‘Being Critical of the Shareholders can be Risky for a CEO’

Can each of you explain your current shareholder structure, how it came about, and perhaps offer a glimpse into the future?
Aarts: ‘We have been on quite a journey financially with our company. We started with personal loans and grew to attract large venture capital investors, with Tyson Foods as our first strategic partner, holding a 10% stake that enabled us to set up a factory in the United States. I am still the largest individual shareholder, but we now have a fragmented field of venture capitalists and funds. Only after 15 years, in October last year, we for the first time issued Class A-shares, which brought new challenges. Investment funds often have different success criteria than we do. They need to achieve specific returns within a set timeframe, while we are a capital-intensive company focused on building factories. This difference in objectives can cause tension. The current structure is fragmented and not ideal for the long term. Within the next two years, we need to seriously consider our options: an IPO, acquisition by private equity, or a new strategic partner.’
Goedmakers: ‘Since my grandfather started the company, the shares have remained within the family, so we experience less of the fragmentation Kees describes. We also have a family charter that clearly sets priorities: first, the continuity of the company, then family harmony, and finally the individual. This ‘compass’ of our shareholders largely dictates our company’s direction. However, we sometimes miss the acuteness that external shareholders can bring. For smaller acquisitions, for instance, we bring in professionalization, but particularly with tech startups, we lack the necessary expertise. We are now exploring ways to introduce this acuteness without compromising our core values—perhaps through strengthening our supervisory board.’
Van Glabbeek: ‘When we started in 1999, the company was 50-50 between the two of us. We operated without investors for as long as possible to avoid the problems we saw in other companies, where founders ended up with nothing in a sale due to investors’ preferred shares. Five years ago, we decided to go public. Now, Gilbert and I together hold 50%, and the stock market holds the other 50%. Over the next seven years, we plan to reduce our stake to 40% to give the market more influence.’

How is your relationship with your shareholders, Mr. Aarts? Do they provide you and your company with the acuteness that Ton Goedmakers sometimes misses in his family business?Aarts: ‘In our capital-intensive sector, reliance on external funding is inevitable. With our value-added ingredients, we compete with global players who are unwilling to pre-finance our expensive scaling. That is why we depend on external capital providers and shareholders. As for acuteness, I am critical of the concept of smart money. Capital providers should excel at investing, and management should excel at running the company. Unfortunately, these roles often overlap, leading to problems. These issues are understandable as it sadly not seldom happens that investors make commitments to their stakeholders in conflict to the entrepreneur’s long-term vision.’

Is the entrepreneurial climate and the role of shareholders in the Netherlands hugely different from the U.S., where you also operate?
Aarts: ‘I prefer to speak of entrepreneurial culture rather than climate. Culture is less subject to chance than climate; culture is shaped or hindered by existing structures. Cultural change is possible, though it takes time. Currently, many Dutch entrepreneurs feel under-supported compared to their U.S. counterparts. There are three key differences with the U.S. First, the speed and rotation of capital are much lower in the Netherlands: allocating capital takes longer, leading to stricter conditions for entrepreneurs. In the U.S., this process is faster, allowing entrepreneurs to retain more control. Additionally, there is a lack of competition among capital providers in the Netherlands. Dutch funds know each other and often have stakes in the same companies, reducing diversity in investment options. Finally, control over capital is more rigid: in the Netherlands, every investor feels they bear the same risk, regardless of investment size, leading to unreasonable demands from smaller investors. Considering these factors, I believe few Dutch companies will endure. It is such a tough environment that even I have often thought, ‘I will not be able to keep going.’

