As an energy network operator with an important role in Dutch society, we endorse the importance of good governance, effective supervision and transparent accountability in respect of all stakeholders.
The Alliander group, headed up by Alliander N.V. (Alliander), is made up of various business units, including Liander, Qirion and Kenter. Alliander is a statutory two-tier company and applies the full two-tier regime. All of Alliander’s shares are held directly by Dutch provincial (4) and municipal authorities (72). Alliander has a two-tier management structure, with a Management Board and a Supervisory Board. The Management Board controls Alliander in its day-to-day operations; the Supervisory Board oversees the Management Board and its management of the company’s business. Both Boards act independently of each other and are accountable to the General Meeting of Shareholders (GMS) in respect of the manner in which they carry out their tasks.
Dutch Corporate Governance Code
The Dutch Corporate Governance Code (the Code) is a code of conduct for listed companies. It serves as a general standard for good corporate governance. Alliander applies the Code voluntarily, where possible and relevant. In doing so, we emphasise our responsibility for the social aspects of entrepreneurship. The Code is applied at the level of the holding company.
Compliance with the Code
Some provisions of the Code are not relevant for Alliander. For example, because Alliander is a two-tier company and its shares are not listed on the stock exchange. In addition, Alliander has a different management structure (no one-tier board), there is no executive committee and also no variable remuneration arrangement for the Management Board. Moreover, Alliander has an internal audit department. The best-practice principles that do not apply to Alliander are summarised below:
1.3.6: absence of an internal audit department
2.1.3: executive committee
2.1.8 vi, vii and 3.3.2 - 3.3.3: remuneration of the Supervisory Board members in shares, or shares held by Supervisory Board members
2.8.2 - 2.8.3: takeover bid
3.1.2 ii and iv to vii: remuneration policy
3.1.3: remuneration of the executive committee
3.4.1 iii and v Remuneration report
4.2.6: anti-takeover measures
4.3.3: cancelling the binding nature of a nomination or dismissal
4.3.4: voting right on financing preference shares
4.3.5: publication of institutional investors' voting policy
4.3.6: report on the implementation of institutional investors' voting policy
4.4: issuing depositary receipts for shares
5: one-tier governance structure
Deviation from the Code
Deviations from the Code are explained below in accordance with the ‘comply or explain’ principle.
Principle 2.2.1: appointment and reappointment periods - Management Board members – A member of the Management Board is appointed for an indefinite period. They act based on a long-term strategic perspective and a fixed-term appointment is not appropriate in this context.
Principle 2.3.2: establishment of committees – A combined Selection, Appointment and Remuneration Committee has been established for practical reasons.
Principle 2.3.7: vice-chair of the Supervisory Board – No vice-chair has been appointed within the Supervisory Board. The meetings of the Supervisory Board are chaired by one of the other members of the Supervisory Board if the chair is absent. The replacement is appointed by a majority of votes of the present and represented members of the Supervisory Board.
Principle 2.4.3: point of contact for the performance of Supervisory Board and Management Board members – Each Supervisory Board member acts as a point of contact for members of the Supervisory Board and Management Board regarding how the chair of the Supervisory Board performs his/her duties.
Principal 3.4.2: Management Board member agreement – The Supervisory Board appoints the Management Board members. The Supervisory Board notifies the GMS - in this case the Committee of Shareholders - of the proposed appointment. The salary components of the Management Board members are transparently reported in the Remuneration Report.
Principle 4.1.10: AGM report – Alliander sends the report to all shareholders within three months of the AGM.
Principal 4.2.3: meetings and presentations – Alliander’s shares are not listed on the stock exchange; they are held by provincial and municipal authorities, but Alliander has issued stock exchange-listed bonds. These are listed on the Amsterdam stock exchange. Alliander communicates in a transparent manner that is tailored to the target group. Alliander does not organise analysts’ meetings, though the company does organise meetings with investors and shareholders after publication of the half-year and annual figures. Alliander also organises press conferences after the publication of its half-year and annual figures, during which the Management Board explains the results. The Management Board’s presentations can be downloaded from www.alliander.com. In addition, Alliander organises annual (and, if necessary, ad hoc) meetings with rating agencies after the publication of the annual figures. These meetings and presentations cannot be followed by all shareholders in real time via webcasting.
