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Board-level Representation

Works councils have the right to nominate up to one third of the members of supervisory boards in larger companies – above 100 employees among other things. However, neither employees of the companies nor trade unionists dealing with them can be nominated, so the works council nominees are often distant from employees’ day-to-day concerns.

Larger companies – defined as those with issued capital of more than €16 million, at least 100 employees and a works council (obligatory for companies with more than 50 employees) – fall under the so-called structuurregeling (structure regime) and until 2013 had to provide for indirect representation of employees at supervisory board level. The supervisory board appoints and dismisses the management and approves major management decisions. (These arrangements only apply to companies which have a majority of employees in the Netherlands. International groups with the majority of employees outside the Netherlands are exempt from the obligation to have employee representation at board level.)



Since January 2013, public and private limited companies, including those subject to the structure regime, are able to choose between a two-tier (dualistic) corporate governance structure, with a management and supervisory board, and a monistic structure with a single board of directors. However, right of employees to have indirect representation on the board is maintained (see below).



The appointment procedure for supervisory board members was changed in 2004 and is now fairly complex. Under the current legislation, supervisory board members are appointed by the general meeting of shareholders – they were previously co-opted by the existing supervisory board. However, nominations must come from the supervisory board in line with a desired profile of the composition of the board. The supervisory board should discuss this desired profile with the works council and shareholders but there is no obligation for agreement to be reached. The general meeting of shareholders can reject the supervisory board’s nominations but it cannot nominate candidates itself – only the supervisory board can do this. If the supervisory board’s nominations are rejected it must nominate new candidate(s).



The works council has special nominating rights for one third of the seats on the supervisory board. It can also nominate for other vacancies.



Where works council use their special nominating rights (for one third of the seats), these go through the supervisory board to the general meeting of shareholders. They must be accepted by the supervisory board, unless there are good grounds for not doing so, such as that the person was unfit or that the appointment would unbalance the board. (If there are objections the two bodies attempt to reach an agreement. And if this is not possible, the issue goes to the Enterprise Chamber of the Amsterdam Court.) However, even for candidates nominated by the works council, the final decision on appointment is still taken by the general meeting of shareholders. It can reject the nominations from the supervisory board that originally came from the works council in the same way as for any other nominees. The whole procedure then starts again.



The general meeting of shareholders also has the right to dismiss the entire supervisory board by a majority vote, provided this vote represents at least one third of the issued share capital. However, the meeting must hear the views of the works council before taking a decision.



Finally, the current legislation also permits the supervisory board, general meeting of shareholders and the works council to agree other arrangements if they wish, although the right of the shareholders to reject a nomination cannot be removed.



Where a company opts for a single board (the monistic structure), many of the duties which in a dualistic structure are carried out by supervisory board become the responsibility of the non-executive directors. In companies subject to the structure regime (that is those required to have employee representation at board level) the non-executive directors appoint the executive directors. The non-executive directors are appointed at the general meeting of shareholders and the works council continues to have special nominating rights for up to a third of the non-executive board members.



However, one very important element of the Dutch approach is that employees of the company or of a union involved in collective bargaining with it are specifically excluded from being members of the supervisory board or non-executive directors. The thinking behind this relates to a core feature of the Dutch system – that members of the supervisory board and non-executive directors should act in the interests of the company as a whole and not as representatives of partial interests, whether they are shareholders, banks or employees. This also means that works council members, for example, cannot be on the supervisory board or become non-executive directors. Those who are chosen are probably somewhat distant from the day-to-day concerns of the workforce. They are sometimes academics, perhaps with a broad sympathy for trade unions positions, individuals with a human resources background, people from the voluntary sector, and in some cases former senior trade unionists.



In practice it appears that under the previous system not all works councils made use of their right to nominate members of the supervisory board. Research by an independent academic on the period before the law was changed found that only 51% of works councils had used their nomination rights: 28% had done so once, 12% twice and 11% three times or more.1 Size was the only significant factor, in terms of the characteristics of the companies involved, in determining whether the works council nominated a supervisory board member or not. Whether there was an agreement between management, the works council and the supervisory board on the practicalities of making nominations and the composition of the supervisory board also made a difference.



Since July 2010, works council of public limited companies (NV) have had the right for their views on certain issues to be heard at the shareholders’ general meeting. The works council can comment on resolutions approving the management board, including appointments and dismissals, on major changes in the identity of a company and on remuneration policy. There is no requirement for the shareholders to take account of the views of the works council.

L. Fulton (2015) Worker representation in Europe. Labour Research Department and ETUI. Produced with the assistance of the SEEurope Network, online publication available at http://www.worker-participation.eu/National-Industrial-Relations.