Summary

This thesis concerns the position of shareholders in Dutch listed companies. The underlying research was aimed in particular at the developments that took place between – roughly – 1999 and 2004. The reason for choosing the developments in this particular period in time for this analysis can be traced to the worldwide financial crisis that emerged in full swing in late 2008. In the wake of the crisis, during which a number of Dutch listed financial institutions had to be rescued by the government through capital injections and in some cases even nationalisations, commentators have argued that the apparent vulnerabilities of the listed companies that ran into problems were caused in part by pressure from shareholders. Some of the arguments advanced by these commentators explicitly referred to the strengthening of the position of shareholders in Dutch listed companies which had occurred in the years preceding the financial crisis. Upon further review, most of the relevant developments regarding this strengthening of the position of shareholders have occurred between 1999 and 2004. The reason for reviewing these developments was set against this background. In addition, the strengthening of this position is still relevant, especially now that the phenomenon of shareholder activism appears to be on the rise again and the market for takeovers of listed companies also appears to be picking up. This study offers a framework for interpretation and appreciation of the legacy from the time around the turn of the century which has now once again become current.

The legal elements from the period 1999 to 2004 which jointly made for a strengthening of the position of shareholders in Dutch listed companies are developments in legislation (in particular the introduction of new statutory shareholder rights through the Structure Regime Act of 2004), developments in self regulation (the promulgation of the first Dutch Corporate Governance Code in 2003) and developments in case law (the decisions of the Enterprise Court of the Amsterdam Court of Appeals and the Dutch Supreme Court in cases involving takeover disputes such as Gucci, RNA, and HBG between 1999 and 2003). These changes each stemmed from earlier developments. These were not only developments at the legal level, but also – and especially – developments at the factual level and developments at the normative level. An example of a development at the factual level is the change in the collective shareholder base of Dutch listed companies. Developments at the normative level mostly concern underlying ideas from policy, academia or market practice, which affect factual and legal developments. Examples are the changing views from time to time on the admissibility of protective measures for listed companies.

This study aims to demonstrate the interactions between developments at the legal, factual and normative levels. In addition, distinguishing between legal, factual and normative matters contributes to the clarity of the analysis of all of these developments. Not applying such distinctions entails the particular risk of producing an inadvertent mixture of factual arguments (It is) with normative arguments (It should be). Certain methodological choices, such as using non- legal sources in addition to legal sources and describing the relevant developments from mostly contemporaneous documents, have been made with a view to producing a sound integrated analysis of legal, factual and normative developments.

The study is structured as follows. Chapter 2 defines a starting point, e.g. the ‘classical’ company law for Dutch listed companies (N.V.’s) that was brought into existence between 1929 and 1971. Chapter 3 describes the developments in legal policy, politics, business and society which occurred between 1971 and 1999 in the Netherlands and at the level of the European Union. On the legal level, the position of shareholders in listed companies didn’t change much during this period, but there were a lot of changes at the factual- and normative levels. By way of excursion, chapter 4 describes the development of the law & economics approach to company law, in particular within the context of the emergence of the law & economics movement in the US. Some of the law & economics concepts that were developed in this field would later on affect the discussions in policy and in academia on company law at both the EU – and Dutch levels.

Chapter 5 describes the changes in policy, legislation, self-regulation and case law regarding the position of shareholders in listed companies which occurred between 1999 and 2004. Lines that were drawn in chapters 3 and 4 are woven together in this chapter. Chapter 6 concerns fault lines, constants and corrections. The fault lines were hidden vulnerabilities within the system of corporate governance that had been put into place between 1999 and 2004. These vulnerabilities caused the developments after 2004 to proceed rather differently than expected, in particular with respect to the emergence of shareholder activism. By contrast, the constants were factors which had a cushioning effect on these developments and the corrections were responses to the apparent vulnerabilities through legislation, self-regulation and case law. Chapter 7 contains a comparative analysis concerning the developments with respect to the position of shareholders in listed companies in Germany and in the United Kingdom. The choice for these two jurisdictions was driven by the fact that Dutch company law historically displays a large degree of similarity with German company law, whereas it shifted more towards the model of UK company law through the changes that occurred between 1999 and 2004. The comparison aims to analyse the extent to which the developments that have occurred in the Netherlands were unavoidable, that is: whether other policy choices had been possible as well. The comparison with the United Kingdom demonstrates the specific political, economic and social context in which British company law with respect to the position of shareholders in listed companies was developed. Chapter 8 concludes with a set of further considerations, conclusions and recommendations.

An analysis of the statutory rules concerning the N.V. that were introduced in the Dutch Code of Commerce in 1929 demonstrates that the N.V. was conceptually aimed at shareholders as partners cooperating together. Typical features of this arrangement were the instrumental interpretation of the concept of legal personality, the role of the corporate objectives clause in a company’s articles of association as guideline for managerial conduct and the limitation of the board’s authority to managing only the day to day affairs of the company whilst viewing the general meeting of shareholders as the ultimate power within the company with residual authority over all matters that had not been expressly delegated to the board. Van der Heijden conceptually labelled the N.V. as a form of qualified partnership, a relationship of a contractual nature between cooperating partners whereby the feature of legal personhood of the N.V. allowed the joint shareholders to participate in legal dealings in a special way through the N.V. as an instrument of property law ordering.

