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Introduction - Annual Report 2015 - DSM

Introduction

Koninklijke DSM N.V. (Royal DSM) is a company limited by shares listed on Euronext Amsterdam, with a Managing Board and an independent Supervisory Board. Members of the Managing Board and the Supervisory Board are appointed (and, if necessary, dismissed) by the General Meeting of Shareholders.

The Managing Board is responsible for the company's strategy, its portfolio policy, the deployment of human and capital resources, the company’s risk management system, the company's financial performance and its performance in the area of sustainability.

The Supervisory Board supervises the policy pursued by the Managing Board, the Managing Board's performance of its managerial duties and the company's general course of affairs, taking the interests of all the company's stakeholders into account. The annual financial statements are approved by the Supervisory Board and then submitted for adoption to the Annual General Meeting of Shareholders, accompanied by an explanation by the Supervisory Board of how it carried out its supervisory duties during the year concerned.

The company is governed by Dutch law and by its Articles of Association, which can be consulted on the DSM website. The General Meeting of Shareholders decides on an amendment to the Articles of Association by an absolute majority of the votes cast. A decision to amend the Articles of Association may only be taken at the proposal of the Managing Board, subject to approval of the Supervisory Board.

DSM fully informs its stakeholders about its corporate objectives, the way the company is managed and the company's performance. Its aim in doing so is to pursue an open dialogue with its shareholders and other stakeholders.

DSM has a decentralized organizational structure built around business groups that are empowered to carry out all short-term and long-term business functions. On 25 August 2015, DSM announced a number of adjustments to its organizational structure related in particular to its support and corporate functions as well as its regional organizations. The new organizational and operating model aims to create more clarity between businesses, regions and support and corporate functions. At the operational level, the business groups remain the cornerstones of the organization. As the primary organizational and entrepreneurial building blocks they focus on four primary business functions: Innovation and R&D, Direct Sourcing, Manufacturing & Operations and Marketing & Sales. The business groups are grouped into clusters. Business groups within a cluster report to one and the same member of the Managing Board. The clusters are the main organizational entities for external strategic and financial reporting. This structure ensures a flexible, efficient and fast response to market changes. Intra-company product supplies are contracted by the business groups on an arm's length basis.

DSM’s business groups receive services from global support functions and functional excellence departments and are supported by the regional organizations. This set up enables DSM to create a global high-performing organization focused on meeting its targets and ambitions. The support functions and functional excellence departments are paid for the services they supply by the users, which are for the largest part the business groups and to a lesser extent other DSM units. Corporate departments are paid from a corporate budget.

Executive Committee

Part of the organizational adjustments announced on 25 August 2015 was a strengthening of the management structure with the establishment of an Executive Committee. The Executive Committee enables faster strategic alignment and operational execution by increasing focus on the development of the business, innovation and people. The members of the Executive Committee are the Managing Board members as well as four senior managers appointed by the Chairman of the Managing Board after consultation with the Supervisory Board. The Executive Committee focuses on topics such as the overall strategy and direction, review of business results, functional and regional strategies, budget setting and people & organization. The statutory responsibilities of the Managing Board remain unchanged.

Managing Board

The Managing Board consists of three or more members, to be determined by the Supervisory Board. The current composition of the Managing Board can be found in the chapter 'Supervisory Board and Managing Board' on Managing Board. Since 2005, members of the Managing Board have been appointed for a period of four years.

The members of the Managing Board are collectively responsible for the management of the company. Notwithstanding their collective responsibility within the Managing Board, certain tasks and responsibilities for business clusters and functional areas as well as regional responsibilities have been assigned to individual members. This distribution of tasks is published on the DSM website.

The remuneration of the members of the Managing Board is determined by the Supervisory Board based on the remuneration policy approved by the General Meeting of Shareholders. The remuneration policy for the Managing Board can be found in the 'Supervisory Board report' on Remuneration policy under 'Remuneration policy'.

The functioning of and decision making within the Managing Board are governed by the Regulations of the Managing Board, which are in accordance with the Dutch corporate governance code and can be found on the DSM website.

In 2015, the Managing Board had 39 formal meetings and 12 Executive Committee meetings. On four occasions, one of its members was excused from the Managing Board meeting due to another commitment. In one Executive Committee meeting, one of the other members was excused due to another appointment. In all cases, members who were unable to attend provided any input to the meeting in advance in writing or via other members.

Supervisory Board

The Supervisory Board consists of at least five members. The current composition of the Supervisory Board can be found in the chapter 'Supervisory Board and Managing Board' on Supervisory Board. Members of the Supervisory Board are appointed for a period of four years with a maximum of three four-year terms.

All current members of the Supervisory Board are independent in accordance with the Dutch corporate governance code. The remuneration of the members of the Supervisory Board is determined by the General Meeting of Shareholders. The functioning of and decision making within the Supervisory Board are governed by the Regulations of the Supervisory Board, which are in accordance with the Dutch corporate governance code and can be found on the DSM website.

In line with the Dutch corporate governance code the Supervisory Board has established from among its members an Audit Committee, a Nomination Committee, a Remuneration Committee, besides which there is also a Sustainability Committee.

The task of these committees is to prepare the decision making of the Supervisory Board. The functioning and tasks of these committees are governed by charters that have been drawn up in line with the Dutch corporate governance code and can be found on the DSM website.

Diversity

Since 1 January 2013, Dutch legislation requires that a large company, when nominating or appointing members of the Managing Board or Supervisory Board, should strive to achieve a balanced composition of these Boards in terms of gender, to the effect that at least 30% of the positions are held by women and at least 30% by men.

DSM strongly values diversity and endeavors to reflect this in its Board memberships. The current composition of the Supervisory Board is in line with this legislation. More than one third of the members are women (of the seven members, three are female and four are male). Given the relatively small number of Managing Board members, the current composition of the Managing Board with one female and three male members comes very close to the aspired composition of the Managing Board in terms of gender balance.

General Meeting of Shareholders

The main powers of the General Meeting of Shareholders relate to:

  • the appointment, suspension and dismissal of members of the Managing Board and the Supervisory Board;
  • approval of the remuneration policy of the Managing Board;
  • approval of the remuneration of the Supervisory Board;
  • the adoption of the annual financial statements and declaration of dividends;
  • release from liability of the members of the Managing Board and the Supervisory Board;
  • issuance of shares or rights to shares, restriction or exclusion of pre-emptive rights of shareholders and repurchase or cancellation of shares;
  • amendments to the Articles of Association; and
  • decisions of the Managing Board that would entail a significant change in the identity or character of DSM or its business.

The Annual General Meeting of Shareholders is held within six months of the end of the financial year in order to discuss and, if applicable, approve the annual report, the annual accounts, any appointments of members of the Managing Board and the Supervisory Board and any of the other topics mentioned above.

The Annual General Meeting of Shareholders and, if necessary, other General Meetings of Shareholders are called by the Managing Board or the Supervisory Board. The agenda and explanatory notes are published on the DSM website.

According to the Articles of Association, shareholders who, individually or jointly, represent at least 1% of the issued capital have the right to request to the Managing Board or the Supervisory Board that items be placed on the agenda. Such requests need to be received in writing by the chairman of the Managing Board or the Supervisory Board at least 60 days before the date of the Annual General Meeting of Shareholders.

The Annual General Meeting of Shareholders was held on 30 April 2015. The agenda was to a large extent similar to that of previous years. Additional topics were the re-appointment of Stephan Tanda as member of the Managing Board and the re-appointment of Pauline van der Meer Mohr as member of the Supervisory Board. Further details can be found on the DSM website.