The code: Back to basics or room for public debate?

The code was created more than twenty years ago and is currently being reviewed. What is the state of the code in 2025?
De Kluiver: ‘In my view, it is a document that is still very much alive. The code is never far away in boardrooms. It is a document that everyone knows and has at hand. It therefore perfectly fulfills what was once intended.’
Veldman: ‘The code has evolved. Perhaps we should go back to the starting point for a moment. In the Netherlands, the code was created at the beginning of this century, but the United Kingdom was ahead of us. They were already working on a code in the early 1990s. Although in the early days it was about the structure of a company and the company’s results, the reason was that there was huge social pressure on auditors in particular. The social dimension was therefore a direct reason to arrive at a principles-based code. The 2008 financial crisis and the growing concern about climate change added new aspects. That social dimension has also been broadened in the UK. In the last update of the code in the UK, last year, it was stated, ‘A successful company is led by an effective and entrepreneurial board whose role is to promote the long-term sustainable success of the company, generating value for shareholders and contributing to wider society.’
De Kluiver: ‘The social debate in itself is of course not new. In the Netherlands we have had it since the 1960s – even then it was already said that you have to take stakeholders into account. In fact, traditionally, corporate law has stated that you have to take the interests of stakeholders into account. At the moment that applies even more emphatically in the Netherlands than in the UK.’
Veldman: ‘But the way in which these interests are explicitly articulated within the context of the code is relatively new.’
De Kluiver: ‘That is true. But whether you make room for that within the code is a choice. It does not have to be. And I am not in favour of it either. I am in favour of going back to basics. The code once originated from all kinds of accounting scandals. As a result, it was necessary to pay attention to financial hygiene within companies. That is what the code should primarily be about. That is complicated enough as it is.’
Veldman: ‘History shows that the code plays an important role in shaping social discussion in the theory and practice of corporate governance. In my opinion, the role of the code is precisely to give civil society a role in the debate about corporate governance and thus ultimately to safeguard the legitimacy of board practice and professional organisations. Otherwise, it is no longer a corporate governance code but a professional code for directors. In addition, removing the public discussion from the code would put the interpretation of the corporate governance debate entirely in the hands of politicians. This does not seem desirable to me. The political process works slowly; politicians have a different perspective than that of the boardroom, and you run the risk that opinions on the interpretation of corporate governance change every four years.’
De Kluiver: ‘We must be careful not to turn the corporate governance committee into a discussion forum. If you invite all parties from the political process into the committee, then we are going to have a political debate. On the contrary, you should not bring the political discussion into the system. The social winds are blowing in all directions. I do not think you should make the code dependent on that.’

The model in the Netherlands is currently based on the principle of supporting parties. Is that a sustainable model?
De Kluiver: ‘The principle of supporting parties is very good. It contributes to the authority of that code. At least, if you eventually reach agreement. But you cannot get everyone involved. The core parties are the companies and the investors/shareholders. The unions came later, but they have always been the odd one out, because in the company, after all, the works council is the appropriate discussion partner. If you allow the unions, why not also allow Greenpeace and other organisations that pursue social goals?’

If you take stakeholder thinking as a starting point, it is perhaps not illogical that there will be more supporting parties …
Veldman: ‘You would have to think about the exact details, but I can very well imagine organizing a public consultation in which many parties, including MVO Nederland and Greenpeace, can make their voices heard. I am not saying that this should give them a decisive vote. You can easily have a committee consisting of experts. But I think it is a good thing if there is a process by which voices around the updating of the code are heard.’
De Kluiver: ‘The latter is not automatic, as far as I am concerned. It may well be that those people have wonderful ideas, but that you still say, ‘Yes, listen, I have a business to run here. That is my core responsibility. That has to be done within the financial regulations, and it has to be done sustainably. You can hold me accountable for that. And I understand that you also find other things very important, but we are not going to do that.’ I would actually also argue that the model is not built on the interests of stakeholders. The core of the system is that you do business in a socially responsible way. Agreed, in doing that we have to take stakeholders into account, but it is not that the business decision is the outcome of a consultation with stakeholders.’
Veldman: ‘It does not mean that everything needs to be integrated. It does mean that in a consultation you reflect a social debate that is taking place at that time.’
De Kluiver: ‘But if you involve organizations in the code, you will also have to let some things be integrated. You cannot let everyone join in the conversation, and then say, we have heard all of you, but we will not be doing anything with it. That does not seem to me to be a desirable situation. We should not broaden, we should deepen.’

