Corporate governance

AEGON N.V. is a public company under Dutch law. It is governed by three corporate bodies: the General Meeting of Shareholders, the Executive Board and the Supervisory Board¹.

For further details on how AEGON’s corporate governance practices differ from those required of US companies under New York Stock Exchange standards, please refer to the Corporate Governance section of AEGON’s website (www.aegon.com).

General Meeting of Shareholders

A General Meeting of Shareholders is held at least once a year. Its main function is to decide matters such as the adoption of annual accounts, the approval of dividend payments and appointments to AEGON’s Executive and Supervisory Boards. Meetings are convened by public notice. When deemed necessary, the Executive or Supervisory Board has the authority to convene an Extraordinary General Meeting of Shareholders.

Any shareholder may request items be added to the agendas of these meetings. Generally, in accordance with AEGON’s Articles of Incorporation, requests are granted providing they are supported by shareholders representing either at least 0.1% of the company’s issued capital or a block of shares worth at least EUR 50 million.

Every shareholder is entitled to attend the General Meeting of Shareholders, to speak and vote at the meeting, either in person or by proxy granted in writing (including electronically embedded proxies). In accordance with the applicable statutory requirements, any shareholder wishing to take part must provide proof of his or her identity and shareholding and notify the company ahead of time of his or her intention to attend the meeting.

When convening a General Meeting of Shareholders, AEGON’s Executive Board can set a date (‘the record date’), which is used to determine the entitlement of shareholders to take part and vote at the meeting.

AEGON is a member of the Stichting Communicatiekanaal Aandeelhouders, a Dutch foundation dedicated to improving communications between listed companies and their shareholders and to encourage greater shareholder participation at general meetings. Through the ‘Communicatiekanaal’ participating shareholders can vote by proxy. In addition, AEGON solicits proxies from New York Registry shareholders in line with common practice in the United States.

At the General Meeting of Shareholders, each share carries one vote. However, the holder of preferred shares, Vereniging AEGON, may cast 25/12 votes per share in certain circumstances. Resolutions are adopted by an absolute majority of valid votes cast, unless the law or AEGON’s Articles of Incorporation stipulate otherwise.

The Executive Board

The Executive Board is charged with the management of the company. Each member of the Board has duties related to his or her specific areas of expertise. The number of Executive Board members and the terms of their employment are determined by AEGON’s Supervisory Board. Executive Board members are appointed by the General Meeting of Shareholders following nomination by the Supervisory Board.

Pension arrangements for Executive Board members are based on a retirement age of 62. Dutch members have the option of retiring earlier, at 60.

For certain decisions, set out in AEGON’s Articles of Incorporation, the Executive Board must obtain the prior approval of the Supervisory Board. In addition, the Supervisory Board may subject other Executive Board decisions to its prior approval.

The Supervisory Board

AEGON’s Supervisory Board oversees the management of the Executive Board as well as the overall course of the company’s business and corporate strategy and shall take into account the relevant interests of AEGON’s stakeholders.

The Supervisory Board operates according to the principles of collective responsibility and accountability. The Supervisory Board may also assist the Executive Board by offering advice. Members are appointed by the General Meeting of Shareholders following nomination by the Supervisory Board.

AEGON’s Supervisory Board currently consists of eleven non-executive members, one of whom is a former member of the company’s Executive Board. The Supervisory Board also oversees the work of several committees composed of its members, dealing with specific issues linked to AEGON’s accounts, corporate strategy and executive remuneration and appointments.

AEGON is eager to ensure the composition of its Supervisory Board is well balanced. With that in mind, a profile has been drawn up outlining the required qualifications of its members. Supervisory Board members are no longer eligible for reappointment after the age of 70, unless the Board itself decides to make an exception to this rule. Supervisory Board members’ remuneration is determined by the General Meeting of Shareholders.

Dutch Corporate Governance code

As a company based in the Netherlands, AEGON adheres to the Dutch Corporate Governance Code, which came into effect on January 1, 2004. AEGON endorses this Code and strongly supports its principles for sound and responsible corporate governance. AEGON regards the Code as an effective means of helping ensure that the interests of all stakeholders are duly represented and taken into account. The Code also promotes transparency in decision-making and helps strengthen the principles of good governance. Overseeing AEGON’s overall corporate governance structure is the responsibility of both the Supervisory and Executive Boards. Any significant change to this structure is submitted for debate to the General Meeting of Shareholders.

