Report of the Supervisory Board
Operational challenges, staff shortages and negotiations on a new main rail network franchise were among the key issues on the Supervisory Board’s agenda in 2023.
Franchise 2025–2033
In 2023, NS intensively negotiated the 2025–2033 main rail franchise with the Ministry of Infrastructure and Water Management. It was one of the most important issues last year for the Supervisory Board, which had set up a special committee for this purpose. The committee was regularly updated by the Executive Board on progress made and bottlenecks encountered. The Supervisory Board served as advisor, touchstone and challenger to the Executive Board. Key themes of the franchise negotiations were possible rate differentiation, international connections, performance indicators and the franchise subsidy. The viability and long-term perspective of NS were paramount considerations for the Supervisory Board in advising on and assessing the contractual negotiations between NS and the Ministry of Infrastructure and Water Management.
The Supervisory Board is satisfied with the final award of the main rail network franchise to NS. Nevertheless, the Supervisory Board sees considerable operational and financial challenges for NS in getting through this new franchise period, including with a view to remaining the carrier of choice on the main rail network after the next franchise period. This will benefit Dutch passengers and the Netherlands as a whole, so the organisation should continue to work on this from 2024 onwards. One challenge is to keep the franchise affordable, especially since the government, much to the Supervisory Board’s regret, has decided against rate differentiation. This could have taken some of the pressure off the system at peak times, with the ability to reduce fares on quieter routes at peak and off-peak times and attract additional passengers to the train. Instead, NS must continue to tailor the size of its investments to the busiest times in the morning rush hour, which will not result in optimal deployment of rolling stock; meanwhile, the costs involved are significant. The organisation must make more savings, while at the same time continuing to invest to deliver good performance. NS will have to perform well and demonstrate that an undivided main rail network provides the most benefits for passengers, including after 2033.
The Supervisory Board was in regular contact with the shareholder last year about the financial side of the negotiations. Due to the limited earning capacity of the new contract, it has been agreed that the shareholder’s return requirements can be revised downwards. This is in the interests of passengers, NS staff and public transport in general
Staff matters
The Supervisory Board is updated on staff matters within the organisation at every meeting. Key issues last year were staff shortages and workloads in a number of positions. The Supervisory Board is concerned about high workloads, which partly stem from the intrinsic motivation of NS staff to provide the best possible service to our passengers: due to staff shortages, many staff did their level best to fill in the gaps. This is understandable, but unsustainable in the long term – as reflected, for example, in the persistently high rate of absences due to sickness. The staff shortages also made the Supervisory Board reflect on its own role. We concluded that, as an organisation, we had failed to anticipate the impending shortages in time.
Fortunately, last year NS was able to fill thousands of vacancies, both with external applicants and through internal transfers. Nevertheless, there are still short and long-term challenges in maintaining staffing levels, especially with regard to Safety & Security and technical staff. This makes it all the more important for NS to be a people-oriented organisation, offering jobs at an organisation that matters to society and that engages and motivates staff. The Supervisory Board believes that NS must continue to invest in its people, by offering attractive jobs, rosters that take employees into account, an effective deployment model and sufficient opportunities for advancement.
Operational performance
Although the minimum standards were met, in many respects operational performance in 2023 was not good and passengers often experienced train delays and cancellations. This was a key focus for the Supervisory Board. The main causes of these issues were shortages of staff and rolling stock, and trackwork. Teething problems with the new ICNG trains and speed restrictions on part of the high-speed line also had a negative impact. With an adjusted timetable and intensive staff recruitment campaigns, NS tried to deliver as good and predictable a product as possible. These efforts were only partly successful. At the same time, we are aware of the many challenges awaiting us in the coming years. In particular, the necessary trackwork carried out by ProRail, which increasingly takes place in the daytime, puts considerable pressure on the timetable. This work mostly concerns overdue maintenance that is essential if train travel is to remain attractive in the longer term.
Eurostar’s international connection between Amsterdam and London will also come under pressure next year. In 2023, the Supervisory Board had many discussions with the Executive Board on the temporary closure of the terminal at Amsterdam Central Station and contributed ideas on alternatives. Unfortunately, it failed to solve this problem in a way that took account of the requirements of all stakeholders. From June 2024, therefore, the terminal will close for about six months – However, it will still be possible to travel to the UK from the Netherlands, with transfer and check-in and border controls at Brussels South station. For passengers travelling from London to Amsterdam, three direct connections remain.
Stations and broad mobility
For NS, investing in broad mobility is an important prerequisite for keeping rail transport attractive and, as such, an essential part of its strategy. The Supervisory Board is regularly updated on progress on this issue. For example, NS is successfully running the public transport bicycle project, with its blue and yellow bikes increasingly visible on streets in all parts of the country. Following a successful pilot, scaling up the public transport ebike project is the logical next step. After initially lagging behind – for example with Mobility as a Service – NS is now catching up. Particularly in the business market, NS Go made several highly effective customer acquisitions. It is good to keep investing in this area in the long term.
