The Dutch Supreme Court has ruled on the position of the managing board and the supervisory board (SB) vis-à-vis activist shareholders. The case under review concerned ASM International N.V. (ASMI).

Strategy with management

  • In line with its earlier ruling of 13 July 2007 in the ABN AMRO inquiry, the Supreme Court ruled that the strategy to be pursued by ASMI was, in principle, a matter for the managing board. It was up to management, under the SB’s supervision, to consider if it was desirable to discuss strategy with external shareholders.
  • The fact that external shareholders disagree with the policy pursued by the managing board and the SB does not automatically mean that the managing board has a duty to respond to the shareholders’ views.
  • In this case the managing board did enter into a dialogue with the external shareholders, addressed their arguments, and put these aside on the bases of sound and justified counter-arguments. This is in accordance with the provisions in the Corporate Governance Code 2008.

SB not obliged to assume a mediating role

  • The SB’s duty is to supervise the policy of the managing board and the general conduct of business in the company. It supports the management in an advisory capacity. The Supreme Court ruled that the SB’s mandate does not entail a duty to play a mediating role in conflicts between management and shareholders.
  • The SB can be approached by the shareholders with requests for mediation or otherwise and it will have to act adequately within its own scope of responsibilities. Assuming a duty of active mediation would be inconsistent with the SB’s discretionary powers.

The Supreme Court reversed the decision of the Enterprise Chamber. The latter will now have to assess if the other grounds put forward by the shareholder activists and the Dutch Shareholders Association (VEB) justify ordering a corporate inquiry into ASMI.

Also see our Legal Alert.

Legal Alert ASMI 15 Juy 2010