Corporate governance in the Netherlands is a success story, even though this success story has a rather grim beginning. In 2001 the energy company Enron went bankrupt in the United States following an accounting scandal of unprecedented proportions. Executives of Enron – until 2001 regarded as a boring, safe investment – hid a loss of more than one billion euros. In the meantime, they sold their own shares. Enron went bankrupt, and 21,000 employees lost their jobs. The executives went to jail, and the fraud finally led to the implosion of Enron’s auditor Andersen.
The arrival of legislationTo prevent bad governance in the future or at least to focus on good governance, various initiatives arose worldwide. In the United States legislation was introduced: the Sarbanes-Oxley Act. This Act requires companies to have robust audit committees and internal controls and makes executives liable for the accuracy of reports. The Act also provides for higher penalties for white-collar crime.
The Netherlands chose a different route but, like the United States, it acted fast. As early as 1997, Jaap Peters had made 40 recommendations for good governance, in the ‘Peters Committee’ as it was called. This early focus on good governance is easily explained. The ‘polder model’ of consultative bodies is traditionally reflected in the stakeholder model and the two-tier model: the ‘executive board’ (also known as ‘management board’) determines the strategy, the supervisory board exercises supervision. The works council and other bodies give advice. In fact, Peters advised how this structure (also called the ‘Rhineland model’) could be used in the best possible manner.
The Rhineland model is characteristic of the Dutch system (among others). This model focuses not only on the company and its shareholders but also on other stakeholders, such as employees, customers, suppliers and society. The management board and supervisory board are separated in a ‘two-tier board’, as it is called.
In countries like the United States the Anglo-Saxon model dominates, with a greater focus on profits and shareholders. Here, executives and supervisors sit together on a board of directors, the ‘one-tier board’, as it is called. Read more about the differences between the Rhineland model and the Anglo-Saxon model here.
Genesis of the Dutch Corporate Governance Code In the wake of the Enron accounting scandal, the Netherlands had its own major accounting scandal. At supermarket group Ahold, the figures were fiddled with. Unlike Enron, Ahold was to survive, but it was clear: even the stakeholder model was not immune to large-scale abuses. In March 2003 Hans Hoogervorst, then Minister of Finance, set up a Dutch corporate governance committee, headed by Morris Tabaksblat.
The celebrated top executive (and later supervisory director) succeeded in persuading the business world to agree to self-regulation through a code of conduct for companies and their executive directors. The Dutch Corporate Governance Code, which was published as early as December 2003, contains over 100 recommendations for good governance. Companies undertook to apply the Corporate Governance Code or to explain why they departed from it on certain points. In 2004 the Dutch Corporate Governance Code, known as the ‘Tabaksblat Code’ among executive directors, was enshrined in the law. The Corporate Governance Code Monitoring Committee was also established. It has been monitoring compliance with the Code ever since.
Under Tabaksblat's successors, Jean Frijns and Jaap van Manen, the Code was revised. Frijns broadened the support base for the Code by, among other things, involving investors in the Code. Under Van Manen, who came up with the Revised Corporate Governance Code in 2018, the concept of ‘culture within the company’ became important. In 2018 Pauline van der Meer Mohr was appointed Chair of the Corporate Governance Code Monitoring Committee. In Management Scope she explained that she did not want to introduce a major revision of the Code but did want to update it.
From day one, there was much debate about recommendations on remuneration and remuneration policies: would transparency perhaps have the effect of forcing up top salaries? Many companies now have a remuneration committee responsible for reviewing remuneration policies, and remuneration has come under increasing scrutiny at shareholders' meetings.
Long-term value creation was also an important theme. This should be the main objective when the long-term strategy is drawn up. In addition, executive directors are expected to formulate a vision on the level of their own remuneration and how this fits in with long-term value creation.
Culture within the company is also considered increasingly important. For example, executive directors and supervisory directors are expected to encourage openness and accountability. In brief: good governance without accounting scandals.
Companies will inevitably face changes again in 2024, very often related to ESG goals. As the season of shareholder meetings approaches, the question is what the agenda of the next AGM will look like. During a seminar for company secretaries, organized by Management Scope in collaboration with Allen & Overy, the key issues were discussed.
Read moreOn the future of the role of CSO, Robert Metzke (Philips) says: ‘We need to start with the next two years, because there is a significant challenge on the road, called CSRD and CSDDD.’
Essimari Kairisto is the highest-ranking woman and highest-ranking foreigner on the list of emerging top supervisory directors, the Management Scope Next50 2024. She entered the list out of nowhere. It is therefore a good time for a closer acquaintance with this TenneT and Fugro supervisory director. ‘The value of a supervisory director lies in his or her talent for sparring with managers. And fortunately, more and more supervisory directors are good sparring partners - perhaps also because of the rise of women.’
