Best practices selection
I. Complying with and upholding the codeBest practice #1 (Code reference: I.1)
The broad outline of the company’s corporate governance structure is reported annually in a separate section of the annual report and is partly based on the principles listed in this code. The company expressly reports the extent to which it complies with the best practices listed in this corporate governance code and, in the event that it does not, states the reason and the extent to which it deviates from the code.
II. Management BoardBest practice #2 (Code reference: II.1.2)
The Management Board submits the following to the Supervisory Board for approval:
a) the company’s operational and financial objectives;
b) the strategy designed to achieve these objectives;
c) any preconditions applied to the strategy, for instance with respect to financial ratios. The most important items are stated in the annual report.
Best practice #3 (Code reference: II.1.4)
The Management Board states in the annual report that internal risk management and control systems are adequate and effective and clearly explains the reasons behind this statement. In the annual report, the Management Board describes the functioning of the internal risk management and control systems during the financial year. The Management Board also indicates any significant alterations that have been made, any significant improvements that are planned and confirms that any such items have been discussed with the Audit Committee and the Supervisory Board.
Best practice #4 (Code reference: II.2.2)
In the event that the company, contrary to best practice II.2.1, allocates unconditional options to its Management Board members, it applies performance criteria for the allocation of such options and these options may not be exercised within three years after allocation.
Best practice #5 (Code reference: II.2.4)
The exercise price of options is set no lower than a verifiable price or verifiable price average in accordance with the official stock market listing on one or more predetermined days during a period of no more than five business days prior to and including the day of allocation.
Best practice #6 (Code reference: II.2.5)
Neither the exercise price nor any other conditions concerning the allocated options may be altered during the term of the options, barring any necessary changes to the structure relating to the shares or the company in line with established market practices.
Best practice #7 (Code reference: II.2.6)
The Supervisory Board draws up a regulation containing rules withrespect to Management Board members possessing and trading in securities other than those issued by their ‘own’ company. This regulation is published on the company’s website. Management Board members periodically notify, at least once a quarter, the compliance officer or, if the company has no compliance officer, the chair of the Supervisory Board of any changes to possession of securities relating to Dutch listed companies. Any Management Board member who invests exclusively in listed investment funds or transfers the discretionary management of his securities portfolio to an independent third party by means of a written agreement is exempt from this provision.
Best practice #8 (Code reference: II.2.8)
The company shall not issue personal loans, guarantees or similar to its Management Board members, unless in the course of normal business and on the terms and conditions applicable to all personnel and following approval by the Supervisory Board. No remission of loans shall be granted.
Best practice #9 (Code reference: II.2.9)
The Supervisory Board remuneration report describes how the remuneration policy has been applied during the past financial year and also contains a summary of the remuneration policy for the coming financial year and subsequent years as anticipated by the Supervisory Board.
Best practice #10 (Code reference: II.2.10)
The report referred to in II.2.9 must at least contain the following information:
a) a presentation of the relative interest of the variable and non-variable remuneration, including an explanation of this ratio;
b) an explanation of any absolute change to the non-variable remuneration;
c) if applicable: the composition of the group of companies (peer group) which determines the remuneration policy as well as the amount and composition of the Management Board’s remuneration;
d) a summary and explanation of company policy on the term of office for Management Board members, the applicable terms of notice and redundancy schemes and a declaration of the extent to which the company complies with best practice provision II.2.7;
e) a description of the performance criteria on which the Management Board members’ entitlement to options, shares or other variable remuneration depend;
f) an explanation of the selected performance criteria;
g) a summary of the methods used to determine whether performance criteria have been met and an explanation of the method selection;
h) if the performance criteria are based on a comparison with external factors: a summary of those factors which will be used to make the comparison; if one of the factors relates to the performance of one or more companies (peer group) or to an index, the companies or index used as a benchmark must be named;
i) a description and explanation of each major proposed change to the terms and conditions which entitle Management Board members to options, shares or other variable remuneration;
j) if any Management Board member entitlement to options, shares or other variable remuneration does not depend on performance criteria, an explanation of why this is the case must be given;
k) applicable regulations for pension and any related financing costs;
l) agreed regulations for early retirement for Management Board members.
Best practice #11 (Code reference: II.3.4)
All transactions involving a conflict of interests for Management Board members are agreed according to established industry practices. Any decisions on entering into transactions involving a conflict of interests for Management Board members, which are of material interest to the company and/or the Management Board members in question, require approval from the Supervisory Board. Any such transactions will be published in the annual report, stating the conflicting interest and declaring compliance with best practice provisions II.3.2 up to and including II.3.4.
III. Supervisory BoardBest practice #12 (Code reference: III.1.4)
A Supervisory Board member will retire early in the event of unsatisfactory performance, structural incompatibility of interests or when otherwise deemed necessary by the other members of the Supervisory Board.
