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Comparative Corporate Governance in a

Neoliberal Perspective

Developments in the Anglo-Saxon and Dutch Corporate Governance Model

Author: Casper Copper

Supervisor: Prof. dr. J.W.J. (Jeffrey) Harrod Second Reader: Dr. L.W. (Luc) Fransen June 2014, University of Amsterdam

Master Thesis Political Science: International Relations Research Project: Global Politics of Investment and Trade

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Table of Contents

List of Abbreviations ... 4

1. Introduction ... 5

1.1 Introduction to the topic ... 5

1.2 Motivation ... 6

1.3 Aim of the research ... 7

1.4 Case Study Selection: Dutch and American multinational corporations ... 7

1.5 Structure of the research ... 8

2. Corporate Governance ... 9

2.1 Introduction ... 9

2.2 The Anglo-Saxon Model in the US ... 9

2.2.1 Sarbanes-Oxley Act (SOX) ... 13

2.3 The Continental Model in the Netherlands ... 14

2.4 Literature on Convergence towards the Anglo-Saxon model ... 16

2.4.1 Literature in Favor of the Presence of Convergence ... 17

2.4.2 Literature Denying the Presence of Convergence ... 18

3. Theoretical Framework ... 20

3.1 Introduction ... 20

3.2 Comparative Corporate Governance ... 20

3.3 Neoliberalism ... 21

3.3.1 History of Neoliberalism in Global Politics ... 23

3.4 Neoliberalism and Corporate Governance ... 24

3.4.1 The Anglo-Saxon Corporate Governance Model and Neoliberalism ... 25

3.4.2 The Dutch corporate governance model and neoliberalism ... 26

3.5 Neoliberal indicators for convergence ... 27

4. Methodology ... 30

4.1 Research design ... 30

4.2 Case validation ... 31

4.3 Challenges ... 32

5. Analysis of American Multinational Corporations ... 33

5.1 Introduction ... 33

5.2 The Coca Cola Company ... 34

5.3 Ford Motor Company ... 37

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5.5 Microsoft Corporation ... 44

5.6 The Procter and Gamble Company ... 47

6. Dutch Multinational Corporations ... 51

6.1 Koninklijke Ahold N.V. ... 51

6.2 AkzoNobel N.V. ... 55

6.3 Heineken N.V. ... 58

6.4 Koninklijke Philips N.V. ... 62

6.5 Unilever ... 66

7. The Dutch Political System and its Corporate Governance Code ... 71

7.1 Introduction ... 71

7.2 Developments in the Dutch Corporate Governance Code ... 71

7.3 Conclusion ... 75

8. Conclusion ... 77

8.1 Changes in Corporate Governance ... 77

8.2 Corporate Governance and Neoliberalism ... 79

8.3 Generalization and Future Research ... 80

9. Bibliography ... 81

9.1 Primary Sources ... 81

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List of Abbreviations

CEO Chief Executive Officer

CSR Corporate Social Responsibility

ESO Executive Stock Option

US GAAP General Accepted Accounting Principles (in the US) IFRS International Financial Reporting Standards:

MNC Multinational Corporation

MSP Minority Shareholder Protection

PCAOB Public Company Accounting Oversight Board

OECD The Organization for Economic Co-operation and Development SEC The federal Securities and Exchange Commission

SOX Sarbanes-Oxley Act

UK The United Kingdom

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1. Introduction

1.1 Introduction to the topic

The early years of the new millennium were marred by several global, corporate scandals, such as the Enron, WorldCom and Ahold scandals (Lawrence, 2010). These events revealed the weak state of the financial accounting and auditing activities of global corporations1. The scandals led to the collapse of Enron and WorldCom and this, together with other financial scandals, caused the United States (US) government to set new regulations for public corporations (Cheffins, 2013, p.53). These new compliance standards for public corporations were laid down in the 2002 Sarbanes-Oxley Act (SOX) (Cheffins, 2013, p.53). Key aspects of SOX were strengthening corporate governance and setting rules for corporate governance procedures (Nilsen, 2004). As corporate governance concerns the procedures and processes according to which an organization is directed and controlled, it is at the core of a company (OECD, 2005). Despite the new regulations, the financial crisis of 2008 shed a different light on corporate governance. The collapse of financial institutions such as ABN AMRO and other global corporations demonstrated that inadequate corporate governance systems were still in place. All in all, it is clear that corporate governance played a central role in the developments of the corporate world in the last fifteen years.

These events and developments illustrate that corporate governance has been at the center of the corporate world for the past fifteen years. Globally, two corporate governance models prevail: the Anglo-Saxon model and the Continental model (Nilsen, 2004). In countries with an Anglo-Saxon model, such as the US, the United Kingdom (UK) and Canada, corporate governance focuses on the firm’s outside investors, mainly shareholders (García-Castro et al., 2008). In countries with a Continental model, such as Germany and the Netherlands, job security is a main corporate objective (García-Castro et al., 2008). Both models have been subject to scholarly discussions, but mainly from a financial or law perspective. Several scholars emphasize that a political perspective on corporate governance is underexposed (Roe, 2003; Cioffi and Höpner, 2006; Goyer, 2010). However, the political environment is decisive in the emergence of corporate governance structures. Furthermore, the developments in the corporate world since 2000 have led scholars to signal a change in corporate

1 For this thesis, the terms companies, corporations and enterprises have the same meaning and are therefore

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6 governance models, where countries with a Continental model shift towards the Anglo-Saxon. It remains, however, unclear how this relates to political influence.

As mentioned above, there have been major shifts in the field of corporate governance since the beginning of this millennium. In the Netherlands, this was illustrated by the acceptance of the new Corporate Governance Code “Code Tabaksblat” in 2004 (Hooghiemstra, 2012). This is a clear example of politics affecting corporate governance. This thesis will investigate the political aspect by focusing on the neoliberal influence on multinational corporations and their corporate governance structures. Analyzing the corporate governance models from a neoliberal perspective will reveal the actual politics of corporate governance, as corporate governance emerged in a neoliberal context (Soederberg, 2008). Also, an analysis of the shifts that have been made in corporate governance models will be analyzed from this perspective.

In order to make this problem tangible, the central research question should capture both the movements in the corporate governance models as well as the neoliberal perspectives. This leads to the following research question:

Are there structural, neoliberal changes taking place in corporate governance of global corporations towards the Anglo-Saxon corporate governance model?

A shift towards the Anglo-Saxon corporate governance model is expected to be observed in global corporations.

