Supervisory Board activities

Supervisory Board activities 2020

Q1 activities 2020

• Review of Q4 2019 financials and performance
• 2019 financial statements and profit allocation
• Final 2019 dividend
• M&A strategy update
• Transformation Office update
• Risk management: Risk session outcomes
• HSE full-year report
• 2019 external audit report
• Amendment of the Articles of Association
• Strategy beyond 2020 update
• COVID-19 update

Q2 activities 2020

• Review Q1 2020 financials and performance
• Investor relations update
• COVID-19 update
• HSE and safety update
• Business updates and deep dives
• M&A strategy update
• Innovation strategy update
• HR strategy update
• Sustainability strategy update

Q3 activities 2020

• Review Q2 2020 financials and performance
• Investor relations update
• Business updates and deep dives
• Transformation Office update
• HR strategy update
• Enterprise risk management update
• Functional and business strategy review
• Operational excellence
• Innovation strategy update
• M&A strategy update
• Integrated Supply Chain strategy
• COVID-19 update

Q4 activities 2020

• Review Q3 2020 financials and performance
• Interim dividend 2020
• Share buyback program
• M&A strategy update
• Information Management update
• Strategy update
• Integrated Supply Chain update
• HR strategy update
• Budget 2021
• COVID-19 update
• Investor relations update
• Business updates and deep dives

The list above provides an overview of relevant topics discussed and reviewed in Supervisory Board meetings in 2020.

Meetings and attendance

The Supervisory Board values the attendance of its meetings by all members. If Supervisory Board members are unable to attend a Supervisory Board or committee meeting, they inform the relevant chair of their reasons. Supervisory Board members always receive the materials for each specific meeting, allowing them to offer input and discuss any agenda items with the relevant chair and provide a proxy to act on their behalf. In 2020, the Board of Management attended all regular and all additional meetings. The Executive Committee attended the majority of the meetings. Almost all plenary sessions of the Supervisory Board were preceded or succeeded by executive sessions of the Supervisory Board, with or without the CEO in attendance. The Chairman had regular one-on-one calls with all Supervisory Board members to discuss individual impressions on the functioning of the Supervisory Board and items covered.

The Supervisory Board aims for all (regular) meetings to be held physically. However, during 2020, most meetings were held virtually due to COVID-19 related measures. All virtual meetings were held with video conference capabilities, enabling the members of the Supervisory Board to perform their role appropriately.

Strategy reviews

During 2020, the Supervisory Board continued to allocate adequate time to discuss strategic activities, including detailed business analyses and portfolio reviews. In addition, it reviewed and discussed functional updates including Finance, Information Management, Integrated Supply Chain, Procurement, Human Resources, Innovation and Health, Safety and Environment.

The Supervisory Board received comprehensive market updates and advised on, reviewed and approved the business continuity and contingency plans.

Strategy beyond 2020

During 2020, the Supervisory Board was closely involved in the development of the new Grow & Deliver strategy by the Board of Management together with the other members of the Executive Committee. In light of this new strategy, in-depth sessions were organized to discuss and review, among others, deep dives into the company’s businesses and topics such as sustainability, organizational health and culture, as well as the competitive landscape. The Supervisory Board was also involved in uncovering the new company purpose and developing the simplified leadership behavior framework.

COVID-19

The Supervisory Board held additional meetings to discuss regular updates on the COVID-19 situation from a global pandemic response team. The team, which was led by the Executive Committee, consisted of various workstreams and regional response teams, with any key risks being identified. The Supervisory Board was regularly informed about the health of AkzoNobel employees and reviewed the related responses from various parts of the business, the risks identified and the measures taken.

Sustainability

The Supervisory Board views sustainability as an intrinsic value driver in the work of all businesses and functions. During 2020, the Supervisory Board continued to assess sustainability as part of strategy and targets. The Supervisory Board is confident that by making sustainability an explicit differentiator – part of the company’s identity – AkzoNobel has enhanced its value proposition for stakeholders, including employees and business partners. Further details are included in the Sustainability statements.

The Super­visory Board is confident that by making sustainability an explicit differentiator – part of the company’s identity – AkzoNobel has enhan­ced its value pro­position for stake­holders.

Performance and management planning

Individual Board of Management and Executive Committee performance was addressed in Supervisory Board meetings, following recommendations from the Remuneration Committee. For more details, see the report of the Remuneration Committee.

Discussions on corporate performance were held at each regular Supervisory Board meeting and included business reviews and performance updates from corporate functions. Forward-looking targets were also addressed in light of these reviews, and both the proposed budget and operating plan for 2021 were diligently reviewed by the Supervisory Board in Q4, taking into account the COVID-19 situation and other prevailing market conditions. Following this assessment, the Supervisory Board has approved the proposed budget and operating plan for 2021.

During the year, the Supervisory Board was pleased to see the company continuing to benefit from management’s strategic initiatives, including cost savings. The nature of this performance, the company’s capital allocation priorities – as well as the significant market disruption resulting from the COVID-19 pandemic – were all considered in the Supervisory Board’s approval of the dividend proposal (further details on the 2020 dividend proposal can be found in the Profit allocation paragraph).

