The DSM Supervisory Board is in charge of supervising and advising the DSM Managing Board in setting and achieving the company’s objectives, strategy and policies and in the ensuing delivery of results. In DSM's two-tier corporate structure under Dutch law, the Supervisory Board is a separate body operating fully independent of the Managing Board. The composition of the Supervisory Board is always such that its members are an appropriate and diverse mix of knowledge, experience and understanding of the markets in which DSM operates. More information regarding the Supervisory Board profile can be found in the Governance part of the DSM website.
In 2010 the composition of the board changed. Mr. Cees van Woudenberg stepped down as he had served the maximum period of 12 years. The Supervisory Board would like to thank Mr. van Woudenberg for his constructive and pleasant cooperation in all those years. He was succeeded by Mr. Rob Routs, who was appointed as a member of the DSM Supervisory Board by the Annual General Meeting of Shareholders held on 31 March 2010 on the basis of his extensive international experience, his knowledge of the (petro)chemical industry and his broad experience in the management and supervision of corporations. Mr. Tom de Swaan, who was retiring by rotation, was reappointed at the Annual General Meeting of Shareholders held on 31 March 2010. Mrs. Louise Gunning-Schepers stepped down with effect from 1 September 2010 in connection with her appointment as president of the Health Council of the Netherlands, a position that cannot be combined with membership of the DSM Supervisory Board. The Board would like to thank Mrs. Louise Gunning-Schepers for her valuable contributions. As announced in December 2010, at the Annual Meeting of Shareholders to be held on 28 April 2011, the Supervisory Board will propose to appoint Mrs. Pauline van der Meer Mohr as member of the Supervisory Board to succeed Mrs. Louise Gunning-Schepers as of that date.
The composition of the Managing Board remained unchanged in 2010. Two members of the Managing Board, Mr. Nico Gerardu and Mr. Rolf-Dieter Schwalb, were reappointed by the Annual General Meeting of Shareholders for a second term of four years; Mr. Rolf-Dieter Schwalb was reappointed as Chief Financial Officer. The first four-year term of Mr. Stephan Tanda will expire in 2011. His reappointment for a second four-year term will be proposed to the 2011 Annual General Meeting of Shareholders.
In 2010 the Supervisory Board met eight times to discuss and approve remuneration and nomination topics proposed by the appropriate Supervisory Board Committees. In three cases, one of the Board members was absent and excused. Discussion topics included the proposal for a new remuneration policy for the Managing Board, submitted by the Remuneration Committee, and the recommendations regarding several Board (re)appointments, submitted by the Nomination Committee. The Supervisory Board adopted the proposals, which were subsequently approved by the Annual General Meeting of Shareholders on 31 March 2010. One of the meetings was dedicated to a self-assessment of the functioning of the Managing Board, the Supervisory Board as well as all individual members. In this meeting, attended by all Supervisory Board members, Mr. Paul Jarrell (at that time Executive Vice President DSM Human Resources) was present as challenger for the assessment of the Managing Board; Mr. Feike Sijbesma was present during part of the meeting as CEO to elucidate the self-assessments of the individual Managing Board members and to discuss the succession planning of the top executives and Managing Board. The self-assessment of the Supervisory Board focused in particular on the independency of the Board members, their professionalism and experience mix, potential conflicts of interest, Supervisory Board committees and their functioning, the quality of the information received, and the frequency of meetings and contacts with the Managing Board and other senior executives of the company. After an extensive discussion the Supervisory Board concluded that:
In view of its supervision of corporate social responsibility issues relevant to the company, the sections 'Sustainability Strategy’, ‘People in 2010' and ‘Planet in 2010’ (the Sustainability Information) in the Integrated Annual Report 2010 were reviewed and subsequently discussed by the Supervisory Board during its meeting on 22 February 2011. Taking into consideration the Independent Assurance Report on People and Planet by KPMG included in Independent Assurance Report on People and Planet of this Integrated Annual Report the Supervisory Board approved the reporting in these sections. The Sustainability Information is based on the sustainability reporting guidelines of GRI (G 3) and the internal reporting criteria of DSM included in Sustainability reporting approach of the Integrated Annual Report.
