Corporate governance code
On 10 December 2008 the Dutch Corporate Governance Code Monitoring Committee (the “Committee”) published a revised Dutch corporate governance code (the "Code") with principles of good corporate governance and best practice provisions, based on the Dutch Corporate Governance Code that was published on 9 December 2003 (the “2003 Code”). The Code replaced the 2003 Code and came into effect on 1 January 2009.
The Code applies to all companies whose statutory seat is in the Netherlands and whose shares are officially listed on the Dutch stock exchange. The Code contains principles, set out in the form of specific best practice provisions, that create a set of standards governing the conduct of management board members, supervisory board members and shareholders. They reflect national and international best practices and may be regarded as outlining the general principles of good corporate governance. Listed companies may choose to depart from the best practice provisions.
TNT devotes a separate chapter of its annual report to a broad outline of its corporate governance structure, which states how the principles and best practice provisions of the Code were applied in the past year, or, in the event that a provision was not applied, states the reason(s) for this course of action. Said chapter is presented as a separate agenda item for discussion at TNT’s annual general meeting of shareholders
The statement of compliance with the 2003 Code in the Annual Report 2008 is as follows:
TNT applies the principles and best practices of the Dutch corporate governance code published in December 2003 including the good practice recommendations published by the Corporate Governance Code Monitoring Committee in its subsequent reports until December 2008, except for the following best practice provisions and recommendations below that are not fully applied:
- provision II.2.7 Dutch corporate governance code states that the remuneration in the event of dismissal of members of the Board of Management may not exceed one year’s salary (the “fixed” remuneration component). In case one year is manifestly unreasonable, the maximum of severance pay may not exceed twice the annual salary.
- severance payments other than related to a change of control for members of the Board of Management are one year base salary or a maximum of two year’s base salary in the first four-year term if one year is considered to be unreasonable. The employment contract of TNT’s CFO effective 1 April 2006 states that the severance payment other than related to a change of control will amount to twenty-four months base salary during the first four year term as a member of the Board of Management. During further terms as a member of the Board of Management, his severance payment amounts to twelve months base salary. As stated in chapter 8 of the Annual Report 2008, contracts prior to 2004 remain unaltered.
- For members of the Board of Management who are not residents of the Netherlands, TNT follows local market practice for that part of the base salary earned in the country of residence. This is done to ensure that TNT can offer a competitive package to foreign members of the Board of Management commensurate with local practice.
- severance payments in case of a change in control equal the sum of the last annual base salary and pension contribution plus the average bonus received over the last three years, multiplied by two. No distinction is made between resident or non-resident members of the Board of Management. TNT is of the opinion that such payment is realistic taking into account the special position of members of the Board of Management in a change in control situation. Also, the Supervisory Board may decide that the performance shares vest in whole or in part.
- provision III.3.4 Dutch corporate governance code states that the maximum number of supervisory board positions held by members of the Supervisory Board with Dutch listed companies cannot exceed five (whereby a chairmanship counts twice). From 1 January 2008 until 1 January 2009 TNT’s chairman of the Supervisory Board, Mr Hommen, held more than five board memberships. This situation was remedied when Mr. Hommen stepped down as chairman on 31 December 2008. See chapter 9 of the Annual Report 2008.
- provision II.2.10(e) Dutch corporate governance code states that the remuneration overview shall in any event contain a description of the performance criteria on which the performance related component of the variable compensation is dependent. TNT discloses the nature of the performance targets but not the actual targets in the sense that TNT has opted to use performance targets aligning the remuneration of the Board of Management with the business performance. As a result the targets are so specific that they contain competition-sensitive information, and are therefore not disclosed. See further chapter 8 under current remuneration policy of the Annual Report 2008.
In the chapter sections of the Annual Report 2008 referred to above, TNT explains why it deviates from these best practice provisions and recommendations. Material future (corporate) developments might justify further deviations from the Code at the moment of occurrence.
The full text of the Code can be viewed on the TNT website.
Since its delisting from the New York Stock Exchange on 18 June 2007 and the termination of its reporting obligations with the United States Securities and Exchange Commission on 16 September 2007, TNT is no longer subject to the corporate governance rules of this exchange nor to the provisions of the Sarbanes-Oxley Act.
TNT applies the principles and best practices of the Code as of the financial year 2009. TNT will report on how it complied with these principles and best practices in its annual report over the financial year 2009.