Generally, AEGON applies the best practice provisions set out in the Dutch Corporate Governance Code. Please refer to AEGON’s website for an extensive review of the Group’s compliance with this Code. The cases where AEGON does not fully apply the best practice provisions of the Code are dealt with and explained below (the recorded references are to the relevant provisions of the Code). In these few cases AEGON adheres, as far as possible, to the spirit of the Code.

Code II.2.7: For members of the Executive Board the Dutch Corporate Governance Code recommends that the maximum compensation in the event of dismissal should be one year’s salary, or two years’ salary in the event a maximum of one year’s salary would be manifestly unreasonable for a member who is dismissed in his or her first term of office. AEGON is committed to applying this ‘best practice’ provision to all future Executive Board appointments. However, existing employment contracts with current members of the Board, in particular with reference to the severance payment arrangements, are not in line with this best practice provision. The employment agreements of the members of the Executive Board are disclosed on AEGON’s website.

Code II.3.3: The Code recommends that a member of the Executive Board should not take part in discussions or decision-making related to a subject or a transaction in which he or she has a conflict of interest. The fact that currently AEGON’s CEO and CFO are also members of the Executive Committee of AEGON’s largest shareholder, Vereniging AEGON, could be construed as a conflict of interest. In this connection it should be noted that the Articles of Association of Vereniging AEGON determine that AEGON’s CEO and CFO are excluded from voting on certain issues directly related to AEGON or their position with AEGON. AEGON’s Supervisory Board holds the view that, given the historic relationship between AEGON and Vereniging AEGON, it would not be in the Group’s best interests to prevent the CEO and CFO from participating in discussions and decision-making related to Vereniging AEGON. For this reason, a protocol has been drafted specifically authorizing the CEO and CFO to continue their existing practice in dealings with Vereniging AEGON. The protocol is posted on AEGON’s website.

Code III.3.5: This provision of the Code stipulates that members of the Supervisory Board should serve no
more than three consecutive four-year terms. For reasons of continuity, AEGON’s Supervisory Board has asked Mr. O. John Olcay to complete his current term, which ends in 2008, though he had reached the maximum term stated in the Code in 2005.

Code IV.1.1: The Dutch Corporate Governance Code recommends that the General Meeting of Shareholders may cancel the binding nature of nominations to the Executive and Supervisory Board with an absolute majority of votes and a limited quorum.

AEGON’s current Articles of Incorporation, however, provide for a much larger majority and a higher quorum than those advocated by the Code. AEGON’s Supervisory Board is of the view that, in the absence of any specific anti-takeover measures, the current system is appropriate within the context of the 1983 Merger Agreement. In order to mitigate the possible negative effects of these more stringent requirements in the ordinary course of AEGON’s businesses, the Supervisory Board has decided, in the absence of any unfriendly actions, that it will only make nominations to the Executive and Supervisory Board that are non-binding in nature. For more detailed information, please see AEGON’s corporate website.

Exercise of control

As a publicly-listed company, AEGON is required to provide the following, detailed information regarding structures and measures that might hinder or prevent a third party from acquiring the company or exercising effective control over it.

Capital structure

AEGON has authorized capital of EUR 610,000,000, divided into 3,000,000,000 common shares, each with a par value of EUR 0.12, and 1,000,000,000 class A and class B preferred shares, with a par value of EUR 0.25. As of December 31, 2007, 1,636,544,530 common shares and 246,850,000 preferred shares were issued, representing respectively 76.1% and 23.9% of AEGON’s total issued and fully paid-up capital.

The capital contribution made by class A preferred shares is a reflection of the market value of AEGON’s common shares at the time this contribution was made. Preferred shares confer the right to receive a preferred dividend on the paid-in amount. No other dividend is paid on the preferred shares. In the event AEGON is liquidated, the paid-in amount on the preferred shares will be reimbursed before any payments on the common shares are made. Each share carries one vote. However, the holder of the preferred shares may cast 25/12 (approximately 2.08) votes per share in certain circumstances, as explained in more detail below, in line with the higher par value of the preferred shares.

Transfer of shares

There are no restrictions on the transfer of common shares. As regards the transferability of preferred shares, please refer to clause 10.5 of the Amendment to the 1983 Merger Agreement, as published on AEGON’s website.

Significant shareholdings

Vereniging AEGON holds 171,974,055 common shares, 211,680,000 class A preferred shares and 35,170,000 class B preferred shares. Together, this represents 34% of AEGON’s voting capital, taking into account that the preferred shares are entitled to 25/12 votes per share. The 1983 Merger Agreement (as amended) provides that Vereniging AEGON has option rights to acquire additional class B preferred shares in order to prevent its voting power being diluted by issues of common shares by AEGON N.V., unless Vereniging AEGON as a result of exercising these option rights increases its voting power to more than 33%.

