Board of Management and Executive Committee

General

The Board of Management is entrusted with the management of the company. When it comes to the management of our business, 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 the Chief Financial Officer (CFO)), the Chief Operating Officer (COO), the Chief Supply Chain Officer, the General Counsel and the functional leader of Human Resources. This ensures functional, operational and commercial expertise is entrenched at the highest level in the organization. Among other responsibilities, the Board of Management defines the strategic direction. It establishes and maintains internal policies and procedures for effective risk management and control, manages the realization of the company’s operational and financial targets, its sustainability performance and its pursuit of long-term value creation. In fulfilling their duties, Board of Management members are assisted by the Executive Committee and 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 SpeakUp! grievance mechanism and have established a Code of Conduct, directives, rules, guidelines and manuals incorporated in the company’s Directives framework, in order to drive a culture of good governance, consistency and functional excellence. The values of good governance, sustainability and teamwork adopted by the Board of Management are incorporated in these documents. The Board of Management believes these values contribute to a culture focused on long-term value creation and actively encourages these values through leading by example. Company culture is regularly discussed with the Supervisory Board.

The Board of Management takes precedence; all Executive Committee decisions require 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 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 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 corporate 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.

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. This year, the Board of Management members were appointed by the EGM (Extraordinary General Meeting). The other members of the Executive Committee are appointed by the CEO, after consultation with the Supervisory Board. Board of Management members 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.

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% of the outstanding share capital in order to be adopted at an AGM (or EGM).

AkzoNobel believes in the strength of diversity and in accordance with the Code, a Diversity Policy has been adopted for the composition of the Board of Management and Executive Committee. The objective of the Diversity Policy is to enrich the Board of Management’s perspective, improve performance, increase member value and enhance the probability of achievement of AkzoNobel’s goals and objectives. The Policy addresses concrete targets relating to diversity, including nationality, age, gender, education and work background. A consistent and structured approach is applied to succession planning for the Board of Management and Executive Committee, taking into account the implementation of the Diversity Policy. AkzoNobel currently diverges from the gender target of at least 30% female and at least 30% male Board of Management members. It is believed that due to the size and scale of the Board of Management (being only two members), this divergence is justified as it has ensured the best candidates for the roles were nominated by the Supervisory Board and appointed by shareholders.

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 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 member of the Executive Committee. Furthermore, an exception can be made for an executive joining the Executive Committee upon approval from the Supervisory Board. 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. Currently, no outside directorships are held by members of the Board of Management and Executive Committee.

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 2017, no transactions were reported under which a member of the Board of Management or Executive Committee had a conflict of interest which 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 which is 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 components of Board of Management remuneration, as well as the remuneration policy itself, are described in the Remuneration report and Note 23 of the Consolidated financial statements. The service contracts of the members of the Board of Management do contain change of control provisions. Further details can be found in the Remuneration report. The service contracts of the Board of Management are compliant with the Code. The main elements of these contracts are available on the corporate 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. The format of the OCC was updated in 2017 to accurately reflect organizational changes in order to ensure the highest level of corporate governance is applied throughout the organization. For the Paints and Coatings business, the OCC consists of a monthly Business Review Meeting, comprising the CEO, the CFO, the COO, the Chief Supply Chain Officer and the leadership of the Paints and Coatings business. For the Specialty Chemicals business, the OCC consists of an Operational Review Meeting comprising the CEO, the CFO and the leadership of the Specialty Chemicals business. The other members of the Executive Committee have a standing invitation to these meetings. The meetings provide a forum for regular business and operational oversight, with a focus on commercial activities and supply chain processes.

Executive Committee meetings are frequently held following the Business Review Meeting and the Operational Review Meeting, at which the implementation of the company’s strategy is discussed. The functional agendas of Sustainability, HSE&S, Human Resources, Commercial Excellence, Research and Development and Integrated Supply Chain are also discussed at these Executive Committee meetings. Additional meetings are held to discuss specific topics as required.

The Board of Management and Executive Committee have delegated authorities to individual Executive Committee members, to the Operational Review Meeting of Specialty Chemicals and to certain committees and councils.