About this Report Chairman's Foreword Corporate Management Report Appendices Governance Consolidated Financial Company Financial Statements Statements The Governance Bodies in Short The governance of Rabobank has always been adaptive. Since the establishment of the first credit cooperative in the Netherlands in 1895, Rabobank has been able to change in response to strategic considerations, to trends in society, as well as to developments in banking and regulation. As with previous governance regimes, the new governance structure is founded on a balanced system of closely interrelated and interacting bodies. This new structure was designed by an internal Governance Committee created at the beginning of 2014. The Committee consisted of representatives of local supervisory bodies and chairs of local management teams, as well as Managing Board members of Rabobank Nederland. Its ultimate proposals had to satisfy several shared principles and rectify shortcomings in the previous framework. The governance review process took approximately two years. A defining feature of the new governance is that the cooperative division remains inextricably linked with the tactical and operational banking business. The figure below shows the cooperative governance bodies (LHS) and the banking business (RHS). Bottom-up decision-making entails that member representatives ultimately approve the bank's strategic frameworks. In the following section we will elaborate on the main roles and responsibilities of the two sides of the new governance. Cooperative Governance Cooperatives are distinguished by the fact that clients can become members, and members give cooperatives legitimacy. Currently, more than 25% of our clients are members of a local Rabobank. Their representatives in governance bodies exert an important influence on the course of the local Rabobank as well as of the entire organization. As a core feature of the cooperative governance, membership has always led to divergent internal dynamics and a different - strategic - orientation compared to financial institutions with different ownership structures. Members are divided into roughly 100 member departments at the local level. Each department is assigned to one or more delegates'election assemblies which appoint, suspend or dismiss the members of the Local Members' Councils (LMCs). These councils consist of 30 to 50 members who act as the eyes and ears of the management teams of the local Rabobanks. By bringing the outside world to the table, the members serving on these councils help keep the local Rabobankfirmly on track. LMCs have an important say in how cooperative funds are used. They act as a sparring partner for the management teams of the local Rabobanks, and have a number of formal duties and responsibilities, such as the right to approve the merger or demerger of a local Rabobank or to advise the chair of the local Rabobank's managementteam on members' policy plan. LMCs monitor the financial performance of local Rabobanks, the policies as implemented by the chairmen of local Rabobanks' management teams, as well as the supervision exercised by the members of the Local Supervisory Body (LSB). LSB members are appointed by and accountable to their LMCs. An LSB does not derive its authority from law. The Managing Board has instead delegated the LSBs specific local governance powers under the Articles of Association of Rabobank. LSB chairmen are key players in the collective governance as they represent local members in the General Members' Council (GMC). At the local level, the LSB supervises the execution of the strategy. In this light, the general state of affairs and (social) performanceofthe local Rabobank, including its internal financial reporting, must feature periodically on the LSB agenda. The internal financial reporting of individual local Rabobanks are also compiled in the new governance structure to enable LSBs to perform their roles accurately and adequately, furthermore, this body is authorized to supervise the degree to which the local Rabobank complies with external laws and regulations and the Articles of Association. Local supervisors are required to actively assess whether the quality ofthe offered services meets the needs of clients and members. They judge the extent to which the local management team chair carries out his or her local responsibility to focus on clients' long-term interests, to contribute to the sustainable development ofthe local community and to strengthen ties between the bank and the local community. The LSB is further responsible for the local managementteam chair. This comprises appointing, assessing and suspending the chair. The LSB is also authorized to approve a number of important local decisions. It must ensure that the local management team chair heeds its advice in local policy making, furthermore, the LSB has an advisory role with regard to the management ofthe local Rabobank and fulfills an intermediary position between the community and the local Rabobank. Lastly, it has a duty towards contributing to the sustainable development ofthe district and to strengthen its connection to the community. In 2018, specific programs were developed and employed to stimulate the diversity of LSBs. We consider it important that the collective of local supervisors is an adequate reflection of our customer and member base. Judged by the decline ofthe average age of all local supervisors and the percentage increase in the inflow of female supervisors, these measures already seem to meet with success. In addition, special training is put in place for young supervisors. New tools were developed to assess and improve the functioning of individual LSBs. Annual Report 2018 - Corporate Governance 99

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Annual Reports Rabobank | 2018 | | pagina 101