Corporate Governance

Stedin Group

Stedin Group comprises Stedin Holding N.V. and the subsidiaries Stedin Netbeheer B.V., NetVerder B.V. and DNWG Infra B.V. Stedin Holding heads the group structure and under its articles of association is directly or indirectly the director of its subsidiaries. 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 and advises the Board of Management.

Governance and Stedin Group

The Dutch Corporate Governance Code (CGC) sets out important guiding principles for Stedin Group, which we apply on a voluntary basis. In addition, Stedin Group complies with the governance requirements under the Electricity Act and the Gas Act. A significant 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 (WNT).

The updated CGC was published on 20 December 2022 and took effect from the start of the financial year 2023. The most significant changes concern the topics of long-term sustainable value creation, the role of stakeholders, digitalisation, and diversity and inclusion. Where necessary, Stedin has incorporated these changes into its policies and regulations or will do.

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. Accordingly, below we explain which principles in the CGC we depart from.

Departures from the Corporate Governance Code

• Provision 2.2.1 Maximum terms of office and reappointment of Board of Management members: Members of the Board of Management are appointed by the Supervisory Board as director under the articles of association for a maximum term of four years. They can be reappointed for successive maximum terms of four years. To ensure the continuity of Stedin, no maximum applies to the number of successive reappointments within Stedin Group.

• 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: For practical reasons, Stedin Group has established a combined Selection, Remuneration and Appointments Committee, which is committee of the Supervisory Board.

• Provision 4.2.3 Meetings and presentations: The shares of Stedin Holding are not listed. However, Stedin Holding has issued several (subordinated) bonds, all of which are listed on the Amsterdam Stock Exchange (Euronext). 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 partly because the two-tier board regime applies. The governance structure of Stedin Group includes a two-tier board. In addition, the shares of Stedin Holding are held by government authorities and are therefore not listed.

• 2.1.3 Executive committee

• 2.8 Takeover situations

• 3.1.3 Remuneration of executive committee

• 3.3.3 Ownership of shares by Supervisory Board members

• 4.2.3 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

• 4.3.7 Abstaining from voting if short position exceeds long position

• 4.3.8 Loaned shares

• 4.5 Issuing depositary receipts for shares

• 5 One-tier board structure

Governance roles

Board of Management

Duties and responsibilities

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 sustainable 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 authorities to represent Stedin Group and its subsidiaries internally and externally, including the applicable threshold amounts, are set out in the internal Governance and Authority Structure (GAS).

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 by the Supervisory Board as director under the articles of association 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 2023, 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.

Strategy Management Team

In 2023, apart from the members of the Board of Management, the members of the Strategy Management Team (MT) also included the directors of Asset Management, HR, Communication, Strategy & Regulation and Corporate Affairs. The Strategy MT discusses and provides strategic advice on the key strategic topics, including ESG and the implementation of the CSRD. The Strategy MT is not a decision-making body, but has an advisory role in support of formal decision-making by the Board of Management. The Strategy MT consisted of four women and five men in 2023.

Strategic Coalition

In addition to the members of the Strategy MT, the Strategic Coalition consists of 21 directors, managers and members of a Works Council delegation. They give shape to the strategy and its implementation. For this purpose, they meet several times a year. The Strategic Coalition consists of 11 women and 19 men.

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. also supervises policy implementation by the grid manager (Stedin Netbeheer B.V.).

Terms of Reference

In addition to legal requirements and the articles of association, the Supervisory Board 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. In 2023, the Supervisory Board updated these Terms of Reference and, among other things, integrated the roles and responsibilities of the Supervisory Board in relation to ESG and the CSRD.

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 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 found on the website of Stedin Group. The Audit Committee’s terms of reference were amended in 2023 in order to integrate the roles and responsibilities of the Audit Committee in relation to ESG and the CSRD, among other things.

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 currently consists of five members: three men and two women, representing different age categories and backgrounds. 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.

As a result of the State joining as a shareholder, it was agreed that an additional (in this case sixth) Supervisory Board member would be nominated by the Supervisory Board and appointed by the General Meeting of Shareholders. This agreement will be fulfilled in 2024, for which the initiative lies with the Supervisory Board.

