This chapter concentrates on the formal organization of boards of directors of listed corporations in the Netherlands. In general, the Dutch corporate governance system is based on a two-tier board principle. Whether or not listed, large corporations normally have an independent supervisory board and an executive management board. In contrast to the one-tier board model, the international discussion on boardroom reform has not paid much attention to the role and position of non-executive directors in two-tier boards. This is certainly not the case for practitioners and regulators in the Netherlands. Of importance to this study is the renewed interest in the role and position of Dutch supervisory directors and the governance structure of large corporations in this country.
Although Dutch corporations have been pressured much less than English and American corporations to alter governance structures, supervisory directors are increasingly confronted with new developments in the (inter-)national corporate governance arena. Especially the last two years have been important to the corporate governance discussion in the Netherlands. The introduction of the forty recommendations of the Peters Committee on 25 June 1997 has been a major force in establishing a national corporate governance debate. Representatives from the Association of Securities Issuing Companies (VEUO) and the Amsterdam Stock Exchange Association formed this committee in April 1996.
Under the chairmanship of Mr. Peters, former CEO of AEGON, the attention of the Peters Committee was directed towards the relationship between managing directors, supervisory directors and investors. The committee did not propose major changes in legislation. Its main purpose was to initiate a national debate on the functioning of boards of directors, their accountability and their reporting procedures in relation to internationally accepted corporate governance standards. On 27 May 1998, the Amsterdam Exchanges and the VEUO formed a monitoring committee to investigate the compliance of 159 listed corporations with the voluntary recommendations of the Peters Committee. On December 3, 1998, the “Monitoring Committee Corporate Governance” presented its results. The findings indicated that a large majority of corporations provided compliance reports to shareholders for discussion at annual meetings in 1998.
The detailed information in these compliance reports suggests that corporations are increasingly recognizing the need to publicly disclose information on the composition, the organization and the activities of their supervisory boards. This chapter strongly benefited from changes in the way Dutch corporations disclose information related to the composition of supervisory boards, the appointment of supervisory directors, the formation of board committees and the number of formal meetings (with or without the presence of managing directors). The tests with a possible proxy solicitation system also contributes to the renewed interest of practitioners in the Dutch corporate governance system.
In April 1998, eleven large listed corporations - all included in the sample of this research - have formed the “Stichting Communicatiekanaal Aandeelhouders.” Although popular in the US and other Anglo-Saxon countries, proxy solicitation is a relatively new phenomenon for most (minority) Dutch shareholders. Testing will start in 1999 and the system will probably be fully operative in 2000 after some changes in Dutch legislation have taken place.
To explore the corporate governance system in the Netherlands, this chapter concentrates on developments in the composition and the structure of supervisory boards in corporations listed at the Amsterdam Exchanges. Paragraph 8.2 first describes the historical background and the rules of four legal regimes that regulate the formal structure of Dutch supervisory boards: the common regime, the structure regime, the mitigated structure regime and the exempted structure regime. These legal regimes provide alternative governance models and grant different powers to supervisory directors and shareholders. Similar to the description of one-tier boards in the previous chapters, the study does not directly refer to articles of corporation laws. Its main purpose is to give the reader an overview of the formal and practical characteristics of the Dutch supervisory board model.
Guided by the recommendations of the Peters Committee, paragraphs 8.3 – 8.5 concentrate on the formal description of the Dutch board model. Practical developments in board attributes of one hundred listed corporations are portrayed in paragraph 8.6. Information in this paragraph is based on 1987 – 1997 annual reports, two questionnaires sent to chairmen of supervisory boards in 1996 and 1997 and a survey sent to one hundred corporations listed at the Amsterdam Exchanges in 1998. The data portrays developments in Dutch two-tier boards and indicates the degree of corporations’ adherence to relevant recommendations of the Peters Committee. This chapter ends with a summary on changing two-tier board attributes in the Netherlands.
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