POWER AND INDEPENDENCE
IN THE BOARDROOM
The influence of increased shareholder pressure, the revised structure
regime and the Code Tabaksblat on the Dutch supervisory board
18 December 2007
University of Groningen
Faculty of Management and Organization
Specialization: International Business & Management
Student:
Leonie Verhulst
E-mail:
leonieverhulst@gmail.com
Student number:
s1380702
POWER AND INDEPENDENCE
IN THE BOARDROOM
The influence of increased shareholder pressure, the revised structure
regime and the Code Tabaksblat on the Dutch supervisory board
ABSTRACT
In this paper the effects of increased shareholder pressure, the revised structure regime and the code Tabaksblat on the actual power and independence of the Dutch supervisory board are explored. This explorative research made use of the Stork case by interviewing various stakeholding parties to the firm, leading to a first rough analysis of the actual power and independence of Dutch supervisory boards. The results show that the code Tabaksblat and the strengthened position of shareholders could have an increasingly negative effect on the independence of the Dutch supervisory boards. The results regarding actual power produced insightful findings on the elements of actual power; control of decision processes and power and authority of supervisory board members. However, although this paper endeavoured to serve as an explorative research and an initial support for current public discussions and debates, further research will be necessary.
ABSTRACT ...2
1. INTRODUCTION ...4
2. THEORETICAL BACKGROUND ...7
2.1THE DUTCH GOVERNANCE SYSTEM...8
2.2EVENTS AND CHANGES AFFECTING THE DUTCH GOVERNANCE SYSTEM...9
2.3THE RISE OF ACTIVIST SHAREHOLDERS IN THE NETHERLANDS...12
3. THEORETICAL FRAMEWORK ...16
3.1ANGLO-SAXON SHAREHOLDER PRESSURE...16
3.2DUTCH CORPORATE LAW...17
3.3THE DUTCH GOVERNANCE CODE...19
3.4THE SUPERVISORY BOARD...21
3.4.1 Power ...23
3.4.2 Independence ...26
4. RESEARCH DESIGN ...28
4.1DATA COLLECTION METHOD...29
4.2RESEARCH SAMPLE...30
4.3DATA ANALYSIS METHOD...31
5. CASE STUDY...32
5.1STORK’S CORPORATE BACKGROUND...32
1.
INTRODUCTION
After various corporate scandals, excessive directors’ pay, and the rise of private equity parties and hedge funds corporate governance has proven to be a tough management challenge worldwide. Globalization and the integration of financial markets have created large corporations, which have a tremendous impact on their societies. As such one can argue that the governance of these corporations enters the domain of a society as a whole and does not solely rest in the hands of the management of a corporation anymore. Organisations, therefore, can be seen as embedded in larger social and institutional structures that critically condition their structures and performance (Aoki, 2001; Van den Berghe, 2006). Differences between social and institutional structures originate from the distinct legal, social and cultural histories of various countries in which the values and norms of the society as a whole shaped these structures. Corporate governance systems between countries are dependent on these structures and as such these systems vary per country. When broadly defining governance systems, literature (Van den Berghe, 2006) generally offers two systems; the Anglo-Saxon system and the Continental-European system. The Netherlands applies the Continental-European system in which capital sourcing via banks and/or direct investment, a concentrated ownership structure and a strong emphasis on stakeholder interests are its most important characteristics. An additional and uncommon feature of the Dutch governance system is the two-tier board, where a supervisory board forms an additional layer to monitor management on behalf of all stakeholders. This internal control mechanism replaces for a great part the external control mechanism prevalent in the Anglo-Saxon system; where shareholders control a corporation.
government followed a policy to strengthen shareholder rights and the market for corporate control. Other parties such as the Dutch stock exchange, the Dutch investors’ association, and large institutional investors also believed there was a need to address these trends and changes. The joint action of these parties resulted in the adoption of the revised structure regime (gewijzigde structuurregeling) and the introduction of the Dutch corporate governance code (Code Tabaksblat). These measures have increased shareholder power in the Netherlands, which gradually has given rise to activist shareholder groups.
The growing importance of activist shareholder groups can be observed in large Dutch corporations. Some examples over the last few years are; the takeover of VNU by a consortium of six Anglo-Saxon private equity firms1, the takeover of Vendex KBB by a consortium of private equity firms2, the hedge funds Paulson and Centaurus that pressured both Ahold and Stork into selling off parts of their corporations and the hedge fund TCI (Children Investment Fund) which urged ABN Amro to critically examine its current strategy.
Although the discussions regarding increased shareholder pressure in the Netherlands have had a rather negative connotation, the interference of activist shareholders can also positively affect the performance of a firm. Especially by actively exercising their rights, shareholders can discipline management when a corporation is underperforming. These disciplinary measures keep management alert. Although activist shareholder behaviour can have a positive effect on the performance of management their intentions might not always follow the same line as the managerial long-term objective of creating value for all stakeholders. Especially hedge funds are infamous for their short investment horizons, where the corporations they acquire are usually split up and sold off to benefit from the profits obtained. This counters the prevailing stakeholder- and long-term value maximization principle which prevails in the Netherlands. These principles are also explicitly mentioned in the Code Tabaksblat; ‘The company endeavours to create long-term shareholder value’ and ‘The management board and supervisory board should take account of the interests of the different stakeholders’ (2003: 3). The trend where shareholders and especially Anglo-Saxon
1 The consortium taking over VNU included the following parties: Blackstone Group, The Carlyle Group,
Hellman Friedman, Kohlberg Kravis Roberts (kkr), Thomas H. Lee Partners, and AlpInvest.
2 The consortium taking over VendexKBB included the following parties: Kohlberg Kravis Roberts (kkr),
activist shareholders receive considerable powers, leads to new debates and discussions regarding the power and independence of the Dutch supervisory board as representative of all stakeholders of a firm.
Therefore, the central objective of this research is to analyze to what extent the power and independence of the Dutch supervisory board has changed. This will be done by critically examining three elements, which obviously affect the supervisory board: increased shareholder pressure, the revised structure regime, and the Dutch governance code. This research will largely consist of an analysis of the Stork case, where interviews will be held with various stakeholding parties. The reason for this is that Stork has been one of the cases where activist shareholder parties have tried to pressure management. Furthermore, research by means of interviews with the various stakeholding parties will lead to an objective and full understanding of all opinions regarding power and independence of the Dutch supervisory board. As a result, this study can provide a basis for the analysis of current Dutch supervisory boards and further research into this topic. Furthermore, the results can function as an additional contribution to current debates and discussions by giving an objective analysis.