1.2 Motivation

The reason to conduct this research is firstly because corporate governance has been subject to discussions in- and outside of the political field, making it an interesting and dynamic field of research. Also, the effects of the financial crisis, in which corporate governance played an important role, are still noticeable and a comprehensive solution has not yet been founded and applied. Secondly, in the field of International Relations (IR), the interaction between politics and global corporation is traditionally underexposed. However, global corporations are determining non-state actors in society and its influence on the political field is therefore clearly present.

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7 Regarding corporate governance, studies so far have not been unanimous on whether global corporations are changing towards the Anglo-Saxon model. Researching this issue is therefore challenging and may provide a contribution to current debates. It is uncertain if this thesis will provide a comprehensive and conclusive insight on this matter, but it can contribute to insights for further research in the future.

1.3 Aim of the research

The thesis has a theoretical and a practical aim. The main theoretical purpose of this thesis is to provide a political insight in the influence of neoliberalism on corporate governance structures of global corporations. According to Tomz (2013, p.695), neoliberalism is the prevailing political view in American politics and the Anglo-Saxon model is therefore based on neoliberal assumptions. The main practical purpose of this thesis is to understand the developments in corporate governance models of the last decade. By identifying the changes in corporate governance models of global corporations, possible trends can be detected. The identification may provide an insight for setting strategies to be able to anticipate on future developments.

1.4 Case Study Selection: Dutch and American multinational corporations This study focuses on global corporations, also known as multinational corporations (MNCs)2, operating under the Dutch corporate governance model and the American corporate governance model. Dutch MNCs are selected because the study takes place in the Netherlands, and therefore Dutch MNCs are provide the most relevant outcomes. Also, the Dutch corporate governance model is placed under the Continental model and therefore differs from the neoliberal Anglo-Saxon model. This is also the reason that the Dutch political system on corporate governance is analyzed. American multinational corporations are used because neoliberalism as well as the Anglo-Saxon corporate governance model emerged in the US. The thesis will use a comparative corporate governance approach to analyze developments in the corporate governance models. In order to measure developments and changes in corporate governance structures of the selected MNCs, the years 2004-2014 are compared for each MNC. This period is suitable as it covers a decade in which the

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A multinational corporation (MNC) is an entity or corporation enterprise that produces and sells services or goods in at least one country other than their home country (Wilkins, 2005, p.45).

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8 financial crisis occurred and in which regulations on corporate governance were changed. Also, the timespan of ten years is sufficient as corporate governance changes slowly and a period of ten years is therefore required to detect structural changes. A more extensive explanation on the choice for the selected companies and the period of time is provided in the methodology chapter (Chapter 4).

1.5 Structure of the research

This research will start with a descriptive section on corporate governance to create a clear image of both the Anglo-Saxon and Dutch corporate governance model. Also, the study of comparative corporate governance is explained in this chapter, which concludes with a discussion of the literature on convergence of corporate governance models.

This is followed by a theoretical framework in which neoliberalism is discussed as a general political view. By elaborating on its history, the link between neoliberalism and corporate governance is clarified. In this chapter, the role of neoliberalism in the Anglo-Saxon and Continental corporate governance model is discussed. Eventually, this leads to the determination of the neoliberal measurement indicators, which are used for the analysis. The subsequent chapter is the methodology, in which the method of analysis is explained. This is followed by the analysis, which contains three parts. First, American MNCs are analyzed. Secondly, Dutch MNCs are analyzed and the chapter ends with an analysis of the Dutch political system and its corporate governance code. Each analysis of a company is ended with a brief conclusion on the findings. Finally, clear conclusions are generated from the outcomes of the analysis in the last, concluding chapter.

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2. Corporate Governance

2.1 Introduction

This chapter contains the core subject of this research: corporate governance. In general, corporate governance concerns the procedures and processes according to which an organization is directed and controlled (OECD, 2005). Furthermore, the corporate governance structure specifies the distribution of rights and responsibilities among the different participants in the organization – such as the board, managers, shareholders and other stakeholders – and lays down the rules and procedures for decision-making (OECD, 2005). The interpretation of the concept of corporate governance is dependent on the analytical perspective. As this research regards the political perspective, which encompasses a wide array of influences, a broad interpretation of corporate governance is applied.

This chapter describes the two globally prevailing models of corporate governance: the Anglo-Saxon model and the Continental model (Gourevitch and Shinn, 2005, p. 5). Elaborating on both models is relevant for this study as the Anglo-Saxon corporate governance model applies to American corporate governance and the Dutch corporate governance model can be ranked under the Continental model (Cernat, 2004; Hooghiemstra, 2012; Nilsen, 2004). For each model, a brief history is given, followed by an elaboration on the characteristics of each model. This will illustrate the discrepancies between both models, which is required in order to determine the presence of convergence.

The sections on the two models will be followed by a description of convergence in global corporate governance and the developments in this field, including an overview of other research on corporate governance.

2.2 The Anglo-Saxon Model in the US

The Anglo-Saxon model of corporate governance is found in countries with an Anglo-Saxon legal tradition, for example English-speaking countries such as the US, UK, Australia and

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10 Canada3. As this study focuses on the corporate governance models in the US, the Anglo-Saxon model is explained here.

In the post-World War II era, until the mid-1970s, the role of the state in the market economy was significant in the US, and corporations were led by managers while shareholders followed (Cheffins, 2011). This changed in the mid-1970s when the Oil Crisis and other financial crises alarmed the American government. At this time, the governance of corporations was reviewed, which led to the introduction of the term ‘corporate governance’ by the U.S. Security and Exchange Commission (SEC) in 1976 (Cheffins, 2011). Together with the enactment of the Reagan administration in 1981, the developments at that time changed the regulations within the American market economy. Minimum state intervention and deregulation became the main characteristics of the American market economy and the role of shareholders increased (Centeno and Cohen, 2012;). This development continued in the 1990s as the American economy grew successfully and interest in corporate governance grew, especially in shareholder activism. However, the perception of corporate governance altered in the early 2000s due to financial accounting scandals (Goyer, 2010). This eventually led to the emergence of the Sarbanes-Oxley Act (SOX), which is a law that set new regulations on corporate governance for listed American companies (Cheffins, 2013). SOX will be discussed in detail later on.

The developments above are important for this thesis as they determined the current American corporate governance model. Corporate governance in the US became characterized by aspects that promoted self-regulation of the market economy and competition within the market economy. Simply put, this led to the following characteristics of the US corporate governance model: shareholder orientation (maximization of shareholder

value), strong minority shareholder protection (MSP), diffused ownership structure, one-tier board structure, external market for corporate control, and high dependency of executive compensation on stock performance (Weimer et al, 1999; Garcia-Castro et al., 2008).