Principle 4.3: casting votes – Remote voting and communication with all other shareholders is not facilitated at this time.
Corporate governance statement
This is a statement on corporate governance as referred to in Article 2a of the Decree on the content of the Management Board Report of 1 January 2018 (‘the Decree’). For the information that must be included in this corporate governance statement, as referred to in Articles 3a(a) and 3a(d) of the Decree, please refer to the following chapters of the 2020 management report.
The main features of the internal risk management and control system relating to the financial reporting process of the Alliander group (Article 3a(a) of the Decree) are set out in the Risks chapter.
The diversity policy relating to the composition of the Management Board and the Supervisory Board, including the objectives of the policy, the method of implementation, and the results of this policy in the past financial year (Article 3a(d) of the Decree), and the measures for achieving the desired situation and expected timing, are set out in the Report of the Supervisory Board.
Corporate Governance in outline
Corporate governance framework
Alliander’s governance structure is based on Book 2 of the Dutch Civil Code, the Code, Alliander’s articles of association, and various sets of internal rules and by-laws. The Dutch Gas Act and the Dutch Electricity Act 1998 also contain provisions that influence the governance of Alliander and its affiliated enterprises. In addition, based on its core values, Alliander has formalised key rules of behaviour and requirements in a code of conduct (including the Guideline for the Prevention of Market Abuse) and a whistleblower policy. The articles of association, various rules and by-laws and other documentation on corporate governance can be found at www.alliander.com.
Tasks and responsibilities
The Management Board is responsible for managing Alliander. The Management Board determines the long-term strategy, sets the operational and financial objectives of the company and defines the preconditions for achieving the strategy. In addition, the Management Board is responsible for compliance with all relevant legislation and regulations, risk management and financing of the company. When performing its duties, the Management Board carefully weighs up the interests of the stakeholders. During this process, the Management Board also considers the social aspects of doing business that are material to the organisation and its management and control. The Management Board has set out values that contribute to a culture that focuses on long-term value creation.
In addition to their collective responsibility for the management of the company, individual members of the Management Board are assigned specific tasks and responsibilities. The Management Board may amend these tasks and responsibilities as required. The division of tasks has been approved by the Supervisory Board. The Management Board as a whole and the individual Management Board members have the authority to represent the company.
The Management Board complies with the Management Board By-laws. These by-laws supplement the Management Board’s statutory obligations and obligations under the articles of association and contain provisions on the composition, tasks and powers of the Management Board, and on meetings and decision-making. In addition, the by-laws also contain provisions on behaviour and culture, on the interaction with the Supervisory Board and on the provision of information, and on how to deal with (potential) conflicting interests.
Appointment and dismissal
The Supervisory Board appoints the members of the Management Board as directors under the articles of association for an indefinite period. The Supervisory Board also has the power to suspend or dismiss members of the Management Board.
Tasks and responsibilities
The Supervisory Board supervises how the Management Board implements the strategy for long-term value creation, the policy of the Management Board and the general course of business within Alliander and its affiliated enterprises. The Supervisory Board also advises the Management Board. The Supervisory Board acts as the employer of the Management Board. The Supervisory Board of Alliander is also the Supervisory Board of network operator Liander N.V.
In the performance of its duties, the Supervisory Board – like the Management Board – focuses on the creation of long-term value for Alliander and the affiliated enterprises and carefully weighs up the interests of the stakeholders. The Supervisory Board also gives due consideration to the social aspects of entrepreneurship that are relevant to the company. The Supervisory Board is jointly responsible for the performance of its duties.
The Supervisory Board complies with the Supervisory Board By-laws. These by-laws supplement the Supervisory Board’s statutory obligations and obligations under the articles of association and contain provisions on the composition, tasks and powers of the Supervisory Board, and on meetings and decision-making. The by-laws furthermore contain provisions with regard to the Supervisory Board’s interactions with the Management Board, the shareholders and the Works Council, and on how to deal with existing or potential conflicts of interest.
