4.3.4 What are the main features of the national corporate code regarding contents and do they reflect the country's culture?

As discussed above the Belgian corporate governance system is an insider-controlled and stakeholder-orientated system strongly influenced by developments from abroad. Despite this strong influence the main characteristics of the Belgian corporate governance system still apply, which is discussed by means of two main features: (i) board structure, (ii) shareholders and stakeholders, and (iii) culture is taken into account to see whether the contents of the code reflect Belgium's culture. These features are only discussed in relation to the contents of the corporate governance codes and for reasons of comparison, in order to analyse further the application of the comply or explain principle theoretically and empirically (see chapter 6), as is the case for all the countries under research.

The majority of the nine general principles in the Belgian codes focus on the board's composition and functioning (Van der Elst 2008, p. 12). The Belgian corporate governance committee claims that this is justified by the current practice in Belgium (Belgian Code 2004, Preamble). The main board structure is the one-tier board structure with executives and non-executives in one board (Byttebier, Piu et al. 2003, p. 125). The code does not discuss this choice, but only states in its preamble that in the Belgian one-tier board model the board has a dual role to play: to support entrepreneurship and to ensure effective monitoring and control (Code 2009, Preamble). However, the Belgian board structure in practice is hybrid (Byttebier, Piu et al. 2003, p. 141), due to the fact that Belgian companies can install an executive committee (directie comité). This executive committee is nonetheless not addressed in the Belgian code. Based on the Corporate Governance Act of 2 August 2002, companies may choose whether they establish an executive committee or not (Van der Elst 2004, p. 3). Although the board retains the task to establish the company's general policy at all times, it can delegate a comprehensive part of its powers to the executive committee (Byttebier, Piu et al. 2003, p. 141). The executive committee consists of executives and/or managers, legal persons and natural persons. The committee is always supervised by the board. In practice many companies have the possibility to establish such an executive committee laid down in their articles of association, fewer indeed have an operational executive committee (Van der Elst 2004, p. 7). Belgian doctrine criticises the fact that in Belgium there is no clear choice for a board structure; Van der Elst even states that as many board structures as companies exist (Van der Elst 2004, p. 3). The model is not monistic nor dual, since besides monitoring powers, the board always retains several managing powers and members of the executive committee are sometimes board members as well (no actual separate mandates). The Belgian hybrid board model is called sui generis (Byttebier, Piu et al. 2003, p. 141).

Renneboog summarises the Belgian corporate ownership market as follows: (i) few Belgian companies are listed, (ii) there is a high degree of ownership concentration, (iii) holding companies and families are the main investor categories, (iv) control is levered by pyramidal and complex ownership structures, and (v) there is a market for share stakes (Renneboog 1997). These Belgian features of the corporate ownership market add to the general opinion that Belgium is characterised as an insider system. Especially the dominance of the holding companies - large shareholders, often part of pyramidal ownership chains - is characteristic. In Belgium - as in Italy - many holding companies function as decision centres for the company in which stock is held (Wymeersch 1994, p. 142). The holding companies strongly cohere with another characteristic Belgian feature, the referentieaandeelhouder. This referentieaandeelhouder can be qualified as a block owner or a controlling shareholder. The controlling shareholder can have many different forms but in general has a decisive influence on the appointment of a majority of the directors or on the orientation of the company's policy (Byttebier, Piu et al. 2003, p. 68). Control is exercised directly or often indirectly by means of the holding companies. This block ownership has several advantages: in the words of Byttebier the large shareholders are the 'natural monitor' of the company and give enough stability for long-term strategies to work out. On the other hand, these shareholders' own interests can prevail over the interests of the company or of minority shareholders (Byttebier, Piu et al. 2003, p. 71). Hence, agency problems between large and small shareholders are most relevant in Belgium (De Wulf, Levrau et al. 1999, p. 59) (Byttebier, Piu et al. 2003, p. 45). Nevertheless, due to the influence of the UK codes these specific agency problems are only summarily addressed in the Belgian code, although acknowledged in the preamble and provision 8.11: "controlling shareholders (...) are in the position to monitor both from the inside and the outside ofthe company, with the benefits that such a strong position may entail. Controlling shareholders should thus make considered use of their position and respect the rights and interests ofminority shareholders (Belgian Code 2009, Preamble and provision 8.11).

No additional provisions on the specific position of these controlling shareholders and the possible conflicts of interests are included in the code (Van der Elst 2008, p. 26). On the other hand, the necessary dialogue with the shareholders is addressed in principle 8 and the following provisions to promote shareholder participation and to focus on more disclosures relevant to shareholders. Other stakeholders are not a specific code topic, although its preambles state that the code's aim is to support long-term valuation for shareholders but also for all other stakeholders (Belgian Code 2009, Preamble).

The UK Cadbury Report functioned as a guide for the development of the Belgian corporate governance rules. This is understandable due to the fact that the UK Cadbury Report was the front-runner and example for many countries (De Wulf, Levrau et al. 1999, p. 37). When Belgium was developing its corporate governance rules the borders of the national capital markets were already fading. Therefore it was of no use for Belgium to formulate rules that differed from those of other countries; the renewed Belgian corporate governance practices had to encourage international investors (Byttebier, Piu et al. 2003, p. 45). Completely different and new corporate governance rules would not be appreciated by those international investors (Byttebier, Piu et al. 2003, p. 45). As a consequence, some typical Belgian corporate governance practices (e.g. the block holders and executive committee) are practically not discussed in the code (Byttebier, Piu et al. 2003, p. 45).

The design of corporate governance systems is influenced by the culture factor and to be effective the corporate governance principles must be part of the culture (Mintz 2005, p. 587). In section 3.3.2 the outcomes of several studies on the cultural dimensions are reviewed. The results for Belgium are repeated in table 4.3.4 below and table 4.3.4a summarises the above. Especially the scores on power distance and uncertainty avoidance are high compared to the other countries under research (Hofstede 1984a, p. 83). A high power distance score implies that the society accepts a hierarchical order in which everybody has a place which needs no further justification. The members of the society accept that power in institutions is distributed unequally. Strong uncertainty avoidance societies maintain rigid rules, codes of belief and behaviour and are intolerant of nonconformists. These scores on cultural dimensions are not easy to relate to the Belgian corporate governance system and more specifically the code, perhaps due to the strong influence from abroad. The uncertainty avoidance in Belgium is possibly retraceable to the fact that Belgium's company law is extensive (see key question 4) and that the code is complementary to existing law; no provision of the code may be interpreted as derogating from Belgian law (Belgian Code 2009, Preamble). Moreover, the high scores on power distance could relate to the fact that the vast majority of the principles apply to the board. But this is no different for the other countries under research. On the other hand the Belgians are apparently skilled in inserting additional layers in their hierarchy, hence the executive committees, the holding companies and pyramidal structures. Besides that the powers among shareholders are unequal due to the separation between the controlling shareholders and the small shareholders.

To summarise this key question, the main feature of the Belgian corporate governance and more specifically of its code is a focus on the one-tier board, however with the possibility to establish an executive committee (resulting in a board structure sui generis). The aim is to achieve a dialogue with shareholders based on mutual understanding, not neglecting the power, added values and perils of the controlling shareholders, often holding companies. A direct relation between the code's feature and the Belgian culture is difficult to make due to the strong corporate governance influences from abroad that result in a code strongly in line with international practice and EU recommendations but with few typically national features. This is understandable, since the first aim was to strengthen Belgium's competitive position and thus, perhaps, Belgium opts for real convergence in corporate governance practices.