As far as the European Commission is concerned, there is insufficient shareholder involvement and a lack of adequate transparency when it comes to listed companies; this is one of the reasons it adopted the new Shareholders Directive on 17 May 2017. Member States must transpose the directive into national law by 10 June 2019 at the latest.
On 16 October 2018, the Dutch Minister of Legal Protection submitted the legislative proposal implementing the amended Shareholders' Directive to Dutch Parliament. The proposal aims to be as consistent as possible with existing legislation and the Dutch Corporate Governance Code.
Among other things, the proposal provides for the following changes compared to the current situation:
- Listed companies must submit their remuneration policy to their general meeting of shareholders at least every four years for adoption with a binding vote. This applies to both the remuneration policy of the management board and the supervisory board (if the general meeting has decided to award the supervisory board members remuneration).
- Material transactions with related parties entered into outside the normal course of business or not under normal market conditions should be publicly announced no later than at the time of entry into the transaction.
- Identification of shareholders: the scope of the rules on shareholder identification will be limited and will only become relevant for issuing institutions domiciled in the Netherlands whose shares are admitted to trading on a regulated market in the European Union. Issuing institutions incorporated outside the EU with securities listed in the Netherlands and issuing institutions with securities listed on a multilateral trading facility will no longer fall within the scope of the rules on shareholder identification.
- Transparency obligation for institutional investors and asset managers: institutional investors and asset managers will become obliged to publish engagement and voting policies. If they decide not to do so, they must explain their decision. In addition, if institutional investors make use of asset managers, they must publish certain key elements of the agreement with such asset managers on their website. Asset managers will be required to provide information to institutional investors about, among other things, the composition, turnover and turnover costs of their investment portfolio and whether the implementation of the investment strategy is in line with the mandate. Such information need only be made available to the institutional investor (so no general disclosure required).
- Transparency obligations for proxy advisors: on the basis of this bill, proxy advisors will be required to disclose certain essential information about the preparation of their research, advice and voting recommendations. In addition, they must disclose certain key information relating to the preparation of their research, advice and voting recommendations and any actual or potential conflicts of interests or business relationships that may influence them. Additionally, they must disclose whether they are subject to a code of conduct and if so which. Such information should remain publicly available for a period of at least three years in order to allow institutional investors to choose the services of proxy advisors taking into account their performance in the past.
- Transfer of information in the chain of intermediaries: requests of a listed company and information regarding the identity of shareholders should be transmitted between intermediaries to the company or to a third party nominated by the company without delay by the intermediary who holds the requested information. Currently, the company itself should approach the subsequent intermediate in the chain of intermediaries.
- Facilitating the exercise of shareholder rights: the proposal introduces the obligation for all parties in the chain of intermediaries that have their registered office in the Netherlands, to facilitate the exercise of shareholder rights, including voting rights. Currently, such an obligation already exists for intermediaries as far as the exercise of voting rights is concerned. However, the proposal extends the scope of such obligation from intermediaries to all parties in the chain of intermediaries and from the exercise of voting rights to the exercise of shareholder rights in general.
The legislative proposal was discussed in Parliament on 27 March 2019 and accepted – with amendments - on 2 April 2019. Typically for Dutch Parliament, most of the discussion was focused on the remuneration paragraphs. The most important amendments which have been brought to a vote and have been accepted by Parliament include:
- The remuneration policy must be adopted with at least 75% of the votes casts, unless the articles of associations provide otherwise;
- The works council must have been able to advise on the remuneration policy before it can be put on the agenda of the general meeting of shareholders and the works council's advice must be made available to the general meeting of shareholders. Furthermore, deviation from the works council's advice must be explained;
- If (i) the supervisory board of a listed company is entitled to determine the remuneration of the management board, and (ii) the supervisory board has a remuneration committee, the supervisory board member that has been appointed with the enhanced recommendation right of the company's works council shall be a member of the remuneration committee;
- The remuneration policy must include an explanation of the way in which the remuneration policy takes into account (1) the company's identity, mission and values, (2) pay ratio within the company, and (3) social support (maatschappelijk draagvlak).
One may question to what extent these amendments have anything to do with the purpose of the amended Shareholders' Directive (advancement of shareholder involvement and increased transparency when it comes to listed companies), but they will – significantly - impact the current governance of Dutch listed companies.
Next step in the legislative process is the submission of the legislative proposal as adopted by Dutch Parliament for discussion in and approval by the Dutch Senate.