The Supervisory Board is pleased to present the 2019 Royal HaskoningDHV Annual Report including the Financial Statements, as prepared by the Executive Board. The company is committed to delivering responsible and sustainable solutions for clients in relation to cities, water, transport and industry. Staff in the company continue to be proud of delivering projects that matter to society and support the company’s Strong22 strategy for which further implementation steps have been taken in 2019.
The Financial Statements are prepared by the Executive Board, audited by the external auditor and signed following consultation with the Supervisory Board. Given the 2019 result, we support the proposal of the Executive Board to pay a dividend of €0.90 per share. We recommend that the 2019 Financial Statements are adopted by the Annual General Meeting and the Executive Board is granted discharge with respect to its management and the Supervisory Board for its supervision during the financial year 2019.
The company has a two-tier Board structure. The Supervisory Board advises and supervises the Executive Board of the company in setting and achieving the objectives, strategy and policies. The Supervisory Board is nominated by the shareholders and operates fully independently of the Executive Board. The Supervisory Board is guided by the interests of the company and shall take relevant interest of all company stakeholders into account. The Supervisory Board also has had continuous due regard for corporate social responsibility and culture issues that are relevant to the company.
The Supervisory Board has two committees, an Audit Committee and a Remuneration and Appointment Committee, that prepare the decision-making process in the full Supervisory Board.
SUPERVISORY BOARD MEETINGS
The full Supervisory Board convened five times in 2019 in several office locations in Netherlands.
We are pleased to report that average attendance of our members was again high at 92%. Both Tjalling Tiemstra and Angelique Paulussen-Hoogakker had to apologise for a meeting once.
In addition to the formal Supervisory Board meetings, various (informal) meetings between the Supervisory Board and the Executive Board took place. Almost every month there have been bilateral meetings between the chairs of the Supervisory and Executive Board. Members of the Supervisory Board participated in meetings with the Dutch Works Council. The Supervisory Board furthermore participated in a session with Young RHDHV.
The Supervisory Board advised on developments in the company and its strategy. There was ample attention for specific projects and further enhancement of project management in general. Project results, utilisation rates, sales, working capital and profitability were discussed in every meeting. Other main items on the agenda included compliance and integrity, investments (e.g. in Lanner, H2i, Ambiental), remuneration policy, talent development, strategy & digitisation, financial results, claims and risks, incidents and accidents and the annual plan.
Throughout the year the Supervisory Board was informed about the financial and economic situation in South Africa as well as the impact this had on our operating company.
The Supervisory Board approved the plan prepared by the management by the end of the year for financial restructuring of Royal HaskoningDHV South Africa. It expresses its hope that the economic situation in the region will improve in the coming year and the company will be able to reverse the recent downturn.
During the year Jan Bout left the Supervisory Board due to reaching the maximum statutory appointment period. During the AGM in March 2019, Daan Sperling was appointed as member of the Supervisory Board by the shareholders. As from September 2019 Francine van Dierendonck attended the meetings of the Supervisory Board. The Supervisory Board proposes the shareholders to appoint Francine van Dierendonck as member of the Supervisory Board as per the AGM in March 2020. The current chairman, Joop van Oosten, will reach the maximum statutory appointment period in March 2020 and will be succeeded by Peter Blauwhoff.
In the fourth quarter an investigation into the remuneration of both the Supervisory Board and the Executive Board was performed by an external advisory firm. The outcome of this investigation may lead to an amendment of the Executive Board’s fixed remuneration from April 2020, as well as a proposal to the AGM to adjust the remuneration of the Supervisory Board.
In May 2019 the then CFO of the company, Nynke Dalstra, informed the Supervisory Board of her decision to step down as CFO. It was her personal wish to take a break from her professional career and thereafter to pursue her career outside of Royal HaskoningDHV. The Supervisory Board would like to thank Nynke Dalstra for her contribution to the Executive Board. She has shown the right balance between managing control and stimulating entrepreneurship which enabled a solid implementation of the company strategy.
The Supervisory Board was pleased an internal candidate, Jasper de Wit, succeeded Nynke Dalstra, as CFO from September 2019.