2.
THEORETICAL BACKGROUND
Over the last decades corporate governance has received increased attention from scholars, management, governments and the media. This increase in attention was partly caused by big corporate scandals that came to light in companies such as Enron, WorldCom, Ahold and Parmalat. As a result of the extensive media attention that followed these scandals, as well as incidents regarding excessive directors’ pay, corporate governance appears to be a new management challenge. However, it was already in 1776 when Adam Smith pointed to possible problems that might arise when separating ownership and control in corporations in his famous book: ‘an inquiry into the nature and causes of the wealth of nations’;
‘The directors of such companies, however, being the managers rather of other people's money than of their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Like the stewards of a rich man, they are apt to consider attention to small matters as not for their master's honour, and very easily give themselves a dispensation from having it. Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company’ (1904: Book 5, chapter 1, p. 107).
In order to restrict potential opportunistic behaviour by managers, shareholders can fall back on control mechanisms such as; company law, contracts, and incentives to motivate management. These mechanisms are the internal and external controls of a corporation. In order to address any remaining deficiencies, codes of good governance were designed. These codes are a set of ‘best practice’ recommendations regarding the way governance in corporations ought to function according to the institutions drafting these codes.
governance and the level of confidence in financial reporting and auditing. The recommendations in this report are based on the core belief that self-regulation, instead of regulatory enforcement, is an adequate way to force corporations to comply with governance standards. Especially because of this self-regulation principle, which is far less time-consuming and costly than imposing new corporate laws, many countries have issued their own codes. So, since the issuance of the Cadbury Report in 1992 the development of governance codes worldwide increased rapidly and various codes of governance have been published and old ones are renewed on a regular basis (Aguilera and Cuervo-Cazurro, 2004).
Thus, corporate governance seeks to prescribe the way in which corporations ought to be organized. However, one has to keep in mind that corporations should be seen as of a larger social and institutional structure that critically condition their structures and performance (Aoki, 2001; Van den Berghe, 2006). As was mentioned before, the different legal, social and cultural environments resulted in two corporate governance systems; the Anglo-Saxon ‘market-oriented’ or ‘outsider system’ and the Continental-European ‘network-oriented’ or ‘insider system’. The Anglo-Saxon system can mainly be found in the United States and the United Kingdom and emphasizes free market operation, where corporations are primarily seen as vehicles to optimize shareholder wealth (Van den Berghe, 2006) The main characteristics of this type of system are; the high dependency on financial markets in sourcing capital, widely dispersed ownership, strong shareholder power, and a one-tier board system. The insider system can be found in Continental Europe and is concerned with a socially corrected market economy. Its main characteristics are; capital sourcing via banks and/or direct investment, a concentrated ownership structure, a strong emphasis on stakeholder interests, which in some cases (in countries such as the Netherlands, Germany and Sweden) has lead to a two-tier board system.
2.1 The Dutch governance system
local (stakeholding) parties instead of just the interests of the owners. As a result of this legacy, Dutch corporations have historically followed the structure where both management (Raad van Bestuur) and the supervisory board (Raad van Commissarissen) consider the interests of all stakeholders of a corporation, where none of the parties involved dominated. Consequently, the Dutch governance system developed into a system with a strong preference for compromise and consensus (Van Iterson, 1997). In this system the supervisory board is the mechanism that bears the legal responsibility for monitoring management on behalf of all stakeholders and as such can be seen as an internal control mechanism. As a result the supervisory board has always enjoyed a very dominant position in the Dutch governance system, whereas in the Anglo-Saxon governance system shareholders take a dominant position.
2.2 Events and changes affecting the Dutch governance system
According to Aoki (2001) the institutional context of a country is self-sustaining and based on shared beliefs. The information compressed in it becomes taken for granted by its agents unless some events shaking the shared beliefs occur. So, institutional change takes place when a society reacts upon changes in a similar manner (Aoki, 2001). In order for corporate governance systems to change, corporations, governmental institutions and other stakeholders to a corporation will have to react to changes and events in a corporation’s environment in a similar fashion. When this is the case a basis for institutional change is created. Several events and changes on a national as well as international level have taken place and created a basis for institutional change regarding corporate governance in the Netherlands. A few examples of these changes and events are:
- Developments in modern technology have resulted in more frequent use of information technology in corporate governance, enabling relevant parties to have instantaneous access to high-quality information (Reid, 2003). This could also be observed from the recommendations the Code Tabaksblat made in 2004 with regard to applying new technologies in order to simplify shareholder voting during annual meetings by making use of e-voting, web casting, etc.
- Worldwide financial markets increasingly serve as important vehicles for raising capital as well as attracting extra capital to finance growth and expansion. According to Franklin & Gale (2000) financial markets have become almost indispensable in the current competitive global markets because government intervention has become widely discredited and because economic theory has stressed the effectiveness of markets in allocating corporate resources. European countries, which traditionally depended highly on direct investments and/or bank financing as a means of sourcing capital now show an increased reliance on worldwide financial markets. This increased interest in external financing can especially be found in The Netherlands (Van den Berghe, 2006)
- A continued, and increasingly, important role for organisations such as the European Commission, the OECD and the World Bank in the design and setting of corporate governance standards (Hermes, Postma and Zivkov, 2004).
- An increase in the participation of institutional investors amongst others caused by the formation of Eumedion resulted in stronger monitoring and the introduction of new corporate standards in the Netherlands (SpencerStuart, 2006).
- According to Coffee (2001) the traditional system of concentrated ownership is weakening at least marginally across Europe.
pressure from their, predominantly, British and American shareholders3 (Spencer Stuart, 2004)
- Several influential Dutch proponents of a more Anglo-Saxon governance system have been advocates for a one-tier board system in The Netherlands. For example, Ton Risseeuw4 (chairman of the supervisory board of KPN), Rob Pieterse5 (former CEO of Wolters Kluwer, member of the Commissie Tabaksblat) and Jan-Michiel Hessels6 (member of the supervisory board of Philips, Euronext, Heineken, etc.) are all proponents of this system. Others believe the path towards a one-tier system is the logical consequence of changes and trends in the Dutch economy. Jean Frijns (chairman of the Monitoring Commission) said in Het Financieele Dagblad: ‘the one-tier board will quickly gain popularity and in three years there will be little to choose regarding board organisation’ (2005). Spencer Stuart (2004) claimed that larger companies will opt more often for a one-tier system and probably will continue doing so in the future.
