8.7 Summary

The Dutch corporate board model is generally based on a two-tier board principle. Directors operate in a hierarchical board organization with a supervisory board (“Raad van Commissarissen”) and a separate management board (“Raad van Bestuur”). The Dutch supervisory board is entirely comprised of supervisory directors. The management board is composed of managing directors. Supervisory directors within so-called “structure corporations” are nominated and appointed by the supervisory board through a system of controlled co-optation.

Shareholders at the annual meeting and employees in the works council have the right to propose supervisory directors in structure corporations. The Civil Code provides also for regimes that grant flexibility to foreign investors with respect to the governance structure of corporations incorporated in the Netherlands that belong to an international group of corporations. In these corporations, the annual meeting nominates and appoints managing directors.

Yet, the co-optation system is still in place in these so-called mitigated structure corporations. With the publication of the final forty recommendations of the Peters Committee, corporate governance has also been put on the agenda of institutional investors, legislators and directors in the Netherlands. Although it is too early to determine the impact of the recommendations on board practices of corporations listed at the Amsterdam Exchanges, research in this chapter suggests that developments take place in the structure and the composition of supervisory boards in the Netherlands.

Although managing directors and supervisory directors normally meet together, more emphasis is placed on separate supervisory board meetings. When justified for the size of the supervisory board, board committees have become more common. More emphasis is also put on independent supervisory board leadership and supervisory board composition. These developments suggest that supervisory directors are increasingly responding to pressures from commentators to adapt to new corporate governance standards in the Netherlands.

 

Box 8.5

Current Trends in Corporate Governance in the Netherlands

 

Existing corporate governance framework:

  • the Civil Code provides four legal regimes. The formation of a supervisory board is not mandatory for smaller and medium sized corporations that operate under the rules of the common regime. A two-tier board structure is mandatory for large corporations that operate under the rules of the structure and mitigated structure regimes. The regimes grant different powers to shareholders and supervisory directors;
  • supervisory boards are composed of non-executive supervisory directors. Management boards are entirely comprised of executive managing directors;
  • supervisory boards are not co-determinated;
  • legislative changes are not likely to occur in the near future.

 

Boards in listed corporations are undergoing changes:

  • independent board leadership and board composition is receiving more attention. More attention is being paid to formerly affiliated managing directors in supervisory boards;
  • total supervisory board size has been stable en when taking into account the size of the supervisory board, more work is being done in supervisory board committees;
  • managing directors occupy positions in supervisory board committees and regularly formally meet together with supervisory directors.

 

Current issues:

  • ongoing debate on self-regulation with the recommendations of the Peters Committee;
  • more openness on the governance structure of listed corporations;
  • whether the structure regime should be altered to give shareholders and employees a bigger voice in the nomination and appointment of managing and supervisory directors;
  • the development of a universal code of best practice;
  • the introduction of a proxy solicitation system.

 

 

 Sources: Maassen and van den Bosch (1997, 1999a); Maassen (1998b, 1999a).


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Maassen, G.F. (2002). An International Comparison of Corporate Governance Models. A Study on the Formal Independence and Convergence of One-Tier and Two-Tier Corporate Boards of Directors in the United States of America, the United Kingdom and the Netherlands.

Maassen, G.F. (2002). An International Comparison of Corporate Governance Models. A Study on the Formal Independence and Convergence of One-Tier and Two-Tier Corporate Boards of Directors in the United States of America, the United Kingdom and the Netherlands. Amsterdam: Spencer Stuart Executive Search.