Appointment and dismissal
New members of the Supervisory Board are nominated by the Supervisory Board and appointed by the General Meeting of Shareholders, taking into account the profile. Consideration is given to the nature and activities of the company and the desired expertise and background, in accordance with the profile, when nominating and appointing. The Committee of Shareholders and the Works Council have a priority right of nomination for one third of the number of supervisory directors.
A Supervisory Board member is appointed for a period of four years, after which he or she can be reappointed, once only, for a further four-year period. Thereafter, reappointment for a two-year period is possible, with a possible extension of no more than two years. Reappointment after a period of eight years must be reported and explained in the report of the Supervisory Board. The Supervisory Board may suspend its members. The Enterprise Section of the Amsterdam Court of Appeal can dismiss a Supervisory Board member. The General Meeting of Shareholders can withdraw its confidence in the Supervisory Board; such resolution will result in the immediate dismissal of the Supervisory Board members.
Supervisory Board Committees
Members of the Supervisory Board serve on two permanent committees: an Audit Committee and a combined Selection, Appointment and Remuneration Committee. The committees have their own meetings, which are in preparation for the plenary Supervisory Board meetings. In the Supervisory Board meeting, the committees report verbally, and (draft) minutes of the committee meetings are distributed. The recommendations of the committees form the basis for decision-making during the Supervisory Board meeting. The Supervisory Board remains collectively responsible for the decisions prepared by a committee. The committees each have their own by-laws, which describe the tasks and powers, as well as the composition and working method of the committees.
The Audit Committee advises the Supervisory Board and prepares materials to help the Supervisory Board in its decision-making on areas within its supervisory scope, such as the integrity and quality of Alliander’s financial reporting, (assessments of) the effectiveness of the internal risk management and control systems, and the financing policy.
The Selection, Appointment and Remuneration Committee prepares material to help the Supervisory Board in its decision-making on matters such as the selection criteria and appointment procedures for Supervisory Board and Management Board members, the performance of the Supervisory Board and Management Board members and the formulation of the remuneration policy for the Management Board and the Supervisory Board. This committee also prepares the annual Remuneration Report.
The AGM is held annually, no later than six months after the end of the previous financial year. Among other matters, the AGM discusses the annual report, adopts the financial statements and the dividend, grants discharge from liability to the members of the Management Board and Supervisory Board, and appoints the members of the Supervisory Board and the external auditor. Certain powers of the GMS have been transferred to the Committee of Shareholders with the aim of more effectively exercising certain shareholder rights on behalf of all shareholders. For example, the Committee exercises the right of recommendation when appointing or reappointing members of the Supervisory Board and the Committee is involved in the appointment of members of the Management Board.
Internal audit function
The Internal Audit department is responsible for the internal audit function within Alliander. Internal Audit has an independent, objective role in supporting Alliander in achieving its corporate objectives. The department provides detailed information, advice and (additional) assurance on the degree of effectiveness of the risk management, control and governance processes.
Every year, Internal Audit draws up an audit plan based on risk analyses and the audit findings in consultation with the Management Board, the Audit Committee and the external auditor. This plan describes the proposed audit engagements for the coming year. The annual audit plan is submitted to the Management Board for approval and then to the Supervisory Board. Internal Audit reports periodically to senior management, the Management Board and the Audit Committee on audit-related matters, such as the implementation of the audit plan, significant findings and failures to implement recommendations. Internal Audit also informs the external auditor about this.
Internal Audit is the responsibility of the Chair of the Management Board. The Internal Audit manager has direct contact with the Audit Committee and the external auditor and attends Audit Committee meetings. The Audit Committee supervises the internal audit function and advises the Supervisory Board on its performance.
