Netherlands: Proposed Amendments to Update the Dutch Corporate Governance Code

In short

On February 21, 2022, the Corporate Governance Code Monitoring Committee (“Committee“) submitted a proposal to update the Dutch Corporate Governance Code (“Proposal”“). The Proposal (currently open for consultation until April 17, 2022 inclusive) provides for the updating of the Dutch Corporate Governance Code (“Coded“) in areas such as long-term value creation, the role of shareholders and diversity. It also contains proposals to modify the provisions of the Code due to changes in the Dutch Civil Code, such as the introduction of a statutory cooling-off period and statutory rules on remuneration policy and reporting. This overview briefly describes the most important parts of the proposal.


The focus on ESG has increased over the past two years. Climate change is one of the most important themes of the current and coming decades that will have an impact on corporate governance. ESG is an important part of the strategy of companies that focus on creating long-term value. For listed companies, it is expected that ESG will be high on the agenda and that these companies will provide good insight into how they are bringing the ESG aspects of entrepreneurship to life. To highlight the importance of ESG as well as the creation of long-term value, the Committee notably proposed the following:

  1. Companies should formulate a clear ESG strategy and formulate concrete objectives as part of their long-term value creation strategy.
  2. The board report should account for ESG strategy, actions and results, including effects on production and the value chain.
  3. The interests of relevant stakeholders should be taken into account when determining the ESG strategy. To this end, the board of directors should develop a policy of dialogue with stakeholders and facilitate this dialogue.

With the introduction of the amended Code in 2016, the role of shareholders remained virtually unchanged. For the proposal, the committee used elements of Eumedion’s management code. The proposed changes are as follows:

  1. A new principle of good practice to promote dialogue between shareholders and companies.
  2. “Informed voting” by shareholders and, if proxy advisors are involved, dialogue between proxy advisors and companies should be encouraged.
  3. New language regarding institutional investor engagement policies and shareholder abstention from holding more short positions than long positions. Also, securities lending agreements should be reversed when voting on important issues.
  1. The board of directors, the supervisory board and the executive committee (if any) must be composed in such a way as to ensure a balance between expertise, experience, skills, personal aptitudes, age, gender identity, nationality, (cultural) origin and, in the case of the supervisory board, independence.
  2. The report of the supervisory board must refer to gender identity (instead of gender) in case a member of the supervisory board wishes to indicate this.
  3. Companies must have a D&I policy for the whole company, in which attention is given to all aspects and personal characteristics in which people differ from each other.
  4. Responsibility for D&I should be expanded to also reflect the flow and retention of diverse talent in the business.
  • Reflection period and response period: On May 1, 2021, the reflection period of up to 250 days was implemented in the Dutch Civil Code, which differs to some extent from the response period of up to 180 days as reflected in the Code. While the Committee recognized that there are some differences between the legal cooling-off period and the Code response time, the proposal proposes not aligning the response time with the legal cooling-off period. The best practice provision should include a specific reference indicating that both periods can be invoked.
  • Remuneration: Following the implementation of the Shareholder Rights Directive II, new rules on remuneration policy and the remuneration report have been implemented in the Dutch Civil Code for NVs and BVs which are listed on a stock exchange. EU regulated. Although the Committee recognized that the Dutch Civil Code provides more detailed rules on the subject, it is proposed not to modify the respective provisions of the Code relating to best practice, but to specify further that the provisions relating to remuneration in the Code are in addition to the legal conditions.
  • Recommendation report “Strengthening the chain of responsibility”: At the request of the Dutch Minister of Finance, Leiden University conducted research on strengthening the accountability of audited entities for auditing and annual reporting. The Minister of Finance shared Leiden University’s recommendations with the Committee. Following its review, the Committee proposed to include some of these recommendations, including the following:
  1. An independent third party should review the operation of the internal audit function at least every five years.
  2. The internal audit function should preferably report to the CEO.
  3. The internal audit function should report its audit results to the board of directors and the audit committee (instead of reporting only the main audit results to the audit committee and the results of full audits to the board of directors).
  4. In management and supervisory board assessments, more attention should be paid to behavior and culture.

Helen D. Jessen