Best practice provisions
Best practice provisions
Given the company's innovative, project-driven and flexible style of entrepreneurship, Nedap has opted to apply certain provisions of the Corporate Governance Code in a different way. All such instances of non-standard application are explained below in the same order as the Code:
II.1.1 A management board member is appointed for a maximum period of four years. A member may be reappointed for a term of not more than four years at a time.
Given the long-term nature of Nedap's policy, members of the company's Board of Management are appointed for an indefinite period of time. A director's length of tenure depends on his performance which is reviewed annually by the Supervisory Board.
II.1.3 The Company shall, in any event, employ as instruments of the internal risk management and control system: b) a code of conduct should be published on the company's website;
Nedap and its staff act in an honest and honourable manner. This integrity is not based on a whole range of formal rules, but on what any normal person knows to be right or wrong. Honesty and the courage and freedom to admit one's mistakes are crucial in this connection. Staff should always put the interests of the customer and Nedap first in their actions. Against this background Nedap's management plays a vital role in keeping everyone aware of these principles. Ultimately, a good example will be followed. A written code of conduct would not be appropriate for the type of organisation that Nedap is and would be contrary to the way in which we deal with one another.
II.1.7 The management board shall ensure that employees have the possibility of reporting alleged irregularities of a general, operational and financial nature within the company to the chairman of the management board or to an official designated by him, without jeopardising their legal position. Alleged irregularities concerning the functioning of management board members shall be reported to the chairman of the supervisory board. The arrangements for whistleblowers shall be posted on the company's website.
The relationships and open structure within the Nedap organisation are such that alleged irregularities can be exposed without fear of repercussions, regardless of the rank or status of the alleged perpetrator. No separate rules are necessary for this purpose.
II.2.8 The remuneration in the event of dismissal may not exceed one year's salary (the `fixed' remuneration component). If the maximum of one year's salary would be manifestly unreasonable for a management board member who is dismissed during his first term of office, such board member shall be eligible for severance pay not exceeding twice the annual salary.
As was pointed out with respect to II.1.1, members of Nedap's Board of Management are appointed for an indefinite period and there is therefore no such thing as a `first term of office'. In the unfortunate event that a director's performance proves unsatisfactory, then the severance pay will be partly determined by the number of years of service at Nedap.
II.2.13 The overview referred to in best practice provision II.2.12 shall in any event contain the following information: f) a description of the performance criteria on which the performance-related component of the variable remuneration is dependent in so far as disclosure would not be undesirable because the information is competition sensitive, and of the discretionary component of the variable remuneration that can be fixed by the supervisory board as it sees fit;
The remuneration package for the Board of Management comprises fixed and variable annual income.The variable annual income depends on the members of the Board of Management meeting targets set in advance by the Supervisory Board. One third of the variable income is determined by financial targets, one third by targets relating to the development of the internal organisation and one third by targets focusing on the way in which the organisation operates in its environment. As far as possible, the Supervisory Board will set quantifiable objectives for these targets. No further details of the targets can be given for competitive reasons.
g) a summary and account of the methods that will be applied in order to determine whether the performance criteria have been fulfilled;
As no further details of the targets are being given, it is also difficult to give a summary and account of the methods that will be applied in order to determine whether the performance criteria have been fulfilled.
h) an ex-ante and ex-post account of the relationship between the chosen performance criteria and the strategic objectives applied, and of the relationship between remuneration and performance.
As the selected targets cannot be set out in greater detail than in f), an account of the relationship between these targets and the strategic objectives cannot be given to the extent that the targets would have to be disclosed for this. A significant proportion of the variable income is dependant on Nedap's long-term strategy and performance since each director must contribute at least 50% of their variable annual income after tax to Stichting Medewerkerparticipatie Nedap in exchange for depositary receipts. These depositary receipts are locked up for a period of four years. With respect to the relationship between reward and performance ex ante and ex post it is only possible to say that 60% of the fixed annual income is paid for performance at target level, with a maximum of 90% of the fixed annual income.
II.2.14 The main elements of the contract of a management board member with the company shall be made public after it has been concluded, and in any event no later than the date of the notice calling the general meeting where the appointment of the management board member will be proposed. These elements shall in any event include [º] performance criteria to be applied.
At Nedap, members of the Board of Management are appointed by the Supervisory Board after announcing the proposed decision to the general meeting. The performance criteria are not set out in greater detail as explained in Remuneration of the Board of Management.
III.1.1 The division of duties within the supervisory board and the procedure of the supervisory board shall be laid down in terms of reference. The supervisory board's terms of reference shall include a paragraph dealing with its relations with the management board, the general meeting and the central works council or works council. The terms of reference shall be posted on the company's website.
In view of the nature of the Company and the company-specific working procedures of the Supervisory Board as set out in the Report of the Supervisory Board to the Shareholders, and given also the size of the Board and the desired flexibility, the Supervisory Board considers it undesirable to lay down formal procedures for its dealings with the Board of Management, the General Meeting of Shareholders and the Works Council.