Shareholder orientation within the Anglo-Saxon corporate governance model means that the

strategies of corporations are adjusted to the interests of the shareholders. As the main incentive for shareholders is the accumulation of share value, this aspect of the Anglo-Saxon model is defined as ‘maximization of shareholder value’ (Nilsen, 2004). This illustrates that

3 It must be noted that the corporate governance models of these countries might show differences on several

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11 the major power within the corporate governance model is in the hands of shareholders (See figure 1). The board is monitored and operates in the interest of shareholders. Ratification of directors of American multinationals by shareholders illustrates this power relationship (Doremus et al., 1998, p. 25). The focus on maximization of shareholder value explains the

high dependency of executive financial compensation on stock performance. A better

performance by the board of directors increases the benefit for shareholders, which therefore calls for strong financial stimulation. This also means that the board of directors is judged on financial outcomes, which often leads to short term-oriented corporate strategies, as high performance in the short term leads to high financial outcomes, meaning high executive compensation (Goyer, 2010; Cernat, 2004).

Figure 1: The simplified Anglo-Saxon model of corporate decision-making. (Source: Cernat, 2004).

Furthermore, shareholder primacy within the Anglo-Saxon corporate governance model led to the focus on protecting the rights of minority shareholders, also known as minority shareholder protection (MSP) (Detomasi, 2006). In order to prevent large block holdings from gaining an absolute majority and an unequal involvement, the SEC implemented strong

MSP regulations (Gourevitch and Sinn, 2005, p. 43). Thanks to this implementation,

investing became more interesting for investors and corporations gained more capital. MSP is therefore one of the main pillars of the Anglo-Saxon corporate governance model. There is a link between the pattern of ownership in the Anglo-Saxon model and MSP as diffused

ownership is dictated. A low level of ownership concentration means that large block

holdings are less common in the Anglo-Saxon model, as corporate ownership is distributed among numerous shareholders (Roe, 2003, p. 105). Preventing large block holdings from gaining ownership is also advocated by MSP.

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12 As regards board structure, the Anglo-Saxon model advocates the tier structure. A one-tier structure means that the executive and non-executive directors of a company are seated on one single board (Pagano & Volpin, 2005). Executive directors are responsible for the day-to-day running of business in a company and executing strategies within a company and are therefore part of the executive management team (Detomasi, 2006). Non-executive directors, sometimes referred to as independent directors, are not involved in the day-to-day running of business in a company, but generally monitor executive board members (Detomasi, 2006). Non-executive directors do not hold executive responsibilities and are therefore not involved in implementing strategies (Detomasi, 2006). The one-tier board structure of the Anglo-Saxon model allows the executive and non-executive board members to form one legal entity (Weimer & Pape, 1999). Advocates of this model state that the monitoring function of non-executive board members is improved and simplified in this structure, as communication between non-executive and executive members occurs on a more accessible level compared with separate board structures (Nilsen, 2004). However, the disadvantage of this structure is that non-executive tasks mix with executive tasks, which might affect the independence of the supervisory functions of the non-executive board members (Merino et al., 2010).

The Anglo-Saxon model has an active external market regarding corporate control. This is also known as the takeover market (Weime & Pape, 1999). An active external market means that takeovers are common and feasible within the American economy. In terms of corporate governance, this means that the threat of a takeover is interpreted as a method to stimulate performance among managers (Garcia-Castro et al., 2008). The active external market illustrates the orientation on outside investors of the Anglo-Saxon model.

The aforementioned characteristics of the Anglo-Saxon model illustrate the importance of shareholders in this corporate governance model. As discussed earlier, the perception of corporate governance altered in the early 2000s due to financial accounting scandals, such as the Enron and WorldCom scandals. These events alarmed American policy-makers and eventually led to a revision of corporate governance policies, summarized in SOX. SOX will be discussed in the following section.

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13 2.2.1 Sarbanes-Oxley Act (SOX)

In the period 2000-2002, there were several instances of corporate fraud on the American market, which exposed significant problems regarding accountability and monitoring practices within the American corporate system (Merino et al., 2010). As a response, the US government enacted the Sarbanes-Oxley Act (Soederberg, 2008). SOX, formally known as the Public Company Accounting Reform and Investor Protection Act, was presented as a major reform in the American business environment and set new rules for US corporations (Merino et al., 2010). The Securities and Exchange Commission (SEC) was the official governmental agency that implemented the laws advocated by SOX.

The essence of the SOX was to reform regulations in order to prevent the occurrence of more accounting and corporate scandals. SOX therefore encompasses a great variety of elements of corporate regulations (Soederberg, 2008). An important element of the regulations reform was changing corporate governance procedures. The idea behind changing regulations on corporate governance was to clarify accountability and responsibilities within corporations by placing more responsibilities on directors and senior management (Detomasi, 2006). Furthermore, auditing standards for corporations were strengthened and criminal penalties were set to punish offenses of corporate fraud (Merino et al., 2010). All these measures were aimed at improving transparency and monitoring within the corporate world.

However, SOX has been subject to criticism. Critics state that a situation is created in which the monitored elects the monitors as the company’s audit committee is subject to the control of the Chief Executive Officer (CEO) in SOX regulations (Soederberg, 2008). The CEO is the head of the executive board of management. The main criticism therefore state that self-regulating policies were maintained in SOX and that the SOX not changed the system in which corporations operate, but merely shifted internal processes (Merino et al., 2010). In summary, the SOX has been a crucial point in corporate governance policies, not only in the US, but worldwide. The influence of the SOX on corporate governance worldwide will be partly demonstrated in the following section in which the Dutch corporate governance model is discussed.

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14 2.3 The Continental Model in the Netherlands

The Continental model of corporate governance, which prevails in the German and Latin countries and Japan, is characterized by its focus on stakeholders (See figure 2) (Cernat, 2004). The Netherlands also adheres to the Continental model of corporate governance. In the Netherlands, the Continental model is also typified as ‘het Rijnlands model’, named after the river Rhine, which crosses the relevant countries (Hogenboom, Kalma and Plantinga, 2001, p.35).

