report from the supervisory board

Particularly given the successful offer for Vedior, 2008 was a special year in the Group’s 48-year history. The combination of Randstad and Vedior has created the second-largest HR services company in the world and fits very well with our strategic targets and defined growth drivers. Together, we have enhanced market positions, an improved geographic reach and a wider product offering. Based on realistically anticipated and already partly realized synergies, the transaction was expected to create shareholder value by 2010, assuming low single digit growth going forward. If current market trends continue, this will be delayed. The supervisory board is impressed with the speed and effectiveness of the integration process, both at Group level as well as in many countries. Despite the contracting market trends and the difficult financial and economic environment, which have led to a € 500 million impairment on Vedior-related goodwill and the precautionary measure to propose that no ordinary dividend is paid for 2008, the super¬visory board has great confidence in the future of the combined company.

Following the acquisition of Vedior and as approved by shareholders during the extraordinary general meeting held on April 23, 2008, the supervisory board welcomed Beverley Hodson and Henri Giscard d’Estaing, formerly members of the supervisory board of Vedior. With their international profile, management expertise and knowledge of the Vedior Group, they are an ideal fit with the profile of the supervisory board, increasing its diversity. The same meeting approved the appointment of Greg Netland and Brian Wilkinson, formerly members of the board of management of Vedior, as members of the executive board. All of these appointments, which became effective on May 16, 2008, properly reflect the increased international profile and geographical coverage of Randstad.

Structure, composition and working method of the supervisory board

In line with Dutch corporate governance requirements, the members of the supervisory board together represent a broad range of experience and expertise. The board’s role is to supervise the ongoing growth and development of the Group, monitor its strategy, progress and performance and provide expert advice and support. The supervisory board currently comprises nine members, whose profiles are listed here. At the next Annual General Meeting of shareholders on March 31, 2009, the final term of Jan Hovers will expire. Jan Hovers has made a very important and valuable contribution to the supervisory board and to Randstad during his 14-year term as a member of our board. We are very grateful to him and wish him well for the future.
The supervisory board attaches great importance to the independence of its members. As a rule, all members, with the exception of no more than one, should be independent in the meaning of article 1 of the by-laws of the supervisory board. This article is in line with the relevant provision in the Dutch corporate governance code. With the exception of Randstad founder and former chief executive officer Frits Goldschmeding, all supervisory board members are independent within the meaning of the code. The members of the supervisory board were not granted and do not possess any Randstad options or shares, with the exception of Frits Goldschmeding and Henri Giscard d’Estaing who personally hold shares in the company (as stated here).

While the supervisory board as a whole retains overall responsibility for its functions, it assigns some of its tasks to three permanent committees: the audit committee, the strategy committee and the nomination & compensation committee. In light of the acquisition of Vedior, an ad hoc transaction committee was also established. The full supervisory board appoints committee members from its own membership based on the relevance of their expertise and experience. All supervisory board members are in principle also members of at least one committee.

By-laws and terms of reference for both the supervisory board and its committees have been drawn up in compliance with the Dutch corporate governance code. These documents are available at the company’s offices and are posted on the corporate website.

Randstad ensures that there are structured reporting lines to the supervisory board and its committees. Key departments and operating companies work according to reporting frameworks that facilitate monitoring by both the executive board and the supervisory board. The supervisory board meets regularly throughout the year, according to a pre-arranged schedule, both with and without the executive board and senior management. Outside this schedule, its members are available to the executive board at all times. By way of frequent informal consultation with the members of the executive board in between the meetings, the supervisory board, in particular its chairman, remains well informed about the general state of affairs within Randstad and offers advice on various matters. The committees also come together at fixed times during the year, according to a pre-determined schedule, and when required. They report directly to the full supervisory board on a regular basis, usually directly following a committee meeting.

At the end of each year, the supervisory board extensively assesses the composition, performance and functioning of the executive board and the supervisory board, as well as its individual members.

