As a large energy network company that plays a pivotal role in Dutch society, Alliander attaches great importance to careful management, effective supervision and transparent reporting to all stakeholders. For this reason, Alliander – though not listed on the stock exchange – voluntarily applies the Dutch Corporate Governance Code wherever possible and applicable.
Revision of the Code
The Dutch Corporate Governance Code (the Code) was adopted in 2003 by the then Tabaksblat Committee. The last revision was performed by the Frijns Committee in December 2008. In February 2016, the Van Manen Committee submitted a proposal for a revision of the Code and the updated Code was published on 8 December 2016. The most important new elements are the focus on long-term value creation and the introduction of culture as part of good corporate governance.
The Code is effective from the financial year starting on or after 1 January 2017. This means that we will report on our compliance with the revised Code for the first time in 2018 (Report of the Management Board for 2017), provided that the cabinet transposes the revised Code into Dutch law in 2017. In 2017, Alliander will amend its articles of association, by-laws and procedures to bring them into line with the revised Code, where possible and/or relevant. The Annual Report 2017 will be based on the revised Code. You can download the existing and revised Codeon www.commissiecorporategovernance.nl.
Alliander N.V. (Alliander) is a public limited company according to Dutch law. The shares of Alliander are held by Dutch provinces and municipalities and are not listed on the stock exchange. As a company with statutory two-tier status, Alliander is managed by the Board of Management, while supervision is carried out by the Supervisory Board. Both bodies act independently of each other and are accountable for the performance of their duties to the General Meeting of Shareholders. Amendments are made to the articles of association wherever necessary to comply with the law. The articles of association were last emended on 4 August 2015.
Corporate governance structure and governance roles in outline
The Management Board and the Supervisory Board are jointly responsible for corporate governance at Alliander. During the reporting year, no substantial changes were made to the corporate governance structure. Our two principal pillars for good corporate governance remain good executive management and good supervision of that management. The Management Board, the Supervisory Board and the General Meeting of Shareholders are responsible for this. To ensure the competent performance of these duties, they receive support from an effective risk management framework, an internal audit function and the external auditor.
The governance structure is based on Book 2 of the Dutch Civil Code, the Code, the company's articles of association and various sets of internal rules and by-laws. The Gas Act and the Electricity Act 1998 also contain various provisions that influence the company's governance. In addition, Alliander operates a Code of Conduct (including Insider Trading Policy) and a Whistleblower Policy. The articles of association, various sets of rules and by-laws and other corporate governance documentation are posted on the website of Alliander.
Governance structure of Alliander
In 2016, the Management Board of Alliander consisted of three members. More information about the members of the Management Board is given in the Members of the Management Board chapter of this annual report.
Duties and responsibilities
The Management Board is tasked with the management of the Alliander Group. Its responsibilities include:
realisation of the company´s objectives;
strategy and related risk profile;
development of the results;
compliance with laws and regulations;
corporate social responsibility aspects that are relevant to the company.
The Management Board ensures that its actions are based on a balanced consideration of all relevant interests of stakeholders, including customers, shareholders (and other providers of capital), employees and society.
The Management Board performs its management duties as a collegiate body, based on an allocation of tasks to individual members. Each and every change in this allocation of tasks requires the approval of the Supervisory Board. Though each member of the Management Board is responsible for the tasks assigned to him or her, the entire Management Board carries collective responsibility. Both the Management Board and each member of the Management Board is authorised to represent the company.
By-laws of the Management Board
In addition to the statutory regulations and the relevant provisions in the articles of association, the Management Board must adhere to the by-laws of the Management Board. These by-laws set out the responsibilities, tasks and procedures of the Management Board.
The Supervisory Board appoints the members of the Management Board for an indefinite period. This is a departure from the recommendation in the Code (appointment for a maximum period of four years). Periodic appointments as prescribed in the Code entail a risk for the implementation of the corporate policy, which has an inherently long-term nature. The Supervisory Board notifies the General Meeting of Shareholders of a proposed appointment.