NS stations play a pivotal role in broad mobility services for passengers but also for other carriers. This can create dilemmas: for example, if a carrier wants an overnight train to stop at an NS station, NS has to provide staff capacity. It is important for the dialogue with the requesting parties on topics of this kind to be conducted in a proper and businesslike manner.
The property portfolio of NS Stations is under pressure. Although NS is participating in numerous projects and despite the great need for new houses to be built in the Netherlands, factors such as high interest rates and low yields are causing delays in new housing construction in many locations.
Abellio
NS transferred the UK franchises to the management of Abellio UK through a management buyout at the end of February 2023. This is the result of the international strategy that NS settled on several years ago, and according to which international operations should contribute to the interests of the Netherlands and Dutch passengers. Given that the rail franchises in the UK could not reasonably be said to meet this requirement and that their added value, both in financial and substantive terms, was limited, NS decided to sell its subsidiary Abellio UK.
Abellio Germany
The German rail networks continue to cause headaches. Due to frequent trackwork and signal and infrastructure breakdowns, train services have had to be cancelled and replacement bus services arranged. As a result, fines are imposed because punctuality is too low and train cancellations too high, even though the cause is largely beyond Abellio’s control. Abellio is only partially compensated for the costs associated with the fines and replacement bus services. In addition, Abellio is facing staff shortages in Germany due to the tight labour market and high rates of absences due to sickness.
Importantly, we were able to put a stop to the bankruptcy proceedings after a settlement was reached with the trustee in the summer following agreement from creditors. The final insolvency plan is yet to be approved by the court, but it has removed the uncertainty surrounding the outcome of the bankruptcy proceedings in Germany, allowing management to focus fully on the business. A reconsideration of our activities in Germany from the point of view of actual added value for passengers in the Netherlands will be made in the near future, and will obviously take into account the interests of Abellio Germany employees.
Safe travel
Both employees and passengers want a safe environment in which to work and travel. Safety comes first at NS under all circumstances, and we never compromise on that principle. Supervisory Board members also participate in ‘safety walks’. In addition, there is a lot of focus on the topic of safety during Supervisory Board meetings.
Despite NS’s considerable focus on safety, incidents unfortunately do occur every year. A horrific collision with fatalities took place near Voorschoten in 2023. The Supervisory Board was immediately informed of the circumstances and was kept closely involved by the Executive Board. We also deeply regret another fatal collision that occurred near Maarn, in which a train driver was killed.
Public safety at our stations and on our trains is under pressure. Passengers and staff are increasingly confronted with aggression. This is a problem in society as a whole, and there are limits to NS’s ability to solve it. The Supervisory Board therefore supports the Executive Board’s efforts to get more support from the government.
Another type of safety issue occurred in the form of a hardware failure at ProRail’s traffic control centre on 4 June. Many passengers were affected by the disruption on that day, unable to continue their journey or forced to spend the night at the station or a shelter. NS made serious errors in this incident. ProRail and NS have evaluated the events and measures are being taken. The Supervisory Board appreciates this as a sign of a learning culture.
Investments and financial position
NS is facing major investments in IT and new trains, among other things. Both are necessary to continue providing reliable services to passengers in the long term. In 2023, the Supervisory Board considered, among other things, investments in IT infrastructure, modernisation of the VIRM4 and a tendering procedure for new double-decker DDNG and Sprinter S5G trains.
NS realised a net loss of -€380 million for 2023. The result from operating activities was -€540 million. NS will continue to face major challenges in the years ahead, including, in particular, a new main rail network franchise with limited earning capacity.
Corporate governance
Changes in the Executive and Supervisory Boards
Supervisory Board
Chair Gerard van de Aast left NS last year. We would like to thank Gerard for his huge contribution and commitment to NS and the Supervisory Board. He led the Supervisory Board during difficult and hectic years, kept everyone alert and had an unfailing eye for safety. We are also grateful to Marike van Lier Lels and Nebahat Albayrak for their commitment to NS in recent years. The Supervisory Board welcomed Ron Teerlink and Pamela Boumeester as new members in 2023.
Executive Board
After serving for more than seven years as CFO and a brief interim term as CEO, Bert Groenewegen will hand over his role as Executive Board member and CFO from 1 March 2024. The Supervisory Board is extremely grateful to Bert for the way he has fulfilled his duties, his tremendous commitment and his contributions to the company. We are pleased to welcome Angelique Magielse as Bert’s successor and are happy with this internal transfer. Angelique will continue to serve as Managing Director of Abellio until 1 March 2024. The Supervisory Board also thanks Anneke de Vries, who retired from NS in 2023. The search for a fifth member of the Executive Board is currently ongoing.
Performance of the Supervisory Board
Once every three years, the Supervisory Board commissions an external agency to examine its performance. A self-assessment took place in 2023. One of the outcomes is that the Supervisory Board wishes to meet at least twice a year at an NS location other than Utrecht so as to increase the connection with NS as a whole. Furthermore, the Supervisory Board has decided to split the Risk and Audit Committee (RAC), which is quite large in its current form, into an operational committee and a financial committee. This will enable the Supervisory Board to increase its focus on operational challenges, which is one of the focus areas in its supervision strategy.
