The updated Dutch Corporate Governance Code (the Code) was published on 20 December 2022. This may have an impact on articles of association and company rules for executive and supervisory boards. The Code comes into effect from the financial year that starts on or after 1 January 2023. The most significant amendments to the Corporate Governance Code relate to: (i) sustainable long-term creation of value, (ii) the role of stakeholders, (iii) computerisation and (iv) diversity and inclusivity.
The Code sets out principles and provisions on best practice that are designed to promote good governance. The Code regulates the relationships between the executive board, supervisory board and shareholders. While it is only compulsory to apply the Code for companies listed on the stock exchange, many other businesses opt to apply the Code voluntarily within their internal rules. The Dutch Supreme Court has described the Code as a reflection of generally leading legal doctrine in the Netherlands. This means that the Code is important for al directors and all legal entities.
(i) Sustainable long-term creation of value
When determining their strategy and taking decisions, directors of companies must focus on long-term tenability and sustainability as key values. Boards are expected to consider the impact of their actions on people and the environment. They should also take account of the relevant interests of their stakeholders.
Stakeholders are groups of individuals who influence or may be influenced by the attainment of the company’s objectives. The Code mentions employees, shareholders and others who provide capital, suppliers, customers and other interested parties. It is the board’s responsibility to identify who are the relevant stakeholders in any particular case so that they can enter into a dialogue with them.
The Code talks about the transformation our society is undergoing in relation to computerisation. The inventory of risks that directors must identify mentions specific risks in the fields of cyber security, data protection and risks connected with technologies and business models.
(iv) Diversity and inclusivity
The Code stresses that a diverse range of views, argumentation and also teamwork and cohesion are essential preconditions for a valuable discussion. The Code expects there to be a policy in place on diversity and inclusivity. It must contain definite, appropriate and ambitious objectives, designed to achieve a proper balance in gender diversity and other areas that are relevant to the company. This applies to the composition of the executive and supervisory boards as well as to a further (“sub-top”) category of managerial positions that the executive board should designate.
Follow-up and action points
Companies are deemed to be applying the updated Code from 1 January 2023 and will have to account for the way they are complying with it. We are advising directors to assess whether any adjustments are needed in the organisation’s articles of association or company rules in order to make the Code applicable.
If you have any questions about the Corporate Governance Code and how the executive and supervisory boards should frame articles of association or company rules, you can get in touch with Koen van Wijk and Anne-Rieke van der Linden.