It appears that the intense scrutiny that financial institutions have historically faced from a variety of stakeholders left them well-positioned to meet the enhanced disclosure and outreach requirements. The Polder Model is consensus decision-making, based on the acclaimed Dutch version of consensus-based economic and social policy-making in the 1980s and 1990s.Įxamples of Top-of-the-Class Disclosure Financial Institutions
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While undoubtedly presenting challenges for Dutch companies in general, this approach is embedded in Dutch culture, for instance through the so-called Polder Model.
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Other Dutch companies also experience pressure to downwardly adjust maximum opportunity, especially in terms of overall quantum. Difficulties in such a widescale engagement outreach are to be expected, as the view from the Dutch public and legislators may contrast starkly with asset managers’ expectations.įor example, whereas most investors, internationally, believe that a significant proportion of executive pay should be at risk, the introduction of the Act on the Remuneration Policy for Financial Undertakings (“WBFO”) in mid-2016, dictated that financial institutions with operations predominantly based in the Netherlands must limit variable pay to a maximum of 20% of fixed remuneration.
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Under the local implementation of SRD II, Dutch companies are asked to look beyond shareholders to communicate how the broader society, including employees, consumers and the general public, has been taken into account when formulating their remuneration policies. We are just trying to make sure we aren’t the ones who get surprised.’įor the companies that got their proposed remuneration policy voted down, the upcoming proxy season represents another chance, and another challenge to seek adequate shareholder – and widescale public – support for the upcoming proxy season to have their proposed remuneration policy approved by shareholders.įor the current fiscal year, companies that had their proposed remuneration policy voted down can continue to pay their management board executives under the previously approved remuneration policy, even if no changes were made to the policy.īackground to Dutch legislation Dutch Polder Model There are simply too many variables to consider. The forecast made by one of the board members we spoke to during our annual engagement programme turned out to be quite prescient: ‘there will definitely be a number of companies that will encounter an unpleasant surprise. The signs of heightened scrutiny were already present in the Dutch market. Three companies in our covered database also failed to receive shareholder approval of the remuneration report, which only required a simple majority voting requirement.
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Of the 70 remuneration policies Glass Lewis provided voting recommendations on during the past proxy season, nine did not pass the 75% voting requirement set by the Dutch law, equaling a staggering 12.9% of total remuneration policies. The introduction of the Shareholder Rights Directive (“SRD II”) across the European Union proved to be challenging for many European companies, but nowhere were the additional forward- and backward-looking remuneration proposals as controversial as the Dutch market.