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Corporate Governance

ICT Group N.V., a public limited liability company incorporated under Dutch law with its registered office in Barendrecht, the Netherlands (the “company”) is the parent company of the ICT group of companies. The company’s shares have been listed on the NYSE Euronext Amsterdam since 1997. The company qualifies as a ‘large company’ (structuurvennootschap) within the meaning of the Dutch Civil Code and applies the relevant rules of Dutch corporate law.

The company has pursued a consistent policy to align its corporate governance in line with Dutch law and the Dutch Corporate Governance Code 2008. The company will continue to enhance transparency and communications with investors and other stakeholders in the company. In this report, the company addresses its overall corporate governance structure and states to what extent it applies the principles and best practice provisions of the Dutch Corporate Governance Code 2008. Relevant substantial changes in the company’s corporate governance structure and in the company’s compliance with the Dutch Corporate Governance Code 2008, are proposed for approval to the General Meeting of Shareholders. More detailed information on ICT’s corporate governance and the related rules and regulations can be found on the company’s website (https://ict.eu/about-us/investor-relations/).

On 8 December 2016, a new Corporate Governance Code was published. The Corporate Governance Code 2016 is effective 1 January 2017. The company will report on compliance with the new Code in its Annual Report 2017.

EXECUTIVE BOARD

The company has a two-tier board structure, comprising an Executive Board and a Supervisory Board. The Executive Board is responsible for the management of the company. According to the Articles of Association, the Executive Board must consist of at least one member. As of 21 May 2014, the Executive Board consisted of the following two members: Jos Blejie, Chief Executive Officer, and Jan Willem Wienbelt, Chief Financial Officer. In accordance with the company’s objectives and Dutch law, the Executive Board manages the company, taking into account all parties involved in the company and its related businesses. The Executive Board is supervised by the Supervisory Board. The Executive Board provides the Supervisory Board with all the information the Supervisory Board needs to fulfil its responsibilities. Major decisions of the Executive Board require the approval of the Supervisory Board. The Executive Board is obliged to perform its duties in accordance with the Rules for the Executive Board, which have been placed on the company’s website.

Terms of appointment
The members of the Executive Board are appointed for a term of four years. This term expires at the end of the General Meeting of Shareholders to be held in the fourth year after the year of their appointment. Reappointment is possible for consecutive terms of four years. Members of the Executive Board are appointed by the Supervisory Board. The Supervisory Board shall inform the General Meeting of Shareholders and the Works Council in advance of a proposed appointment. Members of the Executive Board may be suspended or dismissed by the Supervisory Board. In the event of a dismissal, the General Meeting of Shareholders shall be consulted.

Conflicts of interests
Dutch legislation on conflicts of interests, effective 1 January 2013, provides that a member of the Executive Board may not participate in the adoption of resolutions if he or she has a direct or indirect personal conflict of interest with the company or related enterprise. If all members of the Executive Board have a conflict, the resolution concerned will be adopted by the Supervisory Board. Relevant matters relating to conflicts of interests, if any, shall be mentioned in the Annual Report for the financial year in question. There were no such conflicts of interest in the financial year 2016.

Remuneration of the Executive Board
The remuneration of the members of the Executive Board is determined by the Supervisory Board on the proposal of the Remuneration and Appointments Committee. Said committee closely follows the trends related to the remuneration of members of the Executive Boards of similar organisations. The remuneration must be consistent with the remuneration policy as adopted by the General Meeting of Shareholders. The current remuneration policy applicable to the Executive Board was adopted by the General Meeting of Shareholders in 2012 and is published on the company’s website. In 2017, the Supervisory Board intends to propose an adjustment of the remuneration policy to the Annual Meeting of Shareholders.

Further insight into the remuneration of the members of the Executive Board is included in the Supervisory Board report. Pursuant to Dutch law, the remuneration of the members of the Executive Board and the Supervisory Board must be included as a separate agenda item in the convening notice for a general meeting of shareholders and must be dealt with before the meeting can proceed to consider and adopt the financial statements.

The members of the Executive Board are employed by means of a management contract in accordance with Dutch law. In anticipation of the implementation of new legislation (Wet DBA), the fixed part of the remuneration based on the so-called intercompany transfer salary scheme (doorbetaaldloonregeling) has been reviewed with and approved by the tax authorities.

Balanced allocation of seats in the Executive Board and Supervisory Board
The company currently does not have a balanced allocation of seats among men and women on the Executive and Supervisory boards. Although the company aims to realise such a balanced allocation, the interests of the company and its subsidiaries and the demonstrated capacity and experience of the candidates for the positions in these organs have been and will be decisive in the selection of candidates. When vacancies arise, the aim of achieving a gender balanced Board composition will again be an important consideration.