Best practice #13 (Code reference: III.1.7)
At least once a year and in the absence of the Management Board, the Supervisory Board discusses both its own functioning and that of the individual Supervisory Board members and any conclusions drawn. The desired profile, composition and competence of the Supervisory Board are also discussed. At least once a year and in the absence of the Management Board, the Supervisory Board will also discuss both the functioning of the Management Board as a whole and of its individual members and any conclusions drawn. The occurrence of these meetings must be noted in the Supervisory Board’s report.
Best practice #14 (Code reference: III.2.1)
All Supervisory Board members, with the exception of a maximum of one person, are independent in the sense of best practice provision III.2.2.
Best practice #15 (Code reference: III.3.2)
At least one member of the Supervisory Board is a financial expert, which means that this person has gained relevant expertise and experience in financial administration/accounting at one or more listed company or any other large legal entity.
Best practice #16 (Code reference: III.6.3)
All transactions involving a conflict of interests for Supervisory Board members are agreed according to established industry practices. Any decisions on entering into transactions involving a conflict of interests for Supervisory Board members, which are of material interest to the company and/or the Supervisory Board members in question, require approval from the Supervisory Board. Any such transactions will be published in the annual report, stating the conflicting interest and declaring compliance with best practice provisions III.6.I up to and including III.6.3.
Best practice #17 (Code reference: III.6.4)
All transactions between the company and natural persons or legal entities which hold at least ten percent of the shares in the company are agreed in accordance with established industry practices. Any decisions on entering into transactions with these entities which are of material interest to the company and/or these entities require approval from the Supervisory Board. Any such transactions will be published in the annual report, declaring compliance with best practice provision III.6.4.
Best practice #18 (Code reference: III.7.1)
No shares and/or entitlement to shares are allocated to Supervisory Board members as remuneration.
Best practice #19 (Code reference: III.7.4)
The company shall not issue personal loans, guarantees or similar to its Supervisory Board members, unless in the course of normal business and following approval by the Supervisory Board. No remission of loans shall be granted.
IV. The (general meeting of) shareholdersBest practice #20 (Code reference: IV.1.1)
The general meeting of shareholders of a company not holding statutory two-tier status may decide to annul the binding nature of a nomination of a Management Board or Supervisory Board member and/or a resolution to dismiss a Management Board or Supervisory Board member in the event of an absolute majority of votes cast. This majority may be required to represent a specific proportion of the issued capital, which proportion may not exceed one third. If this proportion is not represented at the meeting, but an absolute majority of the votes cast are in favour of the resolution to annul the binding nature of the nomination or dismissal, then a newly convened meeting can pass the resolution in the event of an absolute majority, irrespective of the proportion of capital represented at this meeting.
Best practice #21 (Code reference: IV.1.2)
The right to vote on financial preference shares is based on the fair value of the capital contribution. This applies in any event to the issue of financial preference shares.
Best practice #22 (Code reference: IV.1.3)If a serious private bid for a business unit or a participation, of which the value exceeds the amount stipulated in draft article 2:107a paragraph 1 (c) of the Dutch Civil Code, is made public, the Management Board must publish its position on the bid, including its reasons for adopting this position, as quickly as possible.
Best practice #23 (Code reference: IV.1.4)
The company’s reserve and dividend policy (the reserve’s amount and purpose, the dividend’s amount and type) will be dealt with and explained as a separate agenda item at the general meeting of shareholders.
Best practice #24 (Code reference: IV.1.6)
Approval of the policy pursued by the Management Board (discharge of Management Board members from liability) and approval of the supervision conducted by the Supervisory Board (discharge of Supervisory Board members from liability) are voted on separately at the general meeting of shareholders.
Best practice #25 (Code reference: IV.2.2)
The board of the trust office are appointed by the board of the trust office. The meeting of depositary receipt holders may recommend candidates for nomination to the board of the trust office. No (former) Management Board members, (former) Supervisory Board members, employees or permanent company advisers may participate in the board of the trust office.
Best practice #26 (Code reference: IV.2.5)
When exercising voting rights, the trust office focuses primarily on the interests of the depositary receipt holders and takes into account the interests of the company and the affiliated business.
KCM subscribes to the applicable laws and legislation pertaining to principles and best practices on issuing information to shareholders. The relevant best practice provisions are IV.3.1 up to and including IV.3.9.
V. Financial reportingBest practice #27 (Code reference: V.2.2)
The Management Board and Audit Committee report annually to the Supervisory Board on any developments in the relationship with the external auditor, including in particular its independence (including the desirability of rotating responsible partners within an office of external auditors which is tasked with the audit and the desirability of any non-audit tasks being conducted for the company by the same auditor). The Supervisory Board will take this into account when determining its nomination of an external auditor to the general meeting of shareholders.