Performance of the Executive Board and collaboration with the Supervisory Board
The Executive Board’s performance has been satisfactory. The Executive Board is carrying out its tasks effectively, under difficult circumstances. The relationship between the Supervisory Board and the Executive Board is professional and good. The Supervisory Board is involved in major and complex decisions in a timely and effective manner. Discussions also cover specific dilemmas. The Supervisory Board has confidence in the Executive Board and professional relations between the two boards are good. Both the Supervisory Board and the Executive Board keep to their roles in the performance of their tasks.
Supervisory Board meetings
In total, the Supervisory Board met 10 times last year. Virtually all of these meetings were attended by all Supervisory Board Members, with an average attendance rate of 86%. The Supervisory Board has two permanent committees: the Risk and Audit Committee, and the combined Remuneration and Appointments Committee.
Risk and Audit Committee
The Risk and Audit Committee (RAC) consists of all Supervisory Board members and has been chaired by Ron Teerlink since 1 July 2023 (previously by Herman Dijkhuizen). The committee met five times. The CEO, members of the Executive Board for Finance and Risk & Compliance, Audit Director, Group Control & Expertise Director and external auditor were also invited to these meetings. The external auditor attended all RAC meetings.
Depending on the agenda, other individuals – such as the directors of Legal Affairs and Sustainable Enterprise – were also invited. In 2023, the committee discussed the financial statements, the annual report, the yearly reporting for the Ministry of Infrastructure and Water Management, the six-monthly figures, the budget, risk management and risk appetite, the group plan for 2023–2027, periodic reporting by the Risk & Compliance department, plans and reports from the Internal Audit department, reports prepared by the external auditor, finding a new external auditor, Abellio and cybersecurity issues.
The RAC also discussed rolling stock reports and the performance of the external audit function. A key focus of the RAC, based in part on HR reports, was the progress made in addressing inappropriate behaviour and preventing nuisance.
Key points from the external auditor’s management letter include internal control, the disposal of Abellio UK, the handling of the insolvency proceedings in Germany, IT and cyber security and the CSRD.
The main topics from the auditor’s end-of-year report that were discussed related to NS’s results, solvency, financing and continuity, the valuation of assets in Germany and the impairment of the main rail network as a result of the new franchise that was agreed.
Over the course of the year, the Chair of the Supervisory Board and the Chair of the RAC held several consultations separately with the external auditor and the shareholder.
Remuneration and Appointments Committee (combined)
The combined Remuneration and Appointments Committee is chaired by Janet Stuijt, and its members are Pamela Boumeester, Herman Dijkhuizen, Marieke Lier Lels and Pim van der Feltz. The committee met three times in 2023. The topics discussed include talent and leadership development, succession planning and remuneration for the Executive Board. The committee also considered the remuneration report, target letters, the appraisal process, the rate of absences due to sickness and succession processes. The Supervisory Board as a whole is independent within the meaning of the Dutch Corporate Governance Code. The Supervisory Board broadly subscribes to best practice stipulations 2.1.7 to 2.1.9 in the 2016 Code.
Shareholder
The Supervisory Board maintained good relations and regular contact with the shareholder. In 2023, for instance, we discussed the new franchise, Abellio and changes in the composition of the Executive Board and Supervisory Board, among other things.
Employee participation
The Supervisory Board had frequent contact with the Central Works Council in 2023, including through the standing SB-COR Committee, which meets four times a year. Themes discussed included the new franchise, operational performance, safety and finding successors for Bert Groenewegen and Anneke de Vries. The appointment of new Supervisory Board members Ron Teerlink and Pamela Boumeester was also discussed. The Supervisory Board also had two ‘Section 24 Works Council Act meetings’ with the Central Works Council and the Executive Board. The Supervisory Board appreciates the atmosphere of constructive cooperation and confidentiality in which these meetings are held.
Relationship with the external auditor
The external auditor routinely attends all meetings of the Risk and Audit Committee. The external auditor also attends the meetings of the full Supervisory Board at which the financial statements and six-monthly figures are discussed. In addition, the RAC consults with the external auditor without the Executive Board being present. Every year, the RAC evaluates the external auditor’s performance and issues a report to the Supervisory Board.
2023 was the last year in which EY served as the external auditor. The Supervisory Board would like to take this opportunity to thank EY for its professional services and cooperation. KPMG will take over the auditing of the financial statements of NS in 2024.
About this report
The financial statements for 2023, as prepared by the Executive Board, were discussed by the Supervisory Board in the presence of the external auditor. The financial statements are accompanied by the Executive Board’s report. We propose that the General Meeting adopt the 2023 financial statements. We also request our shareholder to discharge the Executive Board and Supervisory Board from their liabilities.
The Supervisory Board would like to give special thanks to all employees, the employee participation bodies and the Executive Board of NS. Despite the multitude of operational and staff-related challenges, all staff served with full commitment throughout the year. 2024 will once again require a great deal of resilience on the part of our people, but passengers will always be able to count on NS.
Utrecht, 20 February 2024