Supervision and advisory activities in 2008

The supervisory board met nine times during the course of 2008, five of which meetings were held jointly with the full executive board and four among themselves, with the participation from the chief executive officer in some of the items. These four meetings were held to discuss the nominations for appointment to the supervisory and executive board as well as board remuneration and other items. Senior corporate and operational management were invited to several meetings. The external auditor was involved in one meeting. The supervisory board also paid a two-day visit to the operations in the United Kingdom. In 2008, absenteeism was again negligible.

The supervisory board is updated on a regular basis regarding market developments in the countries where the company operates and in potentially interesting markets. This generally includes the latest developments in labor relations, demographics and politics. These updates are either provided by the members of the executive board or directly by senior local management. Senior management of the operations in Spain and Belgium joined a supervisory board meeting in 2008 to give an update on their respective countries, including Randstad’s position and the integration of Vedior’s operations. The two-day visit to the various operations in the United Kingdom gave the supervisory board additional insight into the quality of local management and a better understanding of the working processes there. Incidentally, supervisory board members also visit country management or participate in country meetings on an individual basis, as the opportunity arises.

Strategy is a priority for the supervisory board. Ample time was spent on an in-depth discussion with the executive board on the realization of the strategic targets in the past years, the acquisition and integration of Vedior, the geographic and sector coverage as well as the strategy for the Group going forward. The supervisory board also discussed the company’s profitability through the cycle, for example how to continue achieving the strategic EBITA margin objectives, also during economic downturns, and the medium-term targets for the new and combined businesses.

As Randstad operates in a competitive environment, it is inappropriate to detail some of the topics discussed and monitored by the supervisory board. However, the following overview is an indication of its supervisory activities – most topics and issues recur throughout the year:

• strategy and growth, organically and through acquisitions
• corporate planning projects, including potential acquisitions and divestments
• the Vedior agreement and transaction, and the subsequent integration process, including the post-deal organizational structure and board composition
• the financial performance of the Group as a whole and key issues per operating company
• budgets
• managing Randstad through the cycle
• capital structure, including the restructuring of the preference shares
• the assessment of company risks (see Risk and oppurtunity management)
• corporate governance, including the assessment of compliance with the Dutch corporate governance code and the proposals of the monitoring committee
• compliance, including the updated insider dealing rules and the list of sensitive securities
• the preparation, evaluation and follow-up of the annual and extraordinary general meetings of shareholders
• management development
• corporate social responsibility, including compliance with the code of conduct and the integrity code
• the extensive evaluation and appraisal of the executive board and its individual members
• the composition of the supervisory board and its committees, including new appointments
• the composition of the executive board, including new appointments
• the remuneration policy and remuneration of the executive board
• the allocation of shares to senior management
• supervisory board remuneration
• investor relations, share price and shareholder development
• legislation, particularly the status of the European Directive on agency work.

During a separate meeting, the supervisory board discussed its own performance, composition and that of its three committees. In preparation for this self-assessment, each member of the supervisory board anonymously completed a questionnaire, assessing all relevant topics. A summary of the main findings from the completed questionnaires was used as the basis for the self-assessment discussion.

To underline the importance of Randstad’s code of conduct and integrity code, the supervisory board shares responsibility for these with the executive board. The integrity code is supported by a confidential telephone line and website that can be used by any employee to anonymously report issues or activities that they consider to be illegal, in breach of the Group-wide code of conduct, or other relevant policies and procedures. Operating company integrity officers report periodically to the central integrity officer, who in turn reports quarterly to the audit committee. Should any reported misconduct concern the senior management of an operating company, the Group integrity officer informs the executive board or supervisory board, and either board may involve the audit committee for investigation and follow-up. More information on these codes can be found here.

We are pleased to report that Jan Hovers was awarded the honor of Knight in the Order of Orange-Nassau by Queen Beatrix of the Netherlands. In the annual Institutional Investor magazine rankings, Robert-Jan van de Kraats was named as ‘Europe’s Best CFO’ in the business & employment services sector for the third year running. He also received the CFO of the Year 2008 award in the category AEX companies (the top 25 companies on NYSE Euronext Amsterdam). The nomination of Ben Noteboom as a member of the supervisory board of Ahold was announced in November 2008.