Shareholders

Stedin Holding N.V. has 42 Dutch municipalities and the Dutch State as its shareholders. The 43 shareholders are represented by the Shareholders’ Committee, whose members are Rotterdam, The Hague, the Dutch State, Dordrecht, Delft, Lansingerland, Molenlanden, Achtkarspelen, Nissewaard and Uithoorn. The Dutch State joined as a shareholder of Stedin Holding N.V. on 8 December 2023. Consequently, the State contributed € 500 million in capital in mid-December 2023.

_{* These shareholders also have cumulative preference shares}

In connection with the Dutch State joining Stedin as a shareholder, a number of governance changes were made. To sum up:

1. For the financial years 2023 to 2032, a revised dividend policy has been drawn up based on the tiers shown in the table below.

2. Under the pre-existing governance arrangements, Stedin shareholders have the right to approve Stedin’s Multi-Year Strategic Plan (MSP) and its mid-term review. In addition, the Board of Management must annually adopt a Long-Term Investment Plan that includes a forecast of expected investments with a 10-year horizon and the strategic considerations underlying those investments. The Board of Management consults the Shareholders’ Committee on the Long-Term Investment Plan.

3. The Board of Management annually draws up a Financing Plan outlining how Stedin plans to meet its financing needs over the next five years. The Financing Plan must comply with a number of Financial Principles set out in the shareholders’ covenant. The Board of Management consults the Shareholders’ Committee when preparing the Financing Plan. If in the substantiated opinion of the Dutch State, the proposed Financing Plan deviates from the Financial Principles, a Special Decision-Making Procedure may be invoked.

4. At least one member of the Supervisory Board has a financial profile. This Supervisory Board member is a member of the Supervisory Board’s Audit Committee. The Shareholders’ Committee has an enhanced right of recommendation regarding the appointment of the relevant Supervisory Board member, while the State also has a right to object. The relevant Supervisory Board member cannot chair the Supervisory Board, and the Works Council has no right of recommendation regarding the appointment of this Supervisory Board member.

General Meeting of Shareholders (AGM)

Stedin Holding N.V. holds a General Meeting of Shareholders (AGM) within five 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 and cumulative preference shares.

The Energy Transition Committee was established in 2021. The Committee consists of a delegation of shareholders and Stedin Group. Its 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.

Internal audit function

The internal audit function helps us realise our objectives, based on a systematic and disciplined approach to evaluating the effectiveness of our governance, risk management and control processes. The Internal Audit (IA) department provides independent and objective insights, guidance and (additional) assurance to assist management in further optimising those processes.

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 Internal Audit manager attends the meetings of the Audit Committee. The Supervisory Board supervises the IA function and advises the Supervisory Board on its performance. The Board of Management carries out an annual review of the way the Internal Audit function performs the task after consultation with the Audit Committee. IA reports to the Board of Management and the Audit Committee on audit-related topics, such as the effectiveness of internal controls, follow-up of recommendations and realisation of the annual audit plan. IA also informs the external auditor accordingly.

The internal audit function prepares an annual audit plan after consultation with the Board of Management, the Audit Committee and the external auditor. The annual audit plan is submitted to the Board of Management for approval and then to the Supervisory Board. This working plan focuses on interaction with the external auditor.

The external auditor

The General Meeting of Shareholders appoints the external auditor, who is nominated by the Supervisory Board. The external auditor for Stedin Group is Deloitte Accountants B.V. The external auditor attends all meetings of the Audit Committee. Additionally, the external auditor in any case attends the part of the meetings of the Supervisory Board in which the auditor's report on the audit of the financial statements is discussed and in which the Supervisory Board decides about approval of the annual report. 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 the report on the true and fair view provided by the financial statements.

Integrity

A safe working environment and ethical behaviour among employers and employees are important to Stedin Group: a business culture in which our employees and stakeholders can build and rely on our core standards and values.

