Judges are appointed ’for life’. This means that they remain in office until their retirement. They can only be dismissed as an exception. The reason is simple: this way a judge can always remain independent. Judgments displeasing the government cannot lead to dismissal or to not reappointing the judge. This is convenient in a democracy with separation of powers.

Oddly, the opposite principle is used for supervisors. Most supervisory directors are only appointed for three or four years. A reappointment is often possible once or twice. After that, it is end of story. The reason, paradoxically, is just like with judges the need for independence. The idea is that after nine or twelve years a supervisory director has become ’part of the furnishings’ of the company: he knows everyone and he knows all ins and outs. The risk hereof is ’company blindness’. A routine creeps in at a certain moment. The supervisory director pays less attention to the matters he sharply has to monitor. At home you also fail to notice that the window frames could use some painting. You have grown used to these few scratches and stains. You have ’become blind’ to this kind of flaws. In short, having a limited term of appointment and duration of appointment for supervisory directors is quite a good idea. In general: convenient.

However, this is not always the case in Curaçao. The group of suitable people you can call on for a position as supervisory director on a small island is not as large as in countries on the continent. If you dismiss a suitable supervisory director (too) quickly, you do not have one. Not convenient.

Sometimes there is a misunderstanding about the difference between a term of appointment and the duration of the appointment. Supervisors are usually appointed for a certain term, for instance for one year, or for three or four years. At the end of the term of appointment, their appointment ends by operation of law. Consequently, dismissal or formal termination of the appointment is not necessary. If a supervisor wants to stay in office longer, he has to be reappointed. In principle, this can be done endlessly. Theoretically, a supervisory director can be reappointed ten times ore even more. So, if the term of appointment is four years and the supervisory director is reappointed ten times, he will be in office for forty years. This is the duration of his appointment.

The term of appointment is usually mentioned in the articles of incorporation, the (maximum) duration of appointment not always is. The duration of appointment can be limited in the articles of incorporation, for instance to twelve years. With a term of appointment of four years, one can consequently be reappointed twice. If the term of appointment is one year and the duration of the appointment is twelve years, one can be reappointed eleven times. It is recommended to closely monitor the duration of appointment as well as the term of appointment. This often does not happen. Then the entire management board or entire supervisory board appears never to have been reappointed and the fake supervisory directors consequently have made invalid decisions for years. Not convenient.

This column is also available in Papiamentu. Click here to download a pdf version.

Do you have a question about corporate governance yourself? Please e-mail it to governance@ekvandoorne.com and perhaps your question will be discussed in the next blogpost.

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