And how do you envision that deepening?
De Kluiver: ‘A good example is the VOR, the Statement on Risk Management, which has been considerably refined and is being included in the code. I find that to be an excellent development. Just explain how your risk management system functions. The same applies to sustainability reporting. Just explain it!’

How do we prevent the code from ending up as instrument of the political wind? In the United States, a different wind started blowing. How do you prevent that the next revision to the code will not be completely out of favour in x number of years?
Veldman: ‘You cannot prevent that completely. Dutch corporate governance is usually ahead of the curve. I think that is positive insofar as we in the Netherlands put issues on the agenda early and look for workable solutions. Sometimes themes will eventually find their way into legislation. Other times, themes will disappear from the code. Finding out what works in practice by means of a comply or explain mechanism is exactly what makes the code so meaningful. If we go too far, the next Monitoring Committee can take a step back. That too is moving along with the social debate.’

What strikes me is that an important party currently does not play a role in the corporate governance code: the proxy advisors. They are of essential importance when it comes to the behaviour of shareholders. Should they not be involved?
Veldman: ‘We used to have the stewardship code that was separate from the corporate governance code. With the integration of the stewardship code, the governance code now also addresses how institutional investors relate to companies. Perhaps the next edition of the code will also pay more attention to the role of proxy advisors.’
De Kluiver: ‘Yes, you touch on a very essential point, which is actually broader than proxy advisors, namely the shareholders. Over time, the package of obligations for the board and supervisory board has grown, while there are very few obligations on shareholders in the code. As soon as you want to impose more obligations, shareholder advocacy groups revolt. If you want to ‘socialize’ the code, you should at least want the necessary requirements to be imposed on the shareholder side as well.’

The Enterprise Chamber also sometimes refers to provisions of the code in its decisions, which seems to be abandoning the pure status of ‘soft law.’ Is it desirable for the code to be seen as a legal document?
De Kluiver: ‘We should not exaggerate that. The code only comes up for discussion before the Enterprise Chamber when listed companies are involved. That is a great rarity. In general, I think we should be cautious about viewing the code as a legal document. This was also the major debate when the code was reviewed in 2022. There was endless discussion at the time about what it means when you say that the company is responsible for sustainable development, for example. Does that then mean that by doing so you also bring in legal responsibility and legal liability? We really should avoid that. Then you take the very element of inspiration out of the code. It paralyzes the process.’
Veldman: ‘Yes, I agree with you. The purpose of the code is to express the way in which society thinks about the interpretation of good governance and thus to create a conversation in the boardroom. Not to open the door to strategic litigation.’

How logical would it be to think about a European corporate governance code, to replace national codes?

De Kluiver: ‘That could very well be the case. The existing codes are eighty, ninety percent similar. They have the same core. They all state what a board must do, what a supervisor must do, what the internal controls are, etc. You could merge that. But whether that would provide added value right away, I am not sure.’
Veldman: ‘There was extensive discussion in the 1970s about the harmonization of company law in Europe. That never happened. The differences between the Member States are still just too great. Just look at the differences between the interpretation of fiduciary duties for Dutch and German supervisory directors. Such differences make it complicated to arrive at an overarching European code.’

In your opinion, Harm-Jan, what would have to be removed from the code to bring the document back to its core?
De Kluiver: ‘I actually do not think that much should be taken out. What could be removed are the issues that are already contained in legislation and that are repeated in the code. The quota system and things like that. If you clean up the document, it will gain traction. But for me, there is not much need to take things out. I would be very careful about adding things, though.’

What would you want to add, Jeroen?
Veldman: ‘I think we should try to form a picture of where we will be in ten years and what a rapidly changing physical, political, and social context means for corporate governance and the futureproofing of business models. That should guide the development of the code.’

What is your advice to the newly appointed Monitoring Committee?
Veldman: ‘I would advocate treating the code with respect, because there are good historical reasons for the themes it addresses and the way it does so. Also think carefully about how to bring the social debate in, in such a way that it has an effect and also remains workable in the revision of such a code. But think particularly about where we want to be in ten years and what it will take to get there.’
De Kluiver: ‘I am happy to endorse the first and third points. I would really stay away from bringing that social debate into the code. Shoemaker, stick to your last.’

This article was published in Management Scope 06 2025.