4.5.16 How board committees can help to get the best out of directors

In the Netherlands a nomination committee is concerned solely with nominating supervisory and management board members. Most Dutch remuneration committees have until now restricted themselves to the remuneration of directors. Since 2008 the remuneration committees of banks only have become involved in the remuneration of certain levels of middle management following the introduction of new tules on the financial rewards for large groups of bank employees.1

The differences between a two-tier system and the proposed one-tier system will become noticeable in the scope of work of the various board committees once a one-tier board is introduced. An interesting point can be made about the difference between the committees of a two-tier board and a one-tier board. In a two-tier board it is logical for the nomination committee to discuss only the succession of the management and supervisory board members. In a one-tier board it is to be expected that the nomination committee will also be involved in discussing the succession to all key positions in the company and its subsidiaries. The same is broadly true of the remuneration committee. In a two-tier board this committee discusses the remuneration of the management board members only, whereas in a one-tier board they have to discuss the income policy at middle management levels as wel1.2

This aspect of a one-tier board, where its remit includes management development in a broader sense, should be studied in the light of US practice and experience. In the US, succession is given much consideration at board level.3 US business leaders understand that choosing the right people throughout the company and ensuring they receive appropriate remuneration is part of risk management and should be regarded as setting the tone from the top.

Over the last ten years Dutch practice has to some extent converged with that of the UK and the US. Here too, board committees are increasingly preparing decisions in great detail before proposing them to the full board for final decision. This is in keeping with the example of the US,4 where committees soit out the details so that matters are ready for brief discussion and a quick vote by the board.