4.6.2 What is the background of corporate governance in the country under review?

As was the case in the UK, corporate governance became a hot topic in the Netherlands at the end of the twentieth century. The Netherlands was influenced by the UK and shaken by the bankruptcy of the commercial vehicle manufacturer DAF in 1994 (Voogsgeerd 2006, p. 106). The supervision of the Dutch supervisory boards was questioned and recommendations were asked for. In April 1996 the first Dutch Corporate Governance Committee was established under the chairmanship of Jaap Peters (also known as the Committee Peters), and had the task of examining whether the balance between supervision, management and shareholders within listed companies was sustainable against the internationalisation of the Dutch economy. The committee published its "Recommendations on Corporate Governance in the Netherlands' in 1997. The recommendations involved issues such as transparency, accountability and shareholders' control, but mainly focused on the functioning of the supervisory board. The committee regarded the recommendations as: "a set ofrules for sound management and proper supervision and for a division ofduties and responsibilities and powers affecting the satisfactory balance ofinfluence ofall the stakeholders" (Committee Peters 1997, p. 10). Unfortunately, these recommendations were not followed as often as had been anticipated (De Jong and Roosenboom 2002, p. 927). The Dutch government responded with new legislation since it believed that soft regulation was not sufficient enough for some of the recommendations (e.g. the law on amending the structure regime of 2004 (Staatsblad 370, 2004)). Besides that, on 10 March 2003, by request of several stakeholders a new corporate governance committee was established to draft a new corporate governance code within nine months.1 In December 2003, the committee published its final Corporate Governance Code which came into force with effect from the financial year starting on or after 1 January 2004. This code applies to all companies whose registered office is in the Netherlands and whose shares or depositary receipts for shares are officially listed on a government-recognised stock exchange. The code compliance ofthe listed companies was monitored annually by the Dutch Monitoring Committee Corporate Governance Code for four years. Consequently, in 2008 the Monitoring Committee published consultation documentation with proposals for a revised Dutch corporate governance code and on 10 December 2008 presented its amended code to the special interest groups and to the Ministers of Finance, Justice and Economic Affairs that had requested the changes. The amended code came into force with effect from the financial year starting on or after 1 January 2009 and is applicable to: "all companies whose registered offices are in the Netherlands and whose shares or depositary receipts for shares have been admitted to listing on a stock exchange, or more specifically to trading on a regulated market or a comparable system, and to all large companies whose registered offices are in the Netherlands (balance sheet value > € 500 million) and whose shares or depositary receipts for shares have been admitted to trading on a multilateral trading facility or a comparable system" (Dutch corporate governance code 2008, Preamble 2). The above phrase shows that in the most recent Dutch code multilateral trading facilities are acknowledged as such, which is in line with the current developments and rise of multilateral trading facilities in the EU.

The corporate governance committee defines good corporate governance as: "Good entrepreneurship, including integrity and transparency of decision-making by the management board, and proper supervision thereof, including accountability for such supervision, are essential if the stakeholders are to have confidence in the management board and the supervision" (Dutch corporate governance code 2008, Preamble 8). The aim of the Dutch committees, with the current and previous code as instruments of self-regulation, is to promote good governance within Dutch listed companies. Self-regulation is believed in, since the market parties involved are able to draft proper working behavioural rules themselves and are thus able to react to changing circumstances and deliver custom-made behavioural rules (Monitoring report 2008, p. 5). The codes are strongly based on the stakeholder model accepted in the Netherlands. It is argued in the preambles that a company is a long-term form of collaboration between the various parties involved, the stakeholders. The management and supervisory board have to weigh up the interests of all those stakeholders to ensure the continuity of the enterprise and to create long-term shareholder value (Dutch corporate governance code 2003, Preamble 3).

Since, and under the influence of, the first Dutch corporate governance code other primary sources of law concerning corporate governance have been developed and modified. An example of legislation developed after the implementation of the code is the Financial Reporting (Supervision) Act (Wet toezicht financiële verslaggeving, Wtfv) by which the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten,the AFM) is authorised to examine the annual reports of companies listed in the Netherlands, i.a. regarding the corporate governance statement. Several court cases have endorsed the importance of good corporate governance (HR 21 February 2003, NJ 2003/182) (HR 13 July 2007, NJ 2007/434) (OK 14 December 2005, JOR 2006/7) (HR 14 September 2007, NJ 2007/612). Moreover, on 1 January 2007 the Dutch Financial Supervision Act (Wet op het financieel toezicht, Wft) became effective. A total of eight already existing laws on supervision were modified and brought together into this one law on financial supervision.2 In 2008 the Dutch corporate governance code itself was modified. The alterations in the latest code regard risk control, remuneration, shareholders' responsibility, diversity in the supervisory board and corporate social responsibility. The most remarkable changes involve a 'time of response' of 180 days if the company is faced with a shareholder who wants to bring about a change in strategy (e.g. a split-up), behavioural rules for the boards in case of takeovers and the rule that variable remuneration is based upon long-term goals. Moreover, corporate social responsibility and diversity in the composition of the supervisory board are introduced in the Dutch national code (Press release Monitoring Committee 10 December 2008). The most recent development is a proposal to amend the Dutch Financial Supervision Act (Wet op het financieel toezicht, Wft) which is nicknamed "the corporate governance proposal" and will probably come into effect on 1 July 2012 and deals with subjects such as a limitation of the number of appointments as supervisory board member and legislating the possibility to establish a one-tier board structure instead of a two-tier board structure (Tweede Kamerstukken 2008-2009, 31763, nr. 2).