Special control rights

AEGON’s major shareholder, Vereniging AEGON, has voluntarily waived its right to cast 25/12 vote per preferred share, except in the event of a ‘special cause’, as defined in greater detail in the Preferred Shares Voting Rights Agreement, published on AEGON’s website. They include the acquisition by a third party of an interest in AEGON N.V. amounting to 15% or more, a tender offer for AEGON N.V. shares or a proposed business combination by any person or group of persons, whether individually or as a group, other than in a transaction approved by the Executive and Supervisory Boards.

If, at its sole discretion, Vereniging AEGON determines that a ‘special cause’ has occurred, it shall notify the General Meeting of Shareholders. In this event, Vereniging AEGON retains its full voting rights on the preferred shares for a period limited to six months. Based on its current shareholdings, Vereniging AEGON would for that limited period command 34% of the votes at a General Meeting of Shareholders. As a result of this and of the existence of certain qualified majority requirements specified in AEGON’s Articles of Incorporation, Vereniging AEGON may effectively be in a position to block unfriendly actions by either a hostile bidder or others for a period of six months. In the absence of a ‘special cause’, Vereniging AEGON’s share of AEGON’s voting capital represents 23.9%. For more information on Vereniging AEGON, please use this link.

Exercise of option rights

Senior executives at AEGON companies and other employees have been granted share appreciation rights and share options. For further details, please refer to note 37 of this Annual Report. Under the terms of the existing share option plans, AEGON cannot possibly influence the exercise of granted rights.

Restrictions on voting rights

There are no restrictions whatsoever on the exercise of voting rights by holders of common shares, either with regard to the number of votes or to the time period in which they may be exercised. The voting rights attached to preferred shares held by Vereniging AEGON are limited as mentioned above. Depositary receipts for AEGON shares are not issued with the company’s cooperation.

Shareholder agreements

AEGON has no knowledge of any agreement between shareholders that might restrict the transfer of shares or the voting rights pertaining to shares.

Amendment of the Articles of Incorporation and Board Appointments

The General Meeting of Shareholders may, with an absolute majority of votes cast, pass a resolution to amend AEGON’s Articles of Incorporation or to dissolve the company in accordance with a proposal made by the Executive Board and approved by the Supervisory Board.

The General Meeting of Shareholders appoints members of both the Executive and Supervisory Boards, following nomination by the Supervisory Board. This nomination is binding if at least two candidates are nominated. However, the General Meeting of Shareholders may cancel the binding character of such nominations with a majority of two-thirds of the votes cast, representing at least one-half of AEGON’s issued capital.

The General Meeting of Shareholders may bring forward a resolution to appoint a person other than in accordance with a nomination by the Supervisory Board, but such a resolution also requires a two-thirds majority of the votes cast, representing at least one-half of AEGON’s issued capital.

Members of AEGON’s Executive and Supervisory Boards may only be dismissed by the General Meeting of Shareholders with the same qualified majority, unless this dismissal is proposed by the Supervisory Board.

The provisions on appointing board members were included as part of a broader review of AEGON’s corporate governance and were adopted at the Extraordinary General Meeting of Shareholders held on May 9, 2003. The qualified majority requirements were included to give AEGON temporary protection against unfriendly actions from, for example, a hostile bidder. In effect, major shareholder Vereniging AEGON may block any hostile attempts to replace AEGON’s Executive or Supervisory Board for a period of up to six months.

Issue and repurchase of shares

New shares may be issued up to the maximum of the company’s authorized capital pursuant to a resolution of the General Meeting of Shareholders. Shares may also be issued following a resolution of the Executive Board, if and to the extent that, the Board is empowered to do so by the General Meeting of Shareholders. An authorization to this end is usually presented to the annual General Meeting of Shareholders.

AEGON is entitled to acquire its own fully paid-up shares with due regard to the applicable legal requirements. The General Meeting of Shareholders usually authorizes the Executive Board to acquire shares of the company on conditions determined by the General Meeting of Shareholders.

Significant agreements and change of control

AEGON is not party to any significant agreements which may take effect, alter, or terminate, conditional on a change of control following a public offer for the outstanding shares of the company, other than those customary in the financial markets (for example, financial arrangements, loan and joint venture agreements).

Severance payments in employment agreements

Executive Board members’ employment agreements, as published on AEGON’s website, contain provisions entitling members to severance payments should their employment be terminated as the result of a merger or takeover.