Netherlands to overhaul corporate governance code

8 April, 2022

The Netherlands is currently consulting on changes to its corporate governance code, including plans to better integrate ESG factors.

The country's Corporate Governance Code Monitoring Committee is seeking input on updates to the code to reflect "social trends" and "a new zeitgeist".

The code was last revised in 2016. In recent discussions, the committee said in its introduction to the consultation, it had identified areas for improvement including long-term value creation, diversity, and the role of shareholders.

There are also proposed amendments to internal audits and the regular evaluation processes for Dutch companies' management boards and supervisory boards.

The consultation document explains that ESG factors are central to long-term value creation, and proposes requiring companies to formulate clear strategies in this regard. These should be communicated in regular management reports, and should explain the company's chosen strategy, its actions, and its results, including any impact on its value chain.

ESG strategies should reflect the interests of stakeholders, and not just shareholders, and companies should also explain how their strategies reflect the "culture, values and behaviour encouraged within the company".

On shareholders, the proposals include provisions to "encourage dialogue" between shareholders and the companies in which they invest, and between proxy voting firms and companies.

New rules are to be introduced governing engagement policies for investors holding net short positions in companies, and for those involved in stock lending.

The new code will also include a range of measures to improve diversity metrics in management and supervisory boards, as well as across the broader workforce. Boards and executive committees will be required to have a balance between "expertise, experience, competencies, personal qualities, age, gender identity, nationality, background, including cultural background, and – as regards the supervisory board – independence".

A supervisory board member can request the publication of information regarding gender identity in the board's reports, the consultation document states, and companies will be expected to have a "firmwide diversity and inclusion policy that covers all aspects and personal characteristics in which people may differ".

"When formulating proposals, the committee set its sights on the future, taking into account the wishes and recommendations of the supporting parties and other stakeholders, as well as the national and international social context and anticipated legislative and regulatory developments," the committee stated in the consultation document.

Interested parties have until 17 April to respond.