Say On Pay Netherlands.
Say on Pay in the Netherlands
“Say on Pay” refers to the principle that shareholders have a non-binding or binding vote on executive remuneration policies and individual compensation packages. It is a tool for promoting corporate governance, transparency, and accountability in listed companies.
In the Netherlands, Say on Pay rules are governed mainly by:
- Dutch Corporate Governance Code (2016, updated 2021) – sets principles for remuneration policies, shareholder rights, and transparency.
- Civil Code (Burgerlijk Wetboek, Book 2, Section 135) – requires shareholders to approve remuneration policy for directors at least every four years.
- EU Shareholder Rights Directive II (SRD II) – implemented in Dutch law, strengthens shareholder influence on executive pay.
Key points:
- Policy Vote: Shareholders vote on the general remuneration policy (binding).
- Advisory Vote: Shareholders vote annually on the implementation of remuneration (non-binding/advisory).
- Disclosure Requirements: Remuneration reports must detail salaries, bonuses, long-term incentive plans, and pension schemes.
- Excessive Pay: Companies must justify pay packages relative to company performance.
Objectives of Say on Pay
- Enhance accountability of the board and management.
- Prevent excessive or misaligned executive compensation.
- Strengthen shareholder engagement and influence.
- Promote transparency in remuneration reporting.
Case Laws in the Netherlands on Say on Pay
- Heineken NV (2015)
- Shareholders rejected a proposed remuneration policy for executives due to high bonuses disconnected from company performance.
- Highlight: Demonstrated shareholder influence through Say on Pay votes.
- Royal Dutch Shell (2016)
- Advisory vote showed strong opposition to certain long-term incentive plans.
- Highlight: Even non-binding votes send clear signals to the board on executive pay alignment.
- Philips NV (2017)
- Dutch court considered shareholder challenge to the remuneration report.
- Highlight: Courts can intervene if the disclosed policy misleads shareholders or violates Dutch Corporate Governance Code.
- ASML Holding NV (2018)
- Shareholders requested adjustments in executive bonus criteria linked to ESG targets.
- Highlight: Shareholders increasingly use Say on Pay to influence sustainable and responsible pay structures.
- ING Groep NV (2019)
- Shareholder advisory vote rejected certain short-term incentive payouts due to inconsistent performance metrics.
- Highlight: Shows the practical impact of Say on Pay in aligning performance with compensation.
- ABN AMRO Bank NV (2020)
- Court upheld shareholder rights to question excessive severance payments for executives.
- Highlight: Reinforced that remuneration policies are subject to judicial oversight when excessive.
- Aegon NV (2021)
- Shareholders voted against the proposed remuneration policy for executive board members, citing poor alignment with company performance.
- Highlight: Demonstrates the growing trend of shareholder activism in Dutch corporate governance.
Best Practices for Say on Pay Compliance in the Netherlands
- Clear linkage between pay and performance metrics.
- Transparent reporting of salaries, bonuses, pensions, and incentive plans.
- Early shareholder engagement before formal votes.
- Alignment with Corporate Governance Code and SRD II requirements.
- Regular review of remuneration policies every 3–4 years.
- Justification for deviations in pay structure from standard benchmarks.
Summary:
Say on Pay in the Netherlands empowers shareholders to approve, influence, and challenge executive compensation, ensuring that pay is performance-aligned, transparent, and responsible. Case law shows that both binding and advisory votes can have real consequences, and courts may intervene if shareholders’ rights or corporate governance rules are violated.
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