The N.V. as a legal entity was primarily aimed at small and medium sized businesses with closely held shareholder structure. Large enterprises with dispersed share ownership, in particular listed companies, were expected to be able to cope with the statutory N.V. law in practice; a specifically tailored statutory regime was not deemed necessary. In practice, the widespread use of oligarchic arrangements had produced a divergence between the conceptual position of shareholders in those companies on the one hand and their true position on the other, especially as concerned minority shareholders. Also, the conceptual vision of an N.V. as a qualified partnership was more and more at odds with the post-war reality in which large enterprises were becoming increasingly important in the economy. Academics such as Van der Grinten acknowledged this reality by nuancing their views on the limits of the board’s authority pursuant to section 47 of the Dutch Code of Commerce. Even so, the Dutch Supreme Court’s 1949 ruling in Doetinchemse Ijzergieterij, which featured the first mention of the phrase ‘the interest of the company’, was regarded by Van der Grinten as an unhelpful precedent. On principal grounds, he rejected the Supreme Court’s suggested distinction between the interest of the company on the one hand and the interest of its joint shareholders on the other. The Dutch Supreme Court’s 1955 ruling in Forumbank, in which the Supreme Court held that the board had an autonomous position vis-à-vis the general meeting of shareholders and was thus not required to adhere to specific instructions from the general meeting regarding matters that fell within the board’s prerogative, was not viewed as a major development in law at the time. Only in later academic literature would these cases be labelled as landmark cases in the process of development of a more institutional view of the N.V..

The institutional view on the nature of the N.V. was first promulgated in Maeijer’s introductory lecture of 1964. Maeijer’s view that the N.V. had a distinct interest of its own was based on the property law equation of a legal person with a natural person, whereby Maeijer invoked the precedent of Doetinchemse Ijzergieterij in support of his view. The fact that Maeijer’s view of the company interest (including the related subsequent view of Van der Grinten about the company interest being the resultant of the respective interests of all interested parties) became the dominant paradigm within company law was not so much due to the strength of the legal arguments, but rather because this view sat well with the changing views in society on the functioning of large enterprises, in particular with respect to the position of employees in those enterprises. This was not the case for the alternative view of Löwensteyn in which the company interest was equated with the objectivised interest of the joint shareholders.

The discussion on the economic and societal divisions between labour and capital in the context of large enterprises resulted in a 1964 report of the Verdam Committee with recommendations about the governance structure of largeN.V.’s. In the wake of this report, a number of substantial changes in legislation were brought into force, including the introduction of the large companies’ regime (Structure Regime) in 1971. Formally, the position of shareholders in companies that were subject to the new structure regime was limited because the authority to appoint and dismiss members of the management board was attributed to the mandatory supervisory board. In fact, however, this did not constitute a weakening of the actual position of shareholders because the use of oligarchic arrangements on the one hand and absenteeism among shareholders on the other had even in the old situation precluded the general meeting of shareholders from exercising these authorities effectively. With the introduction of the structure regime and other changes in legislation such as the introduction of rules on annual accounts in 1970 and a revision of the rules concerning inquiry proceedings in 1971, the classical Dutch company law for listed N.V.’s effectively arrived at its final form in 1971.

Chapter 3 describes the shifts at the factual and normative level with respect to the position of shareholders in listed companies that occurred between 1971 and 1999. These developments can also be placed in a broader political context. Where the Dutch Labour Party (PvdA) at the time of the Den Uyl government and in subsequent years openly flirted with ideas about restraining large enterprises and forms of workers control over companies, the Christian Democrats (CDA) and the Liberal Party (VVD) from the first Lubbers government onwards deliberately chose to pursue a policy of deregulation and privatisation. This choice was not driven by ideological considerations, but by pragmatic considerations with a view to restoring the health of the nation’s public finances. Meanwhile, the PvdA in the second half of the 1980s went through a process of ideological reorientation. The CDA/VVD policy of deregulation and privatisation could therefore be continued when the PvdA entered the Lubbers III government in 1989. This policy would also be continued in the subsequent ‘purple’ governments of PvdA/VVD/D66. This policy also entailed a change in the government’s policy concerning state participations. Among other things, the government pursued a strengthening of the position of shareholders with a view to using its position as shareholder to exert control over state enterprises.

Meanwhile, a process of internationalisation in financial markets had been going since the 1980s, which led to an increase in the international competition between stock exchanges. The Dutch government had earmarked the Dutch financial markets as an aspiring key player in international competition. To that end, a framework of laws and regulations (partly through the implementation of the first EU directives with respect to capital markets) and a framework of public law supervision with the introduction of the Trading Monitoring Foundation (Ste) was developed in the 1980s. In addition, the Stock Exchange Association (VvdE), the operator of the Amsterdam Stock Exchange, was pursuing means to attract more listings and to increase turnover and trading volumes on the exchange. In this context, a dialogue was initiated between the VvdE and the Association of Listed Companies (VEUO) about the use of protective measures by listed companies and possible limitations thereto. The government presented its position in a policy document but left the actual discussions to the VvdE and the VEUO for the time being. In the early 1990s, the discussion gained a European dimension with the introduction of the draft Thirteenth Directive. In 1992, the VvdE and the VEUO agreed to a compromise for the duration of three years. The government agreed to the compromise as temporary measure, but also announced that legislation could be introduced in the event the VvdE and the VEUO would be unable to agree on a satisfactory permanent arrangement on protective measures.

