Corporate governance

This project is a cooperation with Gerarda Westerhuis (Utrecht University), Ailsa Röell (Columbia University) and Abe de Jong (RSM).

Corporate governance and financing of Dutch business in the 20th century

The way in which businesses in the Netherlands are being managed – their ‘corporate governance’ – is the result of a set of rules that developed in the past and that are embedded in the culture and society of the country. Traditions in this field go back to the East Indies Company (V.O.C.) of 1602, the first company based on tradable shares (Frentrop 2002). The most salient features of corporate governance were that it was managed by a team of directors, who took decisions in board meetings, that it had a two tiered system of management and supervision, and that its management was based on the acknowledgement that other stakeholders (such as the state) had an important interest in the company as well. Some of these rules have been adapted to circumstances in the past four centuries, but their essence has remained unchanged. The observation by Van Vree (2000), that the Netherlands is the only country that has been governed by meetings (vergaderingen) for the past 400 years, also applies to a large extent to its (big) companies.

Varieties of capitalism

The rules of corporate governance are a crucial part of the ‘business system’ of a country, a concept introduced by Whitley to analyse the persistent differences in the way in which business is organized and relates to the wider society and culture, the result of the national development paths pursued by different countries and by the institutions that have been generated out of the interaction of social groups (Whitley 1992, 1998). The most striking rules in the case of the Netherlands are: collegial management by teams who operate on the basis of consensus and who take the most important decisions in meetings (following centuries old traditions which are sometimes referred to as the ‘poldermodel’ (Van Zanden 2002; Van Vree 2000), the relatively strong position of managers vis-à-vis other stakeholders, supported by the development of a number of protective devices (takeover defenses or beschermingsconstructies), the recognition of the role and importance of other stakeholders (in particular labour – via workers’councils – and the state), and the relatively important role played by family firms in economic development and of families in the management of ‘their’ companies (again facilitated by beschermingsconstructies). An important change occurred during the 1960s and 1970s, when the importance of banks grew, which moved the Dutch business system more into the direction of the German (Continental model). The increased weight and presence of directors of banks in the supervisory boards of companies also stimulated the formation of a tightly knit network of managers who (as commissarissen) together managed Dutch business. Such a network is said to reduce information asymmetries and enhance information flows, but has also been criticized for the concentration of power in the hands of a few insiders (and has also been called the ‘old boys network’) (Helmers et al. 1975)

The Anglo-Saxon model

In the final quarter of the 20th century a trend towards the Anglo-Saxon business system (or ‘model’) can be discerned, resulting in the strengthening of the role of the chairman of the board of directors (the Chief Executive Officer or CEO in American firms), a growing influence of shareholders on decision making and supervision, a weakening of the role of other stakeholders (in particular labour), and, perhaps, a declining role of banks in supervision of the big companies (Heemskerk et al. 2002 for a first analysis of these trends between 1976 and 1996). These changes have been accompanied by a lively debate on the corporate governance of Dutch business, which was also stimulated by attempts to harmonize these rules by the EU. This has resulted in a set of new guidelines for corporate governance – the ‘Nederlandse corporate governance code’ or code Tabaksblat issued in 2003 – which already has a big impact on the management of Dutch companies. It also appears that the new rules, in combination with other developments, such as the decline of the number of banks operating in the Netherlands due to the mergers of c. 1990, have led to the weakening or perhaps even the disintegration of the network of directors and supervisory directors (commissarissen) who previously dominated Dutch business. This has also been linked to weakening of the ‘national’ character of Dutch business as a result of the process of globalization.


As this brief sketch shows, the Dutch system of corporate governance has certain specific features embedded in its culture and society (such as the omnipresent vergadercultuur), but is also relatively open to international influences. An important idea behind the changes in the past 30 years – such as those proposed by the commission Tabaksblat – is that the Anglo American ‘market oriented’ business system, in which the power of shareholders and the role played by the stock exchange in financing industrial expansion is relatively large, is more efficient than the network-based systems found in Continental Europe (see for a discussion of these differences Hall and Soskice 2001). The debate on this is still going on. One of the limitations of most contributions to it, is that they focus on the very recent period (during which indeed the Anglo-Saxon economies have been more dynamic than the Continental ones) and often concentrate on relatively short-term indicators of financial performance, whereas the viability of a business system is a long-term affair. For example, La Porta et al. (2002) relate governance structures in 27 countries to the stock market valuation of firms at a specific point in time. A notable exception is De Jong (1991), who considers ten year growth rates and non-financial performance measures like employment.

Historical perspective

The project aims at contributing to this important societal debate from an economic-historical perspective, on the basis of a study of the long-term performance of the Dutch business system during the 20th century. Starting from the theoretical framework sketched here briefly (in brief: new institutional economics and financial economics), we aim to systematically analyse these developments in corporate governance using a unique set of data of Dutch companies (whose shares were traded at the Amsterdam stock exchange), and link them to the performance of the companies studied in order to answer the questions about the efficiency and long-term effects of the different rules. The approach is interdisciplinary: we combine the theories and methodologies of economists working with similar datasets for the recent period, with the long-term perspective of the historian, who is able to collect comparable data for the 20th century as a whole, and interpret their meaning on the basis of an intimate knowledge of the business and economic history of the period (building on the detailed work in business history of many of the companies studies carried out by business historians). Also, the new dataset that will be constructed, will be very valuable for future research and an important innovative part of the project itself. It will be possible to address many other relevant questions concerning the long-term development of Dutch business in the 20th century using these data.

More information

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Any queries about the project should be directed to Gerarda Westerhuis: