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

The Dutch corporate governance regime has a stakeholder approach (although shareholder activism is gaining importance), is i.a. characterised by a two-tier board structure and having many takeover defences is common practice. The main features of the Dutch corporate governance and code are discussed below by means of the features: (i) board structure and (ii) shareholders and stakeholders. Moreover, (iii) culture is taken into account to see whether the code's contents reflect Dutch culture. As stated above, 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.

In the Netherlands the two-tier management structure is the predominant board structure (Weil, Gotshal & Manges 2002, p. 171). Alongside the management board a separate supervisory board monitors and advises the managing directors. As stated above, the Committee Peters focused mainly on the functioning of the supervisory board. 21 of its 40 recommendations were devoted to the functioning of the supervisory board. Although having a supervisory board is common practice, it is not compulsory, except for those companies bound by law to apply the statutory two-tier rules (structuurregime).1Additional rights of the supervisory board members if the statutory two-tier rules apply are, for instance, the appointment, suspension and dismissal of members of the management board, the right to nominate new members of the supervisory board and several decisions of the board are subject to the approval of the supervisory board (e.g. the issuance of shares). Although still applicable to some listed companies, the statutory two-tier rules as in effect since 1971 are losing impact in the Netherlands. A growing number of listed companies, influenced by international practice, now opts for the one-tier board structure (Voogsgeerd 2006, p. 114). Although both a one-tier and a two-tier board structure are allowed in the Netherlands, a one-tier board was not laid down in legislation until recently. Currently a legislative proposal is due to come into effect as from 1 July 2012 (Tweede Kamerstukken 2008-2009, 31763, nr. 2). In the 2003 code the trend towards one-tier board structures is acknowledged and: "In order to ensure that the code takes account of future developments and scenarios, the provisions regarding the supervisory board are also applicable to the non-executive directors of companies which have a one-tier structure, without prejudice to the management obligations of these non-executive directors" (Dutch Corporate Governance Code 2003, Preamble 10).

The modified 2008 code continues the current trend towards one-tier board structures and chapter III.8 contains several best practice provisions specifically for companies that have a one-tier board structure.2 Besides the discussion on the board structure, a general tendency towards more attention to the supervisory board members currently exists as a result of the financial crisis and the alleged lack of efficient supervision. Therefore, the modified code has more provisions and more specific provisions on supervisory board members and their functioning (such as on remuneration and a company-specific supervisory board profile) than the previous code. All supervisory board members with the exception of one must be independent and precise material independence criteria are formulated (provision III.2.2), as well as the fact that the supervisory board shall aim for a diverse composition, in terms of for example gender and age (principle III.3).

The Netherlands has a tradition of the stakeholder model as the prevailing corporate governance model; or, even more specifically, in the Netherlands the Rhineland model is considered applicable (Wymeersch 2002, p. 231). This model reflects the general views in the Netherlands on the organisation of the state and economy. The Rhineland model aims for a socially corrected market economy. Value maximisation of shareholders is mainly long-term based and the maximisation is not the only goal to aim for; other stakeholders are of importance as well. Co-operation is desired and labour as well as capital considered a necessity (Van den Berghe en De Ridder 1999, p. 40) (Van den Berghe and De Ridder 1999, p. 40). The 2003 and 2008 codes underwrite the stakeholder model in their preambles and even mention various stakeholders: "The Code is based on the principle accepted in the Netherlands that a company is a long-term alliance between the various parties involved in the company. The stakeholders are the groups and individuals who, directly or indirectly, influence - or are influenced by - the attainment of the company's objects: i.e. employees, shareholders and other lenders, suppliers, customers, the public sector and civil society" (Dutch Corporate Governance Code 2008, Preamble 7).

Strikingly enough the provisions in the codes do not establish the influence of those stakeholders further. The only stakeholders directly mentioned in the codes are the (institutional) shareholders. The employees are only mentioned indirectly in best practice provision II.1.7 regarding the whistleblower arrangements and in preamble 3: "The Code contains principles and best practice provisions that regulate relations between the management board, the supervisory board and the shareholders (...). Relations between the company and its employees (...) are regulated elsewhere. Nonetheless, the interests of the employees should be taken into account when the interests ofall stakeholders are weighed in connection with compliance with the Code " (Dutch Corporate Governance Code 2008, Preamble 3). The above quote shows that this code is an instrument of self-regulation suitable within the stakeholder model, but specifically designed for the relations between and behaviour of the (supervisory) board members, shareholders and (internal and external) auditors; not neglecting the fact that other stakeholders do exist, just not discussing them in this specific instrument.

