5.2 Boards before the 1980s

In all three countries up to the 1980s boards were led by strong managers, who in practice chose their outside or supervisory directors and used them as their trusted advisors. In all three countries shareholdings were spread out and there were hardly any shareholders with a substantial holding of shares, a situation which favoured managerial capitalism.

The main differences concerning corporate governance in the three countries can be expressed onder the following captions:

In the US especially, and in the UK as well, there was an emphasis on the strong CEO/chairman, while the Netherlands favoured management by consensus. The cultural background of a greater hierarchy in the US and the UK and a lesser hierarchy and consensus boards in the Netherlands plays an important role here.

The UK and the US had one-tier boards, which meant that from a forma! point of view all directors were involved in decisions, while the Netherlands had and has two-tier boards, where the managing board decides and the supervisory board is limited to consent or veto. This is an important cultural and practical difference.

While in all three countries the board had the duty to act in the interest of the company, this was generally interpreted to imply that in the UK and the US the board acted in the interest of shareholders, while in the Netherlands it acted in the interest of stakeholders. The Netherlands had workers' participation rules which the UK and the US did not have. In the UK boards were not able to use legal defence mechanisms against hostile takeovers, while this was the practice in the US and the Netherlands. UK shareholders had the legal power to dismiss directors, while US and Dutch shareholders in practice did not have such power. These differences have been part of the culture of each country.

While in the US there was substantial litigation and a large market, the UK and the Netherlands were less litigation prone and relied on social control in a small market where most influential players knew each other. These are important cultural differences, caused by the large size of the US and its appreciation for fair trial, free speech and debate. In liability cases the Netherlands works with the concept of joint and several liability of directors, because boards are deemed to be collegial. In the UK and the US a liability claim is usually instigated against individual directors and the courts weigh the facts concerning each individual director.