8.5 About Board Committees

Although not required by Dutch company laws or the listing rules of the Amsterdam Exchanges, board committees are receiving more attention in the Netherlands. The Peters Committee recommends the formation of board committees such as the nomination committee, the remuneration committee and the audit committee. The Peters Committee (1997:15) states: “The supervisory board considers whether to appoint from its midst a selection and nomination committee, an audit committee and a remuneration committee. These committees submit reports on their findings and make recommendations to the full supervisory board. The supervisory board should report on the existence of such committees in the annual report.”

According to the Peters Committee, the selection and nomination committee could be used to:

  • prepare the selection criteria and nomination procedures for supervisory board members, managing directors and higher management posts;
  • periodically assess the size and the composition of the supervisory board and the management board;
  • periodically assess individual supervisory board members and managing directors;
  • prepare proposals for (re)appointments.

 

The Peters Committee identifies the following functions of the remuneration committee to periodically assess the:

  • remuneration system;
  • granting of options, pension rights, redundancy compensation schemes and other benefits;
  • company’s liability insurance.

 

The Peters Committee also paid attention to the audit committee. In a special paragraph, the Committee specified the specific duties of the audit committee to:

  • supervise the quality of all external financial reports;
  • supervise compliance with internal procedures and laws and regulations and the control of company risks;
  • facilitate the communication with the auditors;
  • assess the activities and functioning of auditors.

Source: Peters Committee (1997:15).

 

According to the chairmen in the Maassen (1998a) study, the most important function of the audit committee is to monitor the financial reporting activities of the corporation. A second important purpose is the exchange of information between the management board and the supervisory board (see also table 8.5).

 

Table 8.5

The Function of Audit Committees

Purpose

Not important Very Important

 

Governance function

----------|----------|----------|----------|---x------

 

Exchange information

----------|----------|----------|----------|--x-------

 

Consult accountant

----------|----------|----------|----------|-x--------

 

Consult executive chairman

----------|----------|----------|--------x-|----------

 

Discussions within the board

----------|----------|----------|-----x----|----------

 

Consult managing directors

 

----------|----------|----------|----x-----|----------

 

                                                                 

Sources: Maassen (1998a, 1998b).

 

The study also indicated that supervisory directors met on average twice a year with the certified public accountant (see also Maassen, 1998b). The Peters Committee recommends the audit committee - when formed - to have a meeting with the external auditor at least once a year.


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Maassen, G.F. (2002). An International Comparison of Corporate Governance Models. A Study on the Formal Independence and Convergence of One-Tier and Two-Tier Corporate Boards of Directors in the United States of America, the United Kingdom and the Netherlands.

Maassen, G.F. (2002). An International Comparison of Corporate Governance Models. A Study on the Formal Independence and Convergence of One-Tier and Two-Tier Corporate Boards of Directors in the United States of America, the United Kingdom and the Netherlands. Amsterdam: Spencer Stuart Executive Search.