SUPERVISORY BOARD

The Supervisory Board is responsible for supervising and advising the Executive Board and overseeing the policies of the Executive Board and the general course of affairs of the company and its business. The supervision by the Supervisory Board, acting in the interests of the company and its associated companies, and taking into account the relevant interests of the company’s stakeholders, also includes (a) the achievement of the company objectives, (b) the company’s general strategy and the risks associated with the company’s activities, (c) the set-up and operation of internal risk management and related control systems, (d) the financial reporting processes, (e) compliance with legislation and regulations, (f) the company-shareholders relationship and (g) corporate social responsibility. Under Dutch law and in accordance with the provisions of the Code, the Supervisory Board is a separate body that is independent of the Executive Board and all its members are independent. In its report, the Supervisory Board describes the composition and functioning of the Supervisory Board and its committees, the activities of the Supervisory Board and its committees in the financial year, the number of committee meetings and the main items discussed. The Supervisory Board has set up two separate committees: the Remuneration and Appointments Committee and the Audit Committee. The Supervisory Board as a whole is responsible for the supervisory tasks.

The Supervisory Board Rules of Procedure
The Supervisory Board’s Rules of Procedure are set forth its own governance rules (including meetings, items to be discussed, resolutions, appointment and re-election, committees, conflicts of interests, trading in securities and the profile of the Supervisory Board). The Supervisory Board has adopted a profile which is published on the company’s website. The composition of the Supervisory Board is in line with this profile. The Supervisory Board’s Rules of Procedure are published on the company’s website. The rules include the charters of its committees, to which the plenary Supervisory Board, while retaining overall responsibility, has assigned certain tasks: the Remuneration & Appointments Committee and the Audit Committee. Each committee reports on and submits minutes of its meetings to the Supervisory Board.

Terms of appointment
The members of the Supervisory Board are appointed by the General Meeting of Shareholders for fixed terms of four years upon a recommendation from the Supervisory Board. The recommendation is drawn up by the Supervisory Board once the General Meeting of Shareholders and the Works Council have been notified of the vacancy in question and have been given the opportunity to recommend individuals for nomination. The Supervisory Board’s recommendation may be overruled by an absolute majority of votes cast, representing at least one-third of the subscribed share capital.

For a third of the members of the Supervisory Board, the Works Council has the right to recommend a candidate. The Supervisory Board may object to this recommendation if it considers the recommended person to be unsuitable to fulfil the duties of a Supervisory Board member, or that the Supervisory Board would not be properly composed if the appointment were made according to said recommendation. The Supervisory Board must inform the Works Council of its objection and consult with the Works Council to reach agreement on the nomination. If no agreement can be reached, the Enterprise Chamber of the Amsterdam Court of Appeal can be asked to render a decision on the objection. There is no age limit applicable and members may be re-elected for a maximum of three four-year terms in compliance with the Corporate Governance Code. The individual members of the Supervisory Board can only be dismissed by the Enterprise Chamber of the Amsterdam Court of Appeal. In addition, the entire Supervisory Board shall resign in the event the General Meeting of Shareholders adopts a motion of no confidence against the Supervisory Board.

The Supervisory Board is assisted by the Company Secretary. The Company Secretary shall ensure that correct procedures are followed and that the Supervisory Board acts in accordance with its statutory obligations and its obligations under the Articles of Association. Furthermore, the Company Secretary assists the Chairman of the Supervisory Board in the actual organisation of the affairs of the Supervisory Board. The Company Secretary shall, either on the recommendation of the Supervisory Board or otherwise, be appointed and may be dismissed by the Executive Board following the approval of the Supervisory Board.

Following their appointment, all members of the Supervisory Board follow an introductory programme, which covers general financial and legal affairs, financial reporting by the company, any specific aspects that are unique to the company and its business activities, and the responsibilities of a Supervisory Board member. Any need for further training or education of the members is reviewed annually.

Under the Dutch Corporate Governance Code, no member of the Supervisory Board shall hold more than five supervisory board memberships at ‘large’ companies or foundations as defined under Dutch law, the chairmanship of a supervisory board counting as two regular memberships. During the financial year 2016, all members of the Supervisory Board complied with the limitations on Supervisory Board memberships described above.

Conflicts of interest
Dutch legislation on conflicts of interests, effective from 1 January 2013, provides that a member of the Supervisory Board may not participate in the adoption of resolutions if he or she has a direct or indirect personal conflict of interest with the company or related enterprise. If all members of the Supervisory Board have a conflict, the resolution concerned will be adopted by the General Meeting of Shareholders. Any relevant matters relating to conflicts of interests shall be mentioned in the Annual Report for the financial year in question. No decisions to enter into material transactions in which there are conflicts of interest with members of the Supervisory Board were taken during the financial year 2016. ICT declares that stipulations II.3.2 to II.3.4 and III.6.1 to III.6.3 of the Code (conflicts of interest) have been observed. All transactions of the company and the natural persons and legal entities holding at least 10% of the company shares were conducted under the sector’s usual conditions. Decisions to effect transactions with these persons that are of material significance to the company and/or to these persons require the approval of the Supervisory Board. These transactions are published in the annual report.