As was mentioned before, a basis for institutional change is created when the various agents affecting a corporation’s environment react upon several changes in an institution. The abovementioned trends and changes suggest that the globalising economy and the liberalisation and integration of financial markets have resulted in a stronger interdependency between countries and diminishing differences between legal, social and cultural environments worldwide. The various agents, or groups, within an institution will react upon this in order to adapt to changes and trends, which will result in a new equilibrium.
The Dutch government decided, after thorough research by the SER7 (Social and Economic Council of The Netherlands) to address these trends and changes by making adjustments to its governmental policies. The SER’s research report (SER, 2001) formed the basis for these adjustments, which led to the introduction of the revised structure regime in 2004. The research report indicated that the government should adjust to the aforementioned trends and changes by: (1) strengthening the market for corporate control; (2) strengthening
3 ‘Shell onder druk uit VS vanwege managementstructuur’, Dow Jones Nieuwsdienst, 09/02/2004 4 Nederlandse commissarissen prefereren de ‘1½ tier board’, Het Financieele Dagblad, 15/04/2005 5 Nieuwe commissaris, Management Scope, april 2006
6 Commissarissen moeten in raad van bestuur, Het Financieele Dagblad, 29/03/2005
7 The SER is the main advisory body to the Dutch government and the parliament on national and
shareholder rights; and (3) enhancing the openness and transparency concerning corporate information (SER, 2001). Therefore, the primary goal of the Dutch government was to create an economic environment where shareholders, especially institutional investors, are actively involved in the governance of a corporation and management is forced to take full responsibility for their actions and behaviour.
Other interested parties, such as large institutional investors, the Dutch Stock Exchange, and the Dutch investors’ association (VEB), believed actions were needed to address the aforementioned institutional changes. Together with the Dutch government they drafted the Dutch governance code, which was mandated by law in 2004. The Code Tabaksblat was put in place to provide principals and explicit criteria for the parties (amongst others institutional investors) and persons (amongst others executive and non-executive directors) associated with a certain corporation (www.corpgov.nl). This principles and criteria as formulated by these parties were meant to enhance shareholder participation and result in greater openness and transparency of decision-making. These goals were to be reached by taking into account all stakeholders;
‘The goal is based on the principle accepted in The Netherlands that a company is a long-term form of collaboration between the various parties involved.(…) The management board and the supervisory board have overall responsibility for weighing up the interests, generally with a view to ensuring the continuity of the enterprise. In doing so, the company endeavours to create long-term shareholder value’ (2003: 3)
2.3 The rise of activist shareholders in the Netherlands
have resulted in a slight increase in participation of institutional investors, as can be observed from the active participation of Eumedion, it mainly resulted in other shareholder parties exercising their rights more actively.
Private equity parties and hedge funds are amongst the parties which have taken most advantage of the stronger shareholder rights. Recently, these parties have caused great turmoil and discussions in the Netherlands. In the summer of 2006 these discussions reached their peak when Joop Wijn, minister of Economic Affairs, proposed additional rules to give boards more defence mechanisms against possible buyers. According to him these additional rules were necessary to: ‘prevent corporations from being devoured by parties as locusts’. Henk van der Kolk, chairman of FNV Bondgenoten (Dutch union), Bernard Wientjes, chairman of VNO-NCW (largest employers’ organisation) and Jan Kalff, former CEO of ABN AMRO, shared and expressed the same sentiments (Het Financieele Dagblad, 2006b; Het Financieele Dagblad, 2006c). In this same article Van der Kolk claimed: ‘Hedge funds cause great turmoil and chaos and it appears their aim is merely to earn as much as possible from buying corporations, separate them and resell them in the shortest possible time’. The Dutch National Bank joined the discussion when it issued a press release on 6 September 2006, where the Dutch National Bank expressed its concern about the influence of private equity on the financial stability of Europe and as such will start an investigation.
In the heart of these discussions lies the question which party bears the ultimate power in Dutch corporations. Traditionally the supervisory board has taken a dominant position in the Dutch corporate governance system and it appears as if shareholders are gradually taking over this position. This raises questions whether the interests of all stakeholders to a firm are still equally respected and whether the body representing these interests can still be regarded as sufficiently independent. In the Netherlands it is a supervisory board’s task to monitor whether the management board represents these interests.
assume that the Dutch supervisory board is more sensitive and likely to respond to issues brought forward by a large and powerful interest group (such as shareholders) than issues of other stakeholders, which can have a negative effect on the independence of a supervisory board. On the other hand, increased shareholder power can also have a positive effect on the independence of the supervisory board since shareholders are better able to discipline management and a supervisory board, when a corporation is underperforming. As such, shareholders can serve as a control mechanism for a supervisory board to safeguard its independence from a corporation’s management.
The Dutch corporate governance code and the revised structure regime, however, were both put in place in order to restore confidence in the way in which corporations are governed. This goal had to be achieved by improving the power and independence of the supervisory board. The Code Tabaksblat, for example, prescribed criteria for independence, non-executive directors have their own responsibility in collecting relevant information for decision making, and apply self evaluation. So, on the basis of these criteria one can assume that the implementation of the Code Tabaksblat has led to an increase in the independence of the supervisory board. The revised structure regime on the other hand, does not directly consider the independence of the supervisory board but it does address the increase in shareholders rights. This is incorporated in the revised structure regime by giving shareholder the right to formally appoint non-executive members as well as to collectively dismiss them. Because of these rights non-executive members might find themselves in a position where they are more susceptible to the interests of shareholders, since these shareholders are able to control the position of supervisory board members within an organisation.
3.
THEORETICAL FRAMEWORK
The objective of this study is to gain insight into the extent to which the power and independence of the supervisory board has changed as a result of the implementation of the revised structure regime, the adoption of the Code Tabaksblat and increased shareholder pressure. Before this objective can be reached more information is needed on how the revised structure regime, the Dutch corporate governance code and Anglo-Saxon shareholder power affect the power and independence of Dutch supervisory boards. These three elements will be described in the first part of this chapter followed by the conceptual model and propositions. The chapter concludes with an explanation of the concepts of power and independence of the supervisory board.