AUDIT COMMITTEE MEETINGS
The Audit Committee is composed of two members Tjalling Tiemstra (chairman) and Jan Bout who was replaced by Daan Sperling in March 2019. They met on four occasions with management, the internal auditor and external auditors. The Audit Committee furthermore advised the Supervisory Board on the financial restructuring of South Africa. The committee also met with the internal and external auditors without the presence of management.
Topics on the agenda were the Financial Statements, the annual plan, cash management and working capital, refinancing South Africa, compliance with bank covenants, tax policies, defined benefit pensions, risk management and developments in ICT and ICT security. In addition, the internal and external auditor’s audit plan and audit report and the external auditor’s management letter were discussed. The financial results and extended business analysis were on every meeting’s agenda.
REMUNERATION AND APPOINTMENT COMMITTEE
Current members are Peter Blauwhoff (chairman), Joop van Oosten and Angelique Paulussen-Hoogakker. In 2019 the committee convened in scheduled meetings five times. Topics on the agenda were amongst others the remuneration of the Executive Board, also in relation to the development of to the remuneration of the Extended Executive Council. (consists of the Business Line Directors and Corporate Directors).
During the year the Remuneration Committee met with several senior managers in the company. They concluded that succession planning was in place: sufficient and capable successors have been identified for the leadership levels in the organisation.
This year, the Supervisory Board performed its self-evaluation with the support of an external specialist, Governance University. The topics discussed included the organisation, way of working and culture of the Supervisory Board. The effectiveness and focus of the Supervisory Board were investigated as well. Improvement actions and working arrangements for the Board were agreed upon. The main findings of the self-evaluation were discussed with the Executive Board. We further refer to the Remuneration Report in Notes to the Consolidated Financial Statements.
PROFILE AND COMPOSITION OF THE SUPERVISORY BOARD
The Supervisory Board is properly constituted according to the Articles of Association and its members possess the desired competencies in accordance with the profile of the Board. The current Board consists of five members. A reappointment and resignation scheme has been agreed for the coming years. Background information on the Board is available on our website.
The Supervisory Board consists of one female and four male members, all of whom are of Dutch nationality. The Executive Board consisted of one female and one male member until September 2019; thereafter of two male members, both of Dutch nationality. The Supervisory Board continues to strive and achieve a balanced composition of both the Executive and the Supervisory Board in terms of gender in the future. The Executive Council consists of 62.5% male and 37.5% female members.
The Royal HaskoningDHV Corporate Governance Report and further information concerning the remuneration policy, the Code of Conduct, the SpeakUp Line and regulations for the Executive Board, Supervisory Board, Audit Committee and Remuneration and Appointment Committee are in line with the Corporate Governance Code and can be found on the company's website. The remuneration of the Executive Board is included in this Report of the Supervisory Board. The remuneration of the Supervisory Board is reported in the Financial Statements, which forms part of this Annual Report.
Various delegations of the Supervisory Board met several times with the Dutch Works Council to discuss the general course of events and the developments within the company in an open and constructive dialogue. The quality and outcome of these meetings is highly appreciated by the Supervisory Board.
In 2019 the Executive Council consisted of the Executive Board, the Business Line Directors and the Corporate Director HRM. The Executive Council convenes with the Corporate Directors in the Extended Executive Council to discuss company-wide topics. Individual Corporate Directors are also regularly invited to Executive Board and Executive Council meetings depending on the agenda items. The Supervisory Board believes that the composition of the (Extended) Executive Council has proven to remain a good management model to lead the company.
The Supervisory Board is positive about the future of Royal HaskoningDHV. We appreciate the achievements made in 2019 and thank all staff members for their commitment and energy. We are grateful to clients for continued trust in the company, reflected in the inspiring range of projects undertaken during the year. It is pleasing to see positive impact being delivered through the strategic transformation and we look forward to further development in the year ahead.
March 6, 2020
J.A.P. (Joop) van Oosten (Chairman)
P.M.M. (Peter) Blauwhoff
J. (Jan) Bout (until 26 March 2019)
A.M. (Angelique) Paulussen-Hoogakker
D.A. (Daan) Sperling (as from 27 March 2019)
J.S.T. (Tjalling) Tiemstra
Adoption of Remuneration policy
The Supervisory Board has developed the remuneration policy for the Executive Board of Royal HaskoningDHV on the basis of a proposal of the Remuneration Committee. The remuneration policy was adopted by the General Meeting of Shareholders.
