governance code The new trend of the Dutch model.
3.6 Developments in legislation and practice
3.6.1 Commentaries to the Frijns Code and subsequent developments Regarding the inclusion of CSR as a subject in the Frijns Code, various developments are interesting to record.
The first one is positive: various leading Dutch companies have set up a CSR committee.93This shows an increasing awareness of the importance of the role of CSR. Even more so, it demonstrates that these companies consider CSR a strategic issue.
92. Idem.
93. Burgmans Report, p. 41. Furthermore,e.g.Shell’s supervisory board has a CSR Committee chaired by former Dutch prime-minister Mr Wim Kok; www.shell.com/home/content/ aboutshell/who_we_are/leadership/the_board/ board_of_directors_09112006.html; Rabo bank has a Young Rabo CSR Committee comprising employees of all levels of the organisation; www.jongrabo.nl/index.php?option=com_content&view=article&id=134: spetterende-aftrap-mvo-commissie&catid=22:verslagen&Itemid=43; Heineken has installed a‘CSR Advisory Board’. The most important task is to define the main areas of focus for the corporate responsibility agenda and to develop interventions that will lead to improved company performance in these areas. Measuring, benchmarking and stakeholder dialogue all help the CSR Advisory Board to determine their priorities; www.heinekeninternational.com/ VISION.aspx, all sites accessed on 30 March 2010.
The second development is disappointing. Not only is the lack of a CSR definition reiterated as a manifest problem, but supervisory board members interviewed indicated their concern that the new CSR provisions may only be a ‘tick-the-box’exercise.94Furthermore, informal consultations with Dutch listed companies indicated that corporate secretaries of boards often have a legalistic approach. They seem unsure about the content and extent of the new CSR provisions and wonder whether they pertain to strategic decisions only or also to decisions at the operational level that relate to CSR.
The third development is an interesting one. In section 3.3, it was explained that Frijns Code provision II.1.2 requires the management board to report on the main elements of the company’s CSR strategy in the annual report. The Dutch MP Kalma thought the meaning of this provision unclear. He pondered that it could be understood as referring to the obligation included in article 2:391(1) DCC, accounting Guideline 400 or the GRI G3. Since the Monitoring Committee does not elaborate on this, Kalma has put questions to the Dutch Cabinet. The answers did not clarify the point.95 Consequently, he decided to prepare an initiative bill on this. The Bill proposes to amend article 2:391(1) DCC so that the text thereof aligns with the Frijns Code,i.e.to require Dutch companies to give an account in their annual reports on CSR aspects important for the enterprise: ‘report or explain’.96Small and medium-sized companies will be exempted from this obligation. It would however apply to all large companies including non- listed companies. In addition thereto, inspired by Swedish and Danish legislation, the author has suggested to propose a Decree as meant in article 2:391(5) DCC to designate the GRI G3 guidelines as a code of conduct with which large companies have to comply in their annual reporting or in a separate sustainability report. They should be allowed to deviate, subject to an explanation as to why and to which extent they deviate. Kalma has subsequently mentioned this option, although so far the Cabinet has responded negatively to the suggestion.97
Another development that will be mentioned here is not a new one that relates to the Frijns Code, but affirms the decision of the Frijns Committee to consider CSR as a principle of corporate governance. Since a few years there have been shareholders of listed companies who have called for a more
94. R. Havelaar, ‘Commissarissen; zie toe en daag uit. Evaluatieonderzoek naar invoegen Maatschappelijk Verantwoord Ondernemen in Code Corporate Governance. Rol van com- missarissen: toezichthouders, adviseurs en aanjagers voor MVO bij beursgenoteerde bed- rijven’[Research on the role of supervisory board members regarding CSR], at: http://www. triple-value.com/upload/docs/Zie_toe_en_daag_uit_SAMENVATTING_MASTER_THESIS. pdf, accessed on 30 March 2010.
95. Parliamentary Documents II, 2009/10, 31 083 (32)8, (35)6, (83)5 and (88)8 regarding
‘Corporate governance, hedge funds and private equity’.
96. In February 2010, the Dutch Cabinet has fallen. New elections will be held on June 2010. It is unclear what will happen to the legislative proposals of MPs.
sustainable board strategy. Vide e.g. the resolution of Shell shareholders submitted for the general meeting 2006.98 They indicated that they had concerns about three projects: Corrib Gas in Ireland, Bayelsa State in the Niger Delta and Sakhalin in Russia. In the resolution they requested that‘in the interests of the good reputation of the Company, and the avoidance of costly delay to, or interruption of, production’, the directors undertake greater action on environmental sustainability in order to ensure the peace, safety, environ- ment and prosperity of local communities directly affected by the company’s operations. The resolution also called upon the directors to report to the shareholders by the 2007 general meeting how the company has implemented the measures. At that time, the Shell directors issued a recommendation to the general meeting to reject the resolution arguing that it was not necessary to adopt the resolution as the Shell board already acted responsibly. The resolution was defeated with 83 per cent voting against it and 6 per cent for it. A percentage of 11 abstained from voting. The value of the shares that day that did not follow the board recommendation was over £10 billion.99
In 2010, another resolution was presented by the organisation FairPensions (London) requiring Shell to perform further research as to how the intended oil exploration of the tar (oil) sands in Canada can be performed in a sustainable way. Eleven per cent of the shareholders voted for the resolution or abstained.100 The Dutch pension asset manager APG has indicated that it considers to withhold its votes or to vote for the resolution, depending on whether the critical questions that it submitted to Shell will be answered satisfactorily by Shell.101 This resolution is scheduled for Shell’s general meeting in May 2010. A similar resolution has been proposed for the BP general meeting in April 2010. A number of institutional investors have communicated the intention to vote for these share- holder resolutions.102 From a responsible corporate governance perspective,
98. The Ecumenical Council for Corporate Responsibility (ECCR), supported by the World Council of Churches and 130 other shareholders, proposed this resolution, at: www.eccr.org. uk/dcs/ShellShareholderResolution.pdf, accessed on 2 April 2010.