The Netherlands is a relatively small player in the world economy. In order to maintain its position within the world economy and to favor Dutch companies, the Netherlands secured strong social accommodation, which helped rebuild the Dutch economy after World War II (Gourevitch and Shinn, 2005, p.180). The strong focus on social security also became apparent in the structure of Dutch corporate governance, with its focus on stakeholders (employees, clients, suppliers, society). Over time, this slowly evolved. The ownership structure of Dutch multinationals changed mainly in the 1960s, when large block holders (mainly families) were bought out (Gourevitch and Sinn, 2005, p. 180). As a result of this change, managers and employees became the central focus of corporate governance strategies. Eventually, this led to the enactment of the so-called structuurregime (two-tier regime) in 1971 (Gourevitch and Sinn, 2005, p. 197). Two-tier regime legislation protected listed companies against the influence of shareholder value by allowing corporations to find their own balance in the interests of various stakeholders (Hooghiemstra, 2012). Also, strong

protection against hostile takeovers was embedded within Dutch corporate governance as

well as a low level of MSP (Hooghiemstra, 2012). Clearly, Dutch corporate governance strongly focused on the position of stakeholders. However, as the global economy evolved, so did the Dutch economy, and the corporate governance laws were revised in 2003. The revision was a reaction to the ‘Ahold-scandal’, which revealed financial and accounting problems at Dutch multinational Ahold. The revision was laid down in the ‘Code-Tabaksblat’, which led to the following characteristics of Dutch corporate governance:

stakeholder orientation, weak MSP, mainly diffused ownership structure, possibility of choosing between using a two-tier or one-tier board structure, internal market for corporate control (with anti-takeover mechanisms) and limited executive compensation.

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15 Figure 2: A simplified scheme of the Continental Model of corporate governance. (Source: Cernat, 2004).

The aforementioned stakeholder orientation of the Dutch corporate governance code means that corporate governance strategies are characterized by an equal focus on shareholders, employees, clients, suppliers and society. This is legally regulated by the obligation that supervisory boards must take the interest of all stakeholders into account (De Jong et al., 2005). Furthermore, the obligation that all big Dutch firms must have a works council illustrates the focus on stakeholders (De Jong et al., 2005). Also, the revised Dutch corporate governance code included a focus on society by incorporating corporate social responsibility (Corporate Governance Committee, 2008, p.47).

The described stakeholder orientation is in line with the low level of MSP in the Dutch corporate governance model. This is demonstrated by the mechanisms that have been applied by Dutch multinationals to limit the influence of shareholders (Hooghiemstra, 2012). By means of a complicated system involving trust offices, Dutch companies can limit voting rights of shareholders as voting rights can be transferred to these trust offices (Hooghiemstra, 2012; Gourevitch and Sinn, 2005, p. 184). The weak MSP and the trust-office construction also relate to the use of antitakeover mechanisms in the Dutch model. As the construction with trust offices limits the voting capacity of shareholders, Dutch corporations are protected against the strong vote of shareholders aimed at a takeover (Gourevitch & Sinn, 2005, p. 183). The measures against takeovers were interpreted as one of the most complex and sophisticated in the world (Gourevitch and Sinn, 2005, p.179).

In the Dutch model, the ownership structure has evolved towards diffused ownership. According to Gourevitch and Sinn (2005, p.183), this is not in line with “regular” findings on corporate governance, as a diffused ownership structure is normally accompanied by weak

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16 takeover defenses. This also means that ownership by large block holdings is rare in the Dutch economy.

Executive compensation measures have been a subject of debate in the Netherlands since the

financial crisis of 2008. Executive compensation was not directly linked to performance within the Netherlands, but this changed from 2003 onwards, when compensation became more performance-related (Corporate Governance Committee, 2008, p.48). Due to the financial crisis of 2008 and its outcome, national debates concerned the remuneration procedures of big multinationals. However, this mainly regarded the level of remuneration and, on a lower level, the link with performance.

Until recently, the board structure of the Dutch corporate governance code allowed only a two-tier board structure for corporations (Hooghiemstra, 2012). However, since January 2013, corporations in the Netherlands are allowed to choose between a one-tier or a two-tier board structure (Corporate Governance Commissie, 2012, p.12; Wijers, 2013). Providing corporations with the opportunity to choose between both board-structures is based on the philosophy that this makes it more attractive for foreign companies to settle in the Netherlands (Corporate Governance Commissie, 2012, p.32). This might be conceived as an indication that the Dutch model is moving towards the Anglo-Saxon model, which will be discussed in greater depth in the analytical section. The following section encompasses the debates on convergence towards the Anglo-Saxon model and the developments associated with that convergence.

2.4 Literature on Convergence towards the Anglo-Saxon model

The central issue of this thesis concerns the possible convergence of the aforementioned Dutch corporate governance model towards the Anglo-Saxon model. The origin of this issue lies in part in academic literature that detects or describes this convergence (O'Sullivan, 2003; Hansmann & Kraakman, 2000; Casey et al., 2012; Lane, 2003; Markarian et al., 2007; Doremus et al., 1999; Yoshikawa & Rasheed, 2009). Most literature concerning this topic focuses on the convergence of the general Continental model towards the Anglo-Saxon model. This section will set out the differing findings on the presence of convergence in literature on the subject. First, literature favoring the presence of convergence will be discussed, followed by a section on literature denying the presence of convergence. It must be

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17 noted that most literature describes the Continental model as a general model and not as country-specific.

2.4.1 Literature in Favor of the Presence of Convergence

Focusing on the continental corporate governance models of France and Germany, O’Sullivan (2003) detects a convergence towards the Anglo-Saxon model in those countries. O’Sullivan adopts their orientation on the stock market as main indicator for convergence. O’Sullivan clarifies that the stock market is still more prominent in the US than in Germany and France, but demonstrates that the importance of shareholder value has grown, which indicates that convergence towards the Anglo-Saxon model is present. Hansmann and Kraakman (2000) confirm these findings from a juridical perspective and they also state that shareholder orientation has increased on a global scale. These scholars ascertain a ‘triumph’ of the shareholder-oriented model on the stakeholder-oriented model. Hansmann and Kraakman (2000) find a rise in diffused ownership structures, a shift towards shareholder-orientation, a shift towards the preference of a one-tier board structure and a convergence of regulations on takeovers among Dutch and German multinationals.

Markarian et al. (2007) also focus on multinational corporations and use the convergence of disclosure practices as indicator for a shift towards the Anglo-Saxon model. By using a large sample of firms, this research illustrates that a rising number of large firms increased disclosure practices, which is a characteristic of the Anglo-Saxon governance model. Makarian et al. (2007) interpret the convergence towards the Anglo-Saxon model as a positive development as it enhances transparency. Opposed to this, Lane (2003) sees the development towards the Anglo-Saxon model as a negative trend. Lane (2003) detects a developmental tendency towards the Anglo-Saxon system in the German market economy. According to her research, the increasing focus on stock markets and the growing influence of competition adversely affected the German codetermination model (Lane, 2003). However, like O’Sullivan (2003) as well as Hansmann and Kraakman (2000), Lane (2003) emphasizes that the Continental model still strongly prevails, but that convergence towards the Anglo-Saxon model is definitely present.