The members of the Management Board are suspended or dismissed by the Supervisory Board. The Supervisory Board shall not dismiss a member of the Management Board before hearing the General Meeting of Shareholders about the proposed dismissal.
At year-end 2016, the Supervisory Board consisted of five members with one vacancy. More information about the members of the Supervisory Board is given in the Members of the Supervisory Board chapter of this annual report.
Duties and responsibilities
The Supervisory Board has three roles: supervisor, adviser and employer of the Management Board. The Supervisory Board supervises and advises the Management Board with regard to the policy and Alliander's operations in general, including:
realisation of the company's objectives;
strategy and risks arising from the operational activities;
internal risk management and control systems;
The Supervisory Board performs its supervisory task with due regard to the corporate social responsibility aspects that are relevant to Alliander and the interests of all stakeholders. The Supervisory Board fulfils its duties as a collegiate body with collective responsibility.
By-laws of the Supervisory Board
In addition to the statutory regulations and the relevant provisions in the articles of association, the Supervisory Board has also adopted by-laws to ensure its proper functioning. It is required to adhere to these by-laws, which provide for the composition, committees, duties and powers, meetings and decision-making of the Supervisory Board.
The General Meeting of Shareholders appoints the members of the Supervisory Board, upon the nomination of the Supervisory Board. Both the General Meeting of Shareholders and the Central Works Council can recommend candidates. The Supervisory Board is in principle obliged to nominate one third of its members upon the recommendation of the Central Works Council ('enhanced right of recommendation’). The General Meeting of Shareholders also has an enhanced right of recommendation for the nomination of one third of the Supervisory Board members.
To be eligible for appointment or reappointment, a candidate must meet the criteria as set out in the profile of the Supervisory Board. The profile is a guideline for the composition and size of the Supervisory Board. A Supervisory Board member is appointed for a four-year period and resigns, in accordance with the schedule of resignation, no more than four years after his/her appointment. A Supervisory Board member can be reappointed twice, and shall resign after three four-year terms of office or, if earlier, in the year that he or she turns 70. In special circumstances, the Supervisory Board is entitled to make an exception to the above.
A Supervisory Board member can be suspended by the Supervisory Board. Only the Enterprise Section of the Court in Amsterdam can dismiss a Supervisory Board member. The General Meeting of Shareholders can only withdraw its confidence from the full Supervisory Board and cannot dismiss individual Supervisory Board members.
The Supervisory Board has two standing committees.
The committee advises on, among other things, the financial reporting, the effectiveness of the internal risk management and control systems, the role and functioning of the Internal Audit Department, the relationship with the external auditor and the risk management in relation to the application of information and communication technology.
Combined Selection, Appointment and Remuneration Committee
The committee advises on, among other things, the composition of the Supervisory Board and the Management Board and about the conditions of employment (including remuneration) of the members of the Management Board. It also assesses the functioning of the members of the Management Board at least once a year. In addition, it prepares the Remuneration Report.
Each committee has its own by-laws setting out its tasks, responsibilities and procedures. The committees meet independently and do the preparatory work for the full Supervisory Board in specific areas. Each and every committee meeting is reported on in the meeting of the full Supervisory Board. Decision-making takes place on the basis of these reports.
General Meeting of Shareholders
The shares of Alliander are held directly or indirectly by 56 public shareholders (municipalities and provinces). Alliander organises a General Meeting of Shareholders within six months after the end of the financial year. The agenda includes the following subjects insofar as relevant:
discussion of the annual report;
external auditor's explanation of the audit opinion;
adoption of the financial statements and the dividend;
discharge of the Management Board and the Supervisory Board from responsibility;
appointment of members of the Supervisory Board;
appointment or reappointment of the external auditor.
An overview of the other most important powers of the General Meeting of Shareholders is posted on the website Alliander.com. Certain powers of the shareholders have been allocated to a Committee of Shareholders. These include the power of recommendation, appointment and dismissal of members of the Supervisory Board and powers in relation to the appointment and dismissal of members of the Management Board.
All decisions are made on the basis of the ‘one share is one vote' principle. Decisions are made with an absolute majority of votes, unless the law or the company's articles of association explicitly prescribe a larger majority.