Risk management

The Supervisory Board views risk management as an essential mechanism to safeguard the business and assets of the company, and to secure long-term performance and value creation. As the Supervisory Board sought to assure itself of the robustness of the company’s risk mitigation and internal controls, it received multiple risk management updates during the year.

The Board of Management and Executive Committee maintain the risk management framework and system of internal controls. The Supervisory Board and the Audit Committee monitor the implementation of risk mitigating measures for the key risks, as identified by the Board of Management and the Executive Committee during the year by means of risk updates and reviews. Further details are included in the Risk management chapter.

Corporate governance

The Supervisory Board continuously reviews the company’s corporate governance and its compliance with the Dutch Corporate Governance Code.

Talent management and succession planning

In 2020, the Supervisory Board, after discussing its own composition and succession plans, proposed the reappointment of Dr. Pamela Kirby as member of the Supervisory Board. The reappointment was approved at the AGM held on April 23, 2020. Following the retirement of Ben Verwaayen as member of the Supervisory Board in April 2020, the number of members of the Supervisory Board was reduced to eight as of April 23, 2020.

During 2020, the Supervisory Board also discussed and supported changes to the composition of the Executive Committee. With Ruud Joosten stepping down as Chief Operating Officer, his responsibilities were taken over by the CEO ad interim.

Marten Booisma was succeeded as Chief Human Resources Officer by Joëlle Boxus as of March 9, 2020. The requirements of the Dutch Corporate Governance Code and the skills matrix, updated further upon recommendation by the Nomination Committee, were considered throughout the process.

Independence of the Supervisory Board

Supervisory Board members are required to act critically and independently of one another, the Board of Management, the Executive Committee and the company’s stakeholders. Each member of the Supervisory Board meets the independence requirements of the Code and completed the annual independence questionnaire addressing the relevant requirements for independence.

Supervisory Board evaluation

To assess its effectiveness, the Supervisory Board carried out an independent performance evaluation – facilitated by a third party – of itself, its individual members, its Audit, Remuneration and Nomination Committees, the Chairman, as well as the relationship with the Board of Management and the Executive Committee. The process consisted of Supervisory Board members completing a confidential questionnaire, while the third party held interviews with each of the members of the Supervisory Board, the Board of Management and the other members of the Executive Committee, the external auditor and the external advisor of the Remuneration Committee.

In a separate meeting without the Board of Management, the Supervisory Board discussed the results of the evaluation questionnaires. The Supervisory Board also discussed the functioning of the Board of Management and the performance of its individual members.

The Supervisory Board is pleased to confirm the evaluation concluded that the Supervisory Board and its committees continue to operate proficiently. There is a dynamic and open atmosphere between the Supervisory Board and the Executive Committee and the Supervisory Board papers reflect this openness, although it was recommended that board papers be shared in a more timely manner in the future. With regard to Supervisory Board meetings, the Chairman and CEO will work together to review the current Supervisory Board agenda to ensure both the topics and the time allocation reflect the future strategic priorities for the company. In line with AkzoNobel embarking on its new Grow & Deliver strategy, the key recommendations included reviewing the composition of the Supervisory Board and the Committees to optimize their fit for the future. In addition, the Nomination Committee will ensure a strong executive development and succession management program is developed during 2021. AkzoNobel has a strong track record in ESG and will continue to focus on this across all countries in which it operates. The Supervisory Board will continue to actively support these initiatives. The impact of COVID-19 meant that most of the interaction took place virtually in 2020. As soon as restrictions allow, spending more time in person will be prioritized. In the meantime, the use of virtual technology to enable the Supervisory Board to “meet” with AkzoNobel’s people around the world and deep dive into different areas of the business has been very helpful and will continue in 2021.

Financial statements and profit allocation

The Board of Management submitted the report and financial statements, including the report of the Board of Management, to the Supervisory Board for review and approval. The financial statements of Akzo Nobel N.V. for the financial year 2020 were audited by PricewaterhouseCoopers Accountants N.V. (PwC).

The financial statements and the report were extensively discussed by the Audit Committee with the external auditors, in the presence of the CFO, and by the full Supervisory Board with the Board of Management and the Executive Committee. Based on these discussions, the Supervisory Board is of the opinion that the 2020 financial statements of Akzo Nobel N.\/. form an adequate basis to account for the supervision provided (see the financial statements). The Audit Committee monitors the follow-up by management on the recommendations made by the external auditors. The Supervisory Board recommends that the AGM adopts the financial statements as presented in this Report 2020 and, as proposed by the Board of Management, the proposed total dividend for 2020 of €1.95 (2019: €1.90), including a final dividend of €1.52 per share. An interim dividend of €0.43 (2019: €0.41) per share was paid in November 2020. This reflects the continued commitment to providing a stable to rising dividend. The dividend will be paid in cash.

In addition, it is requested that the AGM discharges the members of the Board of Management from their responsibility for the conduct of business in 2020 and the members of the Supervisory Board for their supervision in 2020.