Using a case-study in Germany, Casey et al. (2011) demonstrate that the neoliberal influence of the Anglo-Saxon system has increased in Germany. They see the growing liberalization of German companies as weakening for the positions of employees. However, according to

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18 Casey et al. (2011), German companies are challenged by the liberalizing system, but most of them adhere to the main elements of the Continental system. Casey et al. (2011) therefore agree with the aforementioned scholars that convergence towards the Anglo-Saxon system is present in countries with a Continental system, but that the Continental model remains the most prominent.

2.4.2 Literature Denying the Presence of Convergence

Before the financial and accounting scandals became visible, Doremus et al. (1998) did extensive research into the growing dominance of the American market economy in the globalizing world. Based on mechanisms of corporate control, they detect strong dissimilarities between the model of the US and the models of Japan and Germany. Typical elements of the American market economy, such as hostile takeovers, strong shareholder protection, and limited independent supervisory board of management, were not found in the German market. Focusing on the capital market, Doremus et al. (1998) state that the German and Japanese markets are unlikely to be overwhelmed by the American market and are therefore not influenced. These findings are soundly based on extensive research, but may be questioned as developments since the appearance of the book (1998) have influenced global corporate markets. Nevertheless, Doremus et al. (1998) provide interesting insights that strengthen the argument of non-convergence.

The same applies to Gourevitch and Sinn (2005) in their book on corporate governance. One of their key findings concerns the possibility of convergence in global corporate governance models. An important aspect of their argument to deny the presence of convergence is that too many factors affect corporate governance to be able to detect convergence (Gourevitch and Sinn, 2005, p. 284). This means that although a rising number of similarities may be detected among corporate governance models, growing dissimilarities may emerge at the same time. Also, Gourevitch and Sinn (2005) observe that countries’ corporate governance models are certainly affected by global economic forces. However, they state that each country adopts and implements these changes differently and adjust them to the country’s internal economic structure. This observation is supported by the findings of Yoshikawa and Rasheed (2009) in their meta-analysis on comparative corporate governance. They conclude that the elements that play a role in corporate governance are too extensive and divergent to indicate convergence. Also, Yoshikawa and Rasheed (2009) interpret the convergence

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19 towards the Anglo-Saxon model as a conscious choice by firms individually rather than a general trend. Both Gourevitch and Sinn (2005) and Yoshikawa and Rasheed (2009) find that defining the developments in the corporate world as convergence is too generalizing. Instead, researchers should focus on a specific element of corporate governance and should be careful when applying their observations on the corporate governance model as a whole (Gourevitch and Sinn, 2005; Yoshikawa and Rasheed, 2009)

Overall, the available literature has demonstrated that there is no unanimity regarding the presence of convergence towards the Anglo-Saxon corporate governance model. However, proponents as well as opponents detect a shift towards the Anglo-Saxon model. It depends on the factors taken into account whether the detected shift may be interpreted as convergence. Furthermore, literature predominantly focuses on either the Continental model as a global model or on the German model. Therefore, not all elements of the abovementioned literature may be applied to this thesis, as it focuses solely on the Dutch model and the American Anglo-Saxon model.

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3. Theoretical Framework

3.1 Introduction

This chapter outlines a framework that shows corporate governance in a theoretical political perspective. This theoretical basis is a political concept that has greatly influenced corporate governance strategies in the last decades: neoliberalism. The concept of neoliberalism is in line with the central issue of this thesis as this thesis focuses on the neoliberal changes in corporate governance of global corporations towards the Anglo-Saxon model. The influence of the various corporate governance codes on the corporate outcomes will therefore be analyzed on the theoretical basis of a neoliberal perspective. Furthermore, this chapter provides an introduction to the study of comparative corporate governance and its different perspectives.

The chapter starts with an explanation of the concept of comparative corporate governance and how this concept is utilized in various perspectives. Comparative corporate governance is discussed as this thesis uses the comparison between the Anglo-Saxon and Dutch corporate governance model to determine whether convergence is occurring. After this, the concept of neoliberalism will be discussed and explained. A brief history of neoliberalism will be provided as it relates to the emergence of current corporate governance models. This section will be followed by the description of the role of neoliberalism in corporate governance, and how the present corporate governance strategies may be viewed in the light of the neoliberal approach. This will reveal the relevance of neoliberalism in corporate governance and its influence on both the Anglo-Saxon and Dutch model. This chapter will conclude with the determination of the neoliberal measurement indicators for convergence, which will be used in the analytical section.

3.2 Comparative Corporate Governance

This research uses the study of comparative corporate governance to identify the shifts that are occurring in the corporate governance model. A comparative approach allows convergence or divergence in a corporate governance system to be detected. In comparative

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21 corporate governance, a wide array of approaches is possible, which may be analyzed from several theoretical perspectives. For the analytical perspective, the most common in the prevailing literature are law, finance and organizational. (Nilsen, 2004; Hansmann and Kraakman, 2000). Most frequently, these approaches use the principal-agent problem as a theoretical framework, as this describes the management-shareholders relationship. Although this approach encompasses a vital element of comparative corporate governance, its findings are sufficiently conclusive to be applied in the broad context of corporate governance. The political approach supplies information that is more useful in the broad context of corporate governance, as it encompasses a wide array of elements. However, political scholars conclude that the political - and in particular political-economical - approach to corporate governance is underexposed in academic literature (Nilsen, 2004; Soederberg, 2008; O’Sullivan, 2003; Lütz et al., 2011).

A common theoretical approach among political-economic studies on comparative corporate governance is the varieties-of-capitalism approach (Hall & Soskice, 2001; Nilsen, 2004). This is a useful approach, that compares economic systems on several levels and allows us to understand the differences and similarities of these systems (Hall & Soskice, 2001). However, this theory does not focus on the theoretical basis of the prevailing political system. For this study, that focuses mainly on the neoliberal effects on corporate governance systems, the varieties-of-capitalism approach is not satisfactory. The comparative corporate governance approach, analyzed from a neoliberal perspective in order to detect the effect of the neoliberal political system on the Anglo-Saxon and Dutch corporate governance models, is therefore leading in this study, which is discussed in the following section. As regards literature on comparative corporate governance, section 2.4 on corporate governance outlined the diverging outcomes of research on comparative corporate governance and potential convergence.

