NV Nederlandse Spoorwegen is a public limited company under Dutch law. Its registered offices are in Utrecht. NV Nederlandse Spoorwegen is the holding company of NS Groep NV. NS is a state participation, The governance of NS is based on the modified two-tier company regime. NS has a two-tier management structure. NS Groep NV is managed by the Executive Board, which consists of the same individuals as the Executive Board of NV Nederlandse Spoorwegen.
Corporate Governance Code
As a major enterprise with a significant role in Dutch society, NS attaches great value to a high-quality governance structure. This is why NS applies the Dutch Corporate Governance Code 2016 (hereinafter the 'Code'), even though it is not a listed company. Given that NS is not a listed company and does not have a one-tier management structure, several elements of the Code do not apply to it. On its website, NS provides an overview of all the provisions in the Code plus explanatory notes on how NS applies those provisions.
The sole shareholder of NV Nederlandse Spoorwegen is the Dutch State. The role of the shareholder is performed by the Ministry of Finance. The General Meeting takes place annually, within six months of the close of the financial year. The matters discussed at the General Meeting include the annual report by the Executive Board. The General Meeting also adopts the financial statements, approves the profit appropriation (if applicable), discharges the members of the Executive Board from liability for their policy work, discharges the members of the Supervisory Board from liability for their supervision and instructs the auditor to audit the financial statements. Other general meetings can be held as often as is desired by the Executive Board, the Supervisory Board and the shareholder. Resolutions can also be adopted outside meetings.
The Executive Board is charged with and responsible for managing the business. The Executive Board develops the vision and associated mission, strategy and objectives of NS. The Executive Board aims to achieve the objectives and ensure the continuity of the company and its affiliated enterprises. The Executive Board is also responsible for implementing the NS strategy. Through the NS strategy, the Executive Board focuses on long-term value creation while weighing up the relevant interests of the stakeholders. That means that when making decisions, the Executive Board takes aspects such as safety and the role of NS in providing sustainable mobility into account, in addition to financial aspects. The tasks of the Executive Board are performed in part by the business units and subsidiary companies.
Responsibilities, tasks and procedures
The Executive Board’s responsibilities, tasks and procedures are laid down in the Articles of Association of NV Nederlandse Spoorwegen and in the Rules of Procedure of the Executive Board. Pursuant to the Articles of Association of NV Nederlandse Spoorwegen, the Executive Board Rules of Procedure and the Supervisory Board Rules of Procedure, certain decisions by the Executive Board are subject to approval by the Supervisory Board and/or the General Meeting. The Executive Board is responsible for managing the business in a transparent way. The Executive Board reports to the Supervisory Board and the General Meeting.
Executive Board members are appointed in the General Meeting on the recommendation of the Supervisory Board. The Supervisory Board decides on the number of members for the Executive Board. Members of the Executive Board can be suspended or dismissed by the General Meeting. Members of the Executive Board are appointed or reappointed for a period of four years at most. The Executive Board aims for a composition that is diverse, with a good mix in terms of gender and age. Both the Executive Board as a whole and each individual Executive Board member are authorised to represent NS.
Members of the Executive Board will not be involved in discussions or decision-making concerning matters or transactions where their direct or indirect personal interests conflict with the interests of NS. If all members of the Executive Board have a direct or indirect personal interest that conflicts with the interests of NS and, as a result, the Executive Board is unable to make a decision, the decision will be made by the Supervisory Board. The Supervisory Board must give its approval beforehand to decisions by the Executive Board about such matters as entering into transactions which involve conflicting interests that are of material significance to NS and/or the Executive Board member in question. Such transactions are published in the report of the Executive Board, stating the conflicting interest. There were no such transactions in 2021. Transactions involving conflicts of interests of members of the Executive Board or Supervisory Board are agreed with conditions that are in line with the market. The Company Secretary ensures that the proper procedures are followed and that the actions taken comply with the legal and regulatory obligations applicable to the Executive Board. This procedure was adhered to in 2021.
The remuneration and terms and conditions of employment of the Executive Board members are established by the Supervisory Board with due regard for the remuneration policy adopted by the General Meeting. The remuneration policy for members of the Executive Board, to which reference is made in their respective employment contracts, includes the right to compensation upon dismissal on the initiative of NS, up to a maximum that has been fixed at one year’s basic salary. The Supervisory Board decides whether a severance payment is to be paid and, if so, what the amount should be.
The Supervisory Board’s tasks include supervising the Executive Board’s policies and the general affairs of the company and its affiliated enterprises. It also advises the Executive Board. In performing its duties, the Supervisory Board focuses on long-term value creation for the company and its affiliated enterprises, taking into consideration the interests of the company's stakeholders. The Executive Board provides the Supervisory Board promptly with the information and resources the latter requires in order to do its work properly. If the Supervisory Board and/or one of its members consider it necessary, they can obtain information from the Executive Board, NS Audit, the external auditor, the Central Works Council and/or other officials and external advisers to NS.
Responsibilities, tasks and procedures
The Supervisory Board's responsibilities, tasks and procedures are laid down in the Articles of Association of NS, the Articles of Association of NS Groep NV and the Rules of Procedure of the Executive Board, the Supervisory Board and its committees. The Supervisory Board reports to the General Meeting. The Supervisory Board as a whole is responsible for the proper implementation of its tasks. Supervisory Board members are free to adopt positions independently from the Executive Board. Members of the Supervisory Board perform their duties without a mandate and independently of any personal interest in the company. At least once a year, the Supervisory Board discusses the performance of the Executive Board as a body and the performance of the individual members of that board.