Another relevant factual development concerned the shifts that occurred in the collective shareholder base of Dutch listed companies. Historically, a substantial part of the shares in Dutch multinational companies such Royal Dutch Shell and Unilever had been held by foreign shareholders, mostly foreign competitors from the same industry which held the shares by way of strategic participation. In addition, Dutch financial institutions, in particular Dutch insurers, traditionally held large minority stakes in Dutch listed companies. Finally, Dutch retail shareholders also collectively held a sizeable amount of shares. This state of affairs changed during the 1980s. In large share offerings that were issued by Dutch listed companies to finance foreign acquisitions, the bulk of newly issued shares went to foreign investors, in particular to UK and US institutional investors. Also, Dutch listed companies as part of these foreign acquisitions gained foreign stock exchange listings, which attracted foreign investors to their shares as well. The shareholdings of Dutch institutional investors in Dutch listed companies did not match this trend. The large Dutch pension funds traditionally only held a small part of their assets in the form of shares, whereas the Dutch insurers from the 1990s onwards were selling down their large stakes in Dutch listed companies. In the mid-90s, the Netherlands was the only country in comparison to the surrounding countries such as Germany and the United Kingdom which did not have a ‘national block’ in the collective shareholder base of Dutch listed companies.

In the same period, the discussion on protective measures between the VvdE and the VEUO re-emerged. In 1995, the parties reached an agreement in principle on the basic points for a new arrangement on the possibilities for a breakthrough of protective measures. At the request of the government, the VvdE and the VEUO also drew up a proposal for a draft bill. However, this proposal did not meet the criteria which the government had formulated earlier in its policy statement. Early 1996, the government claimed the initiative by arranging an agreement between the VvdE and the VEUO – presumably by forcing an agreement upon them – on the basic elements of new statutory rules concerning the breakthrough of protective measures. The ensuing bill, the Protective Measures Bill, was introduced in 1997. This bill aimed to curb to some extent the use of legal protective measures in the face of takeover bids. The explanatory notes to the bill mentioned that listed companies should instead make an effort to arrange for economic protection by attracting a stable group of core shareholders. The notes also mentioned that the Dutch pension funds had declared themselves to be willing to take up this role, provided that the strategy of the relevant companies would be conducive to the continuity of the business and to the interests of shareholders.

Another progeny of the agreement in principle between the VvdE and the VEUO was the installation of the Peters Committee. In October 1996, the Peters Committee published its forty recommendations in the field of corporate governance for listed companies. The committee had aimed to provide a set of best practices (probably following the example of the UK Cadbury Committee), while leaving compliance to a market based system of enforcement. Compliance would be mainly driven by political pressure. Shortly after the publication of the Peters Committee report, the government had indicated that legislation would ensue if apparent compliance with the recommendations by Dutch listed companies would be found to be lagging. With respect to shareholders, the Peters Committee’s recommendations contained a number of initiatives for strengthening their position, such as the incentive for listed companies to provide for possibilities of proxy solicitation and the recommendation that shareholders representing a certain percentage of shares should be allowed to propose agenda items for general meetings. The report also contained a number of remarkable normative claims, such as the statement that shareholders should be able to exert influence over the company’s strategic policy. Regardless, as was demonstrated by a onetime review of results over the financial year 1998, the compliance of listed companies with the recommendations set out by the Peters Committee failed to meet expectations. The true impact of the Peters Committee’s recommendations should therefore not be overestimated.

Finally, in the 1990s a discontent of some sorts was emerging within company law academics with respect to the status quo on the position of shareholders in listed companies. To be sure, this discontent was not widespread, but in particular company law academics with ties to practice as members of law firms (Slagter, Den Boogert, Van der Hoek) or in-house lawyers with large Dutch multinationals (HonÉe, Raaijmakers) were increasingly vocal in articulating their views. Other academics such as Timmerman and De Kluiver critically assessed the status quo from a more contemplative- or multidisciplinary perspective. As such, the debate within company law academic circles on the position of shareholders became more diverse.

In the second half of the 20th century, a law & economics approach to company law was developed within the US academic field of law & economics. This law & economics approach provides a normative framework in which the system of corporate governance of listed companies primarily focuses on its shareholders. In 1999, American academics Hansmann and Kraakman formulated their thesis on the ‘End of history for corporate law’ on the basis of this normative framework. They predicted a worldwide convergence of systems of company law in which all of these systems would unavoidably tend towards the shareholder oriented model proposed by Hansmann and Kraakman. Features of this model included the notion that the managers of a listed company should act exclusively in the interests of shareholders and that the stock price could be deemed to constitute the yardstick for determining these interests. The ideas advanced by Hansmann and Kraakman drew at lot of attention, also in the Netherlands. Because of this attention it is useful to reconstruct the origins of these ideas. This analysis can also serve as a basis for assessing how and to what extent these ideas influenced developments at the normative level with respect to European- and Dutch company law.

An important stepping stone for the rise of the US law & economics movement was the work of Coase. In 1960, Coase presented the position that was later dubbed the ‘Coase Theorem’ which stated that irrespective of the initial distribution of rights and entitlements, an optimal distribution of these rights and entitlements between parties – assuming zero transaction costs – could always be automatically achieved through voluntary market transactions. Coase acknowledged that the assumption of zero transaction costs was unrealistic and that in practice corrective actions with respect to the market mechanism from the government were needed. Even so, Coase argued that the legislator and the judiciary in considering whether such corrective actions were necessary and if yes in what way and to what extent should let themselves be guided by empirical analyses on the economic effects of such actions. Upon further review, the theory advanced by Coase also contains an inherent element of an ideologically driven preference for market based solutions rather than government intervention. Later work of other scholars in the field of law & economics that was based on the Coase Theorem thus adopted an inherent normative bias with respect to the relationship between government and markets which was invisible on the surface.

A number of concepts which would later prominently feature in the law & economics approach of company law were developed within the field of economics, in particular within the academic sub-discipline of finance. The most important of these concepts was the ‘Efficient Markets Hypothesis’ (EMH) that was advanced by Fama in 1970. Fama had demonstrated on the basis of empirical and econometrical research that the stock price of a given share at all times took into account all available information about the underlying business. By extension, it could be assumed that the stock price at all times was an adequate reflection of the intrinsic value of the respective business. Fama’s work was very influential within the field of finance. The idea of the EMH would also be adopted in other academic fields, in particular within law & economics.