Code of conduct

Those standards and values and statutory rules are laid down in Stedin Group’s Code of Conduct. This code, which lays down the norms and rules regarding our conduct and interaction,

describes the behaviour that we demand from our employees: amongst one another and towards external parties such as customers, shareholders, suppliers and other relations of Stedin Group. Topics in the code of conduct include health and safety, conflicts of interest, how to treat confidential and other information and company property, harassment and sexual harassment and unacceptable behaviour. Unacceptable behaviour includes fraud and theft, bribery and other forms of corruption, abuse of power, intimidation and harassment, aggression, violence and discrimination in any form whatsoever. We do not tolerate unacceptable conduct. Any such conduct will be investigated and the perpetrators will be punished. The code of conduct and guidelines for conduct (including non-discrimination) are also the starting point for HR processes such as recruitment, selection, promotion, remuneration and training. See the ‘Good employment practices’ section.

Our code of conduct is not a document without obligations. All our permanent employees, hired staff and interns are expected to endorse, know and comply with the contents of our code of conduct and to accept their responsibility to protect Stedin Group’s reputation. All employees sign the employee regulations and a non-disclosure agreement. In this context, our supervisors play a vital role in promoting an ethical business culture. After all, integrity starts with setting a good example.

Any failure by an employee to comply with the code of conduct, or guidelines covered by the code of conduct, can have serious consequences for Stedin Group. In the event of a reported suspected violation of the code of conduct, a detailed investigation will always take place in accordance with an established protocol. This investigation may lead to us taking measures. The nature and severity of the violation determine the sanction to be imposed, with due regard for the given circumstances. Sometimes we impose a disciplinary measure while on other occasions we may decide to offer the person concerned a second chance, and serious cases may result in instant dismissal.

Within Stedin Group, we work with guidelines for specific topics such as competition and tendering. These guidelines are part of the code of conduct. The detailed guidelines are available for employees on the intranet and are regularly brought to their attention by us. In 2023, two workshops and awareness sessions were held on risks and lessons learned. On several occasions in 2023, we also requested attention for integrity and compliance via the general means of communication.

The Board of Management supervises compliance with the code of conduct of Stedin Group. The Compliance Officer creates awareness, monitors the effectiveness of the code of conduct and reports the numbers and nature of any incidents at regular intervals to the Board of Management and the Supervisory Board (via the Audit Committee and the SRA Committee).

Supply chain responsibility

Our purchasing processes take into account various aspects. including CO ₂ footprint, use and reuse of materials, and social working conditions. They form the basis for selecting suppliers. We are committed to ensuring that our suppliers and supply chain partners comply with our Code of Conduct. This Code of Conduct, which is based on the OECD guidelines, the Universal Declaration of Human Rights and the ILO Convention, sets requirements for fair and ethical business practices by Stedin and by our suppliers, their suppliers and third parties they engage. The Code of Conduct has been signed by parties accounting for 69% of the total work we have put out to tender. Signing the Code of Conduct is mandatory in all new tendering procedures. 

Fraud prevention

Stedin Group has a fraud risk prevention policy that has been approved by the Board of Management is annually updated, and was therefore updated again in 2023. Based on discussions with the management teams of departments, fraud risk consultations produce a fraud risk analysis from which control measures may ensue. Fraud risk consultations are held at regular intervals and are attended by the Internal Audit, Control and Risk managers, as well as the Compliance Officer. In these consultations, the topic of fraud is discussed in a structured manner, and the reporting by the Compliance Officer is addressed. Based on this reporting, control measures may be implemented.

Reporting facilities

Stedin Group has an ‘Integrity & security’ reporting facility. The Compliance Officer investigates every report, including reports of fraud. Integrity incidents are handled on the basis of the Guideline for Integrity Incidents and Abuses. There is also an information security reporting facility and a privacy issues reporting facility. In 2023, 207 reports (2022: 186 reports) on possible breaches of the Code of Conduct were received within Stedin Group at the Integrity & Security reporting facility. For 70 reports (2022: 51) it was established that they included an integrity element. A number of reports concerned social safety within the group. Based on these reports, the Board of Management and HR decided, in consultation with the director of the relevant unit, to deploy a department-wide culture and behaviour programme in several departments in 2023.  

Confidential advisers

Employees can also contact one of the organisation’s confidential advisers. Stedin Group has a total of seven confidential advisers: six internal advisers and one external adviser. Confidential advisers work in strict confidence, have a duty of secrecy and never act on their own initiative or without the approval of the person reporting. A confidential adviser receives a fee for this work.

