8.2.4.2 Board composition

The label independent or non-independent has implications for some other best practice provisions of the DCGC. Best practice provision III.2.1 provides that all supervisory board members must be independent, according to criteria mentioned earlier, with the exception of not more than one supervisory director. This means that at most one supervisory director is allowed to be nonindependent.

For unitary board structures, chapter III.8 provides a principle and best practice provisions. Principle III.8 mentions that the composition and functioning of the board of directors is such that proper and independent supervision by NEDs over executive directors is assured. In order to comply with this principle, some best practice provisions are formulated. With respect to board composition, best practice provision III.8.4 lays down the requirement that the majority of the board of directors should comprise independent NEDs. The independence majority requirement implies that a board of directors with eleven members should have six independent NEDs in order to fulfil the majority requirement. When the same board of directors has three executive directors, the other two NEDs must not necessarily be independent in order to comply with the requirements from the DCGC. In this example, two out of eight NEDs are allowed to be non-independent. In a situation with a dual board structure with a management board of three members and a supervisory board of eight members, the situation is different. Since, according to best practice provision III.2.1, at most one supervisory board member is allowed to be nonindependent, this supervisory board must have seven independent members and at most one non-independent member. This differs with respect to the same example for a unitary board structure, which has in total the same number of directors.

Best practice provision III.8.2 requires the chairman of the board of directors to check the proper composition and functioning of the board. This chairman of the board of directors may not be a current or former executive director of the company, according to best practice provision III.8.1. This implies that the chairman of the board of directors may not be CEO, who is a member of the executive directors. By means of this best practice provision the DCGC prohibits CEO duality, which is in accordance with section 2: 129a DCC. The chairman of the supervisory board may not be a former member of the management board, according to best practice provision III.4.2. This is congruous with the best practice provision for the chairman of the board of directors. However, the DCGC does not provide any principle or best practice provision that requires the chairman of the supervisory board or the chairman of the board of directors to be independent.

Table 8-3: Average numbers for board composition in Dutch listed companies in 2010, calculated using data from Spencer Stuart (2011). (EDs = executive directors, MB = management board, SB = supervisory board)

Table 8-3 gives a brief overview of board composition numbers in the Netherlands for AEX and AMX companies. In dual board structures – 21 AEX companies and 24 AMX companies – 89 per cent of the supervisory board consists of independent supervisory directors in 2010. This percentage is slightly lower for independent NEDs in unitary board structures: 76 per cent. Board independence, which is the ratio between independent NEDs and the total number of directors, in unitary board structures is on average 61 per cent. Eight companies do not comply with the board composition recommendations of the DCGC. Akzo Nobel, Arcelor Mittal, ASMI, Draka, Heineken, SNS Reaal and Vopak have more than one non-independent supervisory director. Air France-KLM has a unitary board, of which 40 per cent comprises independent NEDs. Delta Lloyd and Unit 4 do not provide details about the independence of their supervisory directors. Arcelor Mittal is the only company with CEO duality. In all other cases the chairman of the board of directors is not the CEO (Spencer Stuart 2011: 34).