1. The Supervisory Board should draw up a profile which is to be periodically amended. It should be available for inspection at the company offices.
We agree. The profile has been recently updated and is available for inspection.
2. The composition of the Supervisory Board should be such that the Board Members are able to operate independently of one another and of the Board of Directors and in a critical way.
We agree. This is now specified in the profile.
3. The Annual Report should contain the particulars of each Supervisory Board member as proposed by the Committee.
We agree.
4. No more than one former member of the Board of Directors should serve on the Supervisory Board. Special consideration should be given to the influence that former membership of the Board of Directors could exert on the performance in and on the Supervisory Board and on the performance of the Board of Directors. This is of special importance when a former chairman of the Board of Directors is the intended chairman of the Supervisory Board.
We agree. This is now specified in the profile, together with the stipulation that no former Managing Board member can be chairman of the Supervisory Board. There are currently no former Managing Board members on the Supervisory Board.
5without a . Members of the Supervisory Board who have been appointed on the basis of a nomination, should perform their duties mandate from those who nominated them and independently of subsidiary interests associated with the company. This means that they, like other Supervisory Board members, should not commit to certain subsidiary interests while neglecting other associated interests.
We agree. This is now covered in the Rules for the Supervisory Board.
6. Reappointment of Supervisory Board members should be given careful consideration and should not be automatic.
Supervisory Board members in companies without a structure regime should also be appointed for a certain period of time.
The Supervisory Board should draw up a rota for resignations to prevent an unnecessary number of resignations having to be made at the same time.
We agree. Reappointments are specifically discussed by the Supervisory Board, in the absence of the incumbent in question. A rota for resignations has been drawn up. See also DSM´s viewpoint regarding recommendation No. 15.
7. Members of the Supervisory Board should resign early whenever inadequate performance, fundamental differences of opinion, irreconcilable conflict of interests or other circumstances so dictate.
We agree.
8. A member of the Supervisory Board facing a conflict of interests should immediately report this to the chairman of the Supervisory Board.
We agree.
9. The number of Supervisory Board memberships which a person can hold with a (listed) company should be limited in such a way as to guarantee the satisfactory performance of duties. Companies should allow employees in active service to hold memberships on Supervisory Boards of other companies.
We agree. The profile includes the requirement that Supervisory Board members should have sufficient time to perform their duties satisfactorily.
10. Neither hierarchic subordination within an interest group, cross bonds nor other relations with a person under his supervision should prevent a Supervisory Board member from performing his duties independently.
We agree.
11. Any company shares held by a Supervisory Board member are meant to be long-term investments. The aggregate number of shares, certificates of shares and options held by the joined Supervisory Board members are to be published in the company´s Annual Report.
We agree.
12. The remuneration of Supervisory Board members should not be dependent on the results of the company. Any business relationships with the company should be published in the notes to the Annual Accounts.
We agree.
13. Any semblance of conflict of interests between the company and a Supervisory Board member should be avoided.
We agree.
14. The specific duties of the Supervisory Board and those of its chairman are laid down in the regulations for the Supervisory Board. The Supervisory Board also considers the desirability of adding rules to the regulations concerning the relation of the Supervisory Board with the Board of Directors, the works council and the investors. The existence of such regulations should be mentioned in the report by the Supervisory Board in the company´s Annual Report.
We agree. The Rules governing the Supervisory Board were revised in 1997.
15. The Supervisory Board should consider setting up a nomination, audit and a remuneration committee from among its members. The existence of such committees should be mentioned in the report of the Supervisory Board in the company´s Annual Report.
We agree. This consideration has resulted in the appointment of a committee on appointments and remuneration. The audit results are discussed directly by the full Supervisory Board.
16. The Supervisory Board should meet according to a predetermined time schedule. Individual members should be called to account for frequent non-attendance.
We agree.
17. At least once a year the Supervisory Board should review the strategy and the risks involved in the company and the results of the assessment by the Board of Directors of the systems of internal control. These matters should be included in the Supervisory Board report in the company´s Annual Report.
We agree.
18. At least once a year the Supervisory Board should meet in the absence of the Board of Directors to discuss the functioning of the Supervisory Board, the relationship with the Board of Directors, the assessment of the Board of Directors including issues concerning succession and remuneration. The Supervisory Board should refer to this meeting in the Annual Report.
We agree.
19. The adoption (approval) of the Annual Accounts and the approval of the policies pursued by the Board of Directors and the supervision exercised by the Supervisory Board should be separate items on the agenda for the annual General Meeting of Shareholders.
The proposed separation would lead to a situation in which the Managing Board and the Supervisory Board would be discharged of more responsibilities than in the present set-up, which is laid down in DSM´s Articles of Association.
We would rather see this practice continued and await further developments in this area in the Netherlands.
20. A permanently delegated Supervisory Board member is not desirable.
We agree.
21. The Board of Directors should report in writing to the Supervisory Board on company objectives, the strategy and the associated risks and the mechanisms used to control financial risks. The main items in the report should be a permanent part of the Annual Report. Quantification can be a tool to help clarify the company objectives and the strategy. If quantifications have been given they should be utilized in comparisons with the actual outcome.
We agree. This point is also covered in the Rules governing the Supervisory Board.
22. The aggregate sum of the remuneration in the Annual Report should be split into that for serving and that for former board members.
We agree, as long as the privacy of the people concerned is protected.
23. Any securities held by a member of the Board of Directors are meant to be long-term investments. The aggregate number of securities held by the joint members of the Board of Directors at the end of the financial year should be included in the Annual Report, with a subdivision into:
- shares/certificates of shares;
- convertible bonds;
- marketable options;
- options issued by the company with the most significant conditions.
We agree.
