Good Governance: From Corporate Governance to Culture

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

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.

Important themes in the Dutch Corporate Governance Code

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.

Read more

Hide text

Annet Aris: ‘Time for a Hard Reset of the Remuneration System’

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

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.

Five Best Practices for Stakeholder Engagement

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.’

Willem Cramer: 'Underboarding is a Danger'

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.

Supervisory Board members who determine executive compensation are navigating an increasingly complex environment. Not only is remuneration progressively the subject of public debate, the responsibilities of the Remuneration Committee are also increasing. This brings new challenges, according to a fourth master class on Remuneration Policy by Management Scope in cooperation with Deloitte. Members of the Remuneration Committee of several listed companies attended the virtual presentation on the changing role of the Remuneration Committee (or, as it is generally called in the United States, the Compensation Committee), which was led by a panel of specialists on corporate governance and executive compensation.

Closing the gender and minorities pay gap, linking executive pay to sustainability goals and the magnifying glass of the critical capital market and society: the Remuneration Committee has more and more on its plate. According to Remco veteran Jacqueline Tammenoms Bakker, it is not getting easier, but it is getting more interesting. 'External expectations are healthy.' And: ‘Non-executive directors are not untouchable either.'

The Next50 2023: half of the upcoming top non-executives are women, 80 percent are over 50, and multicultural diversity is still far from the mark. In the coming editions of the Next50 we will see a breakthrough in these areas. We signal a broadening of profiles in the Supervisory Board.

A Broader View For The Remuneration Committee

Supervisory Board members who determine executive compensation are navigating an increasingly complex environment. Not only is remuneration progressively the subject of public debate, the responsibilities of the Remuneration Committee are also increasing. This brings new challenges, according to a fourth master class on Remuneration Policy by Management Scope in cooperation with Deloitte. Members of the Remuneration Committee of several listed companies attended the virtual presentation on the changing role of the Remuneration Committee (or, as it is generally called in the United States, the Compensation Committee), which was led by a panel of specialists on corporate governance and executive compensation.

Jacqueline Tammenoms Bakker: 'Remuneration Touches the Soul of the Company'

Closing the gender and minorities pay gap, linking executive pay to sustainability goals and the magnifying glass of the critical capital market and society: the Remuneration Committee has more and more on its plate. According to Remco veteran Jacqueline Tammenoms Bakker, it is not getting easier, but it is getting more interesting. 'External expectations are healthy.' And: ‘Non-executive directors are not untouchable either.'

Next50 Non-Executive Directors 2023: Up-and-coming Talent is White and Middle-aged

The Next50 2023: half of the upcoming top non-executives are women, 80 percent are over 50, and multicultural diversity is still far from the mark. In the coming editions of the Next50 we will see a breakthrough in these areas. We signal a broadening of profiles in the Supervisory Board.

It is High Time to Professionalize the Nomination Committee

The main responsibility of a Supervisory Board is to ensure adequate succession and evaluation of the Management team and Supervisory Board members. However, the Nomination Committees that should play a key role in this process often fail to fulfil their potential. This was the outcome of research conducted by Professor Hélène Vletter-Van Dort and consultant Rob Miesen from Spencer Stuart.

Read more

Most read

Jeroen Drost (SHV): 'There is leeway for strong wills'

‘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.’

Remuneration policies need rethinking

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.

The Ways of the NomCo are Inscrutable

The International Center for Financial Law & Governance and Spencer Stuart conducted research on the role of the nomination committee (NOMCO). Professor Hélène Vletter-Van Dort and consultant Rob Miesen presented the findings to Supervisory Board members during a master class. They themselves take a clear position: the tasks and responsibilities of the NOMCO should be more clearly defined. 'How the NOMCO operates now creates frustration and is risky.'

Iris Bouwers: The Youngest Member in the Next50 2023

Mieke de Schepper: The Highest Ranking Woman in the Next50 2023

D&I: A Justifiable Nuance in The New Corporate Governance Code

Jos Nijhuis: ‘A Supervisory Director Should Know What it is Like at the Helm’

Bram Schot: Fast Climber in Top 100 Non-Executive Directors 2023

Analysis Top 100 Non-Executive Directors 2023: A new No. 1, many boomers

The experienced Supervisory Board members we invited to discuss board effectiveness in times of turbulence and transition, all have one thing in common: they wish to challenge Boards of Directors to maintain their connection to society and create a positive impact even in turbulent times. Bottom line: this cannot be achieved unless strategy sessions start at the beginning. ‘What do we actually mean by sustainability, social responsibility and inclusion? You will notice the answers will not be identical. How, then, can we know that we share the same ambitions?’

