Import Supervisory Directors

Import Supervisory Directors
Six out of ten supervisors at AEX-listed companies come from abroad. Half of the foreign supervisory directors have an Anglo-American background. Emerging markets are hardly represented.

Not a Dutchman but a Dane waves the gavel at two AEX-listed companies: Nils Smedegaard Andersen is Chairman of the Supervisory Board of paint manufacturer AkzoNobel and since the end of last year he has been the Chairman of consumer goods and food giant Unilever. Andersen appears to personify the rise of the foreign supervisory director in the community of listed companies in the Netherlands. By now, the majority of supervisors at AEX-listed companies are non-Dutch: of the total of 184 supervisory directors and non-executive directors (in one-tier boards), 110 are from abroad; that is 60 per cent. As a result, the supervision of the largest Dutch companies has been internationalized to a great extent. There also seems to be an increase: in 2019 alone, 19 foreign supervisory directors were appointed to AEX-listed companies and, from 2016 onwards, a total of 58 supervisory directors from abroad were in their first term of office or they have just been reappointed. In the preceding years − from 2003 to 2015 inclusive − 52 foreign appointments were made. So in the past four years alone, more non-Dutch supervisory directors have been appointed than in the previous 13 years. Since Management Scope conducted the present survey this year for the first time, however, it is not possible to make a comparison with certainty.

100% non-Dutch
Three AEX-listed companies even have only foreign supervisory directors or non-executives: the Indian steel producer ArcelorMittal, the South African tech conglomerate Prosus (even if the CEO is Dutch, by the way) and the Dutch-Belgian biotech company Galapagos. The first two of these ‘100% non-Dutch’ companies, however, only have a stock exchange listing here.  This top three − in terms of the percentage of foreign supervisory directors − is closely followed by the publishing group/data supplier RELX (former Reed Elsevier, now entirely British), Philips (now supplier of medical technology) and the aforementioned Unilever. Each of these companies is firmly rooted in Dutch company history and has undergone far-reaching internationalization in recent decades.

Only one Dutch passport
This internationalization is reflected in the board rooms: RELX and Philips both have only one Dutch supervisory director/non-executive. At RELX it is Marike van Lier Lels, and at Philips only Chairman Jeroen van der Veer still has a Dutch passport (see ‘Jeroen van der Veer and Christine Poon discussing corporate governance’ on page XX). At Unilever, non-execs Marijn Dekkers (who also has American nationality) and top executive Feike Sijbesma of chemical company DSM represent the Dutch squadron on the multi-member board. With no less than nine foreign supervisory directors, Unilever ranks number one in absolute numbers, followed by oil and gas group Shell, real estate company Unibail-Rodamco-Westfield, beer producer Heineken and RELX (each with eight supervisory directors from across the border) and Philips (seven).
The internationalization of Dutch supervisory boards is not limited to its ordinary members: eight of the twenty-five AEX-listed companies (almost a third, in other words) now have a foreign chairperson and six have a vice-chairperson from abroad. At Unibail-Rodamco-Westfield, the Supervisory Board is even led by a duo of a British-American chairman and a British vice-chairman.

Dutch get-together
At the other end of the spectrum we find the AEX-listed companies that do not have any foreign supervisory board members: industrial conglomerate Aalberts and insurer a.s.r. Nederland. This is hardly surprising when it comes to an insurer that has even included the strategic focus and home market in its name, but this is different for Aalberts. Top executive Jan Aalberts (who stepped down in 2014) built a global network of 156 locations with his well-known 'strings of beads'. The group serves markets in Northern and Western Europe and the United States. The Supervisory Board of the industrial firm, however, is a Dutch get-together. With the German Executive Director Oliver Jäger, the Executive Team does have a foreign touch.

Scandinavian address book
Two other companies with relatively little foreign presence in their Supervisory Board are bank ABN AMRO and telecom group KPN. ABN AMRO attracted the Swedish Anna Storåkers last year, but that choice seemed more motivated by the desire to engage a woman with banking experience. Of course, a Scandinavian address book always comes in handy, for example for the recent investments in the Swedish fintech Tink. Since the bank's nationalization in 2009, the international role of the bank has been abandoned. After the American Chairman of the Supervisory Board Arthur Martinez and the Dutch but Anglo-Saxon-oriented Olga Zoutendijk, the Board is now chaired by Tom de Swaan. He will soon form a Dutch tandem at the top of the bank with the new CEO, Robert Swaak. However, international ambitions are still smouldering within the bank. Should the ambition arise to revive the global ABN AMRO of yesteryear, it is likely that the international content of the supervisory board will increase again as well. Telecoms company KPN deliberately put the ambitions of becoming a European player on hold a few years ago: the business operations in Germany and Belgium were sold and the company is now concentrating on its home market. This is reflected in the Supervisory Board. Admittedly, it still contains a Mexican, but this is a legacy from 2013, when KPN had to deal with a hostile takeover attempt by the Mexican company América Móvil of Carlos Slim and was forced to appoint two supervisory directors from Mexico.   

