Research report - Rotterdam School of Management

(2000), for instance, show that in many European countries single blockholders frequently control
more than 50% of the votes, while the majority of U.K. and U.S. listed companies have no
blockholder owning more than 10% respectively 6% of the shares. In addition, Becht and Mayer
show large differences between Continental European counties, ranging form a “private control
bias” in Germany to a modest management control bias of the Anglo-Saxon variety in the
Netherlands and Spain 6 .
In the Netherlands, like in Germany, a two-tier board structure is most commonly used as
opposed to the one-tier board structure in Anglo-Saxon countries. Within a two-tier board system,
the management board is responsible for the day-to-day business, the corporate strategy and
(financial) results. The management board, chaired by the CEO, is accountable for this to the
supervisory board and to the general meeting of shareholders. The role of the supervisory board,
e.g. the non-executive board members, is to supervise the policies of the management board and
the general affairs of the company, as well as to assist the management board by providing
advice. Because of this two-tier structure there is a natural distance between executive board
members and non-executive board members as opposed to the (Anglo-Saxon) one-tier model.
In a one-tier board all directors (both executive directors as well as non-executive directors) form
one board and take combined decisions. Furthermore, in a two-tier board structure there is a
clear split between the CEO and the chairman of the supervisory board, while in a one-tier board
the CEO can also be the chairman which has been common practice amongst many US
corporations 7 .
Executive compensation practices within Dutch firms tend to follow UK pay practices rather than
French or German pay practices 8 . Bryan et al (2006) compares the structure of executive
compensation of US firms with 256 firms of 36 non-U.S. countries for the period 1996-2004. They
show that the average ratio of equity-based compensation to total compensation of Dutch
companies (0.395) is closer to the ratios of the England (0.366) and the United States (.534), then
to France (0.176) and Germany (0.063). More recent studies of Van Ees et al (2007) and Hewitt
(2009) showed a strong convergence between the European countries, although variable pay
packages of German CEOs show a strong bias towards annual bonuses as opposed to long term
6 Becht and Mayer (2000) document that voting blocks of Austrian and German companies are typically clustered around
the 25%, 50% and 75% voting level which correspond to significant voting levels in both countries (blocking minority,
majority and super-majority voting). Haid and Yurtoglu (2006) also use these voting thresholds as dummy variables in
their regression models.
7 In the sample of Core et al (1999) about 75% of the firms had a CEO who was also the board chair. Agrawal and Nasser
(2009) showed that this percentage is about 64% for a more recent sample period (1998-2006). In addition Agrawal and
Nasser (2009) found that in about 30% of the firms the CEO also serves on the board’s nomination or corporate
governance committee.
8 Possible explanations are amongst others: a) the cross-listings of major firms like Reed Elsevier, Royal Dutch Shell and
Unilever, and b) that the U.K., in general, serves as a guide for the Netherlands on many corporate governance topics.
The British Combined Code that includes best practice provisions with regard to executive remuneration, for instance,
greatly influenced the first edition of Dutch Corporate Governance code, e.g. the Tabaksblat Code.