22 December 2021

Monitoring Committee report: a new perspective on "comply-or-explain" reporting?

The Corporate Governance Monitoring Committee has published its report on compliance with the Corporate Governance Code by Dutch listed companies for financial year 2020. This year, the Monitoring Committee has focused on the quality of reporting on the Code's five key themes. The Committee investigated to what extent companies provide insight in how they have complied with the Code's principles and best practices when it comes to these themes. Based on the advice the Committee seems to provide about the scope of the Code's "reporting provisions", companies are expected to also provide insight on how they complied with the Code's "conduct-related provisions" that apply on a comply-or-explain basis. The Committee encourages boards to provide more insight into the relevant dilemmas and challenges they faced in complying with the conduct-related provisions, how these were addressed, and how this has impacted the business.

A new perspective?

The Committee distinguishes between "conduct-related provisions" and "reporting provisions". Reporting provisions require a company to disclose certain information; all other provisions are conduct-related and as such apply on a comply-or-explain basis.

Since its monitoring report over the 2018 financial year, the Committee has called into question the high rate of compliance with the conduct-related provisions as reported by companies, and has concluded in previous instances that such high compliance rate did not seem to be justified in all cases.

These findings may have inspired the Committee to make a one-time request to Dutch listed companies to report on long-term value creation, culture and diversity, on, what the Committee refers to as, a "comply-and-explain" basis. In its October 2021 letter making this request, the Committee essentially provided advice on the scope of the requirements that follow from the Code's reporting provisions. The Committee asked companies to report over the 2021 financial year in such a way that the reporting would provide insight into the extent of their compliance with the conduct-related provisions on long-term value creation, culture and diversity. According to the letter, this one-time request would allow the Committee to draw meaningful conclusions on the actual compliance rate.

In its recent monitoring report on the 2020 financial year, the Committee states that the reporting obligations of the Code primarily serve to encourage companies to provide insight into how they apply the conduct-related provisions. This interpretation seems to correspond with the approach that the Committee referred to in its October 2021 letter. Essentially, the Committee seems to have monitored to what extent companies already reported, in accordance with the instructions included in its letter, on the three above themes (long-term value creation, culture and diversity), as well as on risk-management and remuneration. Whether the Committee's advice on the scope of the reporting provisions will continue to apply after the 2021 financial year remains to be seen.

In its monitoring report, the Committee also identifies substantive reporting as a trend that is gaining importance, for example on ESG-related matters, while many companies struggle with the increasing disclosure requirements. The Committee expects that asking companies to include more substantive reporting when complying with the Code may help the same companies to be better prepared for statutory ESG-related disclosure requirements when these take effect.

Key findings of the Committee's monitoring report

In previous years, the Committee examined overall compliance with the Corporate Governance Code on the basis of the company's annual reports. This time, the Committee limited its research to five topics: long-term value creation, risk-management, culture, diversity and remuneration. For each of these topics, the outcome was that compliance rates were similarly high as in previous years when based on the approach that a company complies unless it specifically reports a deviation. At the same time, the Committee concludes that reporting on most of the topics is too often process-driven and less substantive and that many companies have not yet reported in accordance with the Committee's perspective on reporting as set out above.

Below, we summarize the Committee's key findings on the five key topics:

Long-term value creation

Companies often report in a process-driven manner on the involvement of the supervisory board in developing and monitoring the strategy on long-term value creation. The Committee does not expect companies to disclose in detail the impact and involvement of the supervisory board in this regard. But companies can, for example, provide more insight into topics that have been of particular concern to the supervisory board, and why this was the case. The Committee also encourages companies to combine the reporting on strategy and on long-term value creation as these are intertwined in the Code. Furthermore, there is room for improvement in the reporting on stakeholder engagement, especially in relation to the long-term value creation strategy.

Risk Management

Companies often do not provide adequate insight into the various risk categories relevant to the company and the company's risk appetite. The Committee encourages companies to report on risk management in the context of long-term value creation.


Companies can report more meaningfully on culture and values. Often, a clear explanation is lacking of why the chosen values are appropriate for the company, and how these values contribute to long-term value creation. The Committee reiterates its call on companies to pay explicit attention to creating a culture aimed at long-term value creation, and expects them to report on how this is created, and what its impact is. This also reflects the trend of increasingly scrutinising the social responsibility of companies, which cannot be underestimated.

In this context, the Committee states that it is considering making this more explicit with the update of the 2016 Code. The primary aim is to encourage a more holistic approach to thinking about and reporting on values, culture, and long-term value creation.


Compliance on this theme remains too low. Reporting on this topic is limited in content, and the objectives of the diversity policy are not substantiated, or only to a limited extent. The Committee reiterates its call of last year to put diversity higher on the agenda.

The Committee refers to the recent bill on gender diversity, which will come into force on 1 January 2022, but stresses that diversity is a broader concept than gender. The Committee notes that it is working on revising the diversity provisions in the Code.


Often, companies report on remuneration in a process-driven manner. They do not reflect on their remuneration structure and do not always clearly indicate how they take different aspects into account when formulating the remuneration policy for their directors. In addition, companies in general do not report on whether a pay ratio is considered appropriate.

Revised Code

In the first quarter of 2022, the Monitoring Committee expects to publish a consultation document aimed at updating the 2016 Corporate Governance Code. The Committee is still in dialogue with supporting parties and other stakeholders about the relevant key topics.