3.1 Anglo-Saxon shareholder pressure
Traditionally, shareholder power in the Netherlands has been in the hands of large parties. In 50% of the Dutch companies the largest shareholder holds at least 44% of the shares (Abma, 2006). Institutional investors became the first parties to actively interfere with the governance of Dutch corporations and these parties still play an important role (Van den Berghe, 2006). However, more recently other parties such as foreign private equity parties and hedge funds are also actively interfering with the governance of Dutch corporations. The reason that foreign parties are now actively exercising their shareholder rights is twofold. First, the globalization and internationalization trend has resulted in a growing share of foreign investment in the Netherlands and has allowed foreigners, the majority of which are British or American, to hold 41% of all shares (Van den Berghe, 2006). Second, Dutch governmental policy, as was previously mentioned, played an active role in promoting and strengthening shareholder rights. Especially the improvement of the disciplining function of the market for corporate control and the strengthening of shareholder rights played an important role (SER, 2001).
pursuing shareholder value to the fullest it will discipline management, creating a short-term goal for value maximization. In pursuing value these shareholders have four ways to pressure management. These are (1) a successful proxy contest (although this is hardly used because of its lack of effectiveness and the high costs involved); (2) the purchase of one firm by another in a merger or acquisition; (3) a leveraged buyout of the firm by a private group of investors; and (4) a divesture, in which a firm sells part of its operations to another company or spins it off as an independent firm (Brealey, Myers & Marcus, 2007). Over the last few years several cases where these strategies were used could be observed in the Netherlands. The cases where private equity parties and hedge funds have exercised their rights as shareholders have caused great upheaval and public debates in the Netherlands. For example, the hedge funds Paulson and Centaurus that pressured Stork and Ahold into selling off parts of their corporations. This rise in the use of the financial market as disciplinary mechanisms in the Netherlands has also been confirmed by research of KPMG (2007). According to KPMG’s research shareholders in the Netherlands are making more use of the aforementioned mechanisms for pressuring management: 2006 showed a further development of buy-out transactions and numerous high-profile transactions. According to their research it is the fourth year in a row that the number as well as the deal value of these buy-out transactions increased. The number of exit transactions or divestures in 2006 also increased: 6% with regard to the previous year (KPMG, 2007). These figures indicate that shareholders have gradually obtained more power in the Dutch governance system and as a result of this increase in power they are more actively exercising it. This increase in power directly influences the power and independence of Dutch supervisory boards.
3.2 Dutch corporate law
companies. The most distinctive feature of the structure regime is that management is not disciplined by their shareholders but a supervisory board. In this context the supervisory board represents both capital and labour (De Nijs Bik, 2004).
The structure regime applies to corporations that during a period of three years: employ over 100 people, have an established works council, and a subscribed capital for which the amount is set by Royal Decree8 (Burgerlijk Wetboek 2 article 153; De Nijs Bik, 2004). In 2000 the Dutch government requested the Social and Economic Council of the Netherlands (SER) to critically analyze the functioning and future of the structure regime with regard to its policy regarding the improvement of shareholder rights and the Dutch investment climate (SER, 2001). A revision of the structure regime was believed necessary since the Dutch government acknowledged that the application of the structure regime had a negative effect on international corporations. It was believed that corporate policies could be hampered by the far-reaching rights of the supervisory board and certain rights should be transferred back to corporate shareholders (De Nijs Bik, 2004). As a result of thorough analysis the SER issued an advice, which was the foundation for the revised structure regime. The revised structure regime was legally adopted in 2004. This law allows firms that meet the criteria of the structure regime but are majority foreign-owned or where the majority of its employees work abroad, to follow the mitigated structure regime (gematigde of verzwakte regime) (Chirinko, van Ees, Garretsen, & Sterken, 2004). The mitigated regime facilitates international corporations by granting powers to the annual meeting or shareholders instead of the supervisory board. These powers contained a shift in authority regarding the appointment of members of the board and the approval of the annual report. In the Code Tabaksblat this is explicitly mentioned; ‘Under the new provisions on companies having statutory two-tier status (Bill no. 28 179) the general meeting of shareholders of companies having statutory two-tier status may pass a resolution of no confidence in the entire supervisory board. Membership of the board is immediately terminated by such a resolution’ (2003: 35). So, under this legal regime, the supervisory board’s responsibilities for appointing and dismissing members of the management board as well as the drafting of the annual financial statement are transferred from the supervisory board to the annual shareholders meeting. The transfer of power from the supervisory board to the shareholders has lead to an increase in
shareholder power and protection (Chirinko et al., 2004). As a result of the revised structure regime the stakeholding position of shareholders in the Netherlands has been reinforced. This indicates that revised structure regime indirectly influences the power and independence of Dutch supervisory boards.
3.3 The Dutch governance code
Most corporate governance codes were designed to avoid the reoccurrence of corporate scandals and incidents regarding excessive directors’ pay. The Dutch code of governance or code Tabaksblat was introduced in 2003 and replaced the forty recommendations of the Peter’s committee of 1997. The Code consists of regulations for stock-listed companies regarding the yearly financial statements of their firm, the responsibilities of their supervisory boards and the protection of their shareholders (Code Tabaksblat, 2003). Compliance to the Code is mandated by law on the basis of the ‘comply or explain’ rule, where the firm has to explain any deviation from the code. The Monitoring Committee was established to keep the governance code up-to-date and monitor whether stock-listed companies apply and comply with the code Tabaksblat (Corporate Governance Committee, 2005). The role of the supervisory board is very broadly described as;
‘…to supervise the policies of the management board and the general affairs of the company and its affiliated enterprise, as well as to assist the management board by providing advice. In discharging its role, the supervisory board shall be guided by the interests of the company and its affiliated enterprise, and shall take into account the relevant interests of the company’s stakeholders’ (2003: 15)
Another important part of the Dutch governance code, besides the role and structure of the supervisory board, are the shareholder rights. The reason that shareholder rights play an important role in the Code Tabaksblat is that it was believed that shareholder participation during the general meeting of shareholder is beneficial for the corporation as a whole and their protection was in line with the aforementioned governmental policies (Abma, 2006; SER, 2001). The importance of shareholder participation is also explicitly mentioned in the Code Tabaksblat: ‘Good corporate governance requires the fully-fledged participation of shareholders in the decision-making in the general meeting of shareholders. It is in the interest of the company that as many shareholders as possible take part in the decision-making in the general meeting of shareholders’ (2003: 25). Shareholder participation is even further promoted when the Code Tabaksblat states that: ‘Any decisions of the management board on a major change in the identity or character of the company or the enterprise shall be subject to the approval of the general meeting of shareholders’ (2003:26). Another clear example is that the general meeting of shareholders can pass a resolution of no confidence in the entire supervisory board. This resolution immediately terminates the membership of the supervisory board.