3.3 Neoliberalism

The essence of the neoliberal approach is to minimize the role of the government in the economy (Weiss, 2009). The core of neoliberalism is therefore strongly related to the

laissez-faire economic approach in which the financial market takes the lead in regulating its own

system (Merino et al., 2010). Thus, the major shift is the increased role of the market in the economy, as opposed to minimum state intervention. The basic premise of neoliberalism is

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22 that the market, as opposed to the state, should take the lead in terms of decisions surrounding economic and social policy-making, since competition among rational, self-interested individuals will allocate resources more efficiently than the government according to Soederberg (2008). Thus, the role of the market is seen as crucial for the social welfare of a state, and therefore creates a profitable area of social life for citizens. Furthermore, the neoliberal approach also assumes that economic growth, brought about by policies of deregulation, liberalization and privatization will lead to more prosperity for all citizens (Soederberg, 2008). According to Weiss (2009), neoliberalism advocates that as many areas of social life as possible should be organized through markets, because markets place the most efficient allocation of resources and market competition serves public interest.

These statements illustrate the strong belief of neoliberal policy-making in the measures of zero governmental intervention in the market so as to improve the economy by linking it to all vital aspects of society. Both these assumptions and the significant role of deregulation and privatization measures can be traced back to various analyses by scholars (Soederberg, 2003, 2008; Weiss, 2009; Centeno and Cohen, 2012; Merino et al., 2010). In providing a leading definition for neoliberalism for the purpose of this research, the following aspects, which are included by scholars when describing neoliberalism and its policies, are taken into account: minimum state intervention, free market, free movement of capital, deregulation,

privatization, and privatized corporate ownership. This results in the following definition: Neoliberalism advocates improving the economic system by promoting minimum state intervention, deregulation, privatization, privatized corporate ownership and free movement of capital in a free market in order to increase social welfare.4

The following section outlines the history of neoliberalism in the political system as this characterized the emergence of current corporate governance models. Also, the developments in neoliberalism brought corporate governance into focus as an important element of the market economy

4 It must be noted that this definition is not uniformly applicable, as the external factors that affect the economic

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23 3.3.1 History of Neoliberalism in Global Politics

Financial events in the late 1970s meant that major world economies adopted neoliberalism and therefore neoliberalism emerged strongly in this period (Centeno & Cohen, 2012). The Reagan administration is considered the starting point of the acceptance of neoliberal policies in government as neoliberalism. Illustrative was president Reagans’ statement on the economic situation: ‘Government is not a solution to our problem; government is the problem’ (Weiss, 2009). At the same time in the UK, the Thatcher government started a revolution by introducing a privatization program for public services and industries (Lütz et al., 2011). In both the US and the UK therefore, economic policies changed sharply towards neoliberalism in the 1980s, and its apparent success reinforced the idea that the free market was a strong foundation for a well-functioning economic system (Lütz et al., 2011).

With the emphasizing of privatization, deregulation and the adoption of the free market, the economy globalized and the financial market changed. After the 1980s, the end of the Cold War was an introduction to a decade where market-centric politics superseded after the fall of communism. As globalization occurred, governmental focus shifted to boosting the economy, which was stimulated by the opening of international financial borders (Centeno and Cohen, 2012). Due to the developments in this decade, the role of governments decreased in the booming international economy (Centeno and Cohen, 2012).

However, at the end of the 1990s, scholars began to detect the downside of the neoliberal argument. The complicated, neoliberal financial constructions increased financial inequality within the US as tax-systems changed and job security for middle-class workers decreased, whereas top managers gained. The Bush administration continued to execute and expand the complex financial system, causing the fiscal system behind neoliberalism to become the biggest threat for the maintenance of the economic policies (Centeno and Cohen, 2012). In the following years, financial accounting scandals led to the emergence of SOX, which was enacted by the US government. As discussed in section 2.2.1, SOX maintained shareholder primacy and self-regulatory mechanisms. The maintenance of these neoliberal aspects illustrate the presence of neoliberalism in the apparent non-neoliberal nature of SOX. Criticism regarding the neoliberal model increased as the financial crisis of 2008 strengthened the negative opinion on the free-market model. Accountability and responsibilities within corporations remained vague, which led to the collapse of big corporations. It was clear that the close relationship between neoliberalism and corporate governance affected corporations, and that the system failed. With shareholder value,

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self-24 regulation and privatization becoming key aspects of the debate on the financial system, the importance of corporate governance was exposed as well. The following section therefore describes the role of neoliberalism in corporate governance.

3.4 Neoliberalism and Corporate Governance

The distribution of power is the core element of the debate on corporate governance, as the distribution of responsibilities within a company is regulated by the corporate governance code (O’Sullivan, 2003). As illustrated in the descriptive part of this research, a vital element of the distribution of power is the shareholder-management relationship. In order to describe the role of neoliberalism in the emergence of corporate governance models, the abovementioned main elements of the neoliberal approach should be taken into account. Therefore, minimal state intervention, a competition-driven market, deregulation, privatized corporate ownership and free movement of capital are the elements on which corporate governance is built in a neoliberal system. If these elements are applied to corporate governance, and therefore to the distribution of responsibilities and power within a company, shareholders will have the power in a self-regulating market. Simply put: because the neoliberal system stimulates profit accumulation, a company’s primary goal is to acquire investors in order to gain capital, as capital is required for profit accumulation. The focus of corporations therefore shifts towards shareholders, which is known as shareholder primacy. Shareholders play a vital role in the neoliberal approach to corporate governance, as managers operate on behalf of the companies’ shareholders. Managers are therefore accountable to shareholders. Summarizing, companies with a neoliberal corporate governance model focus on maximization of shareholder value. Together with shareholder primacy, this illustrates that the neoliberal system of corporate governance is characterized by a key role for shareholders. However, the neoliberal system advocates that the performance of the economic system as a whole is enhanced, when corporations focus on the ‘maximization of shareholder value’ and not just the interest of shareholders (O’Sullivan, 2003). This is substantiated by the argument of competition being the driver for enhancement of the economic system. To incorporate the neoliberal approach in this research, the following sections define the Anglo-Saxon and Dutch corporate governance models in neoliberal perspective.

