RvTs must have right to sack pension fund boards, says Dutch state secretary
Jetta Klijnsma, state secretary in the Netherlands, has written a letter to the Dutch Parliament standing by her decision to give supervisory boards (RvTs) the right to dismiss pension funds’ boards.
The RvT is to be introduced through new governance legislation coming into force in July 2014.
Klijnsma initially decided to grant RvTs the right to sack “malfunctioning” board members at the request of the Senate, which feared that the supervisory board, as originally envisaged, lacked teeth.
Boards that make a decision without an RvT’s approval, and fail to offer a compelling argument as to how that decision is in the best interests of all participants, are considered to have “malfunctioned”.
The Senate also suggested the RvT be allowed to block the nomination of a board member who fails to comply with the set profile.
Klijnsma, addressing recent concerns in Parliament that the RvT’s remit was too broad, stressed that not every dispute would be treated as an example of a “malfunctioning” board.
“I assume the RvT will only use its right of dismissal in cases of serious and ongoing malfunctioning,” she wrote, referring to the “milder” remedy of alerting the pension fund’s accountability body, or the party that appoints board members.
If these third parties respond too late, or their responses are lacking, the RvT could still alert De Nederlandsche Bank, the Dutch regulator, she said.
The Pension Federation said it considered Klijnsma’s letter as guideline for RvTs, but it described the option of a two-track approach as “a bit strange”.
Gert Kloosterboer, the federation’s spokesman, said: “These diverging tracks are at odds with the envisaged streamlining of governance.
“However, because we assume something is seriously wrong before the RvT uses its competence, and given the state secretary’s clarification, we are not contemplating further action for now.”
Henri Lepoutre, pensions adviser at employers association AWVN, said Dutch employers were not entirely happy with the RvT’s right of dismissal.
“Companies usually appoint representatives from their own organisation on their pension fund’s board,” he said.
“If they get fired by an RvT, it doesn’t reflect well. In addition, employers fear a loss of influence if an independent RvT can dismiss the board of their pension fund, while an RvT that cannot appoint a board but can dismiss one does not feel balanced.”
He said clearly defining the concept of “malfunctioning” – to guarantee that the dismissal option is deployed only in the most serious cases – was “very important”.