III.3.3 After their appointment, all supervisory board members shall follow an induction programme, which, in any event, covers general financial and legal affairs, financial reporting by the company, any specific aspects that are unique to the company and its business activities, and the responsibilities of a supervisory board member. The supervisory board shall conduct an annual review to identify any aspects with regard to which the supervisory board members require further training or education during their period of appointment. The company shall play a facilitating role in this respect.
The size of Nedap as well as its organisational set-up are such that no formal induction programme is necessary. Newly appointed members naturally receive an appropriate introduction, including a visit to the head office in Groenlo.
III.3.5 A person may be appointed to the supervisory board for a maximum of three four-year terms.
The Supervisory Board considers that the length of tenure of its members should be determined by their quality and contribution in combination with the specific knowledge they bring to Nedap. The performance of the Supervisory Board and its members are evaluated annually. The Articles of Association stipulate that a member's tenure shall end upon reaching the age of 72.
III.4.1 The chairman of the supervisory board shall see to it that: a) the supervisory board members follow their induction and education or training programme;
As pointed out with respect to III. 3. 3, Nedap has no formal induction programme. It goes without saying that the chairman of the Supervisory Board ensures that the competencies of the members of the Supervisory Board match the profile of the Board and that they are effectively inducted into the Company.
III.6.5 …… The company shall draw up regulations governing ownership of and transactions in securities by management or supervisory board members, other than securities issued by their `own' company.
An agreement is in place whereby interests in other companies involving a potential conflict of interests are avoided and, in case of doubt, discussed in advance with the Supervisory Board. Given Nedap's size and market position, the Supervisory Board sees no need to draw up written regulations regarding members of the Board of Management holding and dealing in shares in companies other than Nedap. IV.1 Principle ............. The Company shall, in so far as possible, give shareholders the opportunity to vote by proxy and to communicate with all other shareholders. Nedap does not have an international shareholder base. Nedap considers that the interest its shareholders have in the Company and its culture is demonstrated by their personal attendance at the General Meeting of Shareholders and, if necessary, their participation in the discussion. Personal attendance is particularly important when matters of substance are being discussed. Shareholders may vote by proxy, where necessary.
IV.1.4 The policy of the Company on additions to reserves and on dividends (the level and purpose of the addition to reserves, the amount of the dividend and the type of dividend) shall be dealt with and explained as a separate agenda item at the general meeting of shareholders.
Nedap's policy on additions to reserves and dividends is directly determined by its strategy and long-term policy and will be discussed in that context. The long-term policy is aimed at creating sustainable added value for customers, staff and shareholders. The policy of additions to reserves and dividends will be a discussion item on the agenda.
IV.1.5 A resolution to pay a dividend shall be dealt with as a separate agenda item at the general meeting of shareholders.
As pointed out with respect to IV.1.4, the dividend payment is directly determined by the strategy and the long-term policy. The dividend payment will be explicitly included on the agenda as a separate item.
IV.3.9 ..... and resolutions for the appointment of management board members [º] shall be submitted separately to the general meeting.
As explained in II.2.14 directors are appointed by the Supervisory Board after announcing the proposed decision to the general meeting. Consequently, formally no proposal to appoint directors is submitted to the general meeting.
V.2.1 The external auditor may be questioned by the general meeting in relation to his report on the fairness of the financial statements. The external auditor shall for this purpose attend and be entitled to address this meeting.
Pursuant to Article 42(3) of the Articles of Association, Nedap's auditor reports on his audit to the Supervisory Board and the Board of Management. The result of his audit is set out in a statement certifying that the financial statements give a true and fair view of the financial position of the Company in conformity with the International Accounting Standards Board and accepted by the European Union and Part 9, Book 2 of the Netherlands Civil Code and that they comply with the statutory provisions for financial statements stipulated in Part 9, Book 2 of the Netherlands Civil Code and, to the extent of his competence, that the Board of Management report is consistent with the financial statements as required by 2:391 sub 4 of the Netherlands Civil Code. This independent auditor's report is included in the Other information section. The activities of the auditor are described in the `Auditor's responsibility' section of the Independent Auditor's Report. This is self-explanatory. Independent auditor's reports at Nedap are unqualified, and so no additional clarification is necessary. Should any provisos be included, these will be disclosed and explained in the Annual Report in conformity with the accountability of the Supervisory Board and the Board of Management vis-à-vis the shareholders. In the view of the Supervisory Board and the Board of Management, the presence of the external auditor at the General Meeting of Shareholders is therefore unnecessary.
V.3.1 The external auditor and the audit committee shall be involved in drawing up the work schedule of the internal auditor. They shall also take cognizance of the findings of the internal auditor.
In view of its size, Nedap does not have an internal auditor (or an audit committee). It goes without saying that the external auditor performs the annual audit with due attention to the existence and implementation of the internal audit and control system. The external auditor attends the meeting of the Supervisory Board at which the financial statements are discussed.
Chairman of the Supervisory Board:
A. van der Velden
Board of Management:
R.M. Wegman G.J.M. Ezendam