Dutch Corporate Governance Code focuses on pay gap between bosses and workers

Dec 28, 2016
<p>Transparency in pay means investors will be able to flag up the issue</p>

Amendments to the Dutch Corporate Governance Code for listed companies includes a clause requiring firms to publish the size of the pay gap between senior staff and shop floor workers.

The publication of the pay gap will allow investors and other interested parties to flag up the issue if they feel the gulf is becoming too wide

Research by the Volkskrant, the Dutch daily newspaper, earlier this year showed senior executives at some Dutch companies earn more than 100 times as much as their average employees.

The revised code says companies would be free to compare their position to other firms to show the pay gap is not unreasonable.

The new corporate governance code also states that supervisory board members may not be paid in shares and they are limited to eight years in the job.

The new code applies to any financial year starting on or after January 1 2017 and every Dutch listed company needs to state in its management report to which extent it complies with the provisions of the code. If a company does not comply, it has to explain why.

Two extensions of two years will be permissible if a proper explanation is given in the annual report.

The code has been significantly revised in both structure and content, and is based on a number of specific themes. It places greater emphasis on long-term value creation and risk management, and it introduces culture as a new element.

The Dutch Corporate Governance Code Monitoring Committee simplified the code by removing overlaps and conflicts with laws and regulations, and it includes new corporate governance developments.

Jaap van Manen, chairman of the Corporate Governance Code Monitoring Committee, says: ‘In the code we have placed greater emphasis on management board members’ and supervisory board members’ personal responsibility.

‘They are also required to render account of their functioning in greater detail. We feel this revised code provides a practice-based framework for corporate governance in the coming years.’ 

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