Model statutes contravene the law

September 26, 2011 10:58 AM

The new model statutes, which the government wishes to introduce for government NV’s, contravene the national regulation and code Corporate Governance.

This is the opinion of four experts in the field of corporate governance: Mike Alexander, Frank Kunneman, Boy Santine and Roel In ’t Veld. In an open letter to Premier Gerrit Schotte (MFK) and States chairman Ivar Asjes (PS), they express their concern and advise the government to abandon the introduction.

The concern of the four experts regards the specific instruction authority included in the model statutes, for the shareholder, and the fact that external experts can assist individual commissioners at the expense of the company. According to the four experts, this creates an almost unverifiable field for the shareholder and the commissioner (intentionally or unintentionally) to give orders not in the interest of the company but in their own (political) interest, to force appointments and dismissals and to approve or disapprove projects. “This contravenes the National Regulation Corporate Governance (the National Regulation) and the Code Corporate Governance (the Code). Moreover, it contravenes internationally accepted standards for Good Public Governance and Good Corporate Governance.”

According to the experts, due to the instruction authority, management members are maneuvered into an impossible position. “They are statutory compelled to act on the instruction from the minister. By law, they are compelled to act in the interest of the company. What are they to do if they believe the instruction from the minister is not in the interest of the company? It they do not act on the instruction, they risk suspension and even dismissal. If they wish to approach the Court on this matter, they will have to pay the costs themselves. Contrary to civil servants and employees, they have no legal dismissal protection. No competent administrator will rush into such a hornet’s nest.”

The four experts believe the instruction authority also contravenes articles 2.8 and 3.2 of the Code. “According to the Code, the minister may not become a commissioner to avoid political influence on the management of the government NV’s. As a result of the model statutes, as shareholder the minister has much more direct influence than if he were a commissioner. Moreover, according to the Code, this thwarts the obligatory Board of Commissioners’ model (article 1). The obligatory division of supervision and management has disappeared.”

The four experts believe that also commissioners will have full scope with the introduction of the model statutes. According article 18 section 6 of the model statutes, every individual commissioner can have external financial, legal or other experts assist them at the expense of the corporation. This allows commissioners to give and grant all friends and relations ‘orders’ in an unverifiable manner, without any possible actual control on this. It is even worse with government institutes. The model statutes for the (government) institutes give the minister almost total authority in these organizations.”

According to the four experts, the introduction of the model statutes will lead to ‘many frictions within the government NV’s, to ineffective management and possibly to patronage’. “Normal parliamentary control and normal corporation legal checks and balances disappear.” From a democratic, administrative and legal perspective, the authors of the letter strongly advise against introducing the model statutes.

20 September 2011