisory board candidates (article 2:158/268 DCC concerning structure' companies).

17. For a long time, the works council has had the right to advise on strategic decisions as listed in article 25 DWCA, and on proposals for director appointments pursuant to articles 30 DWCA.