Corporate Governance

Stedin Group

Stedin Group comprises Stedin Holding N.V. and the subsidiaries Stedin Netbeheer B.V., DNWG Groep N.V. and NetVerder B.V., among others. Stedin Holding heads the group structure and is, directly or indirectly, the director under the articles of association of its subsidiaries. From 1 January 2022, the two grid managers within Stedin Group are integrated into a single grid manager (further information can be found in the section About us). Stedin Holding applies the full two-tier board structure. Stedin Group has a two-tier board structure, with a Board of Management and a Supervisory Board. The Board of Management manages Stedin Group; the Supervisory Board exercises supervision.

The Corporate Governance Code and Stedin Group

The Dutch Corporate Governance Code (CGC) sets out important guiding principles for Stedin Group, which we apply on a voluntary basis. Stedin Group additionally complies with the governance requirements under the Electricity Act and the Gas Act. A large part of the work carried out by Stedin Group is regulated and subject to supervision by the Netherlands Authority for Consumers and Markets (ACM). The remuneration structure of the members of the Board of Management and the Supervisory Board of Stedin is regulated by the Senior Executives in the Public and Semi-Public Sector (Standards for Remuneration) Act.

Stedin chooses not to apply certain provisions from the CGC. The CGC is based on the ‘comply or explain’ principle: organisations are required to comply with the Code or otherwise explain the reasons for their non-compliance. We therefore explain below which principles in the CGC we depart from.

Departures from the CGC

• Provision 2.2.1 Maximum appointment and reappointment periods – management board members: Members of the Board of Management are appointed as director under the articles of association by the Supervisory Board for a maximum term of four years. They can be reappointed for successive maximum terms of four years. Such reappointments are not limited within Stedin Group, to ensure the continuity of Stedin.
• Provision 2.2.2 Appointment of supervisory board members: Supervisory Board members are appointed for a term of four years and can be reappointed for a maximum of two additional four-year terms; this is to ensure the continuity of Stedin.
• Provision 2.2.3 Publication of press release upon early retirement of members of the Board of Management: Stedin makes its own decisions on how it informs its stakeholders about any early retirement of members of the Board of Management. It goes without saying that Stedin Group informs its stakeholders about any early retirements of members of the Board of Management.
• Provision 2.3.2 Establishment of committees: a combined Selection, Remuneration and Appointments Committee has been established within Stedin Group for practical reasons.
• Provision 4.2.3 Meetings and presentations: The shares of Stedin Holding are not listed. However, Stedin Group has issued bonds that are listed on the stock exchanges of Luxembourg and Amsterdam. If Stedin Group organises a call for investors, this call is publicly announced, and the presentations given in the call are posted on Stedin Group's website.

We depart from the provisions from the CGC referred to below because the two-tier board structure applies. In addition, the shares of Stedin Holding are held by local and regional authorities and are therefore not listed. The governance structure of Stedin Group is also different (two-tier and not one-tier).

• 2.1.3 Executive committee
• 2.8.2–2.8.3 Takeover bid
• 3.1.3 Remuneration – executive committee
• 3.3.2–3.3.3 Remuneration of supervisory board members in shares and share ownership of supervisory board members
• 4.2.3–4.2.4 and 4.2.6 Analysts' meetings and anti-takeover measures
• 4.3.3 Cancelling the binding nature of a nomination or dismissal
• 4.3.4 Voting right on financing preference shares
• 4.3.5 Publication of institutional investors’ voting policy
• 4.3.6 Report on the implementation of institutional investors’ voting policy
• 4.4 Issuing depositary receipts for shares
• 5 One-tier board structure

Governance roles

Board of Management

Responsibilities and duties

Stedin Group's Board of Management is responsible for the performance of Stedin Group and all subsidiaries within the group structure. The Board of Management determines the long-term strategy, sets the operational as well as financial objectives and designates the preconditions for delivering the strategy. In performing its duties, the Board of Management weighs all interests, including those of customers, shareholders, employees, providers of capital and society in general. The Board of Management has defined customer and cultural values that contribute to a culture directed at long-term value creation.