The results of Fama’s study were based on a model which in turn contained a number of unrealistic assumptions. Even so, the degree of realism of underlying assumptions was not a relevant factor in the methodology of positive economics as developed by Friedman. Meanwhile, the limitations and caveats with respect to the results which Fama himself had identified faded from view, whereas later studies with contradictory results were marginalised within the field of finance and mostly went unnoticed outside of it. This way, the EMH within the law & economics approach was detached from its original academic context and the idea that stock prices always reflect all relevant information and thereby also provide an adequate reflection of the intrinsic firm value took on a life of its own. The same holds true for other concepts developed in the field of economics in general and in finance in particular, such as the general equilibrium model of Arrow and Debreu (a mathematical rendering of Smith’s ‘invisible hand’) and the rational expectations theory (a building block for econometric models which presumes individual market participations with perfect knowledge and foresight about future developments).

The next step in the development of the law & economics approach to company law was the application of ideas on markets to the relationship between companies and their shareholders. This happened both within the field of finance, notably with the agency theory of Jensen and Meckling in 1973, as well as within the field of legal academia, in particular with the notion of the market of corporate control that was developed by Manne in 1965 and the work of Easterbrook and Fischel during the 1980s which culminated in their standard textbook The Economic Structure of Corporate Law of 1991. In these treatises, the company was conceptually regarded as being a ‘nexus of contracts’. In this approach, shareholders were ‘residual claimants’ because other than other interested parties they had no legal-contractual relationship with the company and thus would only get paid when the company had fulfilled all of its contractual obligations to other stakeholders. As such, it was considered economically efficient for companies to focus exclusively on the maximisation of shareholder value, because this would implicitly also raise or at least maintain the value for other stakeholders. In addition, it was considered efficient to give shareholders certain control powers and certain monitoring mechanisms vis-à-vis the company’s board. The most important of these mechanisms was the hostile takeover which in the law & economics approach was viewed as a mechanism for disciplining management. Also, an optimisation of the governance structure of listed companies could be achieved by having companies provide information about their respective governance structures to the market, because a suboptimal governance – assuming application of the EMH – would lead to a corresponding discount in the company’s stock price. As such, an optimally functioning company law for listed companies could be achieved through shareholder oriented market arrangements.

The law & economics approach to company law was especially influential within US legal academic circles. Its impact on Dutch company law academia was rather limited. Indirectly, these ideas found their way into the academic discourse, for instance through publications by economics scholars in company law periodicals. Conversely, Dutch academics in the field of economics became increasingly active from the 1990s onwards in the academic debate on company law through publications on corporate governance, which meant that the academic discourse on company law in addition to the standard legal dimension also gained an economic dimension. An indirect influence of Dutch company law academics by the law & economics approach to company law was also established through academic treatises on publications such as the ALI Principles of Corporate Governance and the OECD Principles of Corporate Governance, both of which were influenced to a certain extent by law & economics concepts. Through these channels, certain normative arguments which had been developed in the field of law & economics found their way into legal discussions on possible changes in Dutch company law.

In 1999, the Dutch government (PvdA/VVD/D66) presented a new policy framework regarding the further development of company law in a policy paper that was published in response to the report on the monitoring of compliance of listed companies with the recommendations set out by the Peters Committee. The paper contained repeated references to the OECD Principles of Corporate Governance which had been published shortly before and its contents were inspired in more than one way by ideas and concepts from the field of economics. Regarding the position of shareholders, the policy paper repeated the earlier position of the government in the wake of the Protective Measures Bill that listed companies should attract a stable group of core shareholders by way of economic protective measure, in which in particular the Dutch institutional investors were to play an important role.

In practice, the shareholdings of Dutch institutional investors, especially the large Dutch pension funds, developed in a way that was contradictory to the government’s aspirations. For instance, the largest Dutch pension fund ABP had indicated at the time of its privatisation in 1995 that it intended to double the size of its portfolio of shareholdings in Dutch listed companies by 2000, but in 1999 it turned out that there had in effect been a substantial decrease in these investments in ABP’s portfolio. The large pressure on ABP and other pension funds to deliver returns, coupled with the enhanced possibilities of investing in foreign markets without currency risks as a result of the introduction of the EMU in 1999 and a bull-run on various foreign markets, in particular the US stock markets in the run-up to the dotcom bubble, meant that these pension funds had collectively increased the amount of investments in shares relative to their overall portfolios, but that this increase had mostly taken place in the form of shareholdings in non-Dutch companies.

To implement the government’s policy, a number of bills was prepared and introduced in Parliament. The government had also indicated that it would conduct a review of possible changes to the structure regime. To that end, it commissioned an empirical study and an economic study and in February 2000 it issued a request to the Social Economic Council (SER) to issue an advice. Initially, the scope of the request for advice to the SER was limited, but as a result of an additional request for advice that was issued by the Lower House of Parliament in July 2000, the SER had to include additional matters in its advice such as the pending Protective Measures Bill, the discussion on stakeholder models versus shareholder models and the possibilities for designing a system for giving account by companies further to the recommendations of the Peters Committee. As a result, the SER in addition to considering possible changes to the structure regime was also to provide an advice on other policy intentions of the government with respect to company law for listed companies.