Most recommendations the Monitoring Committee has made regarding the company-shareholder relationship were to bring this relationship in line with international standards. The Committee stated that ‘The Committee considers it important for Dutch companies to remain attractive for investors, particularly foreign investors, and at the same time avoid falling prey to short-term investment strategies in the financial markets’ (2007: 5). So, the recommendations issued by the Monitoring Committee were not meant to reduce shareholder rights but to allow for more communication and openness and bring governance in line with international practice. The most significant recommendations in this report were: - Reducing the threshold for disclosure from the current 5% to 3% and a duty to report
every 1% change.
- With a specified percentage interest of shares (the Committee recommends a threshold of 5%) a shareholder should be obliged to disclose his intentions.
- The government should develop legislation to enable companies to establish the identity of a shareholder.
- Augmenting the threshold with regard to putting items on the agenda to 3%.
So, in 2004 the code Tabaksblat substantially increased shareholder rights, which resulted in shareholders effectively utilizing these rights leading to several corporate conflicts. As a result the Monitoring Committee issued an advisory report in May 2007, which to some extent downplayed the rights of shareholders. However, the code Tabaksblat and the recommendations by the Monitoring Committee have lead to an overall stronger stakeholding position for shareholders with regard to other stakeholders of the firm.
3.4 The supervisory board
When analysing this model and its elements discussed beforehand we can formulate the following propositions, which will help to analyse to what extent the power and independence of the supervisory board has actually changed.
P1: Over the last few years, increased Anglo-Saxon shareholder pressure, the revised structure regime and the code Tabaksblat have shifted actual power from the supervisory board to shareholders. P2: The strengthened stakeholding position for shareholders in the Netherlands, over the last few years,
has an increasingly negative effect on the independence of the supervisory board.
These propositions suggest that the increasing shareholder pressure has affected the power and independence of Dutch supervisory boards. Since power and independence are crucial for a supervisory board to exercise their governance role effectively (Pettigrew & McNulty, 1998) any change in the independence and power position can seriously affect the ability and willingness of boards to exercise this role. As such the extent to which power and independence has changed in the supervisory board is of critical importance. Before power and independence can be investigated a better description of these concepts is needed.
Power and independence of the Dutch supervisory board 3.1 Anglo-Saxon shareholder pressure
(private equity + hedge funds)
3.2 Dutch corporate law
(Revised structure regime)
3.3 The Dutch governance code
3.4.1 Power
The first concept that will be analyzed is power. According to Morgan (1986) and Pettigrew & McNulty (1998) there is no clear and single definition of power that is universally appropriate. Morgan (1986) asserts that some researchers have viewed power as a resource, i.e. as something a person possesses, while others have approached it as a social relation characterized by some kind of dependency or an influence over something or someone. However, most studies (Morgan; 1986, Brass & Burkhardt, 1993; McNulty & Pettigrew, 1999; Pettigrew & McNulty, 1998) researching power in the boardroom, describe it as an instrument to influence decision-making and make a distinction between formal and informal or actual power. One should note, when analyzing these studies, that most of the studies on boardroom power have focused on one-tier boards, while Dutch corporations make use of two-tier boards.
Power, however, is indispensable for a board since sufficient power is needed to successfully counterbalance any opportunistic managerial behavior. According to various studies (McNulty & Pettigrew, 1999; Pettigrew & McNulty, 1998) the power discrepancy between executives and non-executives, which are caused by differences in the level of expertise, access to information, and distinctions in the set of power sources, makes it more difficult for non-executives to obtain sufficient power. In the Dutch situation, where non-executives are even further apart from the management board this is even more so. As a result, the law ascribes certain powers to the supervisory board. This type of power can be described as formal power. However, according to Pettigrew and McNulty (1998) possessing power sources is merely a route to potential power. As such, the actual use of power does not just depend on formal power but also on the willingness and ability of board members to use it (Pettigrew & McNulty, 1998). As such the influence board members can exercise depends on two types of power, which are interrelated; (1) formal power; and (2) actual power.
of Baysinger and Hoskisson (1990) on formal power. They claim that formal power constitutes:
- The formal authority to ratify management initiatives; - The evaluation of managerial performance;
- The allocation of rewards and penalties to management.
Actual power is the extent to which board members are able to really exercise power as described by law. As such actual power depends on two aspects: the power sources available to board members and the will and skill of these members to use them (Pettigrew & McNulty, 1998). Power sources are the sources available to non-executive directors to effectively exercise their powers. Examples of power sources are; expertise and authority, access to knowledge and information, and decision control. However, Pettigrew and McNulty (1998) contend that power source lists are infinite and the appropriate sources can be chosen to fit the research at hand. Some of the power sources Morgan (1986) described have also been the focal point in recent discussions on whether the increased influence of activist shareholder parties is desirable or not, these sources of power of the supervisory board are: - Expertise and authority
A supervisory board is expected to consist of members with tremendous knowledge and experience obtained from education and previous work-experience. This expertise gives them unique strengths, which is valuable when the supervisory board offers consultation or advice to the management board. Furthermore, previous positions can also provide impact when the previous positions held by executives were noteworthy, which provides them with a certain level of authority.
- Access to knowledge and information
increase its power, one must have access to sufficient knowledge and information, which is not controlled or mediated by others (Brass & Burkhardt, 1993). So, sufficient and adequate information and knowledge is needed to be able to exercise a certain level of power. In this research the control over knowledge and information will be defined as the extent to which board members possess and/or are able to obtain sufficient knowledge and critical information about the corporation, its industry and its market in order to make well-informed decisions.
- Control of decision processes
Morgan (1986) describes the control of decision processes as the ability to influence the outcomes of decision-making processes. He claims that it is a well-recognized source of power, which has received considerable attention in the organization-theory literature. The reason for this is that organizations can be perceived as decision-making systems, where an individual or group that can exert a major influence on decision processes can have considerable influence on an organization. In this study the control of decision processes will be defined as the ability of supervisory board members to influence outcomes of decision-making processes in Dutch corporations.
will be on the will and skill supervisory board members are able to utilize when employ the power sources outlined before.