The Supervisory Board held six meetings in the presence of the Managing Board. On three occasions, one of the Supervisory Board members was excused. A standing agenda item was an update on financial and business performance. The Supervisory Board was able to get in-depth background information about all financial and business results, to challenge the results and to provide proper advice. The 2009 annual results were discussed in the presence of two Ernst & Young auditors. The Supervisory Board discussed and approved the (Revised) Capital Expenditure Plan and the Financing and Guarantee Plan for 2010, including a threshold of €50 million for the annual increase in guarantee obligation on behalf of third parties.
Furthermore, the Supervisory Board approved the proposal to keep the dividend per ordinary share for 2009 at €1.20 and the proposal to be submitted to the Annual General Meeting of Shareholders regarding the final dividend to be paid out for 2009. In addition, the Supervisory Board approved the interim dividend to be paid for 2010 and the proposal to increase the dividend per ordinary share for 2010. The Supervisory Board discussed during its meeting on 22 February 2011 the proposal to increase the dividend per ordinary share from €1.20 to €1.35, and agreed to submit this proposal regarding the final dividend to be paid out for 2010 to the 2011 Annual General Meeting of Shareholders.
The Supervisory Board also approved the proposal to raise the absolute threshold of guarantees issued on behalf of associates up to a maximum of €110 million. In addition, the Supervisory Board gave the Managing Board a mandate to conclude a pre-hedge for a 10-year € 500 million bond starting in March 2014.
In 2010 DSM held a new Corporate Strategy Dialogue. DSM’s Vision 2010 – Building on Strengths strategy program, adopted in 2005, and the acceleration of the shift to a Life Sciences and Materials Sciences Company were discussed and it was concluded that most of the targets had been achieved despite the economic downturn. The accompanying divestments and acquisitions were also extensively discussed. Building on this achievement, DSM proposed ambitious new targets as key elements of its new strategy, DSM in motion: driving focused growth. In two extended meetings, the Supervisory Board was informed and updated in-depth on DSM’s strategic plans and took the opportunity to challenge and advise the Managing Board on its proposed plans. The Supervisory Board endorsed the new corporate strategy, which is described in DSM in motion: driving focused growth of this Integrated Annual Report.
The Supervisory Board invited DSM management to inform it on relevant developments in innovation and pensions, among other things. One meeting was held at the DSM Nutritional Products site in Switzerland, where the Supervisory Board was invited to visit the Research & Development facilities in Kaiseraugst and the production site in Sisseln and was updated by local management on business, research and production activities.
In an additional meeting the Supervisory Board was extensively informed about the DSM Risk Management System. This interactive meeting, in the presence of the Managing Board and the corporate risk officer, included a shortened corporate risk assessment performed by the members of the Supervisory Board.
With the external auditor, Ernst & Young Accountants, discussions were held about the financial statements for 2009 and 2010. The Report by the Managing Board and the financial statements for 2010 were submitted to the Supervisory Board by the Managing Board, in accordance with the provisions of Article 30 of the Articles of Association, and subsequently approved by the Supervisory Board in its meeting on 22 February 2011. The financial statements were audited by Ernst & Young Accountants, who issued an unqualified opinion (see Independent Auditor's Report on the Financial Statements of this report). The Supervisory Board concluded that the external auditor was independent of DSM.
Until the Annual General Meeting of 31 March 2010, the Audit Committee consisted of Mr. Tom de Swaan (chairman), Mr. Claudio Sonder and Mr. Ewald Kist. After this meeting Mr. Ewald Kist, who moved to the Nomination Committee, was replaced by Mr. Rob Routs. The committee held six meetings in 2010. Three meetings were specifically devoted to discussing and approving the content of press releases on financial results.
The main topics of discussion during the other meetings were the adoption of the group’s financial statements, the 2010 financing plan, auditor independence, the external auditor’s comments and their assessment of DSM’s internal control systems. The Audit Committee discussed and endorsed the dividend proposals for the years 2009 and 2010.
