Koninklijke DSM N.V. (Royal DSM) is a company limited by shares listed on Euronext Amsterdam, managed by a Managing Board together with an Executive Committee, 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 company is governed by Dutch law and by its Articles of Association, which can be consulted on the company website. The General Meeting of Shareholders decides on any 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 an organizational structure built around business groups that are empowered to carry out all short-term and long-term business functions, in which activity they are assisted by support and corporate functions, as well as by regional organizations.
Managing Board and Executive Committee
Since 2015, DSM's management structure has been strengthened by the establishment of an Executive Committee. The Executive Committee was installed to enable 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 with respective responsibility for DSM Nutritional Products (Chris Goppelsroeder), Corporate Strategy & Acquisitions (Philip Eykerman), the DSM Innovation Center (Rob van Leen), and Group People & Organization (Peter Vrijsen, who was succeeded by Judith Wiese as of 1 January 2018). The latter four managers are appointed by the Chairman of the Managing Board after consultation with the Supervisory Board. The Executive Committee focuses on topics such as the company's overall strategy and direction, review of business results, functional and regional strategies, budget-setting, and people and organization. The statutory responsibilities of the Managing Board remain unchanged.
The Managing Board is ultimately responsible for the company's strategy, its portfolio management, the deployment of human capital and financial capital resources, the company's risk management system, the company's financial performance, and its performance in the area of sustainability. It is hence also the Managing Board that is accountable to the Supervisory Board for the company's strategy and management. To this end, the full Managing Board attends the Supervisory Board meetings, whereas the other Executive Committee members attend those (parts of) Supervisory Board meetings that are specifically relevant to their area of responsibility.
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 Managing Board. Since the introduction of the Dutch Corporate Governance Code in 2004, 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 company website.
The remuneration of the Managing Board members 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 'Report by the Supervisory Board' under 'Remuneration policy for the Managing Board' on Remuneration of Managing Board and Supervisory Board.
The functioning of and decision-making within the Managing Board and Executive Committee 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 company website.
In 2017, the Managing Board had nine formal meetings and 41 Executive Committee meetings, some of them by teleconference. No Managing Board member had to be excused from meetings during the year. In three Executive Committee meetings, a member was excused due to other commitments. In all cases, members who were unable to attend provided any input they had to the meeting in advance in writing or via other members.
The Supervisory Board comprises at least five members. The current composition of the Supervisory Board can be found in the chapter Supervisory Board and Managing Board Royal DSM. Members of the Supervisory Board are appointed for a period of four years and may then be reappointed for a period of four years. A Supervisory Board member may then subsequently be reappointed for a period of two years, which appointment may be extended by at most two years. For reappointment after an eight-year period, reasons must be provided in the report of the Supervisory Board.
All current members of the Supervisory Board are independent in accordance with the Dutch Corporate Governance Code. The remuneration of the Supervisory Board members 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 company website.
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. Since the inception of an Executive Committee, the Supervisory Board has also had the responsibility to ensure that the checks and balances that are part of the two-tier system are still taken into account, paying specific attention to the dynamics between Managing Board and Executive Committee. The Supervisory Board is enabled to do so through the information provided to it by the Managing Board.
The annual financial statements are approved by the Supervisory Board and then submitted to the Annual General Meeting of Shareholders (AGM) for adoption, accompanied by an explanation by the Supervisory Board of how it carried out its supervisory duties during the year under review.
In line with the Dutch Corporate Governance Code, the Supervisory Board has established from among its members an Audit Committee, a Nomination Committee, and 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. 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 company website.
DSM strongly values diversity and endeavors to reflect this in its Board memberships. The Supervisory Board has drafted diversity policies for the Supervisory Board, the Managing Board and the Executive Committee. These policies strive for a balanced composition of the respective body, taking into account gender, age, knowledge, experience, and nationality / cultural background. In addition, for the composition of the Supervisory Board, the board tenure is taken into account. In terms of gender diversity, DSM strives for a composition of its Supervisory Board, Managing Board and Executive Committee, whereby at least 30% of the positions are held by women and at least 30% by men, which is in line with Dutch legislation. In order to ensure a balanced composition in terms of nationality / cultural background, DSM's aim is not to have more than 50% of the members of its Supervisory Board or Executive Committee representing one nationality. While a diverse composition in terms of nationality / cultural background is also taken into account in the composition of the Managing Board, no quantitative aim is set here, given the relatively small number of Managing Board members.
