Corporate governance

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. The governance of NS, which is a state participation, 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 people as the executive board of NV Nederlandse Spoorwegen. It is supervised by the Supervisory Board. These two bodies are independent of each other. Both bodies report on the execution of their tasks to the General Meeting.

Shareholder

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 is held 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, 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 appoints the auditor. 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.

Corporate Governance Code

As a large corporation with an important public role of great social significance, and with the Dutch State as our sole shareholder, NS is keen to stress the importance of openness and transparency. Although not a listed company, NS applies the Dutch Corporate Governance Code 2016 (hereinafter the 'Code'). In 2017, the rules of procedure for the Executive and Supervisory Boards, the Risk & Audit Committee, the Remuneration Committee and the Appointments Committee were adapted to the Code (which has replaced the Dutch Corporate Governance Code 2008 as of 8 December 2016). As NS is not quoted on the stock exchange and does not have a one-tier management structure, some parts of the code do not apply^[1].

1 The following best-practice stipulations are not applicable: 1.3.6, 2.1.3, 2.3.8, 2.3.9, 2.7.5, 2.8, 2.8.1 t/m 2.8.3, 3.1.3, 3.3.3, 3.4.2, 4.1.6, 4.1.7, 4.2.2 t/m 4.2.6, 4.3, 4.3.1 t/m 4.3.6, 4.4, 4.4.1 t/m 4.4.8, 5.1, 5.1.1 t/m 5.1.5.

Executive Board

The Executive Board bears the responsibility for managing the business and reports to the Supervisory Board and the general meeting. It establishes the vision for the company and the resulting mission, strategy and objectives. The Executive Board is responsible for implementing the NS strategy. Implementation is partly handled by the business units and subsidiaries, for which the titular directors of the business units and subsidiaries are also responsible. Pursuant to the Articles of Association of NV Nederlandse Spoorwegen, the Executive Board rules of procedure and the Supervisory Board rules of procedure, some 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, with the aim of providing all stakeholders with a clear understanding of the company’s decisions and decision-making procedures.
Executive Board members are appointed by the general meeting on the recommendation of the Supervisory Board. The Supervisory Board decides on the number of members in the Executive Board. Members of the Executive Board can be suspended or dismissed by the general meeting. Members of the Executive Board are appointed each time for a period of four years at most. The Executive Board currently consists of five people and has the following functions: CEO, Finance Director, Risk Management Director, Director of Operations and Director of Commerce & Development.
The Executive Board consisted of the following individuals in 2017: Mr Roger (R.M.L.H.) van Boxtel, CEO, Mr Bert (H.L.L.) Groenewegen, Finance Director, Ms Susi (S.M.) Zijderveld, Chief Governance, Risk & Compliance Officer, Ms Marjan (M.E.F.) Rintel, Director of Operations, and as of 1 April 2017, Mr Tjalling (T.B) Smit, Director of Commerce & Development. The remuneration and terms and conditions of employment of the Executive Board members are established by the Supervisory Board with due regard to the remuneration policy established by the general meeting. The employment contracts of members of the Executive Board include the right to compensation upon dismissal, up to a maximum that has been fixed on the initiative of NS at one year’s basic salary. Both the Executive Board as a whole and each individual Executive Board member are authorised to represent the company. The Executive Board's responsibilities, tasks and procedures are laid down in the Articles of Association of NV Nederlandse Spoorwegen and NS Groep NV, and in the rules of procedure of the Executive Board.
The Executive Board aims to achieve the objectives and ensure the continuity of the company and its affiliated enterprises. It focuses on long-term value-creation and therefore takes relevant interests of the stakeholders into consideration. In cases where a (potential) direct or indirect personal interest of a member of the Executive Board conflicts with the interests of NS, that member will immediately inform the chairman of the Supervisory Board and other members of the Executive Board. The member will disclose all relevant information, including information about any spouse, registered partner or other companion, foster child and relatives by blood or affinity to the second degree of consanguinity. Members of the Executive Board will not be involved in discussions or decision-making about a subject or transaction 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 therefore no decision can be made by the Board, the decision will be made by the Supervisory Board. The Supervisory Board must give its approval beforehand to decisions made by the Executive Board relating to entering into transactions that involve conflicting interests that are of material significance to NS and/or the member in question of the Executive Board. Such transactions are published in the report by the board, stating the conflicting interest. Transactions involving conflicts of interests of members of the Executive Board or Supervisory Board will be agreed on conditions that are in line with the market.
The Secretary of the Executive Board ensures that the proper procedures are followed and that the actions taken are consistent with the legal and regulatory obligations governing the Executive Board’s actions. This policy was complied with in 2017.

Supervisory Board

The Supervisory Board tasks include supervising the Executive Board’s policies and the general management of the company and its affiliated enterprises, and it also provides advice to the Executive Board. In performing its duties, the Supervisory Board shall focus on long-term value creation for the company and the businesses connected with it, taking into consideration the interests of the company's stakeholders. The Executive Board provides the Supervisory Board promptly with the information and resources it requires in order to do its work properly. If the Supervisory Board and/or a member of the Supervisory Board considers 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.

