195 Definition of success.

The definition of corporate success is central to the legal job description of the board. According to Dutch corporate law, the general responsibility of the board is to serve the interest of the corporation and its associated enterprise (vennootschappelijk belang).1 As specified by the Dutch Supreme Court in Cancun, the primary meaning of this responsibility is to encourage the durable success (bestendig succes) of the corporation and its enterprise.2 In my analysis, this definition of the corporate interest has three general implications for the definition of the success expected from corporate boards.3 First, the focus on the success of the corporation and its enterprise implies that success entails more than pursuing the partial interests of its stakeholders. The corporation has an independent interest in its own durable continuation, from which stakeholders can only benefit if the corporation as a whole is successful. By focusing on durable success, the definition further implies a focus on long-term success over short-term success. The Dutch Corporate Governance Code explicates this implication by encouraging boards to pursue long-term value creation in their strategies.4 As a matter of nuance, the Dutch Supreme Court uses “durable” (bestendig) instead of “sustainable” (duurzaam), suggesting that short-term interests may in some circumstances prevail over long-term sustainability strategies (for example to prevent bankruptcy).5 A final implication involves the notion of profit as a boundary condition for durable success.6 Although the Dutch Supreme Court seems to explicitly reject short-term profit maximization, durable success seems to imply some rentability of the assets invested by shareholders, redistributed to them as profits.7 As profits indicate the financial health of a corporation, a corporation without profits is not expected to sustain its success.

Specific circumstances may further define the success expected from corporate boards. In Fortis, the Dutch Supreme Court held that Fortis was deeply rooted in the Dutch financial economy as a systemic bank (systeembank) and hence it fulfilled a utility function (nutsfunctie) in Dutch society.8 This implied that the board of Fortis should have considered the general societal interest in Fortis’ continued operation when deciding to acquire ABN AMRO.9 Building on this, the circumstance of being systemically embedded and performing a utility function may imply that broader societal interests become part of the definition of success. Another factor impacting the definition of success may be the specific purpose adopted by a corporation. Dutch corporate law obliges corporations to state a goal (or purpose) in their articles of association and includes a legal regime to ensure that boards do not operate outside their statutory goal (ultra vires).10 According to this ultra vires regime, corporate boards are bound by the statutory goal of their corporation. In practice, however, statutory goals are often openly formulated and do not necessarily correspond to the externally communicated purpose of the corporation.11 However, the growing movement of corporations explicitly adopting public purposes (such as SDGs) may suggest a shift towards considering these purposes as part of the board’s job description.

In sum, the general definition of success in Dutch corporate law seems to be the durable continuation of the corporation and its enterprise as a whole, with a focus on long-term profitable value creation instead of short-term profit maximization. This definition may be further influenced by the utility function of a corporation in its broader systemic environment and by its adopted purpose. In relation to the inclusion of social and ecological interests in the general responsibility of the board, particularly these latter circumstances raise a first issue that merits further discussion.12