8.2.1.3 Dual and unitary board structure

Due to the establishment of a supervisory board next to the management board the Dutch situation can be characterised as a dual board structure. A graphical representation of the Dutch dual board structure is given in Figure 8-1. It shows a management board, chaired by a CEO, and a supervisory board with a chairman. However, Dutch law also provides for the establishment of a unitary board (Staatsblad 275 2011).1 Section 2: 129a DCC provides the possibility to split the tasks of the board between one or more executive directors and one or more NEDs. The distribution of tasks within the board of directors may not lead to the taking away of the supervisory tasks of the NEDs; the supervisory task is at all times the responsibility of the NEDs (Kroeze 2008: 2157). Other limitations concern the tasks of executive directors. Executive directors are not allowed to be chairman of the board of directors, to nominate directors to be appointed and to be involved in the determination of the remuneration of executive directors. Furthermore, NEDs must be natural persons.

Figure 8-1: The dual board structure in the Netherlands. The management board and the supervisory board are two separate corporate organs. The members of the supervisory board can be divided into independent and nonindependent. The CEO belongs to the management board and the Chairman to the supervisory board. A situation of CEO-duality is not possible in the Dutch dual board structure.

Prior to the introduction of section 2: 129a DCC it was already possible to establish a unitary board structure in the Netherlands. Refer to Dumoulin (2005) for a discussion about this possibility. Some companies on the two most important stock indices in the Netherlands – the Amsterdam Exchange Index (AEX) and the Amsterdam Midkap Index (AMX) – have a unitary board structure. In 2010, four AEX companies (Air France – KLM, ArcelorMittal, Royal Dutch Shell and Unilever) and one AMX company (Logica) have a unitary board structure (Spencer Stuart 2011: 34-37).2

If a company falls within the ambit of the structure regime, section 2: 164a DCC states that the company is allowed to have a unitary board structure with a distribution of tasks between executive directors and NEDs as an alternative to the establishment of a supervisory board. The tasks of the members of the supervisory board are the responsibility of the NEDs in the unitary board structure (Maeijer et al. 2009: 558). The second paragraph of section 2: 164a DCC provides that the weakened structure regime is not possible if the company has chosen to establish a unitary board structure.

Table 8-2 gives an overview of the number of board meetings in 2010 of AEX and AMX companies. Supervisory boards in dual board structures have on average 10.7 meetings per year of which 8.8 are together with the management board. NEDs in a unitary board structure have on average 8.6 meetings per year with the executive directors and they hold a meeting with exclusively NEDs 2.0 times per year. Therefore, the difference with respect to separation of management and supervision seems to be less pronounced in practice than would be expected. This is in line with the described convergence between both board structures in section 2.3.2.

Table 8-2: Average numbers of board meetings in Dutch listed companies in 2010, calculated using data from Spencer Stuart (2011). (MB = management board, SB = supervisory board)