The eventual SER report that was published in February 2001 contained a compromise regarding the proposed changes to the structure regime. In addition, the SER advised to introduce a number of new statutory powers for shareholders outside of the context of the structure regime. These new powers concerned a right of approval for shareholders of certain important resolutions of the board, a right of shareholders to propose agenda items for shareholders’ meetings and a statutory arrangement pursuant to which holders of depositary receipts could only be deprived of a power of attorney to vote on the underlying shares if requested in the event of a ‘state of war’. Not all of these proposals were original. The right to propose agenda items had already been proposed by the Peters Committee, which proposal had already been endorsed by the government. The government in its policy paper had already indicated that it would review possibilities for granting holders of depositary receipts of shares to be able to vote on the underlying shares upon request. The SER report constituted the final hurdle for the introduction of a bill by the government in which all of these topics would be addressed. This bill, commonly referred to as the Structure Regime Bill, was introduced in Parliament in January 2002.

Meanwhile, a lot was happening in the EU policy in the field of company law. After the proposed Thirteenth Directive on public takeover bids had finally collapsed as a result of a tie vote in European Parliament, EU Internal Markets Commissioner Bolkestein in September 2001 instituted the High Level Group of Company Law Experts. The necessity of further developing a modern EU company law had been acknowledged by EU policymakers as part of the Lisbon Strategy. The High Level Group, chaired by Winter, was asked in two stages to advise on the framework thereof, at first only about the topic of public takeovers but later on also on the broader topics of modernising EU company law. The contents of both reports issued by the High Level Group with respect to the position of shareholders in listed companies were influenced in a substantial way by perspectives from the field of law & economics. This was reflected in the proposals for the underlying principles of a new EU takeover directive, in which shareholders were to have a strong position in both the legal as well as the normative sense, as well as in the proposals on the mechanisms for regulation in the field of corporate governance, which mere strongly aimed at facilitating market- based solutions through imposing transparency requirements.

The European Commission by and large followed the High Level Group’s proposals through the publication of the EU Action Plan in 2003. Certain of the policy objectives which were formulated in the Action Plan, such as the protection of shareholders and creditors, could be traced directly to the shareholder oriented vision on company law as articulated by the High Level Group. Contrary to popular belief, the policy position of the Commission in the EU Action Plan was not driven by the accounting scandals at Enron, Parmalat and Ahold. Even so, these cases served to provide the Commission’s policy intentions with political and societal momentum. The EU Action Plan fixated the EU policy agenda in the field of company law at the EU level for the years to come. Eventually, not all of the shareholder oriented objectives were realised. Examples include the EU Takeover Directive which was adopted in 2004 in a substantially watered down form as a result of political compromises and the feasibility study regarding possible initiatives to develop a model of ‘shareholder democracy’ at the EU level which was quietly abandoned in 2007 after the first preliminary reviews had been completed. Still, the shareholder oriented element in the EU policy agenda in the field of company law proved to be important in the subsequent years for developments at the normative level.

As regards case law, the development of company law for listed companies in the period between 1999 and 2004 was primarily shaped through the mechanism of inquiry proceedings. Traditionally, a lot of the relevant developments were established through proceedings before regular district courts, but the introduction by law of the possibility of ordering immediate relief measures within inquiry proceedings (1994), the subsequent Huisdierencrematorium case of the Amsterdam Court of Appeals concerning the division of competence between the regular courts on the one hand and the Enterprise Court on the other (1997), and finally the application of inquiry proceedings as an instrument in contested takeover situations in the Gucci case (1999) culminated in the Enterprise Court obtaining the paramount position as the judicial body for the resolution of company law disputes. Through the cases that were put before it, the Enterprise Court was able to develop rules regarding conduct in contested takeover situations, including certain rules and limitations with regard to the use of protective measures. In addition, the Enterprise Court developed more general rules about the relationship between the company’s board on the one hand and the general meeting of shareholders and individual shareholders on the other. Through its decisions, in particular the ones in Gucci, Breevast, RNA, and HBG, the Enterprise Court gave substantial impulses to the further development of the legal framework in the field of corporate governance. However, the Dutch Supreme Court on a number of occasions corrected the Enterprise Court when it had incorporated perceived changing views in society about corporate governance into the general norms of reasonableness and fairness (section 2:8 of the Dutch Civil Code) without a proper basis.

Developments in the field of self-regulation saw the establishment in late 2003 of the Dutch Corporate Governance Code (the Tabaksblat Code). The Code originated from an appeal by the government to the sector in December 2002 to deliver better results on improving corporate governance in light of the lagging compliance with the recommendations by the Peters Committee. If such improvement would not be forthcoming, legislative measures would ensue. Shortly after the Tabaksblat Committee had been established in March 2003, the accounting scandal involving Ahold had become fully apparent. Thus, the Committee performed its review against a backdrop of societal discontent with respect to the large Dutch companies and the perceived ‘old boys network’ which comprised a substantial part of these companies’ boards. The draft Code that was published in July 2003 aimed for a significant repositioning of shareholders in the system of checks & balances. The Committee also issued proposals for far-reaching legislative measures to the government to reinforce the position of shareholders, for instance by introducing a statutory requirement that trust offices should at all times issue a power of attorney to holders of depositary receipts of shares to vote on the underlying shares if so requested. The responses to the draft Code were mostly positive. In the wake thereof, commentators made proposals for changes in Dutch company law that reached even further, such as abolishing the structure regime outright. Dutch institutional investors also took an assertive stance in response to the draft Code regarding the proposed strengthening of the position of shareholders. Finally, the government was enthusiastic. Shortly after publication of the draft Code, the government submitted an amendment to the Structure Regime Bill to provide for the statutory arrangement of the envisaged ‘comply or explain’ mechanism. Also, after the publication of the eventual Code in December 2003, the government remained up front enthusiastic about the self-regulatory mechanism of the Code. This enthusiasm was such that the Code was singled out as a successful example of self-regulation in policy papers on legislation at a time when even the first data on the compliance and actual effects of the Code were not yet available.

