Strategic focus and performance
During the year, the Supervisory Board was actively involved in discussions with the Executive Board on the strategic focus of the bank, and it monitored the execution of the strategy. To achieve the targeted return on equity, costs had to be controlled and revenues increased by growing, in a considered way, certain existing as well as new businesses, in particular fee-based services. Geographic expansion was put on hold. The Supervisory Board encouraged the Executive Board to seize the growth opportunities for Triodos Investment Management.
The Supervisory Board closely monitored the performance and functioning of the Executive Board and its individual members. An important instrument to set the objectives and assess the outcomes of the performance is the annual priority setting by the Executive Board as a whole and for its individual members. The Supervisory Board approved the priorities for 2019 covering the performance, health and development of Triodos Bank. Close to the end of the year, the Supervisory Board assessed the performance over 2019 and discussed the priorities for 2020. On behalf of the Supervisory Board, the Chair and the Vice-Chair discussed these with individual members of the Executive Board and reported the outcomes to the Supervisory Board.
The Chief Financial Officer (CFO), Pierre Aeby, stepped down at the 2019 AGM. Planning and implementing his succession formed a major area of attention for the Supervisory Board. We took into account the current and future challenges for the Executive Board in general and in the areas of Finance and Risk in particular, as well as the composition of the Executive Board as a team. The area of Risk was previously covered by the CFO. In close consultation with the Executive Board, the decision was made to expand the Executive Board with one additional role by creating the role of Chief Risk Officer (CRO) as a full member of this board. This decision followed from the recognition of the increased importance of compliance and risk management, and the need to manage and guide these matters at Executive Board level. For the function of CRO Carla van der Weerdt was recruited, who was appointed on 17 May 2019 and started the next day. The recruitment of a new CFO took more time. Therefore, the Bank recruited Menno Harkema on an interim basis as non-statutory CFO. He provided valuable contributions in that role from April to December 2019. Given that Triodos Bank operates in several countries, we created a profile so as to reflect this in the composition of the Executive Board. André Haag (German nationality) proved a highly qualified candidate. He was appointed after the Extraordinary General Meeting in December 2019 with effect from 1 January 2020. The selection process was conducted in close cooperation with the Executive Board to ensure in all respects a good fit.
During the year 2019 the Supervisory Board also underwent several changes in its composition. After nine years on the Supervisory Board, the term of Carla van der Weerdt came to end. In the search for a new Supervisory Board member, we found Mike Nawas, then a member of the Board of SAAT (Stichting Administratiekantoor Aandelen Triodos). Mike Nawas was selected in 2018 and appointed in the Annual General Meeting of 17 May 2019. He accordingly stepped down as a member of the Board of SAAT.
In early 2019, it became clear that Triodos Bank would have to convert its branch in the United Kingdom into a subsidiary, in order to adequately adapt to the new banking environment post-Brexit. The Executive Board appointed Gary Page as non-executive Chairman of the new one-tier board of the new subsidiary. To facilitate this change, Gary Page, who theretofore was a member of the Supervisory Board of Triodos Bank, resigned as a member of this Board in May 2019.
Also in early 2019, Udo Philipp resigned as a member of the Supervisory Board, because he was appointed State Secretary for Finance in the German State of Schleswig-Holstein. This position did not allow him to continue his membership of the Triodos Bank Supervisory Board. Confronted with these two members leaving, the Supervisory Board concluded in the Spring of 2019 to conduct a search for one new candidate. In the profile, we focused on banking experience and, given the Dutch nationality of the other members, a non-Dutch nationality. We found Sébastien D’Hondt (Belgian nationality), who was appointed in the Extraordinary General Meeting of 13 December 2019. The Supervisory Board decided not to search for other candidates at this stage, as no members are expected to resign in 2020 and the current composition provides an appropriate and complete competence matrix.
Supervisory Board compensation
Already in 2018, the Supervisory Board had concluded that the compensation for Supervisory Board members required an adjustment, as it had been held constant for many years, even though the workload and the responsibilities had increased substantially. In preparing an adjustment, the Supervisory Board took into account the context of the Dutch financial sector and societal views in The Netherlands regarding board compensation. The Supervisory Board considered seriously and prepared a written proposal to the Annual General Meeting with a clear motivation. The proposal was adopted in the Annual General Meeting of 17 May 2019.
During 2019, topics discussed at the Supervisory Board's meetings and contacts with the Executive Board included:
- Finance: the Return on Equity and the Total Capital Ratio developed below budget; the Supervisory Board discussed with the Executive Board how to respond effectively and endorsed the measures that were taken. As usual, the Supervisory Board examined the quarterly financial results, the Management Letter and Board Report of the External Auditor, the 2018 annual report plus the half-year results 2019 and the respective press releases, and the dividend proposal 2018.
- Risk and Audit: the risk appetite and the effectiveness of the internal risk framework and control systems, the risk appetite and the actual risk profile, the audit findings, the auditor's reports, loan reports and implementation of new regulatory requirements were all discussed in plenary at the Supervisory Board.
- Culture Change Effectiveness: the Supervisory Board continued to supervise the Culture Change Effectiveness process, which started in 2018. The Supervisory Board was informed about and commented on the actions. We welcomed that the Executive Board aligned the Culture Change Effectiveness process with the Strategy and the Business Plan for 2020 and beyond. The Supervisory Board discussed with the Executive Board the reporting towards the Supervisory Board regarding this topic.
- Works Council: on behalf of the Supervisory Board, the Nomination Committee attended the Works Council meeting in March 2019. One of the subjects was the succession of Pierre Aeby and the nomination of the CRO and the CFO. Another subject was the generally heightened workload of co-workers, which is partly due to increased regulatory pressure and the drive to enhance efficiency. The Nomination Committee met with the Works Council in September, at the request of the Works Council.
- Talent Management: The Supervisory Board decided to start, in 2020, with conducting informal bilateral meetings between Supervisory Board-members and senior managers, aimed at getting to know each other better and to increase awareness of how roles and functions are performed in day-to-day practice.
- Business Units: meetings were held with the management of local banking entities and Triodos Investment Management by individual Supervisory Board members, together with a representative of the Board of SAAT and the Executive Board. A Supervisory Board banking entity visit was organised by Triodos Investment Management in 2019.
- Brexit: 2019 saw the preparation and launch of Triodos Bank UK as a new legal entity under the supervision of the British Prudential Regulatory Authority, and the setting of terms and conditions for a successful start.
- Contacts with the Dutch prudential supervisor: delegations of the Supervisory Board met with the DNB, the Dutch Central bank, in 2019. In these meetings we shared views on the development of Triodos Bank. Specific matters discussed with the DNB in 2019 included the letter concerning the Supervisory Review and Evaluation Process and the changes in the composition of the Executive Board and the Supervisory Board.
- Contact with the Board of SAAT: the Supervisory Board met with the Board of SAAT as usual before the Annual General Meeting. In addition, the Board of SAAT, the Supervisory Board and the Executive Board met in October for an update on current regulations regarding governance. On this occasion we also clarified the different roles and responsibilities of these three boards.
The Supervisory Board looks back at a year during which all the above-mentioned discussions took place in an open, mutually respectful and constructive way. The Supervisory Board observes a high degree of motivation, combined with a breadth of complementary competences within the Executive Board and the wider group of co-workers of Triodos Bank, to realise the mission for which Triodos Bank stands.