3.4.2 Independence
The second concept that will be defined in order to examine proposition number two is the independence of the supervisory board. The independence of non-executives in boards is a key element in the code Tabaksblat and corporate governance codes worldwide (Postma & Van Ees, 2004). As was mentioned before Dutch corporate law also explicitly states that the responsibility of the supervisory board is to monitor the company as a whole and, therefore, directors are obligated to act as an instrument to serve all stakeholders. So, independence for the Dutch supervisory board entails besides monitoring management, being independent from all parties on behalf of which monitoring is executed. In order to be able to serve all these stakeholders a high level of independence is needed. The code Tabaksblat formulates independence as follows: ‘The composition of the supervisory board shall be such that the members are able to act critically and independently of one another and of the management board and any particular interests’ (2003: 17).
Although independence of board members is advocated in almost all corporate governance codes worldwide, empirical research so far has not found a direct link connecting independence of the board to corporate performance (Postma & Van Ees, 2004). As such the independence of corporate board members has not lead to a conclusive interpretation of what independence of a corporate board should precisely entail (Moerland, 2000; Postma & Van Ees, 2004). On the other hand, Moerland (2000) makes a rough distinction between two types of independence, relevant in the Netherlands. Therefore, this study will make use of the interpretation of independence according to Moerland (2000) in order to analyze the assumption made beforehand. The two types Moerland (2000) describes are:
- Independence from those over which monitoring is practiced (management)
meetings where supervisory boards meet separately from the board of directors can be seen as a serious breach of confidence. The observation of these closer relations challenges the assumption that two-tier boards have a strict division between the responsibilities of the management board and those of the supervisory board (Maassen, 1999). Furthermore, instead of operating independently, as is the case in a traditional two-tier system, the chairman of the supervisory board now works closer together with the board of directors (Management Scope, 2006).
- Independence from those parties on behalf of which monitoring is executed (shareholders and stakeholders)
Moerland (2000) describes the second type of independence to be characteristic for the Dutch governance system because non-executives have to weigh the interests of all stakeholders to a firm in their decision-making processes. Although supervisory board members are obligated by law to serve all these interests, the increased shareholder power has increased the strength of this stakeholding party in comparison to other stakeholders. In this study we wish to determine whether it has become more difficult for the supervisory board to serve the interests of all stakeholding parties equally.
4. RESEARCH DESIGN
This chapter will describe the logic that links the data to be collected (and the conclusions to be drawn) to the initial research objective. According to Yin (1989) this is also known as the research design of a study. This research is an explorative and observational study in which the propositions regarding the power and independence of the Dutch supervisory board will be examined. The outcome of this research can then serve as a basis for further research. In order to reach this objective a case study method will be used. Yin describes a case study as ‘an empirical enquiry that: (1) investigates a contemporary phenomenon within its real-life context; when (2) the boundaries between phenomenon and context are not clearly evident; and in which (3) multiple sources of evidence are used’ (1989: 23). Furthermore, Eisenhardt (1989) argues that case studies can be used to generate theory or provide a description. Since the objective of this study is to shed light on the changes in the behaviour of the supervisory board as a result of increased shareholder pressure the case study will be a particularly useful method for executing this research. The reason for this is that the contemporary phenomenon to be studied in this research is the increased shareholder power in the Netherlands and its effect on the behaviour of the supervisory board. The boundaries between this phenomenon and the context are not clearly evident and as such it complies with the second point and to study this phenomenon multiple sources of evidence will be used, mentioned as third point. In this research the case study is especially used to provide a description on how increased shareholder pressure affects board room behaviour.
little information and the information constitutes an image of the company and director, which may not reflect the underlying reality. These problems were also confirmed by McNulty & Pettigrew; ‘Inadequate access to the corporate elite has resulted in us knowing little about the work and conduct of boards and directors require greater empirical scrutiny’ (1999: 49). An additional difficulty is that the knowledge about structure and the composition of boards exceeds the understanding of their behavioural dynamics. Besides this, empirical studies of boardroom behaviour provide a mixed set of findings about the involvement of the supervisory board (McNulty & Pettigrew, 1999). Critics of research on organisational sociology of boards and behaviour in general claim research in this field is nearly impossible since behaviour is difficult to measure and answers are usually politically correct. As such the organisational sociology of boards, incorporating the boardroom role of the corporate elite, is a major missing link in analyses of boards and directors (Hill, 1995). For that reason it is important to execute research by using information from various parties surrounding the supervisory board in order to come to objective and normative valuation of board behaviour. This is in line with McNulty & Pettigrew (1999), who state that normative models outlining the functioning of boards require greater empirical scrutiny.
4.1 Data collection method
Eisenhardt (1989) and Yin (1989) both argue that a case study’s unique strength is its ability to use a combination of data collection methods such as interviews, documents, questionnaires, and observations. The subject that will be thoroughly researched in this case study is the Dutch corporation Stork and the power struggle between its shareholders and management. The reason for choosing this corporation is that it has dealt9 extensively with activist Anglo-Saxon shareholders and hedge funds in particular. Since these events surrounding Stork and hedge funds Centaurus and Paulson are practically brought to a close, involved parties will be able to draw a more unambiguous picture regarding these events. The power struggle between Stork and these hedge funds involved other stakeholding parties as well, such as the investors’ association (VEB), large pension funds, the enterprise chamber and the general public. As such, this makes an interesting case since these parties all
9 Currently Stork is involved in another power struggle with shareholders, which involves the consortium LME,
have different backgrounds and perspectives on this case. Investigating their opinions will lead to an objective analysis of the case at hand and the assumptions regarding the power and independence of the supervisory board. However, according to Eisenhardt (1989) there is a potential weakness in solely studying a single case and conducting only a few interviews. The reason for this is that it will prove to be more difficult to make generalizations on the basis of a single case and a few interviews. These weaknesses will be reduced by analysing various opinions from different angles of the involved parties. Furthermore, the parties interviewed are key figures with substantial knowledge regarding the case and as such it is possible to come to an objective analysis. This approach will also enhance the reliability of the results that follow the single case approach. Besides this research will be of an explorative nature and as such no generalisations can be made regarding theory without further research.
The data collection method that will be used in this research is semi-structured interviews. The reason for this is that according to Baarda and De Goede (2001) interviews provide the right method when the information one wishes to obtain involve knowledge, attitudes or opinions. Additionally, semi-structured interviews are necessary since the data collected is qualitative in nature and the topics, real power and independence of the Dutch supervisory board, can be discussed and analyzed more in-depth. Interviewing will provide an effective tool, since the objective of the interviews is to extract knowledge, attitudes and opinions of all stakeholding parties to Stork.