The external auditor is nominated by the Supervisory Board and appointed by the General Meeting of Shareholders. Deloitte Accountants B.V. has been the external auditor of Alliander and its affiliated enterprises since the 2016 financial year. The external auditor audits the financial statements and reports the findings of the annual audit to the Management Board and the Supervisory Board. Important points are highlighted in a statement. The General Meeting of Shareholders can ask the auditor questions about the findings. Consequently, the auditor attends the General Meeting of Shareholders during which the annual accounts are adopted. He is authorised to speak at this meeting.
The Audit Committee reports annually to the Supervisory Board on the performance of, and relationship with, the external auditor. The Management Board gives the Audit Committee, and by extension the Supervisory Board, an opportunity to examine the most important points of discussion arising between the external auditor and the Management Board based on the draft management letter or the draft auditor’s report.
The external auditor attends the meetings of the Supervisory Board in which the external auditors’ report on the audit of the financial statements is discussed. The auditor also attends the meeting of the Supervisory Board in which the half-year figures are discussed. The external auditor attends the meetings of the Audit Committee, unless the Audit Committee decides otherwise.
External organisations supervise Liander in its capacity as a network operator active in a regulated environment. They supervise such aspects as compliance with specific legislation and regulations.
Risk management and control
Risk management is the deliberate handling of uncertainties that can have a negative impact on the achievement of the strategy as adopted by the Management Board. An effective risk management and internal control system is therefore important. The risk management and internal control system is updated in line with internal and external developments. We apply the ‘three lines’ model for risk management purposes. Each line of defence has its own responsibility in the management and control process:
The first line is responsible for identification, management and monitoring of the risks within its processes and for an effective risk management and control system.
The second line supports, advises, coordinates and sets frameworks to ensure that the management genuinely takes responsibility. It thus provides additional assurance within Alliander.
The third line provides additional assurance about the question whether the first and second lines can jointly manage the risks, so that the organisational objectives are achieved. They give an objective and independent opinion on this matter, including suggestions for possible improvements. The third line operates objectively and independently from all other parts of the organisation.
In addition, various other controls are in place to manage our risks, such as the Planning & Control Cycle, the Risk Management Framework, the Business Control Framework and the Alliander Accounting Manual. These controls are discussed in other parts of this report. Management responsibility for supervising the quality of the management of our top risks also consists of three layers.
The Alliander Resilience Committee has the CFO as chair, issues recommendations to the Management Board on privacy & security, compliance, risk acceptance, risk profile, external risk reporting requirements, exceptions of a temporary nature or events that diverge from the applicable risk policy and acceptance. The Committee also discusses risk reports and monitors and advises on the follow-up actions arising from the internal and external audits. Finally, it also promotes the embedding of risk management and internal control processes within the business units and supply chains of Alliander.
The Management Board plays a proactive role in managing attitudes and behaviours regarding risk management and internal control. Every six months, the portfolio of top risks is discussed by the Management Board and the discussion of specific risks is frequently on the agenda. If necessary, the Management Board initiates the implementation of additional measures. Moreover, the Management Board monitors the risk management and control system, which it regularly tests against the expectations of, and developments at, our key stakeholders. The principal risks are set out in this annual report under Risks.
The Supervisory Board supervises the design and effectiveness of the risk management and control system. The portfolio of principal risks is discussed in the Audit Committee every six months. The full Supervisory Board receives a summary thereof. The Management Board provides an explanation of the risk report, which the Audit Committee takes on board in its supervision. Proposed adjustments to the risk management policy are put to the Audit Committee before being introduced.
Alliander attaches great importance to integrity and having an open, honest culture. This reduces the chance of abuses and irregularities. Alliander has various integrity-related regulations in place internally.
Codes of conduct
Alliander has drawn up an internal Code of conduct that sets out standards and values. This sets out how we deal with each other, business partners, company and personal interests, business assets, confidential and non-confidential corporate information, security, and health, safety and the environment. In this way, we protect customers, associates and the reputation of Alliander, and jointly safeguard a pleasant and safe working environment. If the rules of conduct are violated, disciplinary measures can be taken, varying from an (official) warning to dismissal depending on the seriousness of the case.