Extra meetings can be held if the Supervisory Board or the Management Board considers this necessary. The agenda of the General Meeting of Shareholders is determined by the Management Board and the Supervisory Board. Shareholders can also convene meetings and/or put items on the agenda, as provided for in the law and the articles of association.
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 Management Board endorses the significance of effective risk management. The risk management and internal control system is updated in line with internal and external developments. We apply the ‘three lines of defence’ model for the risk management. Each line of defence has its own responsibility in the management and control process:
The first line is primarily responsible for the identification, management and monitoring of the risks within its processes and for an effective risk management and control system.
The second line provides support, advice and coordination 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 guarantee that the level of control is sufficient to achieve the organisational objectives. They give an objective and independent opinion on this matter, including suggestions for possible improvements. The third line operates in complete separation 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 measures are discussed in other parts of this report.
Management responsibility for supervising the quality of the control of our top risks also consists of three layers.
The Alliander Resilience Committee. In mid-2016, the former Risk Management Committee was fully incorporated into the Alliander Resilience Committee. This committee, with the CFO as chairman, issues recommendations to the Management Board and the management team of Liander on risk acceptance, risk profile, external risk reporting requirements, exceptions of a temporary nature or events that diverge from the applicable risk policy and acceptance. In addition, the committee approves guidelines for Governance, Risk and Compliance that arise from approved policy, and makes adjustments in respect of specific risk-related issues. The committee discusses internal and external risk reports, and monitors and advises on the follow-up on internal and external audits. Finally, it also promotes the embedment of risk management and internal control processes within the business units and chains of Alliander.
Management Board. The members of the Management Board play a proactive role in managing attitudes and behaviours regarding risk management and internal control. Every quarter, the portfolio of top risks is discussed by the members of the Management Board. The discussion of separate risks is frequently on the agenda and additional measures are initiated where necessary. Moreover, the Management Board monitors the risk management and control system, which it regularly tests against the expectations of, and developments at, our most important stakeholders. In 2016, the Management Board updated the risks in relation to the Alliander strategy, based on a risk session. The main risks are set out in this annual report at Risk information.
The Supervisory Board. The Supervisory Board supervises the design and effectiveness of the risk management and control system. The portfolio of top risks is discussed every quarter in the Audit Committee and a summary is given to the full Supervisory Board. The Management Board provides an explanation of the risk report, which the Audit Committee takes on board in its supervision. Possible adjustments to the risk management policy, including the risk-bearing capacity, are put to the Audit Committee before being introduced.
Internal audit function
The Internal Audit Department is an independent function that provides (additional) assurance regarding the control, effectiveness, efficiency and compliance of the operations to the Management Board and the management. The department also makes proposals for improvements and functions as a Fraud Disclosure Office within Alliander.
The Internal Audit Director acts under the responsibility of the chairman of the Management Board. She holds regular consultation with the external auditor, has a reporting line to the chairman of the Audit Committee and is a permanent participant in the meetings of the Audit Committee. These powers are laid down in the Internal Audit Charter.
Every year, Internal Audit draws up an audit plan based on risk reports and the audit findings. This plan, which contains the proposed audit engagements, is discussed with the management and put to the Management Board and the Audit Committee for approval. The Internal Audit Director reports twice a year to the Management Board and to the Audit Committee about the progress of the implementation of the audit plan and the actions taken on the recommendations.
The external auditor is appointed by the General Meeting of Shareholders. To this end, the Supervisory Board makes a nomination, based on advice from both the Audit Committee and the Management Board. The auditor examines the consolidated and company financial statements of Alliander as well as the statutory financial statements of Alliander's subsidiaries. In addition to an audit opinion, the external auditor also reports his findings each year to the Management Board and the Supervisory Board in the form of a management letter and an auditors' report.
