Published On: Mon, Jun 24th, 2013

Commissioners, you are warned

Etienne YsWhat are the competencies of commissioners in public limited companies (hereinafter ONV)? Book 2 of the Civil Code (CC) regulates the competencies of the Directors (the Board), the Supervisory Board (SB) and the General Meeting of Shareholders (AGM). The Code of Corporate Governance (the Code) provides a more detailed interpretation of these competencies within the framework of Book 2 (CC).

Here is a description of the powers with quotes from e.g. the Code.

The Management Board: "The Board is entrusted with the management of the company, [....]. In this context the board focuses on the performance of its duties, the interests of the company [....]. The board is accountable to the supervisory board and the general meeting of shareholders. "

Article 10 paragraph 1, Book 2 adds: "Subject to any limitations in the law and the Articles of Association, the Board is authorized to represent the legal person."

The Supervisory Board: "The Supervisory Board is responsible for supervising the policy of the Board [....] and supervises the Board with advice. The Supervisory Board shall be guided by the performance of its duties to the interests of the company [....] "And again:". The Supervisory Board is composed so that the Commissioners [....]can operate independently and critically.

The Commissioner [....] has to perform its task without a mandate from those who have nominated him [....]. "

The AGM: According to Book 2, it is basically in charge of all powers not vested in the Board or the Supervisory Board as amendment, appointment of directors and auditors, dividend policy, holdings, approval policy of the board, exercise approval surveillance of Supervisory Board and appointment of external auditors.

So in short: the management controls and represents the ONV, the Supervisory Board supervises, advises the Board and is therefore independent, the AGM has the powers not vested in the Executive Board or the Supervisory Board. They all have the sole interest of the ONV in mind and not those by whom they are appointed.

In practice, we all too often see the following cases:

- The Supervisory Board itself takes management decisions and sits on the chair of the board.

- The Supervisory Board acts as representative of the ONV.

- Political parties give instructions to the board, which may affect their independence. Some commissioners follow these instructions because they owe their commissioner to said party.

- Some directors allow all this for fear of reprisals.

These cases, by which power structure, defined by law and the statutes, is crossed, can lead to situations of conflict of interest, conflict between the institutions of the ONV, blurring of moral standards, neglect of the company, bad image for the company, mismanagement and more.

In particular, the aspect of mismanagement has led to the initiation of a request for a survey on civil policy at Aqualectra, Curoil and Refineria di Korsou (Curacao Refinery). Some typical passages from the summary of the argument of the prosecution are:

"The management was therefore increasingly weakened and the position of the Supervisory Board (which according to law and statutes supervises and gives counsel) was strengthened so that SB sat down on the managerial chair. The "checks and balances" within the ONV were therefore pushed aside. [....]

He (i.e. representative of the shareholder) acted previously as management than as a shareholder.

In short, the corporate rules within the ONV’s [....] were pushed aside."

Mr. Commissioner, it does not have to get that far. Know what your responsibilities are, you have been warned.

Etienne Ys (Former Prime Minister of the Netherlands Antilles)

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