In one meeting DSM’s Operational Audit system and DSM’s Risk Management system were discussed in the presence of the responsible managers as well as the external auditor. The Committee discussed the work of the Corporate Operational Audit department and endorsed its audit plan. The review of strategic and operational risks reported by the business groups was discussed as well as the follow-up actions following the Corporate Risk Assessment 2009. The system and status of the Letters of Representation issued by the managers directly reporting to the Managing Board were evaluated with a focus on monitoring progress on identified risks and related risk responses. The design and effectiveness of the internal risk management and control systems were reviewed. The meeting in December was used for an in-depth training on the DSM Risk Management System. All Supervisory Board members were invited to this meeting. Furthermore, the Audit Committee was updated on DSM Alert cases submitted under DSM’s whistleblower policy. In order to be able to give proper follow-up to fraud cases, DSM established a Fraud Committee in January 2010 to ensure the systematic mitigation of fraud risks.
The Audit Committee had its regular private discussion with the auditors without members of the Managing Board being present. The Chairman of the Audit Committee verbally reported the main issues discussed to the Supervisory Board in its subsequent meeting. The Audit Committee furthermore provided the Supervisory Board with written reports on its deliberations, findings and recommendations. These reports were distributed among all members of the Supervisory Board.
Until 31 March 2010, Mr. Cor Herkströter (chairman), Mr. Cees van Woudenberg and Mr. Pierre Hochuli were members of the Nomination Committee. As of 31 March Mr. Cees van Woudenberg was replaced by Mr. Ewald Kist. The Nomination Committee prepared proposals for the reappointment of Mr. Tom de Swaan, the appointment of Mr. Rob Routs as new Supervisory Board member, and the reappointments of Managing Board members Mr. Rolf-Dieter Schwalb and Mr. Nico Gerardu. In a second meeting the committee discussed the replacement of Mrs. Louise Gunning-Schepers, concluding in a recommendation to the full Supervisory Board to propose Mrs. Pauline van der Meer Mohr as her successor.
In September 2010 the Supervisory Board held a meeting which was fully dedicated to the succession planning of the Managing Board. Mr. Feike Sijbesma was present during that meeting.
In 2010 the Remuneration Committee, consisting of Mr. Cor Herkströter (chairman), Mr. Cees van Woudenberg and Mr. Pierre Hochuli, met two times. As Mr. Cees van Woudenberg stepped down as member of the Supervisory Board on 31 March 2010 he was replaced in the Remuneration Committee by Mr. Ewald Kist with effect from the same date.
The Remuneration Committee finalized the proposal to adjust the remuneration policy for the Managing Board members, as approved by the Annual General Meeting of Shareholders, with effect from 2010 and recommended this proposal to the full Supervisory Board. Furthermore, the Committee prepared the advice for the realization of the individual targets of the Managing Board members, which was adopted by the full Supervisory Board.
The newly installed Corporate Social Responsibility Committee, consisting of all members of the Supervisory Board, pre-discussed the DSM Triple P Report for 2009 and the Sustainability Information in the Integrated Annual Report 2010, in the presence of two Managing Board members, including the CEO, and the Director Sustainable Development. This meeting served as a preparation for the discussion by the Supervisory Board on the supervision of the Managing Board with respect to formulating, developing, implementing, monitoring and reporting on DSM’s social and environmental policies.
In view of Mrs. Louise Gunning-Schepers' resignation with effect from 1 September 2010, Mr. Cor Herkströter was appointed as interim chairman as of the same date.
The Supervisory Board will submit the 2010 financial statements to the 2011 Annual General Meeting of Shareholders, and will propose that the shareholders adopt them and discharge the Managing Board from all liability in respect of its managerial activities and the Supervisory Board from all liability in respect of its supervision of the Managing Board.
The profit appropriation as approved by the Supervisory Board is presented in the section Profit appropriation.
The year 2010 showed a very strong improvement compared to the downturn year 2009. It was also the last year in a period of transformation for DSM to become a focused Life Sciences and Materials Sciences company. The Supervisory Board wishes to express its sincere appreciation for the results achieved and the new strategy as announced in September 2010 and would like to thank the employees and the Managing Board for their efforts.