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 as a whole is responsible for performing its duties properly, and its members may adopt positions independently of 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 functioning of the Executive Board as a body and the functioning of the individual members of the Executive Board.
Supervisory Board members are appointed by the general meeting, on the recommendation of the Supervisory Board and with due observance of the job profile and after consulting the Central Works Council. The Central Works Council has enhanced rights that let it nominate one third of the number of Supervisory Board members. The Supervisory Board has at least five members and at most nine. The Supervisory Board has drawn up a profile for its size and composition, taking account of the nature and activities of the company and outlining the desired expertise and backgrounds of its members. The Supervisory Board aims for a composition that is well mixed, including a mix in terms of gender and age. The profile is evaluated every three years to ensure it is up to date and accurate. More than half of the Supervisory Board members are independent in the sense of the Code.
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 will be justified by the Supervisory Board in its report. The manner in which the Board member fulfilled their duties in the previous term is taken into account, and they will only be reappointed after careful consideration. The retirement schedule of the Supervisory Board is published on the company's website.

A Supervisory Board member shall immediately report any potential conflicts of interest relating to NS to the chair of the Supervisory Board. If this concerns the chair, they must immediately report it to the vice-chair. The member in question will disclose all relevant information including the information relevant for the situation about their spouse, registered partner or other companion, foster child or relatives by blood or marriage to the second degree of consanguinity. Members of the Supervisory Board will not participate in discussions and decision-making about a subject 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 provide advice to the Supervisory Board and prepare its decision-making. The committees therefore facilitate 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 performs its duties in accordance with the rules of procedure as established by the Supervisory Board in accordance with the provisions of the Code. More than half the Risk and Audit Committee members are independent in the sense of the Code. The Risk and Audit Committee advises the Supervisory Board and prepares the Supervisory Board's decision-making about monitoring the integrity and quality of the financial reporting of NS and the effectiveness (and assessment thereof) of the internal risk management systems and control systems of NS. The Risk and Audit Committee meets at least twice a year or as often as it deems necessary, and at least once a year with the external auditor, without the Executive Board present. The Risk and Audit Committee consists of three members. The Risk and Audit Committee currently consists of Mr J.J.M. Kremers (chair), Ms M.E. van Lier Lels and Mr G.J.A. van de Aast.

Remunerations and Appointments Committee

The combined Remuneration and Appointments Committee performs its duties in accordance with the rules of procedure as established by the Supervisory Board, in accordance with the provisions of the Code. The combined Remunerations and Appointments Committee consists of three members; more than half of them are independent in the sense of the Code. The members of the combined Remunerations and Appointments Committee currently are Mr P. Rosenmöller (chair), Ms J.L. Stuijt and Mr G.J.A. van de Aast.
The combined Remunerations and Appointments Committee prepares the decision-making of the Supervisory Board, including the appointment of the members of the Executive Board and the Supervisory Board, the functioning of the Executive Board and the Supervisory Board, and the formulation of the remuneration policy and its implementation for the Executive Board.

The combined Remunerations and Appointments Committee draws up an annual report about the remuneration policy for members of the Executive Board and the implementation thereof. The Supervisory Board determines the remuneration of individual Supervisory Board members based on the proposals from the combined Remunerations and Appointments Committee, within the limits of the remuneration policy adopted by the general meeting. The remuneration report can be found in this report.
The combined Remunerations and Appointments Committee decides the selection criteria and procedures for appointing members of the Supervisory and Executive boards, as well as periodically reviewing the size and composition of the Supervisory Board and proposing a profile for its makeup. It is also responsible for the process for periodic appraisal of the functioning of the individual Supervisory Board members, and it presents proposals for the appointment or reappointment of Supervisory Board members.

External auditor

The external auditor is appointed by the general meeting. The external auditor reports to the Supervisory Board and Executive Board on the investigations carried out and presents the results of the investigations and audit with an audit opinion concerning the fair presentation of information in the financial statements of NS.

The Risk and Audit Committee provides the Supervisory Board with an annual report about the functioning of the external auditor and the developments in the relationship with the external auditor. The external auditor attends the meetings of the Supervisory Board at which its report on the audit of the financial statements is discussed. The auditor is also available for the general meeting at 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 meetings of the Risk and Audit Committee, unless that committee determines otherwise. The external auditor immediately informs the chairman of the Risk and Audit Committee if abuses or irregularities are observed or suspected when the work is carried out. If (the suspicion of) an 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 the external auditor since the financial year 2014.

NS Audit

The internal auditors perform their duties under the responsibility of the Risk Management Director. The results of their activities are discussed with the Risk and Audit Committee. The Executive Board ensures that the Risk and Audit Committee is involved in drawing up the working plan and that it is agreed with the external auditor. NS Audit is in direct contact with the Risk and Audit Committee and the external auditor.

Organising sustainability

Sustainability of the business practices is safeguarded through a formal organisation consisting of a Council for Sustainable Business Practices, a Working Group for Sustainable Business Practices, a Communications Working Group and a number of temporary task groups. This organisation is supported by a Sustainable Business Practices staff department. The Council is a body that prepares decisions and policies. The Council consists of directors of business units and staff departments and is chaired by the Commerce & Development director. Proposed resolutions and policies to be implemented by the business units and/or corporate staff groups are submitted to the Executive Board for approval. There are also communications and other representatives of the NS business units and staff units in the working group and the communications working group for Sustainable Business Practices.
Sustainable mobility is one aspect of the strategy of NS. This strategy is translated into plans and KPIs by the business units. The plans relate to the three strategic themes of Climate-neutral, the Circular Economy and Inclusiveness.

The progress and development of the sustainability results have been observed and managed through the regular planning, control and reporting cycle. Investment proposals should include sustainability impact reports.
In accordance with the Code, the Executive Board is responsible for the aspects of Corporate Social Responsibility (CSR) that are relevant to NS. The Executive Board reports on this to the Supervisory Board and the General Meeting. There were no changes in 2017 in the CSR policy and objectives.