Dutch goverment signals greater ESG pressure for investors

CSR, governance and executive pay all part of planned law strengthening.

Investors in Dutch companies should be able to apply pressure on a much broader set of legally binding environmental, social and particularly governance issues and expect a proposed ‘response time’ of 180 days for companies to act on shareholder engagements, after the government signalled it was ready to approve reforms of the Tabaksblat code on corporate governance. The move comes as many national governments review how they can close the gap between regulation of companies and shareholder vigilance on corporate activity in light of the credit crisis. Kris Douma, head of responsible investment support and active ownership at Dutch pensions manager, Mn Services, who was appointed to a government committee headed by Anthony Burgmans, former chairman of Unilever, to review a set of corporate social responsibility (CSR) recommendations for reforming Tabaksblat, told Responsible Investor that the Committee for Economic Affairs in the Dutch Parliament had earlier this month indicated it would fully adopt the tougher corporate CSR proposals into law. This, he said, would force Dutch companies to become much more active on CSR issues: “There will be a transparency benchmark for CSR issues, which will push the two thirds of Dutch companies who are doing very little tocatch up with the one third who are doing a lot. It will lessen the gap between the leaders and the laggards. CSR issues will also become obligatory for non-executive directors to keep an eye on. As a result, institutional investors and Eumedion, the Dutch corporate governance lobby group, will be able to push much more firmly on these issues as part of Tabaksblat.” The Tabaksblat Code, initially a non-binding ‘comply or explain’ governance code was launched on January 1, 2004 to improve corporate governance in the Netherlands after a series of corporate scandals. A review of the code was initiated by the government last year and headed up by Jean Frijns, former chief investment officer at ABP, the Dutch pension fund giant. In December 2008, the Corporate Governance Code Monitoring Committee under Frijns presented the amended code to the Ministers of Finance, Justice and Economic Affairs. Notably, its proposals include provisos that corporate management and supervisory boards have “due regard” for CSR issues that are relevant to the enterprise. It also recommends that executive pay be determined by taking into account pay differentials within the company, while bonuses, it says, must be based on long-term objectives and take into account non-financial indicators.
Link to Corporate Governance Code Monitoring Committee proposals