The Netherlands has approved a revised corporate governance code that gives a central role to long-term value creation and the development of corporate culture to promote good corporate governance.
Under the revised code, which is an update on the 2008 code, companies will also be obliged to be more transparent with regard to remuneration, although without any prescribed limits, and must now indicate material risks which may have an impact on the continuity of the company when reporting on risk control.
Chairman of the Dutch Corporate Governance Monitoring Committee Jaap van Manen said: “This shows that Dutch policy attaches importance to the updated code as a guide for relations between the supervisory board and shareholders of stock exchange listed companies, and has confidence in the functioning of the code as an instrument of self-regulation and corporate governance.”
Dutch-listed companies will be obliged to report in 2018 on compliance with the code during the 2017 financial year.
According to a report by the committee on the new code the most important change is the new focus on long-term value creation, which obliges companies to abandon business models that focus too much on achieving short-term gains.
“The consequences of decisions and actions for the company’s long-term value creation and the impact of these on shareholders should be given a prominent role in decision-making processes,” said the committee in a report on the new code.
Also new is the attention to corporate culture. The committee said that management board and supervisory board members will be expected to create a culture that promotes integrity among employees. This culture must be explained in the management report.
Although not defining what this culture should be, the committee said: “A ‘healthy’ culture can reduce the chance of misconduct and irregularities.”