How can we improve the situation in the Netherlands to foster a more entrepreneurial climate—or culture—in ten years?
Aarts: ‘We need to improve the overall culture regarding speed, capital rotation, and control. For companies like Protix, it is crucial that government funding flows faster, with less control and complexity. If this does not happen, I fear there will not be new Protixes or ASMLs in the Netherlands. The effort that entrepreneurs need to go to is simply too immense, which makes the alternative of continuing operations elsewhere, attractive.’
Van Glabbeek: ‘In America, you see a far better capital rotation among entrepreneurs. Successful entrepreneurs become wealthier and can invest more easily, quickly, and with less control in new businesses. This creates a continuous cycle of entrepreneurship and investment. In the Netherlands, a huge portion of what entrepreneurs earn goes to the government, which then tries to reinvest it into entrepreneurship through civil servants, which is the cause for the cycle to never really get going here. Let us be clear, organizations like the Brabant Development Agency (BOM) do excellent work, but they are too small to enable major successes such as ASML.’
‘For Americans, it is logical that the more money you put into something, the more it is worth. That is why companies like Uber receive billions rather than millions. In the Netherlands, we fail to appreciate this. Here, investors always try to get by with as little as possible.’
Aarts: ‘Secondly, in America, there is a play-to-win mentality, whereas in the Netherlands, it is more play-not-to-lose. This leads to lengthy decision-making and wanting to weigh everything carefully. The result is smaller, drawn-out investments that require a lot of control.’
Van Glabbeek: ‘This is compounded by the fact that power in the Netherlands is now concentrated in politics, whereas in the past, institutions like the church, trade unions, and employers’ associations kept each other in check. In the U.S., wealthy individuals and families still function as philanthropists or investors to solve problems that politics or government create. We need ‘wealthy mavericks’ in the Netherlands who are willing to invest in new ideas and drive change and success, like Bill Gates, who invested in Picnic. And maybe make it fiscally more attractive for Dutch people to participate in fast-growing companies through the stock market. This was attempted with Alternext (a stock exchange focused on small and medium-sized enterprises, ed.), but the legislation was never finalized.
Or consider direct listing for companies with more than fifty shareholders, with tax benefits such as less Box 3 tax for everyone who participates. This could classify companies as ‘Dutch-founded’ and encourage investment from other parties.

How do you ensure shareholders not only focus on returns and value development but also support the company’s societal role? That they are willing, if necessary, to accept lower returns in favor of societal goals, like the energy or food transition.
Goedmakers: ‘This remains a huge challenge, at least for publicly traded companies. The moral compass of shareholders strongly influences the company’s direction. Investors, including pension funds and other large institutional parties, aim to achieve maximum returns. Legislation tries to broaden this focus, but the basic model remains geared towards profit maximization. Even if this is not particularly sustainable, the focus on profit maximization seems to be the only constant factor.’
Aarts: ‘Achieving societal goals often takes 20 years, while shareholders often think in the shorter term. These timelines can conflict. I think that the money controllers—pension funds and other large investors—get off too easily with their choices, without being held accountable. While we as CEOs are continuously held accountable to all stakeholders, shareholders appear to remain invisible and continue to act in their own interest. Transformations are tough and complex. You need people with endurance and the ability to extract actionable, creative solutions from complexity. You cannot buy that with money. Many companies in the Netherlands want to do better, like Ebusco, which offers sustainable and zero-emission public transport, but they all struggle because they want to do what is good for the world in the long run while also surviving in the short term. The tricky thing about capital is that it quickly takes on a do not bite the hand that feeds you-character. As a CEO, it is risky to be critical of your shareholders. This is why measures to implement a transition often fail to materialize. There comes a point when the transition is no longer for sale, no matter how much money you throw at it. Of course, material transitions are happening, but the experience is not that of being in a positive acceleration. It is a struggle.’
Van Glabbeek: ‘Indeed, transitions happen ‘despite’ rather than ‘because of’ the business climate and the powerful financiers. Perhaps you simply need to be brave. In that regard, I have learned a lot from CEOs like Feike Sijbesma of DSM, who said emphatically: ‘This is who I am; this is what I stand for. As a shareholder, you can choose to support this or not.’ As a CEO, you must stand firm and not waver. If you are consistent in your stance and make it clear that you want to improve the world in a certain way, shareholders can decide whether to join you or not. Be a good person and try to play a positive role in society. And hold on to that stoically, even if there is no immediate reward.’
Ton Goedmakers: ‘Yet you see that CEOs get ousted by activist shareholders because of their focus on societal aspects to the cost of focus on other areas. In family businesses like ours, it is different. You are highly visible to other stakeholders: if you are a company in a village, continuously dumping chemical waste, you get called out personally. So regardless of whether you have a good moral compass as a family, the public also enforces responsible behavior.’
Aarts: ‘Visibility and the ability to hold each other accountable within a community: I welcome such scrutiny because it promotes responsible entrepreneurship. The problem is that the sense of community has eroded over the decades, as Jeroen mentioned, with the declining influence of the church and trade unions, and as we have become increasingly individualistic. My hope is on employees: that they will gain more influence over company operations within their own companies. This could hopefully stimulate the connection between the company and the community and foster a long-term orientation, even for non-family businesses too.’
Jeroen van Glabbeek: ‘Agreed. One of the reasons we went public was to make everyone in my company a co-owner, thereby recognizing that we have built something together.’