2.12.1 Outline of the Tabaksblat Code recommendations

The board of directors in performing its duties shall be guided by the interests of the company and the enterprise connected therewith, taking into consideration the interests of the company's stakeholders. The board of directors is responsible for complying with all relevant legislation and regulations, for managing the risks associated with the company's activities and for financing the company;

the company shall employ as instruments of internal risk management and control risk assessment, a code of conduct that is published on the company's website, lay out guides for its financial reports and its monitoring and reporting system. In the annual report the board of directors shall state that internal risk management and control systems are adequate and effective and provide a clear substantiation of this statement. The board of directors shall also report on the actual operation of these systems;

transparency on salaries and emoluments of directors;1

a fixed maximum severance pay, standing agreements on the level of the fixed and variable parts (bonuses) of the remuneration, adoption by the supervisory board;2

strict guidelines for granting share options to members of the board of directors in order to secure the board's long-term commitment to the company strategy and disclosure of the cost of share option schemes in the annual accounts;

transparency about dealing in securities by members of the board of directors;

a member of the board of directors is appointed for a maximum period of four years. A board member may be reappointed for a term not exceeding four years at a time;

transparency regarding conflicting interests of members of the board of directors. Decisions by the board of directors that cause conflicts of interest need the approval of the supervisory board;

the board of directors is responsible for the quality and completeness of all publicly disclosed financial statements, not just the annual accounts. The supervision and involvement of the supervisory board and an external auditor are recommended.

The supervisory board in performing its duties shall be guided by the interest of the company and the enterprise connected therewith, taking into consideration the interests of the company's stakeholders;

greater emphasis on composition and competence of the supervisory board; the number of supervisory boards of listed companies of which an individual may be a member is limited to a maximum of five (aims to break through the old boys' network, create opportunities for new talent);

supervisory board members must be independent from the company, with the exception that only one member of the supervisory board is allowed to have ties with the company;

clear criteria for the independence of supervisory board members;

transparency with respect to conflicting interests of supervisory board members;

transparency in remuneration of supervisory board members;3 the supervisory board shall discuss the performance of the board of directors and the performance of its individual members as well as its own functioning and that of its individual members;

the supervisory board shall appoint three committees specialised in (i) the auditing of the annual accounts, the operation of the internal risk management and control systems, and compliance with codes of conduct (the Audit Committee), (ii) the remuneration and emoluments of individual members of the board of directors (the Remuneration Committee) and (iii) the selection and appointment of members of the board of directors (the Selection and Appointment Committee);

the position of the supervisory board has been strengthened: new duties, more active engagement, presence of its members, greater emphasis on responsibility and accountability towards its shareholders and capital markets. The role of the supervisory board used to be limited to supervising and advising the board of directors; its supervisory duties are much broader now and tend towards co-directorship, while not much has been determined about its advisory duty.4

The prestige of the general meeting of shareholders shall be increased and individual shareholders should be stimulated to participate in the decision-making process in the general meeting of shareholders to the greatest possible extent. To this end, electronic participation in the general meeting of shareholders (electronic voting) shall be made possible;

shareholders shall be given the opportunity to vote by proxy (proxy voting) and proxy solicitation (communication between shareholders) shall be enhanced. Obstacles relating to cross-border shareholder voting should be removed;

trust offices are recommended to issue proxies in all circumstances and without limitation to all holders of depositary receipts who so request;5

additional requirements for approval by the general meeting of shareholders of decisions of the board of directors relating to a major change in the identity or character of the enterprise.6

The Tabaksblat Code emphasises that institutional investors (banks, insurance companies, investment institutions and pension funds) have a responsibility towards their rank and file, namely investors, but also towards the companies in which they invest. Because of their substantial interests, they can make a difference;7

institutional investors should make their voting behaviour transparent, for example by publishing their voting policy quarterly.8

The external auditor is appointed by the general meeting of shareholders, which emphasises his independence (following the provision of article 2:393 paragraph 2 DCC);

the external auditor shall report to the supervisory board and the board of directors;

in this respect the supervisory board acts on behalf of the general meeting of shareholders;

the external auditor shall attend the annual meeting and may be questioned by the general meeting of shareholders in relation to his statement on the fairness of the annual accounts;

the external auditor also has the right to address the general meeting of shareholders if the board of directors makes statements that in the auditor's view constitute ' a material misrepresentation of the company's state of affairs'.

The board of directors and the supervisory board are responsible for compliance with and enforcement of the Code and are accountable for this to the general meeting of shareholders (principle I);

owing to the two-tier board system, many substantial powers of the general meeting of shareholders, such as the appointment and removal of directors and the approval of important decisions of the board of directors, have been transferred to the supervisory board.9 The two-tier board system impedes balanced corporate governance and is hard to explain to the international community. Therefore, the Tabaksblat Committee recommends that the two-tier board system should no longer be compulsory for listed companies;

anti-takeover measures may only be taken in the company's interest, for example to seek alternatives, and only for a limited period of time, for example six months, after which they must be withdrawn;

the Tabaksblat Code can only be effective if directors and supervisory board members change their attitudes and put competence, integrity and transparency first. Shareholders, too, should radically change their behaviour and become proactive.