Meetings of the Supervisory Board
The Supervisory Board meets at least four times per year, including a meeting on strategy. The Supervisory Board, on the advice of its Audit Committee, also discusses at least once a year the main risks of the business, plus the result of the assessment of the structure and operation of the internal risk management and control systems, as well as any significant changes to same. In addition to these matters, the Supervisory Board, being responsible for the quality of its own performance, discusses, at least once a year, in the absence of the members of the Executive Board, (i) both its own functioning and that of the individual members, and the conclusions that must be drawn on the basis thereof, as well as (ii) both the functioning of the Executive Board and that of the individual members, and the conclusions that must be drawn on the basis thereof. The members of the Executive Board have regular contacts with the members of the Supervisory Board. The Executive Board is required to keep the Supervisory Board informed of all facts and developments related to the company that the Supervisory Board may need to function as required and to properly carry out its duties, to consult it on important matters and to submit certain important decisions to it for its prior approval.

The Supervisory Board and its individual members each have their own responsibility to request from the Executive Board and the external auditor all information that the Supervisory Board needs to be able to carry out its duties properly as a supervisory body. If the Supervisory Board considers it necessary, it may obtain information from officers and external advisers of the company. The company provides the necessary means for this purpose. The Supervisory Board may also require that certain officers and external advisers attend its meetings.

The Chairman of the Supervisory Board
The Supervisory Board’s Chairman will see to it that: (a) the members of the Supervisory Board follow their introductory programme, (b) the members of the Supervisory Board receive in good time all information which is necessary for the proper performance of their duties, (c) there is sufficient time for consultation and decision-making by the Supervisory Board, (d) the committees of the Supervisory Board function properly, (e) the performance of the Executive Board members and Supervisory Board members is assessed at least once a year, and (f) the Supervisory Board elects a Vice-Chairman. The Vice-Chairman of the Supervisory Board shall deputise for the Chairman when the occasion arises. The Vice- Chairman shall act as the contact for individual members of the Supervisory Board or the Executive Board with regard to the functioning of the Chairman of the Supervisory Board.

GENERAL MEETING OF SHAREHOLDERS

An Annual General Meeting of Shareholders is held once a year to discuss the annual report, including the report of the Executive Board, the financial statements with explanatory notes thereto and additional information required by law, and the Supervisory Board report, any proposal related to dividends or other distributions, the appointment of members of the Executive Board and Supervisory Board (if any), important management decisions as required by Dutch law, and any other matters proposed by the Supervisory Board, the Executive Board or shareholders, in accordance with the provisions of the company’s Articles of Association. The annual report, the financial statements and other regulated information, such as defined in the Dutch Act on Financial Supervision (Wet op het financieel toezicht), will be published solely in English. As a separate agenda item and in accordance with Dutch law, the Annual General Meeting of Shareholders discusses the discharge of the members of the Executive Board and of the Supervisory Board for the performance of their respective duties in the preceding financial year. However, this discharge only covers matters that are known to the company and the General Meeting of Shareholders when the resolution is adopted. The Annual General Meeting of Shareholders is held in Barendrecht, Rotterdam or Amsterdam no later than six months after the end of the financial year. Extraordinary General Meetings of Shareholders may be convened by the Executive Board or the Supervisory Board if deemed necessary and by shareholders representing 10% of the issued capital after judicial authorisation. Meetings are convened by public notice sent by way of an announcement published electronically, which will be immediately and permanently accessible to the general meeting, for at least 42 days prior to the (Extraordinary) General Meeting of Shareholders.

Main powers of the General Meeting of Shareholders
All outstanding shares carry voting rights. The main powers of the General Meeting of Shareholders are to appoint the members of the Supervisory Board, to adopt the financial statements, to determine the profit appropriation, to discuss the reserves and the dividend policy and to discharge the members of the Executive Board for their management and the Supervisory Board for their supervision during the past financial year, to adopt the remuneration policy for the Executive Board, to adopt the remuneration of the members of the Supervisory Board, to pass a motion of no confidence in the Supervisory Board, to appoint the external auditor as required by Dutch law, to adopt amendments to the Articles of Association and proposals to dissolve or liquidate the company, to issue shares or rights to shares, to restrict or exclude pre-emptive rights of shareholders and to repurchase or withdraw or reduce the value of shares.