The Code furthermore had a substantial impact on the then-pending legislative process concerning the Structure Regime Bill. The bill that was introduced in January 2002 provided for the introduction of the new shareholder rights which had been proposed by the SER, in particular the approval right (section 2:107a DCC), the agenda proposal right (section 2:114a DCC) and the rules concerning voting by holders of depositary receipts of shares (section 2:118a DCC), but otherwise the bill was modest in its aspirations. In the summer of 2003, the legislative process moved into the fast lane. Further to the publication of the draft Code, the government introduced an ambitious series of amendments to the bill and substantial amendments were proposed in Parliament from parties all across the political aisle. Many of these amendments aimed at strengthening the position of shareholders. Such proposals were made by two of the three coalition parties in the government at the time (VVD and CDA) and by the largest opposition party in Parliament (PvdA). Each of these parties had its own reasons for wanting to strengthen the position of shareholders. For the VVD, a strong position of shareholders as quasi ‘owners’ of companies was a logical extension of its liberal orientation, whereas the PvdA regarded a stronger position of shareholders as a countervailing power to the power of boards, while the position of employees would have to be strengthened correspondingly for the same reasons. The CDA perceived a need to break the ‘old boys network’, but also attached a firm belief up front to the self regulating ability of the sector through the Code. Eventually, the sharper edges around the proposed amendments were somewhat softened later on in the legislative process. Even so, the legislative changes which were realised through the Structure Regime Bill and which entered into force in October 2004 constituted a clear strengthening of the position of shareholders on the basis of broad political support.

In the period between 1999 and 2004, a whole new edifice concerning the legal, factual and normative position of shareholders in Dutch listed companies was put in place. This edifice was based on certain presumptions and expectations regarding the future effects of the new rules. Shareholders would become full-fledged players in the field of checks & balances vis-à-vis the boards of listed companies by using their newly created rights. Dutch institutional investors were to play an important role in realising the desired dialogue with the relevant boards on governance. However, the actual developments in the years after 2004 turned out differently, even to such an extent that already in late 2006 the first signs of unease from politicians began to emerge. This unease was aimed in particular at the fact that a large number of Dutch listed companies were being taken over by foreign private equity companies and at the emergence of shareholder activism by foreign activist investors, in particular hedge funds, at a number of other Dutch listed companies

By way of explanation for the fact that the developments after 2004 ran a substantially different course than what was anticipated at the time the Structure Regime Act and the Tabaksblat Code came into being, one can point to a number of fault lines that were present beneath the surface of the new edifice regarding corporate governance which went unnoticed at the time. The first fault line concerned the position of Dutch institutional investors. In particular the Dutch pension funds had actively taken an assertive position in the public discussions on corporate governance, but at the same time they had been further downsizing their respective shareholdings in Dutch listed companies. These investors could thus not be expected to meet the expectations that had been raised in the context of the redefinition of the position of shareholders. In their place, UK and US institutional investors (including activists) emerged as the most significant shareholders in Dutch companies. The second fault line consisted of a void within the legal framework which did not provide for standards of conduct through which the conduct of shareholders in the exercise of their new powers could be effectively regulated. This allowed activist shareholders to use their powers in their own interests without a countervailing power from the board or otherwise being available. This resulted in decisions of the Enterprise Court, in particular in Stork and ABN AMRO, that further reinforced the position of shareholders. The third and final fault line regarded the normative orientation in politics and policy. Even when the first cracks in the edifice began to appear, policymakers at the EU level as well as at the national level maintained the normative views regarding the position of shareholders that was developed in the period between 1999 and 2004. This limited the possibilities for government intervention, for instance by proposing legislative changes or by intervening in the 2007 takeover battle around ABN AMRO.

In addition to fault lines, there were also constants in the years after 2004. These constants had a certain cushioning effect on the developments in those years. The most important constant was the case law promulgated by the Dutch Supreme Court. With its decision in ABN AMRO (2007), the Supreme Court on appeal checked the expansion of the position of shareholders at the expense of the board that the Enterprise Court had introduced in its ABN AMRO decision. In doing so, the Supreme Court clarified certain important issues, such as the relationship between the open norms of section 2:8 DCC on the one hand versus the statutory division of authorities between board and shareholders on the other, the specific application of the notion of the interest of the company in takeover situations and the way and extent in which best practices of the Code were part of formal company law. The Supreme Court would later confirm this approach in ASMI (2010) and would also issue other decisions, in particular DSM (2007), VEB/KLM (2013) and Cancun (2014) through which it would further guide the development of company law in a consistent way. The framework developed by the Supreme Court in these cases also led to developments in lower case law concerning the position of shareholders in listed companies, for instance the Enterprise Court’s decision in Cryo Save (2013) and the decisions of the president of the The Hague District Court and the The Hague Court of Appeals in Boskalis/Fugro (2015/2016). As such, the case law of the Dutch Supreme Court constituted a constant in this framework of legal developments.

Finally, in the period after 2007 in the wake of occurrences of shareholder activism and the financial crisis, a number of corrections were applied to the legal framework on the position of shareholders. The most important corrections were made through a revision of the Code (Frijns Code 2008), through newly proposed legislation such as the Corporate Governance Act (2013) and through an amended policy agenda at the European level, for instance through the revised EU Action Plan (2012) and the proposed revision of the EU Shareholder Rights Directive (2014). It is questionable, however, whether these corrections constitute an adequate response to the apparent shortcomings in the system of corporate governance as regards the position of shareholders in listed companies. In particular, one may wonder whether the available standards of review for conduct of shareholders are sufficiently effective in practice to deter undesirable conduct. Also, there is still a degree of uncertainty with respect to the legal status of the provisions of the Code within Dutch company law. Especially now that in recent years the phenomenon of shareholder activism appears to be on the rise again and the market for public takeovers is also picking up, we will have to see whether the company law framework with respect to the relationship between the listed companies and its shareholders is sufficiently robust to be able to meet the present day challenges.

Just as in the Netherlands, a lot happened around the turn of the century with respect to the development of company law for listed companies in Germany. The developments in Germany in a number of ways were substantially different than the ones in the Netherlands. Whereas in the Netherlands the Structure Regime Bill had introduced far reaching legislative changes with respect to the position of shareholders, the German legislative process mostly ran through small, measured steps with consecutive bills each providing for small instrumental changes to the legal framework of the Aktiengesetz and other relevant acts. An important feature of these legislative projects was that the core of the statutory division of powers between the various bodies of companies remained untouched. Another feature was the speed with which legislative changes were brought into force. This allowed Germany to respond through legislation in an effective way to changing societal developments. It was also possible for the German legislature to quickly amend the new rules once again if it turned out that the new rules did not produce the desired results. Like the Netherlands, Germany introduced a corporate governance code of its own (the DCGK), as a part of which a lot of attention was spent on carefully embed the new instrument of the code into the existing system of German company law, both from a dogmatic as well as from a practical perspective. This way, German company law despite all developments remained a robust and coherent body of law.

In the United Kingdom, there was also a major legislative project in the field of company law around the turn of the century, namely the Company Law Review which a few years later would culminate in the Companies Act 2006. In this act, the conceptual orientation of UK company law on the position of shareholders, which had been developed historically, was maintained, albeit that the interests of other stakeholders also gained an explicit statutory basis through the notion of ‘enlightened shareholder value’. For an important part, the specific standards regarding the relationship between boards and shareholders were left to rules of self-regulation such as the Listing Rules of the London Stock Exchange and the Cadbury Code and its successors. The phenomenon of regulation and enforcement through these instruments originated from the economic and social tradition within the UK financial sector of enforcement by and among the parties themselves through social institutions and intertwined social connections. UK institutional investors had traditionally played an important role in the process of drawing up and designing these rules. Hence, the position of shareholders within UK company law was relatively strong.

UK company law, in particular the Company Law Review and the Cadbury Code and its successors, has been very influential on the company law policy at the European and the Dutch national levels. For instance, the proposals of the High Level Group with regard to the basic principles for a new EU takeover directive were modelled after the UK example and the Tabaksblat Code was to a large extent based on the UK Combined Code, both in terms of setup as in terms of contents. Still, importing UK concepts meant that these instruments were detached from their own social origins. This meant that these instruments within the Dutch context produced different results. Nowadays, it seems as though self-regulation through codes may have reached its limits in terms of efficiency within the UK as well. As a result of a growing internationalisation of the shareholder base of UK listed companies and the corresponding decrease of influence of UK institutional investors, codes and the mostly informal sanctions for non-compliance therewith appear to have become less effective in terms of influencing actual conduct.

Compared to the Netherlands, Germany has adopted a more independent position towards developments at the EU level with respect to the development of its company law. Just as France, Germany maintained an independent industry policy and Germany also made an effort to have the proposed EU Takeover Directive substantially watered down with respect to the possibilities for German listed companies to defend themselves from unsolicited takeover bids. Also, Germany in the context of implementation of EU directives in the field of company law such as the EU Shareholder Rights Directive maintained the primacy of its own national laws and the ensuing statutory division of authorities between the various bodies of the company. With the benefit of hindsight, one may wonder whether the Netherlands with its policy efforts to bring about a ‘level playing field’ for cross border takeover bids and the resulting policy of non-intervention regarding takeover bids of Dutch listed companies such as ABN AMRO was maybe focused too much on the UK example and maybe paid too little attention to the situation in neighbouring countries such as Germany.

The development of company law is not a linear process. It does not follow a predetermined plan, but is formed incrementally, every time on the basis of the circumstances and influences as they are at that particular point in time and chance is a big factor. The impact of specific developments cannot be predicted up front, but can only be assessed afterwards. For that reason alone, it would not be scientifically sound to extrapolate the developments which have occurred in the past to the future in the form of specific recommendations for changes to laws, regulations or otherwise. There are too many substantial uncertain factors in the environment in which listed companies operate such as the continuous geopolitical tensions with the EU and outside thereof and the more fundamental discussions on the social effects of the current system of market capitalism which have recently emerged, to make a useful prediction on future developments.

It is possible, however, to distil certain lessons for the future from this study with respect to the effects on Dutch company law of ideas from other academic fields such as law & economics and concepts from other legal system such as the system of the United Kingdom. In both cases, the context in which the relevant ideas and concepts were developed is important. In adopting ideas from other academic disciplines, there is a danger that they become disconnected from their original academic context, which means that one loses sight of the limitations concerning the application of the ideas and of qualifications regarding the underlying assumptions and that adjustments to the ideas within their original academic context which are made at a later date are not picked up. In importing concepts from other jurisdictions, one should acknowledge that it is possible that the same concepts engender different results because of changes in the underlying legal and social context. In both cases, use of such ‘legal transplants’ requires great care in understanding the underlying context of these ideas and concepts and to carefully go about embedding them in their new system.