24. An employee stock option plan serves to strengthen involvement in the company over the long-term (at least 3 years). The employee stock option is a form of payment which should be related to the degree of success of the efforts made by the employee to enhance the market value of the company. The conditions for the granting of the stock options should reflect this.
The options issued by the company to the joint board members and other employees in that financial year should be included in the Annual Report together with the most significant conditions.
We agree.
As soon as it is clear to what extent Dutch tax legislation regarding employee stock option plans will change, we shall review our standpoint.
25. Any semblance of a conflict of interests between the company and members of the Board of Directors should be avoided.
We agree.
26. Based on the principle that finance and influence should be in line, companies and investors should be asked to reassess the part played by capital in their company.
In general, we agree with this recommendation. However, deviations from this principle are conceivable; they should have the prior approval of the shareholders. Of the specific situations mentioned by the Committee in which such a reassessment should be considered, only one applies to DSM, namely the issue of preference shares. The issue of cumulative preference shares of NLG 70.00 each in 1996 was approved by an Extraordinary Meeting of Shareholders.
27. For all companies the General Meeting of Shareholders should be the forum to which the Supervisory Boards and the Boards of Directors report and to which they are accountable with regard to their performance.
The General Meeting of Shareholders is an important forum to which the Managing Board and the Supervisory Board report and to which they are accountable. Another such forum is the Central Works Council.
28. The Board of Directors and the Supervisory Board should have the confidence of the shareholders´ meeting. This should be borne in mind when appointing board members.
We agree. Our appointment policy is implemented within the provisions of the law and the articles of association regarding DSM´s status as a company with a "statutory two-tier structure".
29. Based on the criteria mentioned the report, the management should assess the degree of influence of the investors and in what respect it would be desirable to increase the influence of the investors and, if so, what measures should be taken. The results of the assessment should be reported to the General Meeting of Shareholders in I998. This report should be put on the agenda and should be discussed.
"Influence" is defined by the Peters Committee as follows: "The company´s management must not be allowed over a long period of time to ignore the opinions of the investors on subjects that concern them".
Subjects that concern the investors mostly also concern other stakeholders, e.g. employees and providers of loans. The subjects that the Committee mentions in this connection include:
- the company´s strategic policy;
- major changes in the nature and size of the company;
- dividend policy;
- size and composition of the share capital;
- alteration of the company´s articles of association;
- adoption and/or approval of the Annual Accounts.
We interpret this recommendation as a call for open and transparent communication with shareholders (as well as other stakeholders), without transferring the final responsibility for decision-making from the Managing Board and Supervisory Board to any stakeholder.
With regard to "companies with a structure regime", the Committee states that it does not wish to undo the powers granted to the Supervisory Board by law. However, the Committee takes a different view with regard to any additional powers granted to the Supervisory Board via the articles of association within the latitude allowed by the law that undermine the powers of the General Meeting of Shareholders.
As regards the exercise of these additional powers, the Committee proposes that the Supervisory Board and the Managing Board should not stand in the way of any decision that the investors would like to see made by the General Meeting of Shareholders unless this decision is prejudicial to the company´s interest in a major way. This also holds for situations in which prior approval is required.
To the extent that such a position on the part of the Supervisory Board would be impossible in view of the statutory regulation that this Board must be guided by the interests of the company and the enterprise related thereto, the Committee proposes that the said additional powers of the Supervisory Board be revoked by means of an amendment to the articles of association.
In our opinion, adopting this recommendation would be contrary to the very essence of the "statutory two-tier structure", since the Supervisory Board is specifically there to approve or disapprove decisions keeping in mind the interests of the company as a whole and not just the interests of the investors.
30. Requests made by investors who represent 1 percent of the issued capital or whose shares or certificates of shares at the time the General Meeting of Shareholders is called represent a value of at least DFL 500,000 to place a certain item on the agenda should be honoured, if such requests have been submitted to the Board of Directors or to the chairman of the Supervisory Board at least thirty days beforehand, unless substantive company concerns in the opinion of the Supervisory Board and the Board of Directors prevail.
During the Annual General Meeting the agenda items "Annual Report" and "Any other business" provide the meeting with the opportunity to discuss a broad range of topics and ask the Management for an explanation about these subjects. Whether or not a separate item should be added to the agenda will be decided for every individual case. An item can be added only if the request to add it is made early.
31. The quality and the specialisation of investment analysis - particularly with regard to individual sectors - should be enhanced.
We agree on the importance of a good investment analysis.
32. A proxy solicitation system which can enhance the involvement of the investors in the decision-making in the General Meeting of Shareholders should be introduced.
We agree in principle. We are awaiting the results of a study with interest.
33. Parties which have gained control of a listed company by holding 50% or more of its shares should within a reasonable period of time make a bid for the remaining shares and/or certificates of shares on realistic terms.
Duly noted.
34. The main principles of Corporate Governance in the company should be outlined in the Annual Report. In its Annual Report the company should give an argued explanation of the extent of its compliance with the recommendations.
We agree.
35. The Supervisory Board should assess whether the auditors should verify the reporting on the implementation of the verifiable recommendations.
In our opinion the auditors are not in a position to carry out this verifiation.
36. The audit of the Annual Accounts is an integral part of a sound system for Corporate Governance.
We agree.
37. The Supervisory Board or the Audit Committee should meet with the auditors at least once a year.
We agree.
38. Reports from rating agencies should be discussed in the Supervisory Board.
We agree.
39. The Committee proposes to monitor compliance with the recommendations once only after the publication of the Annual Reports in I998 to be arranged by the parties involved.
The process has been initiated. DSM fully collaborates with this monitoring.
40. Buyback of shares in the Netherlands should be possible without fiscal objections.
We agree.