On the future of the role of CSO, Robert Metzke (Philips) says: ‘We need to start with the next two years, because there is a significant challenge on the road, called CSRD and CSDDD.’
Essimari Kairisto is the highest-ranking woman and highest-ranking foreigner on the list of emerging top supervisory directors, the Management Scope Next50 2024. She entered the list out of nowhere. It is therefore a good time for a closer acquaintance with this TenneT and Fugro supervisory director. ‘The value of a supervisory director lies in his or her talent for sparring with managers. And fortunately, more and more supervisory directors are good sparring partners - perhaps also because of the rise of women.’
Chapter Zero brings together supervisory directors of Dutch companies concerned with the consequences of climate change. Board member Caroline Zegers gives an insight into what supervisory directors can expect. ‘Supervisory directors decide on content and form of discussions, Chapter Zero facilitates.’
It is not the increasing complexity that makes the work of executives and supervisory directors challenging these days, says multi-supervisory director Michiel Lap. Much more important, he believes, is the pace and scope of all the changes. ‘Being fully proficient at everything is impossible. Curiosity and willingness to learn are crucial, and supervisory directors must be able to assess whether they are not overlooking essential issues.’
If it were up to Piero Novelli, the world could learn much from the two-tier board system. The Italian top banker has been chairman of Euronext since 2021 and is a thorough expert on governance models in listed companies. A first interview in a series in which foreign leaders at Dutch companies share their views on our governance model.
Chapter Zero brings together supervisory directors of Dutch companies concerned with the consequences of climate change. Board member Caroline Zegers gives an insight into what supervisory directors can expect. ‘Supervisory directors decide on content and form of discussions, Chapter Zero facilitates.’
It is not the increasing complexity that makes the work of executives and supervisory directors challenging these days, says multi-supervisory director Michiel Lap. Much more important, he believes, is the pace and scope of all the changes. ‘Being fully proficient at everything is impossible. Curiosity and willingness to learn are crucial, and supervisory directors must be able to assess whether they are not overlooking essential issues.’
If it were up to Piero Novelli, the world could learn much from the two-tier board system. The Italian top banker has been chairman of Euronext since 2021 and is a thorough expert on governance models in listed companies. A first interview in a series in which foreign leaders at Dutch companies share their views on our governance model.
The focus on compliance and box ticking in the remuneration file seems to have become an end in itself, says INSEAD professor and top Supervisory board member Annet Aris. She advocates stepping back to build a new paradigm for an effective and transparent remuneration system from the bottom up and together with all governance players. ‘Shareholders and proxy advisors have rules that they strictly enforce, while these often turn out not to have the effect they think. Academic research on compensation measures can shed new light on their effectiveness.’
Read more‘Managing a large family company has its benefits. You do not have to report to anonymous shareholders, and you have the freedom to work on long-term continuity. The latter is in fact the primary duty of Jeroen Drost, CEO of SHV Holdings. “We have the luxury of more time to fix and improve things.’
Sooner or later, linking remuneration to sustainability goals will be mandatory. Frederic Barge, Founder of non-profit research firm Reward Value, therefore argues in favor of a new remuneration model. Barge recently exchanged thoughts and ideas with Supervisory Board members about the options.
In The Council series, top experts address a current Boardroom topic. This time: stakeholder engagement. A professor and three sustainability directors present five best practices for optimizing the relationship with a wide circle of internal and external stakeholders. But note: ‘Stakeholder management is different from management by stakeholders.’
Multi-Supervisory Board member Willem Cramer wants to bring the outside world into companies, 'stir up' the board and, above all, interpret the social noise - emphasizing that it is a mistake to operate too cautiously and want to avoid all risks. To keep an open mind, he deliberately chooses to supervise multiple companies: ’Those who focus too much on a single company may miss the external antennae.
In The Council series, top experts address a current Boardroom topic. This time: stakeholder engagement. A professor and three sustainability directors present five best practices for optimizing the relationship with a wide circle of internal and external stakeholders. But note: ‘Stakeholder management is different from management by stakeholders.’
Multi-Supervisory Board member Willem Cramer wants to bring the outside world into companies, 'stir up' the board and, above all, interpret the social noise - emphasizing that it is a mistake to operate too cautiously and want to avoid all risks. To keep an open mind, he deliberately chooses to supervise multiple companies: ’Those who focus too much on a single company may miss the external antennae.