Half are American or British 
Thus, the international composition of the boards of AEX-listed companies directly reflects their global ambitions − or the lack thereof. It is logical for multinationals to acquire foreign knowledge, experience and networks. This is because it is useful if supervisory directors or non-execs are familiar with the local markets, mores and society and can perhaps open doors. But do the boards of the largest multinationals reflect the continents where they operate? If we look at the nationalities, a clear top-3 emerges. North America is ranked at 1: no less than 31 out of 110 foreign supervisory directors (almost a third) come from the United States. At a distance, the United Kingdom is number 2, as the supplier of 19 supervisory directors. And then we don't even count the nine supervisory directors with dual nationality (often a combination of American, Canadian and British nationality). So half of the foreign seats in the board rooms of AEX-listed companies are occupied by supervisors of Anglo-American origin. In third place is our southern neighbour Belgium, with nine supervisory directors, and only in fourth place do we find our eastern neighbour Germany: our most important trading partner, which is also closest to us in terms of governance. Besides, this fourth place is shared with France.

Where's Asia?
It is also interesting to see what nationalities are not or hardly represented in the board rooms of Dutch multinationals. The most conspicuous absentee is Asia, which, after all, is the continent that offers the greatest opportunities for growth. The list includes one Chinese: Laura Cha, a non-executive director of Unilever. This board also includes Harvard professor Youngme Moon: an American, but born in Korea. At Philips, the Asian-American Christine Poon, child of first-generation Chinese immigrants, is a member of the Supervisory Board. Furthermore, both DSM and Shell have a supervisory director/non-exec from Singapore, but that is about it. Heineken, for example (active in 178 countries), which is heavily involved in the beer markets in the emerging countries, does not have an Asian supervisory director on board. It does have two Mexicans, which reflects that country's contribution to the beer manufacturer's profits. The importance of India as an emerging market is also barely reflected in Dutch supervisory positions. Only Philips has an Indian supervisory director, Neelam Dhawan. (Vanisha Mittal, a member of the board of ArcelorMittal and daughter of founder Lakshmi, is not included because that company is Indian).

Feminization from abroad
What is striking is the relatively large number of women among the foreign supervisory directors and non-executives. The male/female ratio is almost equal: 59 men versus 51 women. By way of comparison: the proportion of women in the Top 100 Supervisory Directors of Management Scope is 38 per cent. One explanation could be that companies more often look for female supervisory directors abroad, seeking the management experience they feel they cannot find in their own country. This applies all the more to the supervisory boards of AEX-listed companies, although seven do not yet meet the 30% target, according to a recent survey by Het Financieele Dagblad. However, there is a limit to feminization from abroad: the eight chairmanships are exclusively held by men. Among the six vice-chairs there are two women: the British Mary Harris at Unibail-Rodamco and the already mentioned Poon at Philips. So there is still a hurdle to take.

Careful onboarding
The bottom line: supervision at AEX-listed companies has been strongly internationalized in recent years, a development that does not seem to come to an end for the time being. However, the emphasis is very much on the Anglo-Saxon world and too little on supervisory directors from emerging markets (see also ‘Internationalization of supervision is a challenge’ on page XX). Another point of attention is whether the supervisory directors from abroad have sufficient affinity with the local governance mores and with social relations in the country where the parent organization has its roots and where the head office is located. There is a famous passage in Jeroen Smit's book De Prooi (‘The Prey’) in which Cor Herkströter − at the time Chairman of the Supervisory Board of ING, the intended merger partner, as the two banks were about to merge in 2007 – is talking on the golf course, with the Dutch Civil Code in hand, to his counterpart at ABN AMRO, the American Arthur Martinez, and explains to the latter the duty of the Dutch supervisory director to put the company's interests first. Careful onboarding is therefore of great importance, especially as the majority of supervisory directors and non-execs at AEX-listed companies are foreign. Perhaps, the next governance code could include a specific best practice for this purpose?

This article was published in Management Scope 02 2020.