99. See: www.eccr.org.uk/dcs/CoracleShellHague_Aug06.pdf, accessed on 2 July 2010. 100. ‘What FairPensions is doing about tar sands’, at: http://fairpensions.org.uk/tarsands,
accessed on 2 August 2010.‘ECCR to support BP and Shell shareholder resolution on tar sands’, News ECCR 2010, available at www.eccr.org.uk/News-article-sid-179.html, accessed on 2 April 2010; and ECCR newsletter June 2010, available at www.eccr.org. uk/dcs/ECCRNewsletter_June10.pdf, accessed on 15 June 2010.
101. ‘Kritiek APG op Shell Canada. Pensioenbelegger eist duurzame oplossing voor omstreden oliewinning uit teerzanden’[Critical comments APG on Shell Canada. Pension fund asset manager demands sustainable solution for disputed oil operations concerning tar sands], in
Het Financieele Dagblad, 19 January 2010.
102. Behind the resolutions is a coalition of major investors, NGOs and trade unions, including Co-operative Asset Management, CCLA, Rathbone Greenbank, FairPensions, ECCR, WWF, Greenpeace, Platform and Unison. Available at: www.eccr.org.uk/News-article- sid-179.html, accessed on 2 April 2010.
reflecting in hindsight on the BP disaster in the Gulf of Mexico and the fact that BP had successfully lobbied with the US Minerals Management Services for an exemption from performing a detailed environmental impact analysis, those shareholder resolutions seem to have been on the spot.103
3.6.2 New revisions of the Dutch Company Code impacting corporate governance
In December 2009, the Dutch Lower House adopted various important proposals to amend corporate law.104 The Bills have been submitted to the Upper House and are expected to be adopted in the course of 2010. The subjects concerned the restoration of the balance of power in companies limited by shares, improving the integrity of legal entities, modernisation and creating flexibility in the structure of Dutch companies and the introduction of a works council’s right to present a position in the general meeting of shareholders with regard to certain resolutions.
One Bill introduces the permissibility of a ‘one-tier board’, i.e. one corporate body that includes executive directors and non-executive directors.105 Many Anglo-American legal systems allow this model. To a certain extent the role of the non-executive director will be comparable to the role of supervisory directors in the Dutch two-tier system, although it will exceed the duty of supervision and advising, i.e. responsibilities will also encompass directors’ responsibility. In a one-tier board, key board resolutions106of a large‘structure’ company will have to be approved by the majority of the non-executive directors. Conflict of interest situations, including in the event of a merger, acquisition or public offer, are addressed. The Bill also prescribes a limitation of the number of board positions that can be held by one person, which aligns with provision III.3.4 of the Frijns Code. Furthermore, as announced in section 3.4 supra, the Bill determines that the division of seats between men and women within the company must be balanced.107 This provision will be applicable to all large privately and publicly held Dutch companies (BVs and NVs), both in a one-tier system and in a two-tier system.
103. ‘U.S. exempted BP’s Gulf of Mexico drilling from environmental impact study’, in
Washington Post, 5 May 2010, at: www.washingtonpost.com/wp-dyn/content/article/2010/ 05/04/AR2010050404118.html, accessed on 15 June 2010.
104. Legislative proposals of 8, 10 and 15 December 2009. The revision originates from the 2004 Memorandum of Amendments on the modernisation of the corporate law proposed by Minister Donner, the then Minister of Justice. Parliamentary Documents II, 2003/04, 29 752 (2). 105. Parliamentary Documents II, 2008/09, 31 763.
106. Within the meaning of Articles 2:164/274 DCC. 107. See note 105.
Another Bill provides for a change in the provisions regarding the conven- ing and registration of shareholders’ meetings, thereby implementing the European Directive concerning the exercising of certain rights of shareholders in listed companies.108 This Directive is aimed at strengthening the cross- border exercise of shareholders’rights in listed companies including voting and proxy voting. A request made by shareholders to the management board of a publicly held Dutch company (NV) to place an item on the agenda (seesupra section 3.2) may no longer be refused based on the argument that weighty interests of the company dictate otherwise.109 The request, however, must be substantiated. In addition, the item to be put on the agenda can be tested against the article 2:8 DCC standard of‘reasonableness and fairness’. This matches the Frijns Code’s approach as set out above in section 3.5.
Worthy of note is the Bill that introduces certain new rights for the works councils of Dutch public limited companies.110 The Bill stipulates that a works council can express its opinion about (i) key board resolutions as referred to in article 2:107a DCC submitted for shareholder approval, (ii) resolutions to appoint, suspend and dismiss managing directors and supervisory directors, and (iii) the remuneration policy,i.e.concerning management salaries and bonuses. The Bill also entails the right for the works council to communicate its view regarding any proposal for the appointment of supervisory board members.111 This applies to works councils of holding companies and of subsidiary companies (provided that the majority of the employees of the company and the group companies work within the Netherlands). The new rights are in addition to the works council’s advisory rights pursuant to articles 25 and 30 Dutch Works Council Act and are meant to reinforce codetermination at such a time that the works council’s view can play a role in the decision-making process in the general meeting. If the works council does not express a view or if the works council is not granted the right to speak in the general meeting, the validity of any shareholder resolution adopted will not be affected and neither do any sanctions apply.
108. Parliamentary Documents II, 2008/09, 31 746.
109. Reference is made to note 26 concerning two other relevant legislative proposals not yet been adopted.
110. Parliamentary Documents II, 2008/09, 31 877. 111. Article 2:158(4) DCC.