3.4.2 Supervisory board and CSR

Dutch law describes the supervisory board's task as follows: 'the supervisory board shall supervise the management, and general affairs of the company and the related enterprise. The supervisory board shall support the management board with advice. In the fulfilment of their duties, the supervisory board members shall focus on the interest of the company and the connected enterprise' (article 2:140(2) DCC). In 2009, the Erasmus Institute for Supervision and Compliance published a draft code of conduct for supervisory board members for discussion purposes.1 It provides provisions and insights from Dutch law, the corporate governance codes and research. Principle III.1 of the Frijns Code, concerning the ' supervisory board, follows more or less the above cited DCC text (as did the Tabaksblat Code). In addition thereto, this Principle stipulates that 'the supervisory board shall also have due regard for corporate social responsibility issues that are relevant to the enterprise . It also states that the supervisory board 'shall take into account the relevant interests of the company s stakeholders .2

This Principle is elaborated in best practice provisions. Provision III.1.6 highlights the most important matters that require supervision by the supervisory board: '(a) achievement of the company's objectives; (b) corporate strategy and the risks inherent to the business activities; (c) the design and effectiveness of the internal risk management and control systems; (d) the financial reporting process; (e) compliance with primary and secondary legislation; (f) the company-shareholder relationship; and (g) corporate social responsibility issues that are relevant to the enterprise. The part under (g) is new compared to the Tabaksblat Code. This concurs with provision II.1.2(d) concerning management board practices, which states that CSR falls within the scope of strategic management matters that need supervisory board approval.

Provision stipulates that the division of duties within the supervisory

board and the procedure of the supervisory board shall be laid down in the ' terms of reference, which shall be posted on the company s website. They shall include a paragraph outlining how the supervisory board s relations with the management board, the general meeting and the central works council or works council will be maintained. Since the Frijns Code assigns profound responsibility to the supervisory board, it was considered desirable that a form of structured consultation be set up to enable the members to exchange ideas and information and to serve as a point of contact for third parties. The supervisory board members are expected to develop initiatives in this respect.3 This is exemplified by provision III.4.1(g), which obliges the chairman to ensure that the supervisory board has proper contact with the management board and the works council (or central works council). For this chapter 7, especially the relationship with stakeholders such as the works council is interesting from a CSR perspective as it stimulates stakeholder participation. Another best practice provision asserts that 'the supervisory board and its individual members each have their own responsibility for obtaining all information from the management board and the external auditor that the supervisory board needs in order to be able to carry out its duties properly'. The board may obtain information from company officers and external advisers and require that they attend its meetings (III.1.9). This provision thus allows the supervisory board to invite representatives of 'People and Planet NGOs' or other experts in these fields in order to solicit their opinion on the company's CSR strategy and policies. This in turn would contribute to stakeholder interests.

Principle III.3 of the Frijns Code on 'Expertise and Composition' evidently stipulates that 'each supervisory board member shall be capable of assessing the broad outline of the overall policy' and ' the specific expertise required for the fulfilment' of his or her duties. Noteworthy from a CSR perspective is that this Principle lays a new foundation in terms of gender, i.e. that the supervisory board ' shall aim for diverse composition in terms of such factors as gender and age'. Best practice provision III.3.1 elaborates on this by stating that the supervisory board 'shall prepare a profile of its size and composition', which profile 'shall deal with the aspects of diversity' and 'state what specific objective is pursued' in that respect. In so far as the existing situation differs from the intended situation, the supervisory board 'shall account for this in its report and shall indicate how and within what period it expects to achieve this aim' . The profile will be made generally available and be posted on the company's website. Provision III.1.2 states that the annual statements4 shall include a report by the supervisory board, in which the board describes its activities in the financial year. Furthermore, the Frijns Code expects that the supervisory board's report includes certain specific information about each supervisory board member, such as: gender; age; profession; principal position; nationality; other positions, in so far as they are relevant to the performance of the duties ofthe supervisory board member; the date ofinitial appointment; and the current term of office (provision III.1.3). This is in excess of the DCC requirements. The supervisory board shall discuss the desired profile, composition and competence of the supervisory board on an annual basis (provision III.1.7).

In the consultations preceding the adoption of the final text of the Frijns Code, some respondents expressed general support for the manner in which the Committee had formulated the provisions on diversity in the Code. A few advocated the inclusion of a target figure for female board representation in the Code. In response, the Monitoring Committee pointed at the explicit provision that companies are expected to apply and disclose a specific objective in relation to diversity' (i.e. provision III.3.1) and stated that 'there is wide support for this amendment'.5