The diversity policies are implemented by applying them to nominations for (re)appointment of Supervisory Board and Managing Board members as well as to appointments of Executive Committee members. In 2017, two Supervisory Board members were appointed, strengthening the diversity within the Supervisory Board in terms of age, knowledge and experience. With the appointment of Frits van Paasschen, a member with a broad business background, including knowledge of disruptive business models and digital technology, was added. In view of Tom de Swaan stepping down at the 2018 AGM, the continuity of the financial and accounting experience and knowledge within the Supervisory Board was ensured with the appointment of John Ramsay. The same holds for the reappointment of Dimitri de Vreeze as member of the Managing Board: this ensured the diversity in experience and knowledge within the Managing Board, more specifically the continuity of experience and knowledge with respect to Materials. The diversity in terms of gender and nationality / cultural background in DSM's Executive Committee was strengthened with the appointment of Judith Wiese, who succeeded Peter Vrijsen as head of DSM's Group People & Organization as of 1 January 2018. All in all, both DSM's Supervisory Board and Managing Board were well balanced in 2017 in terms of gender, with 38% (rising to 43% after the 2018 AGM, with Tom de Swaan stepping down) and 33% women respectively, which is in line with Dutch legislation in this regard. With the appointment of Judith Wiese, the gender diversity within DSM's Executive Committee will rise to 29% women, coming very close to the target of 30% of the positions being held by women and at least 30% by men. The composition of both DSM's Supervisory Board and the Executive Committee are in line with the target of not having more than 50% of the members representing one nationality. Furthermore, in the Supervisory Board of DSM Nederland B.V., a subsidiary of Royal DSM, one of the three members is female.
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 on ordinary shares;
- 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 AGM is held within six months of the end of the financial year in order to discuss and, if applicable, adopt 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 AGM 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 company 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 General Meeting of Shareholders.
The AGM was held on 3 May 2017. The agenda was to a large extent similar to that of previous years. Additional topics were the appointment of John Ramsay and Frits van Paasschen as members of the Supervisory Board and the reappointment of Dimitri de Vreeze as member of the Managing Board. The Articles of Association were amended to reflect a change in the way the dividend percentage on the Cumulative Preference Shares A is calculated. Further details can be found on the company website.
Control effectiveness and continuity assumption
The 'Statements of the Managing Board' are reported on Statements of the Managing Board. These conform with the Dutch Corporate Governance Code best practice 1.4.3 on 'Board Statements'.
DSM visualized its control environment as a 'house' that includes the internal control process areas with control measures related to the strategic, operational, compliance and reporting risks. The elements of COSO (the Committee of Sponsoring Organizations of the Treadway Commission) provide a framework for identifying the DSM activities that are executed to ensure the control environment is adequately structured. Finally, to ensure a learning curve is achieved, monitoring activities include sharing findings, experiences, and control measures across the supporting pillars.
DSM has a three lines of defense structure to manage risks, see also Risk management. Corporate Operational Audit (COA) is in the third line of defense. The scope and frequency of the COA audits is set according to the ranking of the auditable units by the magnitude of risk, based on a limited number of defined characteristics.
COA assesses the operation of risk management activities by the units as well as the design of the risk management and internal control systems by performing risk-based audits looking at the key processes and activities for the specific units. With these audits, COA closes the risk management cycle and provides additional assurance to the Managing Board on the effectiveness of the design and operation of the risk management and internal control systems.
COA reports its audit results twice a year to the Managing Board. It also shares an overview with the Audit Committee of the Supervisory Board and communicates the executive summary of each audit report to the CFO and CEO.
In 2017, COA executed 51 audits. In general, findings are considered improvement opportunities as part of a healthy learning culture. In about 5% of the audited areas (e.g. operations, finance, SHE, commercial) significant management attention was needed to come to the DSM standard. In the rare event of insufficient follow-up of a finding, the Director of COA escalates the finding to the CEO.