An allocation of duties has been agreed within the Board of Management, which does not detract from the collective responsibility of the Board of Management as a whole. The Supervisory Board has approved the allocation of duties. Both the Board of Management as a whole and its individual members may represent the company. The internal Governance and Authority Manual sets out the procedure for mandates to represent Stedin Group and its subsidiaries externally and also includes threshold amounts.

The Board of Management also monitors the operation of the internal risk management and control systems. Each year, the Board of Management performs a systematic assessment of the design and operation of these systems. This monitoring covers all control measures relating to strategic, operational, compliance and reporting risks. This is described in detail in the Risk management section and is confirmed in the In-control statement.

Terms of Reference

In addition to legal requirements and the articles of association, the Board of Management is also bound by the Terms of Reference of the Board of Management. These terms of reference include the division of duties, responsibilities and procedures of the Board of Management. The terms of reference adhere to the principles and best practices of the CGC, insofar as they are applied by Stedin Group. The terms of reference of the Board of Management are posted on the website of Stedin Group.

Appointment and dismissal

Members of the Board of Management are appointed as director under the articles of association by the Supervisory Board for a maximum term of four years. They can be reappointed for successive maximum terms of four years. The Supervisory Board may suspend or dismiss members of the Board of Management.

Composition

In 2021, the Board of Management consisted of four members: a Chief Executive Officer (CEO), a Chief Operating Officer (COO), a Chief Financial Officer (CFO) and a Chief Transition Officer (CTO). The Board of Management consists of three male members and one female member. This means that women make up 25% of the Board of Management. The target percentage for the composition of the Board of Management is a minimum of 30% women and a minimum of 30% men. Diversity is a key consideration when undertaking a new search. Each vacancy gives rise to discussion of the desirable outcome also in terms of our diversity aims.

The Supervisory Board appointed Koen Bogers as the new CEO and Trudy Onland as the new COO of Stedin Group with effect from 1 June 2021. Koen Bogers succeeded Marc van der Linden, who stepped down following the expiry of his term of office. Trudy Onland succeeded Judith Koole, who announced her intention to step down as COO at the end of 2020.

Strategy Management Team

Apart from the members of the Board of Management, the members of the Strategy Management Team (MT) also include the Asset Management, HR, Strategy and Corporate Affairs directors. The Strategy MT discusses and provides strategic advice on the key strategic topics and the approach to sustainability strategy. The Strategy MT is not a decision-making body, but has an advisory role in support of decision-making by the Board of Management. The Strategy MT consists of four men and four women.

Strategic Coalition

The Strategic Coalition consists of more than 20 directors, managers and members of a Works Council delegation, aside from the members of the Strategy MT. To develop the strategy and its implementation, they meet several times a year. The Strategic Coalition consists of 14 men and 9 women.

Supervisory Board

Duties and responsibilities

Stedin Holding N.V.'s Supervisory Board advises the Board of Management and exercises supervision on the policy of the Board of Management as well as the general course of affairs within Stedin Group. The Supervisory Board also acts as employer of the Board of Management. Accordingly, the Supervisory Board appoints members of the Board of Management and can suspend or dismiss members of the Board of Management (in consultation with the General Meeting of Shareholders) The Supervisory Board of Stedin Holding N.V. is also the Supervisory Board of the grid managers within the group, i.e. of Stedin Netbeheer B.V. and Enduris B.V.

Terms of Reference

In addition to legal requirements and the articles of association, the Supervisory Board also is bound by terms of reference. The Terms of Reference of the Supervisory Board include provisions on the Supervisory Board's composition, committees, duties and powers, meetings and decision-making and are posted on the website of Stedin Group.

Committees

The Supervisory Board has two permanent committees:

• a combined Selection, Remuneration and Appointments Committee (SRA Committee), consisting of Hanne Buis (chair), Doede Vierstra and Arco Groothedde;
• an Audit Committee, consisting of Theo Eysink (chair), Annie Krist and Arco Groothedde.

The committees prepare decision-making in the Supervisory Board meetings. The committees report verbally in the Supervisory Board meetings. The terms of reference of the Supervisory Board and its committees are posted on Stedin Group's website.

The SRA Committee and the Audit Committee each have separate terms of reference, setting out provisions on their functioning. These terms of reference can also be consulted on the Stedin Group website.