The Management Board monitors the effectiveness of, and compliance with, the Alliander Code of Conduct. Every six months, the Management Board informs the Supervisory Board via the Audit Committee of its findings and observations in relation to the effectiveness and compliance. These reports are based on investigations into suspected violations of the Alliander Code of Conduct. The Internal Audit department acts as a fraud disclosure desk. Specialists are available here to investigate any reported situations. One officer of the Fraud Disclosure Desk is a member of the association of certified fraud examiners (ACFE) with a continuing professional education obligation. The Fraud Disclosure Desk completed 21 investigations into fraud and incident reports in the year under review. In four cases, the management involved decided to impose a measure or sanction. The measures taken were two immediate dismissals, one termination of an agency employee arrangement and one warning.
Every new employee is given the Code of Conduct upon joining the company, including directors and agency employees. In addition, employees take a mandatory e-learning course dealing with subjects relating to the Code of Conduct. The e-learning course helps employees to become even more conscious of integrity requirements and challenges. Integrity issues and ways of dealing with dilemmas in this field are also discussed in team meetings. This concerns such aspects as anti-corruption measures, prevention of conflicts of interest, dealing with gifts, and handling confidential information. Articles focusing on integrity risks are also regularly published on the intranet.
In carrying out our business activities, we want to ensure that we comply with all applicable laws, rules and regulations, and we constantly strive to improve our social and environmental performance throughout the value chain. Ethical and honest business practices are our guiding principle when purchasing products and services. We have a dedicated code of conduct specifying what we require from suppliers and other parties, the Alliander Supplier Code of Conduct. This Code of Conduct covers matters like the ban on child labour and the use of forced labour, non-discrimination, and requirements regarding safety, environmental protection, and working conditions. Alliander expects suppliers to comply with this Code of Conduct in their own business operations and in their dealings with their own suppliers upstream. Non-compliance with the Code of Conduct can lead to the imposition of sanctions such as termination of the contract or temporary suspension of work with or without notice of default.
The Complaints Procedure for Inappropriate Behaviour, the Regulation on reporting suspected misconduct, and a Whistleblower Policy are in place so that employees can report suspected abuse or an irregularity in a safe and structured way. In addition, the Regulation on complaints related to employment conditions - previously applicable only to reorganisations - was made permanently available in 2020 as a procedure for objecting to all decisions relating to employment conditions. Employees can also raise concerns in confidence with nominated officers within Alliander. This guarantees that every employee can report actual or suspected abuses of a general, operational and financial nature within Alliander. The Whistleblower Policy encourages employees to report every complaint or inappropriate situation within the organisation. They can do so internally to their manager, the Fraud Disclosure Desk or the nominated officer for whistleblowers.
Incidents can also be reported to an external party under the protection of the Whistleblower Policy. Once every six months, the nominated officer for whistleblowers provides the Management Board and the Audit Committee of the Supervisory Board with a list of whistleblowing reports received and the actions taken in response to these reports. All actual and suspected abuses and irregularities are immediately reported to the chair of the Supervisory Board.
Once every six months, the nominated officer for whistleblowers provides the Management Board and the Audit Committee of the Supervisory Board with a list of whistleblowing reports received and the actions taken in response to these reports. All actual and suspected abuses and irregularities are immediately reported to the chair of the Supervisory Board.
Guideline for the Prevention of Market Abuse
The Guideline for the Prevention of Market Abuse draws on the Alliander Code of Conduct and the European Market Abuse Regulation. The aim of the Guideline is to set out in clear terms that employees are not permitted to share inside knowledge or use inside knowledge to conduct personal trading transactions in financial instruments of Alliander. The Guideline describes the rules of conduct. This Guideline is also applicable to the members of the Management Board and the Supervisory Board. In 2020, Alliander was not involved in any legal disputes or court rulings on market abuse.
The by-laws of the Management Board and the Supervisory Board stipulate that members of the Management Board and the Supervisory Board must adhere to disclosure and insider trading requirements that apply pursuant to the law or stock exchange regulations with regard to the ownership of or transactions in securities in listed companies.