Supervisory Board members are appointed by the General Meeting, on the recommendation of the Supervisory Board, with due observance of the job profile and after consulting the Central Works Council. The Central Works Council has enhanced powers of recommendation covering the nomination of one third of the Supervisory Board members. The Supervisory Board has at least five members and at most nine. The Supervisory Board had six members as at 31 December 2021. The Supervisory Board has drawn up a profile for its size and composition, taking account of the nature and activities of the company and the desired expertise and backgrounds of its members. The Supervisory Board aims for a composition that is diverse, with a good mix in terms of gender and age. Supervisory Board members can be appointed for two terms of four years each. After that period, they can be reappointed for a maximum of two terms of two years each. Reappointment after a period of eight years must be justified by the Supervisory Board in its report. In the case of a reappointment, the manner in which the relevant board member fulfilled their duties in the previous term is taken into account, and members will only be reappointed after careful consideration. The Supervisory Board’s retirement schedule is published on the company's website.
Members of the Supervisory Board will not participate in discussions and decision-making about any matter or transaction where their direct or indirect personal interests conflict with the interests of NS.
Committees of the Supervisory Board
In view of the extent, diversity and complexity of the matters it has to handle, the Supervisory Board has set up a Risk and Audit Committee and a combined Remuneration and Appointments Committee. The composition of these committees is determined by the Supervisory Board. The committees advise the Supervisory Board and prepare its decisions. This allows the committees to assist effective decision-making by the Supervisory Board. The Supervisory Board as a whole remains responsible for the decisions that have been prepared by a committee.
Risk and Audit Committee
The Risk and Audit Committee (RAC) performs its duties pursuant to the Rules of Procedure as established by the Supervisory Board under the provisions of the Code. The RAC advises the Supervisory Board and prepares the Supervisory Board's decisions with respect to monitoring the integrity and quality of NS’s financial reporting and the (assessment of the) effectiveness of NS’s internal risk management and control systems. The RAC convenes as often as it deems necessary, and at least once a year with the external auditor without the Executive Board being present. The Rules of Procedure stipulate that the RAC must have at least three members. The RAC had six members as at 31 December 2021.
Remuneration and Appointments Committee
The combined Remuneration and Appointments Committee performs its duties pursuant to the Rules of Procedure as established by the Supervisory Board under the provisions of the Code. The Remuneration and Appointments Committee prepares the decisions of the Supervisory Board in areas such as the appointment of Executive Board and Supervisory Board members, the performance of the Executive Board and the Supervisory Board, and the formulation, implementation and monitoring of the remuneration policy for the Executive Board. The Rules of Procedure stipulate that the Remuneration and Appointments Committee must have at least three members. The committee had five members as at 31 December 2021.
The external auditor is appointed by the General Meeting. The external auditor reports to the Supervisory Board and Executive Board on its audit. After the examinations and audit, the auditor issues an audit opinion regarding the truth and fairness of the NS financial statements.
The RAC annually reports to the Supervisory Board on the performance of and developments in the relationship with the external auditor. The external auditor attends the meetings of the Supervisory Board in which its report on the audit of the financial statements is discussed, and is also available for the General Meeting in which the adoption of the financial statements is handled. The external auditor also attends the meeting of the Supervisory Board held to discuss the six-monthly figures. In principle, the external auditor attends the RAC meetings, unless the RAC determines otherwise. The external auditor immediately informs the chair of the RAC if, in the course of its audit task, it encounters any actual or suspected abuses or irregularities. If an actual or suspected abuse or irregularity concerns the functioning of an Executive Board member, the external auditor reports this to the chair of the Supervisory Board. EY has been NS's external auditor since the 2014 financial year. In 2020, the appointment of EY in that role was extended by two years to cover the period up to and including the 2023 financial year, in line with the rule regarding the maximum term of office of an external auditor.
NS Audit provides independent and objective assurance and advice on the adequacy of governance, risk management and internal control measures in view of the need to support NS's objectives and promote continuous improvement. NS Audit is subordinate to the Executive Board, with the NS Audit Director reporting directly to the Chair and CEO. The NS Audit Director also reports to the chair of the RAC. The NS Audit Director has direct access to the NS Chair and CEO, the chair of the Risk and Audit Committee, the members of the Executive Board and the external auditor.
Risk governance at NS has been set up using the ‘three lines of defence’ model. The guiding principle in this model is that the first line of defence (the operational business) is responsible for the management of the risks by embedding this properly in processes and clearly assigning responsibilities. The second line of defence, which involves the NS Risk, Legal and Integrity & Compliance (I&C up to and including 2021) departments, provides support and advice and makes sure that line managers are fulfilling their responsibilities as intended. In addition, there are safeguards that risks are demonstrably taken into account in decision-making, thanks in part to advice from this second line of defence. The third line of defence, involving NS Audit, carries out independent audits to make sure that the risk management and internal control system is working properly. Finally, safeguards have been put in place to ensure that NS will learn from incidents, thus promoting the continuous improvement of risk management processes.
The Council for Sustainable Business Practices is NS's policy and decision preparation body for sustainable enterprise. The Council is comprised of the business unit and staff department directors and its meetings are chaired by the Member of the Board for Commerce & Development. Where necessary, proposed decisions and policies are submitted for approval to the Executive Board. Progress and development in sustainability results are monitored and managed through the regular planning, control and reporting cycle. The Council for Sustainable Business Practices periodically discusses the KPI reports on sustainability results. In accordance with the Code, the Executive Board is responsible for the aspects of Corporate Social Responsibility that are relevant to NS. The Executive Board reports on this to the Supervisory Board and the General Meeting.