Whistleblower procedure

In 2023, the provisions of Stedin Group’s whistleblower procedure were amended in line with the Whistleblowers Protection Act (Wet Bescherming Klokkenluiders). Employees can opt to make a report to the external House for Whistleblowers. In 2023, no reports were made to the House for Whistleblowers. We refer to this legislation and the national whistleblower procedure in the Guideline for Integrity Incidents and Abuses.

Prevention of market abuse

As Stedin has issued publicly traded bonds, we have laid down a guideline on inside information and the possession of and transactions in securities in our ‘Stedin Group Disclosure Policy’ and in the ‘Guideline on private investments’. This guideline builds on our Code of Conduct.

Within Stedin Group, we use an insiders list of persons who have access to price-sensitive information. Sharing inside information and insider trading in bonds of Stedin Group are prohibited for Stedin’s employees. The ‘Guideline on private investments’ also applies to the members of the Board of Management and the Supervisory Board. They are required to comply with all legal rules concerning disclosure and insider trading. All employees require the prior approval of the Compliance Officer to engage in private investments in financial instruments of Stedin Group. Any suspicion of abuse of price-sensitive information must be immediately reported to the Compliance Officer. The Compliance Officer reports at regular intervals to the Board of Management and the Audit Committee of the Supervisory Board; any cases of abuse of price-sensitive information are also included in those reports. With its approach, Stedin Group complies with the European Market Abuse Regulation.

There were no cases of abuse of price-sensitive information in 2023. In the event of abuse of inside information, the Disclosure Committee will decide whether a press release is required to be published on the incident. This will depend on the seriousness of the breach and on applicable laws and regulations.

Compliance with laws and regulations

Stedin Group complies with laws and regulations. This is a shared responsibility of the Board of Management, the management team and employees. They are supported in this by Compliance & Integrity. Stedin Group has an adequate compliance process in place to ensure that we implement all new and existing laws and regulations into our business processes correctly and in a timely manner. Twice a year, the Legal Compliance Officer reports to the Board of Management on legal compliance developments within and outside of Stedin Group.

One sanction was imposed on Stedin by regulators in 2023. The State Supervision of Mines (SodM), the safety watchdog for the gas grids of the regional grid managers, investigated a gas explosion in shopping mall Stadshart in Zoetermeer. SodM concluded that Stedin’s operating assets register did not adequately meet the preconditions laid down in the Gas Act. SodM imposed on order for incremental penalty payments on Stedin, thereby instructing Stedin to draw up and implement an action plan to prevent a recurrence. Stedin will diligently and expediently implement the action plan drawn up in consultation with SodM.

Stedin also applies appropriate processes to ensure compliance with all relevant tax laws and guidelines. These processes cover bribes and corruption, fair competition and taxation.

Stedin is subject to Dutch taxation. Most of its tax liability concerns corporate income tax, value-added tax, dividend withholding tax, and payroll tax and social security contributions. In its dealings with the Dutch Tax and Customs Administration, Stedin is committed to a type of collaboration based on mutual trust, mutual understanding and transparency, and always strives to pay its fair share in taxes. This is implemented in further detail in Stedin’s tax policy.

Privacy

Stedin attaches great importance to the privacy of customers, employees, job applicants and other stakeholders. Stedin therefore handles personal data with care, taking into account applicable laws and regulations, including the General Data Protection Regulation (GDPR) and the Dutch General Data Protection Regulation (Implementation) Act (UAVG). The exercise of due care when handling personal data is part of our Code of Conduct.

When it comes to privacy, we strive for ever higher levels of maturity. We made significant progress in this area in 2023. Examples include the launch of a new privacy intranet page and the roll-out of a new Privacy by Design and Privacy by Default Guideline. Stedin’s privacy policy has also been updated and a new privacy e-Learning programme has been developed. This training programme will be mandatory for all new Stedin employees from 2024.

In 2023, Stedin recorded reports of 56 data breaches in its data breach register (2022: 39). Of these internal reports, 5 were notified to the Dutch Data Protection Authority in 2023 (2022: 5). 

Stedin has signed up to Netbeheer Nederland’s Smart Grid Management Code of Conduct. In July 2023, the Data Protection Authority accredited the supervisory body for this Code of Conduct. This means the Code of Conduct is now in force as the official GDPR Code of Conduct.