4.1.6 Features of Dutch Corporate Culture:• consultation, plurality of interests, two-tier system, defence mechanisms

Although British, US and Dutch culture have much in common, such as a crave for the same Christian religions, rationality and independence, I would like to mention four special aspects of Dutch corporate governance.

First the Nabit to hold discussions in an atmosphere of consultation always with the aim of reaching consensus, second, that all stakeholder interests are considered, third, the role of separate supervisory boards, and fourth, oligarchie features, which even into the 21^st century give directors a feeling of being protected.

Dutch boards consult with the aim of reaching consensus. All those present are free to speak on an equal basis. This is the polder model.1 An important consequence is a "collegial" or "fraternal" board model as is described in 4.1.3 above.2 Boards find practical solutions and try to avoid having to discuss underlying principles. Hard basic questions are seldom asked. Criticism of a consensus through compromises is not appreciated. Board members deal with each other with less hierarchy3 and more informality in decision making than their colleagues in the UK and the US. In the Netherlands it is unusual to vote in board meetings. That fact that Dutch consultation can take a long time and that there is no hierarchy to speed up decision making, can be confusing for foreigners.

Dutch engineers, economists and lawyers have a thorough rather technical, education.4 Graduates of liberal arts, such as history or sociology, which give broader general views of society, are seldom found among members of Dutch boards.5 This leads to practical thinking and a tendency for practical discussions.

Members of Dutch boards, not only of companies but also of churches and societies, are used to speaking their mind. They expect their colleagues do the same and respect them for it. Often they come up with unexpected things to test the waters. This direct, open, frank and cost conscious Dutch attitude makes it natural for a Dutchman to ask challenging questions about practical matters. But once a compromise is reached everybody agrees to act accordingly, confident that even if they have been straight forward, the others will not be upset. Dutch directness and uprightness is often experienced in other countries as aggressive, blunt and pushy.6

The threat of water and of surrounding superpowers, a ruling merchant oligarchy, a small country, social control within such an oligarchy backed by a critical Calvinist church, different religions, many political parties and more recently the interests of employees and environmental concerns have contributed to this spirit of and respect for compromise and consultation.

There is a tradition of taking more than just shareholder interests into consideration. Since the 1960s employee and environmental concerns play a larger role. In the 1960s employee rights even became a centrepiece of Dutch enterprise law with the Works Council Act and the Structure Regime Act. The Supreme Court has recently reconfirmed7 this concept of plurality of interests in the ABN AMR08 case. That the interests of employees count is confirmed by article 2:347 DCC that gives trade unions the right to initiate a case in the Enterprise Chamber as was in the recent case of 2010, where the Enterprise Chamber gave a judgment against management of the publishing house PCM and a private equity buyer at the request of unions.9

Dutch law mentions in many places that all interests should be considered. A centrepiece of company law is article 2.8 DCC, which determines that the managing and supervisory directors and the shareholders are obliged to act in a reasonable manner towards each other. The requirement of reasonability is again a cornerstone of contract law. Although this is not directly relevant to corporate governance, Dutch literature10 on corporate law stresses the importance of the general principle of Dutch law for all parties are to take the interests of other parties into account.

Boards of companies must act in the interest of the company and its enterprise. This important rule, laid down in article 2:140 DCC, describing the obligations of board members, is to be interpreted that board members should take into account the interests of all concerned.12 This is further discussed in detail in 4.2.5 below.

All through the centuries an important role has been reserved for outsiders, independent from day-to-day management. In the "polder" boards the "dijkgraaf' was an outside advisor as were the "influential" outside investors, who were attracted as sounding board and potential supporters. The "polders" had a commercial object as well as a communal aim. The same applies for the VOC, which had a commercial object and a communal aim of colonization and defence at sea.13 The Heeren Zeventien did not have any central government representative as "outsider" looking into governance, but they did consult with city representatives as outside sounding boards and supporters for their co-optation. The first formal committee, that was meant to advise and monitor management, was introduced in 1623 in the VOC. It represented the shareholders, but did not report back to shareholders and, in fact, kept shareholders at a distance. With the focus of enterprises purely on commercial aims, "commissarissen" were deemed to look after the interest of shareholders. In the 18^th century, this soit of outside committees became known as "Raden van Commissarissen", supervisory boards. Supervisory boards were part of Dutch culture and were continued after the French Code de Commerce of 1813 and also contained this system, were reconfirrned in the acts of 1838, 1928 and 1971. These directors always had a certain supervisory role, which implied a role in the nomination of the directors, "seeing to it that there is good management'. In 1971 the legislator added that supervisory boards should "monitor in the interest of the company and its enterprise" and "assist", "staat ter zijde", management with advice.14 In the same year the Structure Regime was introduced, which emphasized the role of the supervisory board as taking an independent stance and considering the interests of all involved and not only of shareholders. Most experienced Dutch directors, management and supervisory directors as well, give great value to this "independent stance" of supervisory directors. In the consideration of whether or not to change from a two-tier system with supervisory directors and to change to a one-tier board with non-executive directors and no supervisory directors, it is important to be cautious and develop a sensitive view. Supervisory boards are part of the Dutch software of the corporate governance mind.

As we have seen, the Dutch developed the combination of private investors' capital with professional management of commercial enterprises, often mixed with public tasks, in a way which reflects a non-hierarchical spirit of governance characterized by frequent consultation, discussions and compromises. Part of this arrangement was that the participants, the boards and supervisors supported each other in their co-optation and in maintaining their positions, as "collegial" or "fraternal" board. For some centuries this had worked well, leading the country into its Golden Age. Peer pressure among the oligarchy within cities and public criticism of excesses from pulpits and in pamphlets prevented this set-up for a long time from degenerating into a corrupt and self-seeking regime.15 The disastrous years around 1800 destroyed much of the fabric of this system, but the spirit revived in the 19^th century together with the revival of commerce and industry. Only recently have challenges been mounted against this spirit of oligarchy bred into most supervisory board members and managers. At the same time the walls of protection against outside influences on the leaders of Dutch public companies are being undermined.

This cosy atmosphere was disturbed by the increase of foreign shareholders, many Enterprise Chamber cases, by new laws and the Code of 2004.16

One could call these changes of 2004 a culture shock for many Dutch board members.17 Those who were internationally trained had less problems.18 It can be expected that Dutch boards have now become more attentive to foreign corporate governance practices, behaviour of directors and expectations of foreign shareholders. Discussions among directors and top managers of corporations now have to deal with the question of how to adapt to the new rules and the new circumstances that bring demands from foreign shareholders, the media and government supervisors. This study aims to contribute to this discussion.