Directors and supervisory directors must always keep the interests of the organization and its stakeholders in mind when performing their duties. They may not (almost) exclusively serve the interests of the stockholders in a public corporation. They certainly may not do so if this is potentially at the expense of the organization itself. The insufficient observance of this basic rule of corporate governance is sometimes confusing for stockholders from a different legal order than that of our Kingdom.
These mostly Anglo-American legal orders usually have a one-tier board structure. The directors and the supervisory directors sit on the same body. Each individual then has the capacity of ‘board member’. The one board member is more concerned with managerial tasks and the other with supervisory tasks. In these Anglo-American management systems, safeguarding the interests of the stockholder is often seen as an important, if not the most important, objective for the board and supervisory directors.
It is different in our legal system. The interest of the stockholder is certainly an important point of view. However, the interest of the organization comes first by virtue of the law. In our case, this is laid down for supervisory directors in Section 19 Subsection 7 of Book 2 of the Dutch Civil Code.
Ultimately, the interest of the organization must always prevail. The interests of all relevant stockholders must be taken into account and weighed responsibly. This requires a certain distance from the supervisory directors. It requires a mental space that is large enough to (continue to) oversee and accommodate all the interests involved.
The Dutch (and Curacao) legal system therefore places a strong emphasis on autonomous financial supervision by a separate supervisory board, especially at financial institutions. One-tier board structures are exceptional in financial organizations. De Nederlandsche Bank, as supervisor of the Dutch financial institutions, even requires that at least 50% of the supervisory directors ‘are autonomous within the meaning of the law’. This means something different from the ‘normal’ autonomous attitude that every supervisory director must have. These supervisory directors must meet all kinds of specific autonomy requirements (formulated in the Dutch Corporate Governance Code). This implies, among other things, that they may not have a direct relationship with (one of) the stockholder(s).
This guideline is slowly being implemented in our Caribbean region as well. It would therefore be good if the financial institutions in the Caribbean part of the Kingdom would internally review whether they have properly implemented the necessary separation between board and supervision. Even more important is the proper implementation of a good regulation.
You have nothing to gain from nice rules if they are not implemented and complied with by the players of the game. Every organization must therefore actually ensure that all those involved, from stockholder to director to supervisory director, are well aware of their tasks and roles and responsibilities. That also means a clear awareness of the differences between the responsibilities and of the boundaries between those tasks.
In short, the ultimate responsibility is the same: the interest of the organization. What you should and should not do to safeguard this interest differs depending on whether you have an executive or a supervisory role. For a supervisory director, this certainly leads to a different interpretation of their role than for a director.
A few months ago, an interesting document on this subject became available. On September 14, 2021, the long-awaited ISO 37000 standard (“Governance of Organizations – Guidance”) was introduced. The ISO 37000 is not a governance code. It is a ‘conceptual framework’. It is a principle-based working model and a benchmark. The standard provides points of departure and a structure for good corporate governance. It can be used as a guide and as an assessment framework for virtually all organizations.
To be continued.