Board of Management and Executive Committee

General

The Board of Management is entrusted with the management of the company. It operates in the context of an Executive Committee. The Executive Committee comprises the members of the Board of Management, (currently the Chief Executive Officer (CEO) and Chief Financial Officer (CFO)), the leaders of each Business Area and leaders with functional expertise, allowing both the functions and the Business Areas to be represented at the highest level in the organization. The additional functions currently represented in the Executive Committee directly are Human Resources and Legal.

Among other responsibilities, the Board of Management and the Executive Committee define the strategic direction. They establish and maintain internal policies and procedures for effective risk management and control, manage the realization of the company’s operational and financial guidance, its sustainability performance, and its pursuit of long-term value creation. In fulfilling their duties, they are guided by the interests of the company and its affiliated enterprises, taking into consideration the relevant interests of the company’s stakeholders.

The Board of Management and Executive Committee promote openness and engagement through a so-called SpeakUp! policy and have established a Code of Conduct, directives, rules, guidelines and manuals, which are incorporated in the company’s directives framework. They drive a culture of good governance, consistency and functional excellence throughout the company.

The Board of Management takes precedence, with all Executive Committee decisions requiring a majority of the members of the Board of Management. The Board of Management can at all times decide to reserve decisions for the Board of Management. The members of the Board of Management remain jointly and individually accountable for all decisions made by the Executive Committee.

The Board of Management is accountable for its performance to the Supervisory Board and is answerable to the shareholders of the company at the AGM. The Executive Committee members who are not also members of the Board of Management report to the CEO. The Supervisory Board has regular direct interaction with all members of the Executive Committee and all Executive Committee members attend a major part of most Supervisory Board meetings.

The CEO leads the Executive Committee in its overall management of the company. He is the main point of liaison with the Supervisory Board. The CFO is responsible for overseeing AkzoNobel’s finances, its corporate control, investor relations and information management. The tasks, responsibilities and procedures of the Board of Management and Executive Committee are set out in their Rules of Procedure. These rules have been approved by the Supervisory Board and are available on the company’s website.

Authority to represent the company is vested in the two members of the Board of Management acting jointly. This includes the signing of documents. The Board of Management has also delegated a level of authority to corporate agents, including the other members of the Executive Committee. The list of authorized signatories is filed with the public registry and is available on request from the Dutch Chamber of Commerce (Kamer van Koophandel). The managing directors of our businesses, the corporate functional directors in charge of the different functions and the country directors report to individual Executive Committee members with specific responsibility for their activities and performance.

Appointment

Board of Management members are appointed and removed from office by the AGM. The other members of the Executive Committee are appointed by the CEO, subject to approval of the Supervisory Board.

Members of the Board of Management are appointed for a four-year term (or less), with the possibility of reappointment.

As described later in this section, the Meeting of Holders of Priority Shares has the right to make binding nominations for the appointment of members of the Board of Management and the Supervisory Board. However, as the company subscribes to the principles of the Code in general, members of the Supervisory Board and the Board of Management are (with the exception of those circumstances described later in this section), appointed on the basis of non-binding nominations by the Supervisory Board. In such cases, resolutions to appoint a member of the Supervisory Board or the Board of Management will require a simple majority of the votes cast by shareholders.

In addition, under certain conditions specified in the Articles of Association, shareholders may also be entitled to nominate Supervisory Board or Board of Management members for appointment. Such nominations require a two-thirds majority, representing at least 50 percent of the outstanding share capital in order to be adopted at a General Meeting.

Outside directorships

Members of the Board of Management and Executive Committee are not allowed to hold more than one supervisory board membership or non-executive directorship in another listed company. This is more stringent than the Code (provision II.1.8) and the requirements of the Dutch Civil Code, which allows members of a board of management two such supervisory board memberships or non-executive directorships. The exception to this rule is that in the 18 months prior to their retirement, Executive Committee members are allowed to hold more than one such supervisory board membership or non-executive directorship in order to allow them to prepare for retirement, as long as this does not interfere with the performance of their tasks as members of the Executive Committee. Furthermore, an exception can be made for an executive joining the Executive Committee. However, a maximum of two supervisory board memberships or non-executive directorships will apply. Acceptance of external supervisory board memberships or non-executive directorships in other listed companies by members of the Executive Committee is always subject to approval by the Supervisory Board, for which authority has been delegated to the Chairman of the Supervisory Board.

Conflicts of interest

Members of the Board of Management and the other members of the Executive Committee shall not participate in the discussions and decision-making on a subject or transaction in relation to which they have a conflict of interest with the company. Supervisory Board approval is required for decisions to enter into transactions under which Board of Management or Executive Committee members have a conflict of interest of material significance to the company and to the relevant member. Any such decisions involving members of the Board of Management will be recorded in the annual report for the relevant year, with reference to the conflict of interest and declaring that the relevant best practice provisions of the Code have been complied with. During 2016, no transactions are to be reported under which a member of the Board of Management or Executive Committee had a conflict of interest that was of material significance to the company and to the relevant member.

Remuneration

The remuneration of the members of the Board of Management is set in line with the remuneration policy adopted by the AGM. The Supervisory Board is responsible for determining the remuneration of the members of the Board of Management on the advice of its Remuneration Committee. The Supervisory Board also decides on the remuneration of the other members of the Executive Committee on the proposal of the CEO. The components of Board of Management remuneration, as well as the remuneration policy itself, are described in the Remuneration report and the Consolidated financial statements (see Note 22). The service contracts of the members of the Board of Management do not contain change of control provisions and are compliant with the Code. The main elements of these contracts are available on our website.

Operational Control Cycle

To facilitate efficient management and oversight of operations, the Board of Management and Executive Committee have established an Operational Control Cycle (OCC), which is conducted once per month. For each Business Area, the OCC consists of Operational Review Meetings comprising the CEO, the CFO, the General Counsel and the leadership of the relevant Business Area. These meetings provide a forum for operational review and decision-making on subjects relevant to the Business Areas. The functional agendas of Sustainability and HSE; Human Resources; Commercial Excellence; Research Development and Innovation; and Integrated Supply Chain are each discussed at least twice per year in these meetings. In addition, Functional and Country Review Meetings are held monthly to review upcoming proposals and progress on the functional and country agendas.

Executive Committee meetings are usually held once per month following the Operational Review Meetings and Functional and Country Review Meetings. Additional meetings are held to discuss strategy and other specific topics.

The Board of Management and Executive Committee have delegated authorities to those Executive Committee members responsible for each Business Area, to the Operational Review Meetings of each Business Area and to certain committees and councils.