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.

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Elise Stevens-Fokkens: 'Make Time for Your Company Secretary'

Secretaries can be important advisors and confidential counsellors to executive and supervisory board members. In practice, however, these roles are often underutilized, states experienced company secretary Elise Stevens-Fokkens in her recent Handboek Secretaris (Company Secretary's Handbook). While primarily intended for her fellow secretaries, this book may prove instructive to board members as well. ‘To be able to offer each other optimal support, communication must go both ways.’

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Petri Hofsté is the most influential corporate woman in the Netherlands for the sixth time now, but will that still be the case next year? There is stiff competition in the Top 10. Plus: twice the number of international ladies in Dutch boardrooms, the cautious advance of chairwomen and time for rejuvenation.

As an independent boardroom consultant, Linda Hovius combines her own practice with supervisory positions, including those at Flow Traders and Royal FloraHolland. She observes that the role has undergone a huge process of professionalization: ‘In the past, it was very easy to identify areas for serious improvement, whereas now many Supervisory Boards are demonstrating best practices.’

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Linda Hovius Sees Professionalization In Supervision

As an independent boardroom consultant, Linda Hovius combines her own practice with supervisory positions, including those at Flow Traders and Royal FloraHolland. She observes that the role has undergone a huge process of professionalization: ‘In the past, it was very easy to identify areas for serious improvement, whereas now many Supervisory Boards are demonstrating best practices.’

Roderick Munsters: From Investing Superpower to Professional Non-Executive Director

Roderick Munsters is the new captain of the Next50. He was already a member of the Supervisory Board of Unibail-Rodamco-Westfield and PGGM Vermogensbeheer, but his chairmanship at Athora Netherlands ensured this top position.

Joëlle Frijters: The Digital Non-executive Director

Joëlle Frijters became a non-executive director at CM.com in 2021. With that appointment, she enters the Next50, and it also fits seamlessly into her portfolio, which mainly consists of functions with a focus on digitization.

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The current system for directors’ remuneration is outdated and inhibits the sustainability of business. That is the opinion of Frederic Barge, founder of Reward Value, Management Scope’s new expert partner. The development of a new model for responsible remuneration can act as a catalyst for social change. ‘We want to make an impact.’

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Hajir Hajji was appointed as a supervisory director of Coolblue in 2021, and in the same year it was announced that she would become CEO of Action on January 1, 2022. A nice combination of functions that rightfully deserves a mention in the Next50.

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Hajir Hajji: Young, Multicultural and a Woman

Hajir Hajji was appointed as a supervisory director of Coolblue in 2021, and in the same year it was announced that she would become CEO of Action on January 1, 2022. A nice combination of functions that rightfully deserves a mention in the Next50.

Nitin Paranjpe: Highest-Ranking Foreign Non-Executive in Next50 2022

The internationalization of the Dutch boardroom is accelerating, but this is not yet really reflected in the rankings of Management Scope. Nitin Paranjpe (1963), from India, is a coo at Unilever and, thanks to his supervisory position at Heineken, the highest non-Dutch non-executive director in this Next50.

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Love and Pain in the Boardroom

Pension funds and institutional investors critically monitor the remuneration policies of companies in which they invest. Diane Griffioen of pension fund ABP and Mirte Bronsdijk of asset manager APG Asset Management would like executive remuneration to be better aligned with the company's performance and strategy. ‘We see the struggle of companies to include appropriate non-financial criteria in remuneration policies.’

Executive remuneration attracts a great deal of attention. In his supervisory roles supervisory director Arjen Dorland searches for reasonableness in the remuneration of executive directors and takes a stand against the increasing complexity, especially in variable remuneration components. The question is always whether any remuneration component can be justified.

ESG Goals in the Remuneration Policy

Pension funds and institutional investors critically monitor the remuneration policies of companies in which they invest. Diane Griffioen of pension fund ABP and Mirte Bronsdijk of asset manager APG Asset Management would like executive remuneration to be better aligned with the company's performance and strategy. ‘We see the struggle of companies to include appropriate non-financial criteria in remuneration policies.’

Arjen Dorland on the Increasing Complexity of Remuneration

Executive remuneration attracts a great deal of attention. In his supervisory roles supervisory director Arjen Dorland searches for reasonableness in the remuneration of executive directors and takes a stand against the increasing complexity, especially in variable remuneration components. The question is always whether any remuneration component can be justified.

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