4.2 Research sample
that the current situation at Stork is still highly unstable and precarious. As such Stork’s board members did not want to participate in this research yet. The perspective of Stork’s shareholders is represented by Eumedion who has been closely involved in the case in order to represent the interests of its participants. The viewpoint of Stork’s employees is represented by the central works council of Stork and the workers union FNV Bondgenoten. FNV Bondgenoten has been actively involved to represent Stork’s employees by threatening to start legal actions against Centaurus and Paulson as well as strikes (Het Financieele Dagblad, 2006d). Furthermore, it requested the Enterprise Chamber to be considered as an interested party in the legal procedure (Het Financieele Dagblad, 2006)
4.3 Data analysis method
The qualitative data obtained through the interviews will be examined by making use of text analysis. This will be done by looking for evidence on changes in the power sources as described in the theoretical framework; the three power sources as described in the theoretical framework; (1) expertise and authority, (2) access to knowledge and information, and (3) control of decision processes. Additionally, evidence regarding the independence of the supervisory board will be obtained by analyzing the opinions of the interviewees.
5.
CASE STUDY
So far, The Netherlands have seen a limited amount of available cases where shareholders have actively interfered with the strategy of a corporation and used mechanisms to control management. Some examples of these cases are: Ahold, VendexKBB, Stork, ABN Amro, and Corporate Express. The case of Stork and the interference of their active Anglo-Saxon shareholders with management in 2006 and 2007 (See appendix 1) proves to be a very instructive case study. The reason for this is that the case received considerable publicity, a substantial amount of information is available and the case as such is essentially settled. This chapter will study the Stork case more in-depth to examine the formulated propositions.
5.1 Stork’s corporate background
The governance of the corporation is in the hands of a management board and a supervisory board. The management board, responsible for the day-to-day operations, consists of three members; the CEO, the CFO, and the COO. The supervisory board, responsible for the supervision of the management board and the general activities of the company and its related businesses, consists of four members10. Stork’s corporate governance statement as well as its regulations describe, to a certain degree, the actual power and independence of the supervisory board. For example, article 22 of the regulations describes the access to knowledge and information. Besides this, Stork mentions in its corporate governance statement that they comply with all best practice principles regarding the independence of its supervisory board (principle III.2: Independence).
However, during the annual meeting on 10 March 2006 a shareholder (speaking on behalf of Robeco, Algemeen Pensioenfonds KLM, Cordares, Nachenius Tjeech & Co., Pensioenfonds KLM Vliegend Personeel, Pensioenfonds KLM Cabine Personeel and SNS Assetmanagement) openly questioned the independence of the supervisory board regarding the proposed going-public-to-private plans and suggested the appointment of an extra and new independent non-executive director for the course of the investigation.
5.2 Recent developments
In Stork’s AGM in 2006 uncertainty arises when a few Anglo-Saxon shareholders withhold their discharge regarding Stork’s management without any further explanation. However in previous years shareholders have fretted over the lacking synergy between divisions and the vague company profile (Het Financieele Dagblad, 2006a). As a result of these developments and in order to avoid the shareholders, Paulson and Centaurus, who wish to split up Stork’s divisions, management decides to investigate a possible exit from the stock exchange. In June 2006 Stork announces that the results from this research are such that it will not exit the stock exchange. As a result of this announcement, hedge funds Paulson and Centaurus request an EGM where management will further explain the results of this research and its future plans. Two days after this EGM Paulson and Centaurus call for another EGM in a press release. During this EGM on 12 October 2006 shareholders voted in favour of
10 As of January 2007 Stork’s supervisory board consists of seven members since the enterprise chamber
splitting up Stork (of all votes, 86.5% of the capital stock present was in favour of the motion, representing 42.8% of the total outstanding shares). In a press release following this EGM Stork announces that the results of this motion will not be binding. Both parties decide to go to court in November 2006 and the union (FNV Bondgenoten) also openly raised objections to Paulson and Centaurus’ plans.
The conflict between management and shareholders reaches a climax when The Stork Foundation announces to issue cumulative preference shares (cumprefs), which will serve as a protection barrier because the foundation will gain an interest of almost 50% of the shares. Paulson and Centaurus react by making an appeal at the Enterprise Chamber of the Court of Appeals (ondernemingskamer) in Amsterdam. As a result of the verdict by the Enterprise Chamber on 17 January 2007 three new additional non-executive directors are appointed; Wim Kok, Kees van Lede, and Dudley Eustace. Next to this, the issuance of the cumprefs and voting on the AGM on that same day is disallowed. In June 2007 private equity firm Candover announces its plans to takeover Stork by offering € 1.5 billion (€47 per share). Paulson and Centaurus react positively and request the Enterprise Chamber of the Court of Appeals in Amsterdam to stop its investigation regarding mismanagement. Although the consortium LME shows reluctance, Candover publishes its official bidding offer on 10 August 2007. LME remains unwilling to offer its shares and continues to expand their interest in the company (owning more than 43% of the shares). As a result, Candover decides to prolong the registration date, but LME refuses to offer their shares. On 17 September 2007 Candover withdraws its offer and strikes by the workers union follow.
6.
RESEARCH FINDINGS
This chapter will present the outcomes of the interviews with the stakeholding parties of Stork. The results will help shed light on the two propositions formulated in chapter three. Furthermore, the case study will help to gain a deeper insight into the extent to which the actual power and the independence of the Dutch supervisory board might change under the increasing shareholder influence. In order to reach this objective the semi-structured interviews consisted of four central questions;
- How do you perceive the actual power of Stork’s supervisory board? - Has this power changed over the past few years, and in what way? - How do you perceive the independence of Stork’s supervisory board? - Has this independence changed over the past few years, and in what way?
6.1 Power
In order to prove that the selected power sources; expertise and authority, access to knowledge and information, and control of decision processes are also put forward as such, respondents had to circumscribe how they perceive actual power. So in order to analyse the presupposed change in actual power the respondents had to describe what, according to them, encompasses actual power.
6.1.1 Power sources
The second power source, access to information and knowledge, describes the ability of non-executive directors to control vital resources such as information and knowledge to increase their powers. This power source was only identified as such by one of the respondents. The third power source, control of decision processes, describes the ability to influence the outcomes of decision-making processes. This power source was put forward by all the respondents by emphasizing the supervisory board’s ability to actively engage in discussions with management, their power to interfere in strategic choices as well as to block certain decisions: ‘They can interfere in a strategy when they believe it does not fit the corporation. With the approval right a supervisory board can force management to follow a different strategy.’