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25 3.4.1 The Anglo-Saxon Corporate Governance Model and Neoliberalism

As neoliberalism shaped the Anglo-Saxon economic system, it is also influential in the Anglo-Saxon corporate governance model5. Its main principles are therefore visible in that model. One of these principles is the element of minimal state intervention in the market. Market institutions therefore coordinate the American market economy, to stimulate competition (Nilsen, 2004). In terms of corporate governance, this entails an active external market for corporate control. Such a market is also known as the takeover market, meaning that the Anglo-Saxon system readily allows hostile takeovers and presents this as a competition mechanism (Weimer and Pape, 1999). Cernat (2004) state that this instrument converges the interests of shareholders and corporate management. This illustrates the central role of shareholders in the Anglo-Saxon model. Shareholder primacy is therefore a vital element of Anglo-Saxon corporate governance, which is in line with the neoliberal approach. This is confirmed by the strong shareholder protection regulations within the Anglo-Saxon system. Shareholder primacy leads to the principle of ‘shareholder value maximization’ which, as discussed earlier, is a core element of neoliberal corporate governance. It can therefore be said that the self-regulation principle of the American economic system is visible in its corporate governance model, as the economy regulates its corporate governance strategies.

As discussed earlier, the developments of the last decades in the economic playing field caused the neoliberal model to be heavily criticized. Theoretical analyses of the Anglo-Saxon model from a neoliberal perspective also identified several points of critique. For example, Soederberg (2008) analyses three neoliberal assumptions in corporate governance, one of which is the assumption that competition leads to efficient market behavior, which falls under the self-regulation principle of neoliberalism. By stating that shareholder value maximization leads to short-term, speculative activities to keep the shareholders satisfied, Soederberg (2008) argues that the wishes of shareholders are more important than the company. Strategic decisions are therefore not based on what is best for the company, but on what is best for its shareholders. In theory, what is good for the corporations might not be good for their shareholders (Cernat, 2004). Furthermore, Merino et al. (2010) criticize the ‘earnings management’ strategy of neoliberal corporate governance as a result of deregulation. On the

5

There are, of course, differences between the corporate governance structures of countries that share the same model. However, it would exceed the scope of this research to include these differences, and their exclusion will not prejudice the research.

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26 issue of shareholders, Merino et al. (2010) turn to executive compensation and state that this was an enormous incentive for corporate misbehavior. On the other hand, Ball (2009) states that the Anglo-Saxon system is adequate because it detects corporate malfeasance due to its neoliberal foundation. Ball (2009) also says that neoliberal self-regulation increases control, and stimulates innovation and growth of the economic system. However, as Merino found, the detecting system is inadequate, as it does not prevent corporate failures. It is clear that neoliberalism has a strong influence on the Anglo-Saxon model, as it supports shareholder value maximization, competition, and, therefore, a strong profit accumulation. The next part will discuss theoretical neoliberalism in the Dutch corporate governance model.

3.4.2 The Dutch corporate governance model and neoliberalism

Where market institutions coordinate the American market economy, the Dutch market is coordinated by non-market institutions that stimulate coordination: a so-called coordinated market economy (Nilsen, 2004). This is not in line with the neoliberal concept of minimal state intervention to stimulate market competition. In the neoliberal approach to corporate governance, corporate governance strategies focus on shareholders, whereas the Dutch corporate governance code, like other Continental corporate governance models, focuses on stakeholders (Hooghiemstra, 2012). This implies that companies operating under the Dutch corporate governance code are more inward focused than neoliberalism would imply, as neoliberalism sees outward orientation as a vital element of creating competition in order to improve the economic system (Weiss, 2009).

Unlike the Anglo-Saxon model, shareholder protection is weak in the Dutch model. This strengthens the aforementioned case of inward orientation and is not in line with the neoliberal approach. These elements of the Dutch model partly confirm the findings of Roe (2003), who states that countries with a social democratic political system apply a Continental corporate model. However, where board structures are concerned, the Dutch model follows the neoliberal approach as it allows companies to implement a one-tier board structure since 2013 (Wijers, 2013). The one-tier model characterizes the neoliberal approach as it strengthens the power of shareholders, who have the possibility to appoint and dismiss non-executive board members (Weimer and Pape, 1999). The acceptance of the one-tier structure indicates neoliberal developments in the Dutch corporate governance model, which is a key element of this research. This aspect will be discussed further in the analysis of this

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27 thesis. Before turning to the methodology and analysis, the neoliberal measurement indicators for convergence are determined.

3.5 Neoliberal indicators for convergence

Chapter 2 on corporate governance outlined the characteristics of the Anglo-Saxon and Dutch model and demonstrated elements that influence the presence of convergence. This chapter discussed neoliberalism as the theoretical foundation for this thesis and illustrated the influence of neoliberalism on corporate governance. By combining both sections, the neoliberal indicators that will be used to measure convergence among Dutch multinationals towards the Anglo-Saxon model can be determined.

The indicators used must be viable and must provide a strong foundation for detecting the presence of convergence for this research to be useful. Furthermore, the indicators must consist of elements that are different in the Dutch and Anglo-Saxon models and that characterize the Anglo-Saxon model. The establishment of the indicators is based on research by Yoshikawa and Rasheed (2009), which contains a wide variety of empirical studies on convergence in corporate governance, and on research from Soederberg (2008) and Merino et al. (2010), who both analyze the influence on corporate governance from a neoliberal perspective. As mentioned in the case study selection in the Introduction (Chapter 1.4), the indicators are used for two measurement points, 2004 and 2014. These years are compared, because this period takes the financial crisis of 2008 into account. Also, ten years is a suitable period for comparison as governance change slowly period of ten years is therefore required to detect structural changes.

The indicators are set out as a questionnaire.

Shareholder interest

o Compared with 2004, what has changed in the rights of the shareholders’

meeting in 2014?

o What changes have been made in minority shareholder protection? o How have the disclosure practices of the company developed? o Were more transparent accounting standards adopted?

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28 As shareholder orientation is one of the main characteristics of the Anglo-Saxon model, it is crucial to involve this as a measurement indicator. Because shareholder orientation advocates a competition-driven and self-regulated market economy, strong shareholder orientation is considered to be an indicator of neoliberal influences (Soederberg, 2003; Merino et al., 2010). The rights of the shareholders’ meeting encompass the actual voting and participation of shareholders. A rise in shareholders’ rights stresses the focus on shareholders (Yoshikawa and Rasheed, 2009). The same goes for MSP. Strong disclosure practices characterize shareholder orientation, as they allow shareholders to gain greater insight and involvement in the company’s practices (Yoshikawa and Rasheed, 2009). Transparent accounting standards are a component of disclosure practices.

Board structure and responsibilities

o Does the company have a one-tier or two-tier board structure? o What is the general role of the non-executive board members?

o What has changed in the tasks of the non-executive board members compared

to 2004?

