4.5.9 Dual task of managing directors: action and monitoring

Under existing Dutch law each member of the management board has a dual task: day-to-day management and monitoring. In the first place he has his specific daily duties. For example, the COO of an oil and chemical storage company is responsible for the storage tanks, their maintenance and the buying and selling of tanks. Let us suppose that he has been given the authority to bind the company in matters within his remit, without the consent of anyone else, up to a limit of €5 million per transaction. This same COO, as management board member, is required to monitor his fellow finance director in so far as general policy and the main aspects of the latter 's tasks are concerned. For example, the COO will also study the financial accounts. The finance director in turn will monitor the work of the COO when he enters into contracts for the building of an LNG tank for €20 million

The Dutch term for the specific (non-monitoring) duties of an individual director is taak, as set out in the present article 2:9 DCC and in articles 2:9 and 2:129/239a, paragraph 3 DCC as amended by the Act. There is also a reference in the old article 2:9 DCC to werkkring, which may be translated as "area of work" or "sphere of duties". The subject of the monitoring task is the general course of affairs (algemene gang van zaken). Article 2:9 DCC of the Act mentions that the whole management board has responsibility (draagt de verantwoordelijkheid) for the general course of affairs, which implies that this board has to act as a team and is jointly and severally liable for the general course of affairs. The present article 2:9 DCC says that each of them is liable for the whole (ieder van hen voor het geheel aansprakelijk), whereas the proposed article 2:9 DCC uses the expressions "bears the responsibility" (draagt de verantwoordelijkheid) and must "monitor the general course of affairs".

This distinction between the specific duties of an individual director and the general task of overseeing is an important topic in Dutch legal literature in general and in particular in connection with thoughts about one-tier boards in particular.1

The general view is that the management board manages the company (the Dutch word is besturen).2 This means that the powers are vested in the whole management board, which is responsible for all aspects of the governance of the company. This is comparable to the US concept in section 141(a) of the Delaware GCL: "the ... shall be managed under the direction of the board" and to the UK concept of the unitary board. In the US and the UK the board as a whole takes all the decisions.

The general view in the Netherlands is that the board as a whole can delegate certain aspects of its work to a specific director. But such delegation does not relieve the board of the responsibility to give clear instructions, to delegate only to a person who is capable of performing the task, to consult and to monitor. This is important not only for the general functioning of a board but also when discussing the possibility of dividing up tasks within a one-tier board. The general view is that delegation is possible under old law and is expressly described in the Act. The Act requires a statutory basis for the division of tasks in article 2:129/239a, paragraph 3 DCC.3

There is a specific difference between Dutch law and practice on the one hand and UK and US law and practice on the other. In the UK and the US it is possible to delegate general powers to a non-director. For example, in US and UK joint venture agreements there is often a clause permitting an "alternate director" (i.e. a replacement director) to attend a board meeting instead of a board member.4 This idea of an alternate director is not pos sible under Dutch law, because the responsibility of a director for the general policy is purely personal.5

Dutch authors make a distinction in 4 (some say 3) tasks of directors: first, the specific task allocated to him; second, all tasks not specifically allocated; third: the general course of business (the second and third can be one group); fourth: monitoring each other. The first is individual, the second, third and fourth are collective.6 See also 4.6.2 below.

The general view is that managing the general course of affairs of a company is the task of the complete management board and, in the case of a one-tier board, of all the executives and possibly the non-executives as well, and that this entails joint and several responsibility and liability for all actions of each and every director, even if the actions were undertaken by a director to whom powers had been delegated. This is in line with the Dutch tradition of governance by consensus.