With respect to the code's contents on shareholders, various developments occurred, starting with the Committee Peters. Although the Committee Peters focused mainly on the supervisory board members, the shareholders were discussed as well. In recommendation 5.2 it was acknowledged that, in the Netherlands, the shareholder powers are often curtailed by takeover defences as laid down in the articles of association. But more importantly the Committee states that: "each company's General Meeting is the forum to which the Board of Directors and the Supervisory Board report and to which they are accountable for their performance" (Committee Peters 1997, Recommendation 5.2). In the subsequent recommendations the increase of shareholder influence is a central theme. The 2003 and 2008 codes put the emphasis elsewhere: "The general meeting of shareholders should be able to exert such influence on the policy ofthe management board and the supervisory board ofthe company that it plays a fully-fledged role in the system of checks and balances in the company" (Code 2008, Principle IV.1). Voogsgeerd considers the 2003 and 2008 codes a step backwards compared to the recommendations of the Committee Peters, since the codes do not mention the accountability towards the shareholders and the increasing influence of their role. A system of checks and balances is supposed to exist within companies in which the shareholders ought to play a substantive role (Voogsgeerd 2006, p. 127). The influences and rights of the shareholders are not strengthened in the codes, but only emphasised and their use promoted. Nevertheless, since the implementation of the code in 2003 the shareholder rights have been extended by legislation3 as recommended by the Monitoring Committee (Monitoring Committee Report 2005, p. 32) and the Corporate Governance Committee itself (Dutch Corporate Governance Code 2003, p. 62).

The role assigned to the institutional shareholders is worth mentioning. In the 2003 and 2008 code a special principle (IV.4) focuses on the responsibility of institutional shareholders. They have to publish their voting policy, the manner in which they have executed this policy and the votes they have cast. The Corporate Governance Committee argued in the 2003 Code that institutional investors should make much more extensive use of their shareholder rights to take corrective action (Dutch Corporate Governance Code 2003, p. 39). In the 2008 code this is once again confirmed and as being a result of the increased and sometimes short-minded shareholders activism.

Another quite unique characteristic is the influence the shareholders can exert on the compliance with the Dutch code. Preambles 7 and 8 of the 2003 code determine that the shareholders can call the management and supervisory boards to account for the compliance in the general meeting and, if desired, the corporate governance statement on the (non-)compliance can be put to vote (Dutch Corporate Governance Code 2003, Preambles 7 and 8). The 2008 code only mentions in its preamble 4 that it is up to the shareholders to call the management and the supervisory board to account for code compliance (Code 2008, Preamble 4). The shareholders' influence on code compliance is elaborated further in section 4.6.7.

In section 3.3.2 the necessity to take culture into account when researching and comparing several corporate governance systems and models at the same time is reviewed, as well as the outcomes of several studies on those cultural dimensions. Table 3.3.2 above shows an overview of the results of these studies on the countries under review in this research. The results for the Netherlands are repeated in table 4.6.4 below. The Dutch scores on Hofstede's cultural dimensions are easy to relate to the Dutch corporate governance system and national code. The Netherlands scores low on power distance, has weak uncertainty avoidance and scores extremely low on masculinity. People in small power distance societies strive for power equalisation and demand justification for power inequalities and weak uncertainty avoidance societies maintain a more relaxed atmosphere in which practice counts more than principles and deviance is easily tolerated. Masculinity stands for preference in society for achievement, heroism, assertiveness and material success, while femininity emphasises relationship, modesty, caring for the weak and interpersonal harmony. The scores on these three cultural dimensions cohere with a self-regulation code from a stakeholder approach. Above all, the aim is to achieve good relations and a dialogue between the parties concerned (Code 2008, Preamble 3 and 4). Schwartz's egalitarianism also fits into this picture of the Netherlands.

However, the influences from abroad must not be neglected nowadays. Although the aims of Dutch corporate governance remain the same, shareholder activism, a more short-term focus and the recent tensions regarding remuneration and between the management and supervisory boards must also be taken into account (Code 2008, Preambles 11 and 12). Nevertheless, it is believed that the Dutch national code is there to cope with these developments: "The Code contains general rules ofconduct designed to ensure the careful handling ofthe processes involving the management board, the supervisory board and the shareholders (...) and to help the management board and the supervisory board weigh up the different interests correctly. Good relations between the various stakeholders are ofgreat importance in this connection, particularly through a continuous and constructive dialogue" (Code 2008, Preamble 10).

To summarise the above, (as shown in table 4.6.4a below), the main features of the Dutch corporate governance system and more specifically of its code are a two-tier board system and a focus on the supervisory board members. The code reasons from a stakeholder approach, although does not discuss the position of the different stakeholders since the code is specifically designed for the relations between and behaviour of the (supervisory) board members, shareholders and (internal and external) auditors. Nevertheless, the interests of all stakeholders are weighed in connection with compliance with the code. With respect to the cultural dimensions the Netherlands scores low on power distance, has weak uncertainty avoidance and scores extremely low on masculinity. The scores on these three cultural dimensions cohere with a self-regulation code from a stakeholder approach. Above all, the aim is to achieve good relations and a dialogue between the parties concerned (Code 2008, Preambles 3 and 4) and it is believed that the Dutch national code is able to cope with changing circumstances.