2.7.2 Corporate governance

The ultimate goals of corporate governance, namely raising confidence in capital markets and increasing shareholder value in the long term, are broad and abstract. It is also necessary for these goals to be transformed into more concrete and practical objectives.

The first concrete objective of corporate governance is to create a solid corporate structure, designed to ensure the integrity of the parties involved. Realising a solid corporate structure requires a better distribution of powers among corporate bodies than at present. As noted earlier, the current company structure is characterised by a dominant position of the board of directors.

A better distribution of powers should lead to a system of checks and balances' that provides for corporate self-assessment and well-balanced decisions.

It is generally argued that a better balanced distribution of powers within listed companies requires: (i) limiting the dominant position of directors; (ii) reinforcing the position of the supervisory board;1 (iii) increasing the powers and active engagement of the general meeting of shareholders; (iv) stepping up consultation procedures between the board of directors, supervisory board and general meeting of shareholders and (v) allowing accountant audits independently from the board of directors, and permitting the accountant to inform the supervisory board and the general meeting of shareholders of its findings.

The second objective of corporate governance is to increase corporate transparency. Companies should disclose information on their corporate governance structure and mutual accountability between corporate bodies should be increased. Moreover, it has been argued that the development of corporate governance in the Netherlands should be placed in a broader perspective as, in addition to the objectives mentioned earlier, corporate governance in the Netherlands is also aimed at a fundamental review of the corporate structure of Dutch listed companies with a view to making their corporate structure compatible with the corporate structures of global financial markets.2

Avoiding legislation on corporate governance is another obvious objective of the business community, besides those mentioned earlier. It is hoped that setting up self-regulatory rules may prevent the introduction of legislation.