The auditor also examines the sustainability information in the annual report. This leads to an Assurance Report. The Audit Committee´s duties in its relationship with the external auditor are to:
Assess the remuneration of, and engagement conditions for, the annual audit by the external auditor
Assess how the external auditor is involved in the content and publication of financial reports, other than the financial statements
Act as the principal contact for the external auditor if the latter finds irregularities in the content of financial reporting
The external auditor attends all meetings of the Audit Committee. In addition, he attends the meeting of the Supervisory Board in which the external auditors' report on the annual audit is discussed and the decision on the adoption of the financial statements is made. He reports his findings about the annual audit simultaneously to the Management Board and the Supervisory Board. Moreover, the external auditor attends the meeting of the Supervisory Board in which the half-year figures are discussed. He is also present at the annual General Meeting of Shareholders. At this meeting, he clarifies the audit opinion and answers shareholders' questions about his opinion on the true and fair view of the financial statements. Effective from the 2016 financial year, Deloitte Accountants B.V. has been appointed as the external auditor for a period of four years with the option of two renewal periods of two years each.
Compliance with the Code
Provisions not applying to Alliander
Not all the provisions of the Code are applicable to Alliander. This is because Alliander is a company with a two-tier structure, while the shares may exclusively be held by Dutch lower government authorities and are not listed on the stock exchange. The principles and best practice provisions relating to share and option plans, the issuance of depositary receipts for shares and institutional investors are also not applicable.
The best practice provisions II.2.4 through II.2.7, II.2.13c, II.2.13d, III.2.2e, III.7.1, III.7.2, IV.1.1, IV.1.2, IV.1.7, IV.3.11 and IV.4.1 through IV.4.3 and the principles included under III.8 and IV.2 are not applicable.
Departures from the Code
Alliander complies with virtually all principles and best practice provisions of the Code. For a number of best practice provisions, Alliander adds a qualifying statement and/or does not apply the best practice provisions either in part or in whole. This concerns principle IV.1 and the best practice provisions II.1.1, II.2.3., II.2.8, II.2.14, III.5, III.6.5 and IV.3.1. We explain these departures in greater detail on the website Alliander.com.
Corporate governance statement
This chapter may be regarded as the corporate governance statement referred to in Article 2a of the Decree on Additional Requirements for Annual Reports (Vaststellingsbesluit van 23 december 2004 tot vaststelling van nadere voorschriften omtrent de inhoud van het jaarverslag’ ('the Decree')). The information required in this corporate governance statement as referred to in Article 3a(a) of the Decree – namely the main features of Alliander's management and control system relating to its financial reporting – can be found in this chapter under Risk Management. This information must be deemed to have been incorporated and repeated in this statement.
Supervision of the network operator
As our network operator Liander fulfils a vital role in society and operates in a regulated market, its activities are carefully supervised by external organisations. Among other things, they supervise compliance with specific legislation and regulations.
Overview of regulators
Code of conduct, integrity policy and complaints policies
Alliander is strongly committed to integrity and reliability. This is explicitly expressed in its Code of Conduct, Insider Trading Policy and Whistleblower Policy.
Code of Conduct
The Alliander Code of Conduct formally sets out how we deal with business partners, company and personal interests, business assets, confidential and non/confidential corporate information and safety as well as the rules of behaviour that apply within Alliander. In this way, we protect customers, associates and the reputation of Alliander, and jointly safeguard a pleasant and safe working environment. If necessary, measures are taken against undesirable behaviour.
The integrity policy includes a ‘Complaints Procedure for Undesirable Behaviour’ and a Whistleblower Policy. Employees can also raise concerns in confidence with Nominated Officers within Alliander. The Whistleblower Policy lays down how suspicions of malpractice of a general, operational and financial nature must be reported and handled within Alliander. All reports are treated in confidence. A whistleblower's legal position shall not be compromised in any way as a result of reporting suspicions of malpractice.
Insider Trading Policy
The ‘Insider Trading Policy for Alliander N.V and Subsidiaries’ is applicable to employees who are directly or indirectly involved in Alliander's transactions in financial instruments or have access to insider knowledge. The purpose of this policy is to prevent the use of insider knowledge and conflicts of company and personal interests (or any semblance thereof) in relation to certain transactions. The Insider Trading Policy forms part of the Alliander Code of Conduct. The Insider Trading Policy is also applicable to the members of the Management Board and the Supervisory Board.