In compliance with Dutch law, decisions of the Executive Board that are so far-reaching that they would greatly change the identity or nature of the company or the business require the approval of the General Meeting of Shareholders. This includes resolutions to (a) transfer the business of the company, or almost the entire business of the company, to a third party, (b) enter into or discontinue long-term cooperation by the company or a subsidiary with another legal entity or company or as a fully liable partner in a limited partnership or ordinary partnership, if this cooperation or its discontinuation is of material significance to the company, or (c) acquire or dispose of a participating interest in the capital of a company to the value of at least one-third of the amount of the assets according to the balance sheet and notes thereto or, if the company prepares a consolidated balance sheet, according to the consolidated balance sheet and notes thereto as published in the last adopted financial statements of the company, by the company or one of its subsidiaries.

Repurchase and issue of (rights to) treasury shares
The Annual General Meeting of Shareholders on 11 May 2016 resolved to authorise the Executive Board, subject to approval of the Supervisory Board, to acquire fully paid-up ordinary shares in the company’s own capital to a maximum of 10% of the subscribed capital of the company within the limits of the Articles of Association for another 18 months as of 11 May 2016. In addition, the Annual General Meeting of Shareholders resolved to authorise the Executive Board, subject to the approval of the Supervisory Board, to issue shares or grant rights to acquire shares in the company, as well as to restrict or exclude the pre-emptive right accruing to shareholders for 18 months as of 11 May 2016. This authorisation is limited to a maximum of 10% of the number of shares issued as of 11 May 2016, plus 10% of the issued capital in connection with or on the occasion of mergers, acquisitions or strategic alliances.

Anti-takeover measures
As a means to protect the company and its stakeholders against an unsolicited attempt to obtain (de facto) control of the company, the company’s Articles of Association allow the Executive Board and the Supervisory Board to issue (rights to) preference shares to a third party, the Stichting Continuïteit ICT. The objective of the Stichting is to safeguard the interests of the company and its business and all stakeholders. In the event of a hostile takeover attempt, the Stichting can call in the preference shares from the company under the option agreement entered into between the company and the Stichting. The Stichting may subscribe for a number of preference shares equal to the number of outstanding ordinary shares in the company. In the event of a hostile takeover bid, the issuance of preference shares will enable the Executive Board to decide upon its position vis-à-vis the bidder, consider the bidder’s plans, examine alternatives, and thus further safeguard the interests of the company and its stakeholders. The Stichting has an independent board. The current members of the board of the Stichting are Mr. H.R. Okkens, Mr. J.C.M. Schönfeld, Mr. P.F. Plaizier and Mr. R. ter Haar.

Overview of corporate governance provisions
ICT complies with the provisions of the Dutch Corporate Governance Code 2008, apart from those listed below. The entire text of the Code is available at www.commissiecorporategovernance.nl.

Best practice provision II.2.5
This stipulation provides that shares granted to members of the Executive Board without financial consideration shall be retained for a period of at least five years or until at least the end of the employment, if this period is shorter. The remuneration policy of ICT provides that under certain circumstances shares may be allotted to members of the Executive Board, which must be held for at least three years or at least until the end of employment. Thus the lock-up period will never be longer than the period of employment.

Principle III.5
Principle III.5 of the Code Corporate Governance stipulates that in the event that the Supervisory Board consists of at least five members, three committees should be installed: the Audit Committee, the Remuneration Committee and the Appointments Committee. Since the Supervisory Board of ICT only consists of four members, this obligation is not applicable to ICT. However, the Supervisory Board has installed two committees on a voluntary basis: the Audit Committee and the Remuneration and Appointments Committee.

Best practice provision III.6.5
There is no regulation covering private investments by members of the Supervisory Board or members of the Executive Board. Members of these boards are already subject to general legislation and regulations and monitoring private investments is considered to be unnecessarily bureaucratic.

Best practice provision IV.3.1
This stipulation provides for webcasting analysts’ meetings, presentations and press conferences for all shareholders. ICT communicates information relevant to shareholders in press releases and adds presentations to its website (https://ict.eu/about-us/investor-relations/). Given the relatively high costs of webcasts, ICT will not be taking action to make this possible in the foreseeable future.

Corporate governance statement
This is a corporate governance statement, as referred to in article 2a in conjunction with articles 3 through 3b of the Decree on additional requirements for annual reports (Vaststellingsbesluit nadere voorschriften inhoud jaarverslag). The information required can be found in this chapter dedicated to Corporate Governance and elsewhere in this annual report. The sections in question should be regarded as inserted and repeated here. Specifically, reference is made to certain sections that have not been included in this chapter, such as:
– composition of the Executive Board and Supervisory Board: see ‘Report of the Supervisory Board’;
– the information required by virtue of article 10 of the Decree pertaining to the takeover guidelines: see this chapter and also page 119;
– the main features of internal risk management and control systems in connection with the group’s financial reporting: see chapter ‘Risk Management and Internal Control’. ICT observes the best practice stipulations of the Dutch Corporate Governance Code 2008 with the deviations explained in this chapter.