Dutch corporate governance code
This section contains a brief overview of CEB’s compliance with the best practice rules of the Dutch Corporate Governance Code (in this section known as the Code). On December 8, 2016, the Corporate Governance Code Monitoring Committee published the revised Dutch Corporate Governance Code. It should be noted that, due to our private ownership structure, the Code’s provisions on shareholders and general meetings (rights, meetings, obligations, and protective measures – see Chapter IV of the Code) are, to a large extent, not applicable to CEB. Also, as CEB has adopted a two-tier structure, Chapter 5 of the Code (one-tier governance structure) does not apply. For 2021, CEB reports on its compliance with the Code as follows:
Long-term Value Creation
The bank’s focus on long-term value creation as opposed to achieving short-term gains is inherent in its private ownership structure. The long-term value creation strategy of the bank for the period to 2025 is included in its Strategy Document, which was prepared by the Managing Board, involving extensive discussion with and approval by the Supervisory Board (for more details on this document’s contents, see Section D).
Long-term sustainability is given a prominent role in determining the bank’s strategy and in its decision-making process. All stakeholders’ interests are carefully considered in this process. The strategy is reviewed annually and, where necessary, updated. As a result of the most recent strategic discussions, the bank will focus on trade finance activities, new digital business models, and sustainability, among other areas. Regular updates enable the Supervisory Board to monitor the implementation of the bank’s strategy. It is of great importance for the bank to be continuously informed about the latest technological developments in today’s rapidly changing society. In order to adequately anticipate these, internal training is conducted and staff members attend external seminars and courses.
CEB has established an Internal Audit Department in accordance with the principles and best practice provisions of the Code. CEB’s risk management framework is comprehensive and is managed by an independent risk management function under the direct responsibility of the Chief Risk Officer. Risk management plays a central role in the bank’s decision-making process. More information on CEB’s risk management can be found in note 37 of the consolidated financial statements. The Supervisory Board, inter alia, oversees the effectiveness of the design and the operation of the internal risk management and control systems.
Within the Supervisory Board, an Audit and Risk Committee (ARC) has been established. KPMG Accountants N.V. has been appointed by the bank’s general meeting of shareholders (at the nomination of the Supervisory Board) as the bank’s external auditor. At least annually, the ARC discusses the bank’s audit plan and any findings of the external auditor. Exchange of information between the Managing Board, Supervisory Board, and the external auditor takes places in meetings of the ARC and in meetings between the Managing Board and the external auditor. Outside these meetings, there is regular contact with the bank’s external auditor to share information and discuss specific topics in more detail.
Effective Management and Supervision
The current composition of the Supervisory Board and Managing Board is very well balanced, considering the specific knowledge and experience of each member, with five members on the Supervisory Board (with effect from Mid-May 2022 there are again six members) and three on the Managing Board. Considering the size and nature of the bank, these numbers are deemed sufficient to properly perform the boards’ tasks. CEB does not comply with best practice provision 2.1.7 (i), which requires that there is at most one Supervisory Board member who meets the criteria laid down in best practice provision 2.1.8 (i)–(v), as two members of the Supervisory Board meet those criteria. At this moment, the Supervisory Board consists of two female and three male members (with effect from Mid-May 2022 there are two female and four male members). Following the introduction of the Gender Balance Act, the bank is setting appropriate and ambitious targets to promote gender diversity on its boards and ExCo and in certain categories of managerial functions, and a plan to reach these targets will be developed.
Furthermore, the bank has adopted a Diversity and Inclusion Policy that will be aligned with new diversity targets, covering areas such as ethnicity and tenure. The main goal of the policy is to promote diversity and inclusion in the workplace as drivers for innovation, growth, and better-balanced decisions. The policy incorporates diversity and inclusion in educational and professional background, gender composition, nationality composition and geographical provenance, and age and seniority. The policy is being implemented through the bank’s recruitment policy, along with education of staff and board members on diversity and inclusion trends, practices, and achievements. The main item for improvement reflected in the bank’s Diversity and Inclusion Policy remains the achievement of a more balanced gender ratio among its staff. At the consolidated level of the banking group, the male–female ratio is very well balanced. However, at entity level in the different countries and within the different seniority levels, there is room for further improvement. A plan and supporting actions are being developed to reach a more balanced gender ratio and to achieve the bank’s other diversity targets.
At CEB level, the composition of the Managing Board can be improved in terms of male–female ratio. No new appointments have been made to the Managing Board. On the contrary, with effect from January 1, 2022, the bank’s former CEO,, Mr. Murat Basbay left the Managing Board and Mr. Senol Aloglu (the bank’s former deputy CEO) succeeded him. In 2022, no new Managing Board members will be appointed, and the number of members has reduced from four to three compared to 2021. In case of a vacancy on the Managing Board, the Recruitment and Selection Policy and the Diversity and Inclusion Policy, among others, will be applied, and the recruitment team will be requested to provide a shortlist with at least 50% female candidates before a final selection is made based on candidates’ suitability for the position. CEB will continue to strive for a good gender balance at Managing Board level, and the aim remains to appoint female candidates in the case of new appointments to the board and when replacing current members.
