Legislative and regulatory developments
The latest version of the Corporate Governance Code was published on 8 December 2016 (the ‘Code’). By means of a Decree dated 29 August 2017 the Dutch government has designated the Code as applicable for Dutch companies with a public listing. The Code is based on the comply or explain principle and applies as from the financial year 2017.
Decree with respect to the contents of the integrated report
This chapter reports on the application of the Dutch Corporate Governance Code at Royal BAM Group nv. Together with the information about the corporate governance structure and the BAM Corporate Governance Compliance Overview (see www.bam.com/en/about-bam/corporate-governance), this comprises the ‘Corporate governance statement’ as specified in section 3 sub 1 of the Decree with respect to the contents of the Executive Board report (‘Besluit inhoud bestuursverslag’).
Information about BAM’s corporate governance structure and compliance with the Corporate Governance Code (clause 3.1 of the Decree with respect to the contents of the Executive Board report), functioning of the General Meeting and the rights of shareholders (clause 3a sub b of the Decree with respect to the contents of the Executive Board report) can be found on the company’s website under the corporate governance heading. The most important aspects of BAM’s risk and control systems (clause 3a sub a of the Decree with respect to the contents of the Executive Board report) are available in chapter 4 of this Integrated report. Information about the composition and functioning of the Executive Board and Supervisory Board (clause 3a sub c of the Decree with respect to the contents of the Executive Board report) is described in chapters 5.3 and 6.1 and the diversity policy for both boards is explained in this chapter and chapter 5.1. A declaration with regard to the Decree on Article 10 of the Takeover Directive (clause 3d of the Decree with respect to the contents of the Executive Board report) can be found in chapter 5.2.
Corporate governance review 2018
In the year under review only a limited review of the corporate governance structure took place due to the extensive review in 2017, when, following the publication of the revised Code (see www.mccg.nl), the Executive Board and Supervisory Board, assisted by the Company Secretary, assessed BAM’s corporate governance and the consequences of the new Code for BAM.
Best practice 2.1.5 of the Corporate Governance Code stipulates that the diversity policy for the Executive Board and Supervisory Board should be explained in the Executive Board report as well as the way that it was implemented in practice, addressing (1) the policy objectives, (2) how the policy has been implemented and (3) the results of the policy in the past financial year.
As part of the implementation of the new Corporate Governance Code in 2017, the Supervisory Board adopted new rules, which included an updated profile for the Supervisory Board. In this profile diversity aspects are included, providing a clear target for gender participation. This target of at least 30 per cent female and at least 30 per cent male members of the Supervisory Board does not differ from the target set in the previous profile. As per the General Meeting in 2017 the composition of the Supervisory Board is in line with this target, given that two out of six members are female. Besides gender, diversity in background, nationality, expertise and experience in the Supervisory Board is equally important in order to provide most value. The Supervisory Board meets these diversity requirements.
When adopting the new rules and profile for the Supervisory Board, the latter resolved that the diversity aspects set in the profile for the Supervisory Board will apply equally to the Executive Board. Since Mrs Menssen stepped down as CFO of the company per 1 July 2018, the composition of the Executive Board is no longer in line with the target as far as gender participation is concerned. In the search for her successor, the Supervisory Board put a lot of emphasis on identifying female candidates. This was expressed in the instructions to the external recruitment agency and in the subsequent review of the resumes and candidates. In the end however, Mr Den Houter turned out to be the best candidate for the position.
The diversity policy as described above will apply equally for the Executive Committee, once this corporate body has been established in 2019. Also here the added value of a diverse composition is clearly acknowledged.
Although the Company strives for a diverse composition of its corporate bodies, it should be noted that especially achieving the gender target at the executive level is proving to be difficult due to the nature of the business and the lack of female candidates with sufficient management experience in the construction industry. It is therefore difficult to predict when this target is likely to be achieved. To achieve it, the Company pays specific attention to women in our management development programs to assure that the rise of women to our senior management positions is warranted. In addition, external recruitment agencies are instructed to identify capable female candidates for senior management positions. Finally, the Company will give preference to women in case of equal suitability.
CSR responsibility and delegation
The Executive Board is responsible for defining the CSR policy, in consultation with the Director Strategy and Director Sustainability and the management of the operating companies.
Meetings with senior management are used to define sustainability issues and reach agreement on prioritising objectives, monitoring activities, and reporting results. Critical concerns are reported to the Executive Board at least in quarterly reports, or whenever more urgency is required. The Executive Board communicates to the Supervisory Board according planned reporting cycles, or whenever more urgency is required. Safety ambitions, the reduction of CO2 emissions, waste management, and enhancing lives, along with business integrity, apply to all BAM operating companies. In addition, each operating company measures KPIs addressing issues of relevance to its own business.
Each operating company has a management team member who has the responsibility for BAM’s sustainability activity. The operating companies report progress quarterly to the Executive Board, Director Strategy and Director Sustainability together with details of actions taken to support the Group’s business objectives. They interpret BAM’s objectives based on their unique operating conditions. CSR is part of how managers and employees do their day-to-day jobs. It is addressed, for example, at regular work discussions and performance reviews. In this way, implementing sustainability is shared across all levels of the Group, from BAM’s Executive Board to its local champions.
Compliance with the Corporate Governance Code
Compliance with the Corporate Governance Code is described in the BAM Corporate Governance Compliance Overview, which is available on the website of BAM (www.bam.com). This is to be read in conjunction with this section and is deemed to be incorporated into this section. In case there is a difference between the content of BAM’s publication and this section, this section will prevail.
BAM fully complies with the principles and best practises of the Code. In accordance with the Corporate Governance Code the company will submit any substantial changes in the main features of the corporate governance structure to the General Meeting for discussion purposes. This includes the changes to the top structure of BAM as announced in a press release on 6 December 2018. The corporate governance structure will be discussed with the shareholders during the Annual General Meeting on 17 April 2019.