An analysis of the board structure and responsibilities of both the non-executive and executive board members provides insight into the accountability and the independence of the directors. The Anglo-Saxon model is characterized by a one-tier board structure and the Dutch by a two-tier model. Although the Dutch model allows a one-tier board structure since 2013, Dutch companies are still characterized by the two-tier board structure (De Jong, 2015). The board structure of a company therefore clearly indicates whether a company is influenced by the Anglo-Saxon model (Yoshikawa and Rasheed, 2009).

Executive pay and remuneration

o Is the remuneration of the executive board solely based upon stock

performance?

o Do executive board members hold executive stock options (ESOs) and are

these subject to performance conditions?

Basing the remuneration of executive board members solely upon stock performance strongly characterizes the Anglo-Saxon model (Soederberg, 2008). In this situation, board members

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29 focus mainly on stock performance and shareholder value maximization (Soederberg, 2008; Merino et al. 2011). Concerning the connection with ESOs, these executive pay packages traditionally have an important element of rewards based on share price (Fiss and Zajac, 2004). ESOs are stock options that are granted to executive directors (Yoshikawa and Rasheed, 2009). Executive stock options are regarded as a method of remuneration and as a stimulation for risk-taking. ESOs determine the payout of executive board members in the Anglo-Saxon model, which was traditionally different in the Dutch model (Yoshikawa and Rasheed, 2009; Hooghiemstra, 2012). Measuring ESOs therefore provides useful information on convergence towards the Anglo-Saxon model. From a neoliberal perspective, the strong influence of ESOs and stock performance illustrates self-regulation of the market and encouraging competition-driven policies (Merino et al., 2011). Also, this stresses the ‘outsiders orientation’ as it solely bases performance on shareholder outcomes and not on internal company structures.

Ownership

o Does the company have a diffused or concentrated ownership structure? o What changes have taken place in the ownership structure of the company? Whereas corporations operating in the Dutch and American corporate governance models usually have a diffused ownership structure, diffused ownership has been stronger in the US, and developments in Dutch companies might therefore indicate a shift towards more or less diffused ownership (Gourevitch and Sinn, 2005, p. 187). Diffused ownership strongly characterizes the Anglo-Saxon model as it prevents single, large block–holdings from gaining too many voting rights and therefore favors shareholders, which is in line with the Anglo-Saxon shareholder orientation. Diffused ownership is in line with the neoliberal approach as it allows many ‘players’ to be involved in the market economy, which is in line with the competition-driven approach of neoliberalism (Soederberg, 2008).

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30

4. Methodology

4.1 Research design

In order to answer the central research question of this thesis: Are there structural, neoliberal changes taking place in corporate governance of global corporations towards the Anglo-Saxon corporate governance model?, this thesis uses a qualitative research design. The

choice for a qualitative study is based on former studies that analyzed and detected changes in corporate governance models. Among others, Yoshikawa and Rasheed (2009), Lane (2003), Casey et al. (2012), Buck and Shahrim (2005) demonstrated the qualitative research approach to be effective for comparative corporate governance research. Also, a qualitative approach is required in order to capture neoliberal influence, as neoliberalism in this thesis is regarded as the underlying ‘philosophy’ behind choices in corporate governance strategies. To measure the presence of neoliberalism, written strategies and reports are analyzed, which entails a qualitative approach.

The testing method of the analysis consists of document analyses and semi-structured interviews, which therefore serve as primary sources for data collection. The document analyses will consist of analyzing companies’ annual reports and proxy statements over the financial years 2004 and 2014, based on the questionnaire which has been presented in the theoretical framework. It differs per company when the documents about the financial years were issued, but most documents were issued in the following year of the financial year. For example, the Heineken annual report of 2004 appeared in 2005, which causes the reference year to be 2005. By answering the questionnaire for documents and reports, changes in corporate governance strategies of the companies can be detected in order to discover if indications for a shift towards the Anglo-Saxon model has occurred, and if these changes are influenced by neoliberalism. Companies’ annual reports and proxy statements provide clear and reliable insights in the corporations strategies and philosophies. All annual reports and proxy statements contain a section on the firms’ corporate governance strategies, and are therefore the most reliable source for gaining information on corporate governance strategies of companies. Furthermore, the selected reports can be defined as a primary source, which is vital for empirical research.

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31

Besides the analyses of annual reports and proxy statements, semi-structured interviews will be conducted with actors who are actively involved in the researched companies and actors who are or have been actively involved in the political system. These semi-structured interviews clarify issues on corporate governance and can be interpreted as a matter of support for the analysis of annual reports and literature on political systems. Furthermore, it provides a first-hand insight in the philosophy behind corporate governance strategies and its choices therein.

4.2 Case validation

The research design will be displayed on ten multinationals, meaning five Dutch-originated and five US-originated companies. The five Dutch multinationals are: Philips, Unilever, Akzo Nobel, Ahold, Heineken. All of these companies have a strong connection with the Dutch culture as they have a long history and bond with the Netherlands and its market economy. Also, they operate under the Dutch corporate governance system and are therefore characterized by the Dutch approach of corporate governance. These corporations are a valid representation of multinationals operating under the Dutch corporate governance system as they represent different sectors and can be placed among the largest multinationals of the Netherlands. The same accounts for the five American companies: Ford, Procter and Gamble, McDonalds, the Coca Cola Company and Microsoft. These companies also represent different sectors and operate under the American corporate governance system. Such as the selected Dutch companies, these selected American companies can be placed among the largest of their country. The American companies serve as a comparative element for the changes in the Dutch companies. By comparing companies from both countries, similarities and dissimilarities can be determined which is required to detect convergence.

In order to determine structural changes, two measurement points are taken: the financial years of 2004 and 2014. The annual reports on 2014 contain the most recent information of the selected companies and are therefore the best representation of the current policies within the companies. The annual reports on 2004 are used, because the period 2004-2014 covers a decade in which major events and other changes have occurred in the corporate world (such as the financial crisis). By comparing the documents and reports of 2004 and 2014, structural changes can be detected.

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32 Furthermore, the Dutch political system will be discussed to detect the developments in the indicators, and the presence and changes in takeover mechanisms. As the policies on takeover mechanisms differ fundamentally in the Dutch and Anglo-Saxon model, analyzing these will provide a good impression of Anglo-Saxon influence in the Dutch model.

4.3 Challenges

The amount of ten companies might be interpreted as a challenge to this thesis. However, the ten companies have been selected, as noted above, for extensive analysis, which would permit meaningful findings. Also, the extensive analysis of ten companies is the maximum possible for the time and resources available.

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