In addition, based on this study certain perspectives can be identified which could play a role in the future development of company law for listed companies. This question is currently relevant in view of the legislative projects that have been announced in December 2016 concerning the modernisation of Dutch company law and the possible review of the relationships in listed companies among shareholders and between shareholders on the one hand and the boards on the other. In that sense, this study constitutes both an evaluation of the company law framework with respect to the position of shareholders in listed companies that was put in place through legislation, self-regulation and case law between 1999 and 2004 as well as a scoping study with a view to possible future changes in legislation and self-regulation. Especially since it has become apparent that the legal framework that was erected prior to 2004 in some respects produced different results in practice than the results that were originally envisaged, it is important for any future review to conduct a thorough up-front analysis – in line with directions nos. 7 and 9 of the Dutch Directions for Regulation – of the relevant facts and circumstances, of the aim of the proposed regulation, of the need for government intervention and the alternatives thereto (including self- regulation), of the expected efficiency of the regulation and of the possible side effects thereof.

Against the background of the fast changing market circumstances and the importance for the Dutch economy of a well-functioning legal infrastructure for companies, there is conceptually an interest in having a responsive company law. In view of the importance of legal certainty, the system of company law as a whole should be sufficiently robust to provide a solid and useful basis for all circumstances, whereas at the same time it should be sufficiently flexible in order to be able to adapt in a positive way to changing circumstances. In addition, company law should have a clear orientation on the target audience. Finally, company law, at least the company law for listed companies, needs to be positioned in a way that is aligned with the place and role of the Netherlands in international economic (trade) relationships.

The perspectives outlined above do not require legislation to be conducted only in the form of big and sweeping reform projects. On the contrary, there is a need for the ability to quickly process instrumental changes in provisions in the law which concern technical or logistical matters. At this moment, there appears to be a sort of antagonistic relationship between the legislature and practitioners. Eventually, politicians, academics and practitioners will need to come together in the process of legislation if any revision of Dutch company law – whether fundamental or instrumental in nature – is to be achieved. Answers to the question how Dutch company law should look like should primarily be developed through the political process as a resultant of a weighed consideration of differing views in society.

The rise of the phenomenon of the foreign listed N.V (e.g. international enterprises which are organised through an N.V., but whose shares are listed only on foreign exchanges) necessitates policy choices. Is Dutch company law for listed companies primarily aimed at facilitating and regulating purely Dutch listed companies, should it be more aimed at the attractive market of foreign listed companies or can it be aimed at both categories of listed companies at the same time? Also, the amount of Dutch listed companies and the cumulative economic activities performed by these companies have also changed over the past fifteen years. These changes prompt questions that should be taken into consideration in policy discussions on the Dutch economic model and the place and role of listed companies in that model. These choices relate to the overarching policy choices regarding the Dutch business climate, including choices with respect to the position and size of the financial sector and choices in fiscal policy. Again, these choices should be made through the political process. After all, they concern questions of how the Dutch economic arrangements should be structured from the perspective of international competition and thus indirectly questions on the Dutch economy’s business model. It is a task for the Dutch political parties to develop and promote distinguishing views on the Dutch economic model – and thereby also on Dutch company law – in the current international relations.

Finally, the role of the state with respect to business needs to be a constant conversation topic in politics. At present, the policy discussions in this field are once again in full swing. A notable development concerns the occurrence of state intervention in the affairs of state enterprises. Recent examples of state interventions lend the impression that the state nowadays is pursuing an active approach to its role as shareholder in state enterprises. Other developments suggest that the state’s approach with respect to large Dutch businesses has changed compared to the pre-crisis situation. In addition, the role of the state with respect to takeover bids for Dutch listed companies is once again a topic of discussion. Further to the unsolicited takeover bids that were made on PostNL, Unilever and AkzoNobel, a discussion ensued on whether possibilities should be created for state interventions in case of takeover bids on Dutch listed companies. For the time being, no end to this discussion is in sight.

If there is going to be a integral revision of Dutch company law for listed companies at any point, then at least one fundamental question regarding the position of shareholders seems inescapable: should the relationship between shareholders and listed companies by primarily regulated through financial supervision laws in which shareholders in terms of rights and entitlements would have to rely on their status of investor in financial instruments of issuers or should the current dual structure in which shareholders can both derive rights from financial supervision law as well as company law be maintained? Even so, the more fundamental question is whether investors in shares issued by listed companies, who sometimes only hold the shares for an extremely short period of time of who have structured their investment through synthetic constructions, still be regarded as ‘shareholder’ in the classical sense of the word would still not be answered.

Regarding this point, the limitations of company law should also be acknowledged. In case law, the Enterprise Court in Cryo Save and the President of the The Hague District Court in Boskalis/Fugro have provided useful feeds for developing more specific standards of conduct on the basis of the general norms of reasonableness and fairness with regard to the exercise of shareholder rights. Specific and effective standards of review for conduct of shareholders that takes place outside the context of the exercise of formal shareholder rights, such as an activist shareholder waging a public campaign, have still not been developed. Moreover, a panacea for delivering the broadly desired mutual orientation of boards and shareholders on long term value creation does not seem to be available. Maybe a solution would be to just accept that conduct of shareholders cannot be regulated through company law and that regulation of the possible damaging side effects could not be better achieved through rules and regulations in the field of public law. At the same time, a possible revision of Dutch company law should also take into account what has been achieved in the unruly years between 1999 and 2004 and ever since. The Cancun-decision of the Dutch Supreme Court has effectively confirmed the notion of the ‘interest of the company’ and has anchored this notion as a fixture into the foreseeable future. All things considered, the edifice that the Dutch Supreme Court has erected with its decisions in RNA, HBG, ABN AMRO and ASMI appears to constitute a firm foundation for present and future (legal) developments. It is now up to company law practitioners to act on the lessons that can be drawn from this history.