Board of Management and Executive Committee

General

The Board of Management is entrusted with the management of the company and operates in the context of an Executive Committee. The Executive Committee comprises the members of the Board of Management, currently the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), business leaders and leaders with functional expertise, allowing both the functions and the Business Areas to be represented at the highest level in the organization. The functions currently represented in the Executive Committee directly are Human Resources, Legal, Finance and Information Management.

Among other responsibilities, the members of the Executive Committee define the strategic direction, establish the policies and manage the company’s day-to-day operations. In performing its duties, the Executive Committee is guided by the interests of the company and its affiliated enterprises, taking into consideration the relevant interests of the company’s stakeholders.

The members of the Board of Management remain jointly and individually accountable for all decisions made by the Executive Committee. All Executive Committee decisions require a majority of the members of the Board of Management. The Board of Management can decide to reserve decisions for the Board of Management. The Board of Management is accountable for its performance to the separate and independent Supervisory Board. The Board of Management is also answerable to the shareholders of the company at the AGM. The Executive Committee members who are not also a member of the Board of Management report to the CEO.

The Supervisory Board has regular direct interaction with all members of the Executive Committee and all Executive Committee members attend the major part of most Supervisory Board meetings.

The CEO leads the Executive Committee in its overall management of the company to achieve its performance goals and objectives. He is the main point of liaison with the Supervisory Board. The CFO is responsible for overseeing AkzoNobel’s finances and information management.

The company has organized its activities into three Business Areas: Decorative Paints, Performance Coatings and Specialty Chemicals. Each Business Area is led by a member of the Executive Committee. To manage our business in a more operational way, an Operational Control Cycle is conducted once per month. For each Business Area, there are Operational Review Meetings comprising of the CEO, the CFO, the General Counsel and the relevant Business Area’s leadership. These provide a forum for a more in-depth operational discussion on subjects relevant to the Business Area. In addition, Functional and Country Review Meetings are held to review upcoming proposals and progress on the respective functional and country agendas. Twice per year in each Business Area’s Operational Review Meeting, the functional agendas of Sustainability and HSE, Human Resources, Commercial Excellence, Integrated Supply Chain and Research, Development and Innovation are discussed.

The Managing Directors of our businesses, the Country Directors and the Corporate Functional Directors in charge of the different functions, report to individual Executive Committee members with specific responsibility for their activities and performance.

The Executive Committee Pensions, chaired by the CFO, oversees the general pension policies (to be) implemented in the various pension plans of the company. The Executive Committee member responsible for HR and the General Counsel are also members.

The company has a Sustainability Council, which advises the Executive Committee on sustainability developments. It also monitors the integration of sustainability into management processes and oversees the company’s sustainability targets and overall sustainability performance. The council is chaired by the CEO and includes representatives from the Executive Committee, Managing Directors from our businesses and Corporate Directors of Strategy, Human Resources, Sustainability and HSE, Supply Chain/Research and Development, Sourcing, and Communications. Progress regarding sustainability objectives, development, target setting and implementation is reviewed quarterly by the Executive Committee and semi-annually by the Supervisory Board, and is verified annually by KPMG Sustainability (part of KPMG Advisory N.V.). Our sustainability framework is further explained in the Sustainability statements section.

The company has a Compliance Committee to support the Executive Committee with its responsibility in assuring and managing compliance, and with its reporting to the Supervisory Board. The Compliance Committee systematically identifies material compliance risks, assists in assurance of compliance with laws, regulations and ethical standards, monitors compliance and reports findings and recommendations to the Executive Committee. The Compliance Committee consists of the General Counsel (chair), Corporate Secretary, Senior Legal Counsel and Corporate Directors of Internal Audit, Control, Compliance, Human Resources and Sustainability and HSE. Our compliance and integrity management system is explained in more detail in the Compliance and integrity management chapter.

Rules of Procedure for the Board of Management and the Executive Committee

The tasks and responsibilities, as well as internal procedural matters for the Executive Committee, are addressed in the Rules of Procedure for the Board of Management and Executive Committee. These rules have been reviewed and approved by the Supervisory Board and are available on the company’s website.

Authority to represent the company is vested in two or more members of the Board of Management acting jointly. This includes the signing of documents. The Board of Management has also delegated a level of authority to corporate agents, including those members of the Executive Committee who are not also members of the Board of Management. The list of authorized signatories is publicly available.

Appointment

Board of Management members are appointed and removed from office by the AGM. The other members of the Executive Committee are appointed by the CEO, subject to the approval of the Supervisory Board.

Members of the Board of Management are appointed for four-year terms (or less), with the possibility of reappointment at the expiry of each term.

As described later in this section, the Meeting of Holders of Priority Shares has the right to make binding nominations for the appointment of members of the Board of Management and the Supervisory Board. However, as the company subscribes to the principles of the Code in general, members of the Supervisory Board and the Board of Management are appointed on the basis of a non-binding nomination by the Supervisory Board other than in the circumstances described under the Appointment paragraph later in this section.

In all other circumstances, resolutions to appoint a member of the Supervisory Board or the Board of Management will therefore require a simple majority of the votes cast by shareholders. Under certain conditions specified in the Articles of Association, shareholders may also be entitled to nominate Supervisory Board or Board of Management members for appointment. Such nominations require a two-thirds majority representing at least 50 percent of the outstanding share capital in order to be adopted at a General Meeting.

Members of the Board of Management and Executive Committee are not allowed to hold more than one supervisory board membership or non-executive directorship in another listed company. This is more stringent than the Code (provision II.1.8) and the Act on Management and Supervision (Wet bestuur en Toezicht), which allows members of a board of management two such supervisory board memberships or non-executive directorships. The exception to this rule is that in the 18 months prior to their retirement, Executive Committee members are allowed to hold more than one such supervisory board membership or non-executive directorship in order to allow them to prepare for retirement, provided that this does not interfere with the performance of their tasks as members of the Executive Committee. Furthermore, an exception can be made for an executive joining the Executive Committee. However, a maximum of two supervisory board memberships or non-executive directorships will apply. Acceptance of external supervisory board memberships or non-executive directorships in other listed companies by members of the Executive Committee is subject to approval by the Supervisory Board, for which authority has been delegated to the Chairman of the Supervisory Board.

Conflict of interest

The handling of (potential) conflicts of interest between the company and members of the Board of Management is governed by the Articles of Association and the Rules of Procedure for the Board of Management and Executive Committee. A member of the Board of Management and the other members of the Executive Committee shall not participate in the discussions and decision-making on a subject or transaction in relation to which he/she has a conflict of interest with the company. Decisions to enter into transactions under which members have conflicts of interest that are of material significance to the company – and to the relevant Board of Management or Executive Committee members – require the approval of the Supervisory Board. Any such decisions involving members of the Board of Management will be recorded in the annual report for the relevant year, with reference to the conflict of interest and a declaration that the relevant best practice provisions of the Code have been complied with. In 2014, no transactions were reported under which a member of the Board of Management or Executive Committee had a conflict of interest that was of material significance to the company.

Remuneration

In line with the remuneration policy adopted by the AGM, the remuneration of the members of the Board of Management is determined by the Supervisory Board on the advice of its Remuneration Committee. The Supervisory Board also decides on the remuneration of the other members of the Executive Committee on the proposal of the CEO. The composition of the remuneration of Board of Management members, and the remuneration policy itself, are described in the Remuneration report and the Consolidated financial statements (see Note 22). The service contracts of the members of the Board of Management do not contain change of control provisions and are compliant with the Code. The main elements of the service contracts of Board of Management members are available on our corporate website.