In 2021 another female member joined the Supervisory Board, as a result of which two out of five members (with effect from Mid-May 2022 two out of six members) are female. In view of the requirements applicable to listed companies’ supervisory boards following the introduction of the Gender Balance Act, for the moment CEB considers its Supervisory Board sufficiently balanced in terms of gender. Targets are being set to further improve the gender balance on the ExCo, which currently has one female member. As half of the ExCo members are Managing Board representatives, reference is made to the above explanations regarding gender diversity within the Managing Board.
The rules and procedures for the appointment and reappointment of Supervisory Board and Managing Board members are set out in the bank’s internal policies and charters, such as the Recruitment and Selection Policy for the Supervisory Board and Managing Board. A succession planning document for the bank’s senior management has been prepared. This document, which accounts for the rationale of the diversity policy, will be updated to reflect the new diversity targets that are currently being set. The functioning of the Managing Board and Supervisory Board and its individual members is evaluated annually. For the organization of the Supervisory Board reference is made to relevant paragraphs of the Supervisory Board Report as included in the bank’s annual report. The diverse composition of the Supervisory Board and Managing Board in terms of age, background, and expertise enables balanced decision-making by these bodies. The high level of transparency between the Supervisory Board and Managing Board also contributes to effective and balanced decision-making, as do the Supervisory Board’s subcommittees. The respective interests of the bank’s main stakeholders (i.e., CEB’s customers, employees, business partners, shareholders, regulators, and wider society) are taken into consideration in the decision-making process. The Supervisory Board and Managing Board members annually discuss other board positions held by their members.
In order to promote and create the desired culture aimed at long-term value creation, new CEB employees participate in an induction program, during which they are trained in the bank’s core and base values, main policies and regulations (including the code of conduct and staff handbook), and culture. CEB organizes regular thematic awareness training for all employees, and the desired culture within the bank is highlighted and discussed during quarterly staff events. In 2017, the bank’s senior management attended a training program on culture and core values. As part of the training program, new core values of dynamism, diversity, and expertise were developed. The initial rollout of these new core values took place in 2018, and in 2019 they were further embedded in the bank’s organization. Feedback from a company-wide engagement survey executed in 2020 identified the key areas to focus on, and a cultural transformation program will be started to focus on three pillars in the coming years: people first, empowerment, and collaboration. Also, as part of this program, investments will be made to support employees in learning and development. Alongside efforts to update the knowledge and technical skills of our professionals, there will be more focus on increasing the employee’s self-awareness through personality profiling. This is considered foundational to personal growth and development, which will contribute to the desired cultural change. An executive leadership program has started to make an explicit link between strategy and the cultural transformation program.
Another way to promote a culture aimed at long-term value creation is the bank’s remuneration policy (see below and Section F of the Corporate Governance chapter included in the bank’s annual report). To enable the bank’s employees to report misconduct and irregularities within the bank, whether actual or suspected, an internal alert system (whistle-blower policy) has been established. This policy describes the purpose of the internal alert system, its usage, anonymous reporting, confidentiality, and external whistle-blowing procedures. In cases of material misconduct or irregularities, the Supervisory Board is informed. Through the Compliance Oversight Committee, the Supervisory Board monitors the operation of the internal alert system, how it deals with signs of misconduct or irregularities, and how adequate follow-up of any recommendations for remedial actions is performed. The bank has established different policies and procedures to manage and prevent conflicts of interest, including the Conflicts of Interest Handling Policy and a Related Party Transactions Policy. For more information on the handling of potential conflicts of interest, see Section E of the Corporate Governance chapter included in the bank’s annual report.
CEB’s Group Remuneration Policy is in line with national and international regulations. The policy applies to CEB and its subsidiaries. It also covers the remuneration of Managing Board members of CEB and its subsidiaries. Through its conservative remuneration policy, CEB promotes a sound remuneration culture with a long-term focus. The Group Remuneration Policy is reviewed and approved by, among others, the Supervisory Board, which monitors its proper implementation by the Managing Board. The compliance to the rules and procedures under the policy is reviewed annually in line with the Control Functions Remuneration Monitoring Procedure. The HR and Remuneration Committee meets at least each quarter and prepares the decision-making process for the Supervisory Board, taking into account the long-term interests of all CEB stakeholders. The Supervisory Board determines the level of remuneration for the members of the Managing Board in line with the principles of the Group Remuneration Policy. The remuneration received by the members of the Supervisory Board is not dependent on the financial results of the bank. Each Supervisory Board member receives an appropriate amount of compensation, taking into account the total number of hours spent for the tasks and the compensation paid to Supervisory Board members of companies of comparable size and business.
The bank’s Remuneration Report is included in Section F of the Corporate Governance chapter included in the bank’s annual report and is also made available on the bank’s website. The main elements of the agreement of a Managing Board member with the bank are not published on the bank’s website as CEB holds the view that sufficient information is disclosed in its Remuneration Report.