Insurance Company Ownership in the Netherlands: Implications for Corporate Governance and Competition

  • Arend Jan Vermaat
Part of the Financial and Monetary Policy Studies book series (FMPS, volume 33)


  1. 1.

    It is fashionable to discuss and consider Corporate Governance (CG)! This was the call by Sir Colin Marshall (CEO of British Airways) at the beginning of 1996 on the occasion of the first annual meeting of the ICGN (International Corporate Governance Network) for a world-wide code of conduct (no laws!) in this area for investors and companies. In part, CG is possibly a hype. Nevertheless at the same time it is a permanent and important topic. It is a new approach to the discussion on the way the market economy works. It is a debate in essence about the direction which should be given to the Western economic order. It is therefore of great structural importance.



Corporate Governance Institutional Investor Pension Fund Competition Policy Supervisory Board 
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  1. 1.
    A well-known definition is: “Corporate Governance can be defined as the whole system of rights, processes and controls established internally and externally over the management of a business entity with the objective of protecting the interests of all stakeholders.” (CEPS 1995 p. 5). In Dutch persistent use is made of the English term CG. This points to the origin of such discussions in the seventies in the USA and later in the UK. With Moerland (FD 16 March 1996) I prefer `ondernerningsdisciplinering’ (disciplining of companies) as the equivalent Dutch term.Google Scholar
  2. 2.
    In the Netherlands a normative retrospective system of supervision has existed for a long time which has as its main focus the monitoring of solvency (of more broadly, solidity). The Dutch Insurance Supervisory Board (which has been a foundation established under Civil Law since 1992) is responsible for legal supervision and operates as a so-called `independent public authority’. For a general introduction see Vermaat/Oosenbrug (1994).Google Scholar
  3. 3.
    The so-called `structure regime’ has been applicable since 1971 to companies which meet the following criteria: (1) a subscribed capital of at least 25 million guilders, (2) at least 100 employees employed in the Netherlands, and (3) the presence of a works council in the company. Under the structure regime, the supervisory board is given strong powers, namely (i) it appoints its own members by co-option (with a right of nomination and a right of veto — which may be annulled by a Court ruling — for the general meeting of shareholders and the works council), (ii) it appoints and dismisses the members of the management board and ratifies the annual statements of accounts and (iii) it has to give its approval for important decisions taken by the company. There are two important exceptions. Subsidiaries of a holding company in the Netherlands, of which the latter is subject to the structure regime, are themselves exempted from it. In the case of international holding companies in the Netherlands, where at least 50 per cent of the shares are in foreign ownership, a milder regime applies in which more powers are given to the general meeting of shareholders.Google Scholar
  4. 4.
    It has by no means been established that the Anglo-Saxon model for companies is superior to the Rhineland or German model. De Jong (1996), for instance, argues on the basis of long-term empirical results, that the Anglo-Saxon model in the long run is characterised by (on average) lower labour productivity, lower growth of the total added value and lower employment. The higher pressure exerted by the capital market — resulting in a relatively higher dividend — appears to be counterproductive from a perspective of society as a whole. According to Scholtens (1996) the differences between the USA, UK, Germany and Japan with regard to their financial systems are, in fact, much less fundamental so that the influence of such systemic differences on the way in which CG operates in these countries cannot be very significant. Other factors would then have to have a greater effect!Google Scholar
  5. 5.
    Corporate Governance in Nederland. This is a Dutch echo of such well-known reports as the Treadway Committee (USA 1987), the Cadbury Committee (UK 1992), CEPS (EU 1995) and the ICMG report (International 1995 ).Google Scholar
  6. 6.
    Pension funds almost exclusively have the legal form of a foundation under Civil Law. See also section 11 of this paragraph.Google Scholar
  7. 7.
    Total value of listed shares as a percentage of Gross Domestic Product: 72,2 per centGoogle Scholar
  8. 8.
    Insurance companies and Pension funds.Google Scholar
  9. 9.
    Directly or indirectly listed on the Amsterdam Stock Exchange: 22.Google Scholar
  10. 10.
    For example: Pension funds, Foundations or Family ownership.Google Scholar
  11. 11.
    In the Netherlands these participations usually are so called certificated shares, i.e. without direct voting power.Google Scholar
  12. 12.
    As regards the other important insurance groups: the ACHMEA GROUP is in essence a mutual group, DELTA LLOYD GROUP is a 100 per cent subsidiary of COMMERCIAL UNION (UK), INTERPOLIS GROUP is a 100 per cent subsidiary of the (Mutual) RABO BANK GROUP.Google Scholar
  13. 13.
    This applies less to partial portfolios for which independent (external) fund managers are given responsibility. In such cases, investment behaviour usually is so active that CG pressure is less efficient.Google Scholar
  14. 14.
    Idem De Man (1996)Google Scholar
  15. 15.
    And that’s a good thing too! After all, from a theoretical point of view, in a pure market form of perfect competition without any exogenous intervention by an `auctioneer’, to use Walras’s term, no new equilibrium would arise of its own accord.Google Scholar
  16. 16.
    This is dealt with extensively in Vermaat and Bakker (1994).Google Scholar
  17. 17.
    In the Netherlands — as in the United Kingdom, and currently in all EU countries — a normative system of retrospective supervision has been applied since 1923, in which insurers are free to adjust the way they run their companies, their products and their premium tariffs to market conditions. This promotes very innovative and competitive markets!Google Scholar
  18. 18.
    Another example which typifies the adverse effect of an approach to competition law which is too legalistic is the following. The new Act will impose a variety of far-reaching limitations on voluntary chains in relation to the use of shop formulas. A large retail business is not subject to this (after all, it is one company!). On balance, the consequence will be a weakening of the independent retailer and, in time, a reduction in competition.Google Scholar
  19. 19.
    This paper does not include a comparative discussion of the achievements for society of the Anglo-Saxon and Rhineland models (see footnote 4). Neither is an answer given to the question whether the net returns required by shareholders at present are not too high from the perspective of society as a whole.Google Scholar
  20. 20.
    The question with regard to so-called Chinese walls will again come forcefully to the fore and not only in relation to financial conglomerates!Google Scholar

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© Springer Science+Business Media Dordrecht 1998

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  • Arend Jan Vermaat

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