6.1.2 Change in power
After respondents put forward what they perceived to be the actual power of the supervisory board, the shift in actual power was discussed. All respondents emphasized that they feel that the actual power of the supervisory board has diminished as a result of the code Tabaksblat, the revised structure regime, the increased shareholders rights and the jurisprudence of the Enterprise Chamber and Supreme Court: ‘The code Tabaksblat and the revised structure regime together have clearly diminished the power of the supervisory board, which does not make it any easier.’
6.2 Independence
In order to analyse the presupposed change in independence we first examine the way in which respondents perceive the independence at Stork. Initially almost all respondents believe Stork’s supervisory board have acted independently from both management as well as other stakeholders when looking at the letter of the law, but most of them thought the supervisory board fell short when looking at the actual desired level of independence: ‘I think when push comes to shove they are independent, but it is not the way they operate.’
Some of the respondents expressing their criticism on the supervisory board’s independence interpret the verdict of the Enterprise Chamber (ondernemingskamer), where three additional non-executives were appointed, as a sign that the supervisory board had indeed lacked independence.
6.2.1 Types of independence
The first type of independence, independence from those over which monitoring is practiced (management), describes the distance and independence of the supervisory board from the management board. The majority of the respondents stated, during the course of the interview, that they believe that the supervisory board had identified itself too much or too quickly with the position management had taken. They also feel that the distance and independence of the supervisory board vis-à-vis management was negatively affected by this. The second type of independence, independence from those parties on behalf of which monitoring is executed (shareholders and stakeholders), describes the extent to which non-executives are able to independently weigh the interests of all stakeholders of the firm. Respondents believe, although some more strongly than others, that the independence of the supervisory board regarding all stakeholders was negatively affected.
6.2.2 Change in independence
7.
CONCLUSION
The institutional context of a country is not static and will change when various institutional transitions take place. Currently, the Dutch government and various other institutional parties are forced to react to different institutional transitions affecting the national governance system as a result of, amongst others, globalization and the integration of financial markets. Some examples of such transitions are; the growing percentage of Dutch shares that are foreign-owned, the increased use of financial markets to source capital (instead of direct financing), the marginally weakening of concentrated ownership across Europe, and an increasingly important role for worldwide organizations to design and set governance standards.
On the one hand, some of these trends show a possible transfer to a more Anglo-Saxon governance system, with the accompanying features such as; strong shareholder power, a higher dependency on financial markets, widely dispersed ownership and a one-tier board to govern corporations. On the other hand, the original Dutch governance system presents very distinctive features such as; the strong consideration for the interests of all stakeholders to a firm, direct financing and a two-tier board to govern corporations. These features are deeply rooted in the Dutch history and valued highly. As such, much effort is put in preserving the powerful elements of the Dutch governance system. This could be observed from current public discussions and the minister’s recent (19 June 2007) request for advice to the SER. In this request the minister of Social Affairs and Employment seeks advice on whether the desired balance in the Dutch corporate governance is obtaining the sought-after results. The Dutch supervisory board, as one of the most distinctive features of the Dutch governance system, lies in the heart of the discussions surrounding this institutional dilemma, where its influence is one of the main themes.
codes worldwide. Therefore, an important need exists for further research on what effect the various institutional alterations, and the regulatory responses to these alterations, have on the Dutch governance system and supervisory boards in particular. As such, this explorative research attempted to contribute to this need by analysing whether the actual power and independence of the Dutch supervisory board has changed as a result of increased shareholder pressure, the revised structure regime, and the Dutch governance code. In order to reach this objective two propositions were formulated to help analyse to what extent the power and independence has actually changed by making use of the Stork case.
The first proposition postulates that over the last few years, increased Anglo-Saxon shareholder pressure, the revised structure regime and the Code Tabaksblat have shifted actual power from the supervisory board to shareholders. As was mentioned in the theoretical framework, Pettigrew & McNulty (1998) contend that power source lists are infinite and the appropriate sources can be chosen to fit the research at hand. In this research actual power is defined by three types of power sources; (1) expertise and authority, (2) access to knowledge and information, and (3) control of decision process. Respondents identified all three power sources, although some better than others. The majority of the respondents distinguish expertise and authority as a power source, claiming that the non-executives’ backgrounds and track-records are an effective way to exercise power. Access to knowledge and information, however, was only mentioned by one of the respondents. On the other hand, the control of decision processes was the power source that stood out the most and was mentioned by all respondents. Morgan (1986) described the control of decision processes as the ability to influence the outcomes of decision-making process. In other words, all parties believe the supervisory board has the power to influence the outcomes of the decision-making process in a corporation. With regard to the change in power, respondents indicated that they believe that the power shifted from the supervisory board to shareholders as a result of the increased Anglo-Saxon shareholder pressure, the revised structure regime and the code Tabaksblat. As such sufficient evidence is found to support the first proposition regarding actual power.
effect on the independence of the supervisory board. In order to analyze this proposition a distinction was made between two types of independence relevant in the Netherlands; Independence from those over which monitoring is practiced (management), and independence from those parties on behalf which monitoring is executed (shareholders and stakeholders). According to Pettigrew & McNulty (1998) the independence of a supervisory board is essential in order for its members to effectively exercise their governance role. As such the extent to which the independence has changed is fundamental for the governance role a supervisory board executes in the Dutch governance system.
With regard to this second proposition the results show that the proposition regarding independence holds. The parties identified a tendency towards an increasingly negative effect on the independence of the supervisory board because of the strengthened position of shareholders as well as the code Tabaksblat. However, one should note that almost all parties believe the supervisory board fulfilled the conditions of independence as set by the code Tabaksblat. Despite this fulfillment with ‘legal independence’ respondents feel independence was inadequate. Respondents described a tendency towards a less independent supervisory board. The decrease in independence from the management board is observed by most parties, although not all. The central works council claimed it did not perceive this decrease in independence vis-à-vis management. Their response could be explained by the relative closeness of the central works council and management. The decrease in independence from all stakeholders, however, is observed by all parties, where the degree to which parties perceive this decrease varies somewhat. Respondents, however, expressed themselves more strongly regarding the independence of the supervisory board vis-à-vis management. As such, respondents believe the independence of the supervisory board vis-à-vis management has suffered most.