Appointment and dismissal

The General Meeting of Shareholders appoints the members of the Supervisory Board. There is a profile for the size and composition of the Supervisory Board. In connection with nominations and appointments, account is taken of the nature of the company, its activities and the desired expertise and background of the Supervisory Board members.

Supervisory Board members are appointed for a term of four years and can be reappointed for a maximum of two additional four-year terms. The Supervisory Board can suspend members of the Supervisory Board. The Netherlands Enterprise Court at the Amsterdam Court of Appeal can dismiss Supervisory Board members. The General Meeting of Shareholders can withdraw its trust in the full Supervisory Board or in individual Supervisory Board members.

The members of the Supervisory Board retire periodically in accordance with the retirement schedule that it has drawn up. The retirement schedule is shown in the Report of the Supervisory Board.

Composition

The Supervisory Board consists of five members: three men and two women, representing a variety of age categories. With this composition, the Supervisory Board complies with the diversity standard. The Supervisory Board strives for sufficient complementarity, pluralism and diversity in terms of age, gender and background in its composition. Diversity in terms of composition is also discussed in the annual self-assessment undertaken by the Board of Management and the Supervisory Board.

Shareholders

Stedin Group has 44 Dutch municipalities as its shareholders. The 44 shareholders are represented by the Shareholders' Committee, whose members are Rotterdam, The Hague, Dordrecht, Delft, Lansingerland, Molenlanden, Achtkarspelen, Nissewaard and Uithoorn.

General Meeting of Shareholders (AGM)

Stedin Holding N.V. holds a General Meeting of Shareholders (AGM) within six months of the end of a financial year. If deemed necessary by the Supervisory Board or the Board of Management, additional meetings may also be held. The Board of Management and the Supervisory Board set the agenda of the AGM. During the annual General Meeting of Shareholders, the annual report is discussed and the financial statements are adopted. The AGM is also responsible for the appointment of the members of the Supervisory Board.

Agreements have been made between the Board of Management, the Supervisory Board, the Shareholders' Committee and the AGM regarding their mutual relationships and the performance of duties and powers. These agreements are laid down in the Articles of Association of Stedin Holding N.V. and the Stedin Group shareholders covenant. The Shareholders' Committee also has its own terms of reference: the Terms of Reference of the Shareholders' Committee. These terms of reference only apply to the shareholders in their mutual relationship.

Stedin Holding N.V.’s authorised share capital is divided into ordinary shares. Each share entitles its holder to one vote. In addition, Stedin issued cumulative preference shares for €200 million to its existing shareholders in 2021.

The Energy Transition Committee was established in 2021. The Committee consists of a delegation of shareholders and Stedin Group. The Committee’s objective is to further reinforce cooperation between the shareholders and Stedin Group with regard to the energy transition and to share as well as develop knowledge through this platform.

Municipalities holding more than 2% of the shares

Internal audit function

The Internal Audit (IA) department consists of a team of independently operating internal auditors. IA supports the organisation by providing insight, advice and supplementary assurance on the extent of risk management.

IA is part of the CEO's responsibilities and has direct access to the Audit Committee of the Supervisory Board as well as to the external auditor. The IA manager attends the meetings of the Audit Committee. The Audit Committee supervises the IA function and advises the Supervisory Board on its performance. IA reports to the Board of Management on audit-related topics, such as the effectiveness of internal controls, follow-up of recommendations and realisation of the annual audit plan. IA reports the main features of these topics to the Audit Committee and informs the external auditor.

Each year, IA draws up an annual audit plan that is based on a risk analysis and interviews with senior management as well as the Board of Management. It also incorporates the input of the Audit Committee and the external auditor. Internal Audit submits the annual audit plan for approval to the Board of Management and then to the Supervisory Board.

The external auditor

The General Meeting of Shareholders appoints the external auditor, who is nominated by the Supervisory Board. Deloitte Accountants B.V. is the external auditor of Stedin Group. The external auditor attends all meetings of the Audit Committee. The external auditor in any case attends the part of the meetings of the Supervisory Board in which the report of the external auditor on the audit of the financial statements is discussed and a resolution concerning the approval of the financial statements is adopted. The external auditor also attends the General Meeting of Shareholders in which the financial statements are adopted. The General Meeting of Shareholders can then take the opportunity to question the auditor about their report on the true and fair view provided by the financial statements.