10.3.2 Board committees

The composition of audit and remuneration committees is roughly the same for the United Kingdom and the Netherlands. The UKCGC requires fully independent audit and remuneration committees, whereas the DCGC allows at most one member to be non-independent. The same requirements apply to the nomination committee in the Netherlands, which only allows NEDs/SDs to have a position on all board committees. In the United Kingdom the nomination committee may also be staffed with executive directors or the CEO. This means that executive directors or the CEO might influence the composition of the board, which is certainly not a good practice. The Dutch board committee composition requirements are therefore stronger than the British. The Netherlands has, additionally, a best practice provision based on which at most one member of the remuneration committee may be a member of the management board of another listed Dutch company.

The SCCG rules about board committee composition differ from those in the other two countries, because it uses two different types of independence and the nomination committee is not a subcommittee of the board. Although the audit and remuneration committees have independence requirements, these requirements do not apply to the employee representatives who are also allowed on these board committees. This weakens the independence of these board committees. Furthermore, on the nomination committee board members may not constitute a majority; the other members are shareholders. The position of shareholder on the nomination committee enhances their influence on the composition of the whole board and has a negative influence on independence. Sweden should reconsider its requirements and bring them more in line with generally accepted good corporate governance practices.

(Consideration 10.4) In order to have a strong composition/structure building block independence of the board committees is required, because they are tasked in areas where conflicts of interest may arise. The Dutch requirements only allow NEDs/SDs to have positions on these committees, which is good from an independence perspective. The possibility in the United Kingdom to have executive directors or the CEO on the nomination committee should be reconsidered. The dominance of shareholders on the Swedish nomination committee must also be reconsidered.