The current remuneration of the Executive Board is based on a comparative study done in 2016 by an independent firm of terms and conditions of employment in the executive remuneration market for peer companies, that is companies operating in a grossly comparable market with a roughly similar risk profile and size as Royal HaskoningDHV. The policy is designed to be able to attract, reward, incentivise and retain qualified and expert individuals that the company needs to achieve its strategic objectives.
The Supervisory Board evaluated the remuneration package on the basis of information supplied by external remuneration experts, most recently in December 2019, to verify that it is in line with the company’s objectives and the market.
The remuneration policy provides for a fixed component and a variable component (short-term incentive). The company does not operate a long-term incentive scheme, as it is not considered to be a way of incentivising suitable to Royal HaskoningDHV.
The variable component is based on the performance of the company, whereby this variable component is challenging, but not excessive. Furthermore, the ratio between the total remuneration of the Executive Board relative to the average remuneration in the company was taken into consideration.
Fixed remuneration component
The Supervisory Board of Royal HaskoningDHV aims to offer its Executive Board a fixed remuneration component targeted at approximately Q1 level of the general Dutch market and at the median of the direct (mostly Dutch and some EU) peer group.
Variable remuneration component
The Supervisory Board determines the variable remuneration component for the members of the Executive Board on the basis of their performance and the company’s results compared to the agreed performance criteria.
The variable remuneration for the Executive Board is intended to drive the pursuit of Royal HaskoningDHV’s short and longterm objectives and is appropriate in relation to both the fixed remuneration and the peer group. The maximum annual variable remuneration component amounts to 40% of the gross fixed remuneration if targets set are widely exceeded, whereas an on-target performance will result in 31% variable remuneration.
The criteria for the variable remuneration comprise both financial (max. 29%) and non-financial (max. 11%) performance elements to balance short-term operational performance with the long-term objectives and stakeholders’ interests. The detailed criteria are not disclosed because of competitive and market intelligence reasons.
The criteria are agreed annually between the Supervisory Board and the Executive Board at the start of the relevant financial year. The variable income is, in principle, payable in depositary receipts until the maximum holding (for all employees the same) is achieved.
The Supervisory Board has verified and is comfortable with the potential pay-out of the variable remuneration component for various scenarios as prescribed by the Netherlands Corporate Governance Code.
Pensions and risk premium
Pursuant to the policy applicable to all staff members in Netherlands, the company contributes to the cost of their pension and the premium for partner pensions and disability. Equally, the members of the Executive Board are compensated for the reduction of the maximum pension accrual pursuant to the Reduction of Maximum Pension Accrual and Contribution Rates and Maximum Pensionable Income Act (Wet verlaging maximumopbouw- en premiepercentages pensioen en maximering pensioengevend inkomen) (Witteveen Framework 2015).
In the event of termination of the employment contract on Royal HaskoningDHV’s initiative, a member of the Executive Board is entitled to a severance payment of one year’s gross fixed annual remuneration. There is no right to the severance payment if the contract is being terminated due to urgent cause or serious culpability.
Royal HaskoningDHV offers the members of its Executive Board a package of secondary employment benefits in accordance with those offered to other staff. The benefit package includes disability insurance, a company car and a Director’s Liability insurance. The company does not issue loans, advance payments or guarantees to the members of its Executive Board.
No other exceptional remuneration was paid to the members of the Executive Board in 2019.
The ratio of the combined remuneration of the Executive Board relative to the average of Royal HaskoningDHV Netherlands staff for 2019 is 7.1 (2018: 7.7), with the CEO at 8.3 and the CFO at 5.9.
The Remuneration Committee of the Supervisory Board has taken note of individual Executive Board members’ views with regard to the amount and structure of their respective remuneration packages. The Remuneration Committee has been informed about the remuneration packages for Business Line Directors and Corporate Directors and is confident that remuneration across the top management structure of the company is consistent.
Fixed income component
The Supervisory Board decided, within the remuneration policy adopted by the General Meeting of Shareholders, to increase the fixed remuneration of the Executive Board members as from 1 April 2019 by 2.17% for the CEO and 11.41% for the CFO.
Variable income component
The maximum variable income continues to amount to 40% of the fixed annual remuneration. The variable criteria for 2019 have slightly changed compared to 2018.
For further information regarding the remuneration we refer to the Notes to the Consolidated Financial Statements.