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. Companies do not need to jump in at the deep end straight away: ‘Draw up a separate policy alongside the existing remuneration policy.’

Board Effectiveness in Turbulent Times: 'Are We Actually Talking About the Same Thing?'

The experienced Supervisory Board members we invited to discuss board effectiveness in times of turbulence and transition, all have one thing in common: they wish to challenge Boards of Directors to maintain their connection to society and create a positive impact even in turbulent times. Bottom line: this cannot be achieved unless strategy sessions start at the beginning. ‘What do we actually mean by sustainability, social responsibility and inclusion? You will notice the answers will not be identical. How, then, can we know that we share the same ambitions?’

Remuneration Policies Need Rethinking

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. Companies do not need to jump in at the deep end straight away: ‘Draw up a separate policy alongside the existing remuneration policy.’

Top Women's Dinner 2022: 'Use Your Momentum to Make Your D&I Mark'

Top Women's Dinner 2022: 'Use Your Momentum to Make Your D&I Mark'

How do you engage diverse talented individuals and prevent them from leaving too soon? These questions featured at Management Scope's Top Women's Dinner 2022, attended by top female professionals who recognize that increasing diversity requires an active attitude. ‘I have seen it too many times: Someone is dropped into a team unprepared and plucked out again like a splinter. It takes a joint effort for organizations to become inclusive – it requires an unbelievable amount of communication.’
Arjen Dorland: ‘Chair Has to Make Extremely Difficult Decisions’

Arjen Dorland: ‘Chair Has to Make Extremely Difficult Decisions’

How does Arjen Dorland, serving on multiple Supervisory Boards, ensure a well-performing board? In his roles as Chair or Vice Chair, he feels a strong sense of responsibility to enable effective collaboration. ‘You really have to form a team and ensure that the team is successful. Nobody else will do that for you.’
An Active Board Stays in Control

An Active Board Stays in Control

ESG, diversity, talent succession: Supervisory Board members have a lot on their plate. Victor Prozesky, Founder and Partner of The Board Practice, views a proactive Board attitude as a prerequisite for future-proofing. A successful Board does not wait for ESG standards and takes diversity, inclusion and talent management extremely seriously. A thorough evaluation of Board effectiveness – from an outsider’s perspective – is also part of the process.
Masterclass Company Secretaries: Excesses, Misconduct and Holding Difficult Conversations

Masterclass Company Secretaries: Excesses, Misconduct and Holding Difficult Conversations

Are irregularities and inappropriate behavior in corporate organizations occurring more often nowadays than in the past? Or are they brought into the open more quickly because of increasing transparency? Whichever is the case, sensitive issues are being tabled for discussion in the boardroom more often nowadays. The verdict that emerged from a masterclass on this subject for company secretaries was: ‘Problems don’t start out as major problems. They only become major problems if you fail to take action in time.’
Ben Noteboom Talks About Board Effectiveness

Ben Noteboom Talks About Board Effectiveness

Having gained extensive board-level experience as CEO of Randstad, as well as in the role of supervisory director, currently at Vopak and Aegon, Ben Noteboom shares his best practices for ensuring effective collaboration in the boardroom, both within the Supervisory Board itself and between supervisory board members and directors. ‘We don’t always have to agree with each other, but we do take each person’s viewpoint seriously.’
Amy Wilson (EOS): 'Simplify Pay Structures'

Amy Wilson (EOS): 'Simplify Pay Structures'

Amy Wilson is the lead of the European engagement team at EOS, a stewardship service provider that is part of the investment manager Federated Hermes, aimed at more sustainable results for both society and environment. A critical view on executive pay is part of that. Wilson sees that there is support amongst directors for simpler pay schemes, more focus on the long term, more fixed salary and higher shareholdings. ‘But we find that in practice, it is difficult.’  
1
2
facebook