1. As I mentioned in post No. 138, the chairman of the Dutch National Bank has proposed measures as to bank director renumeration/bonuses that go well beyond the Dutch Banking Code 2009, only introduced some weeks ago. Now, politicians in Congress from the largest political party have proposed that the Dutch National Bank should approve bonus arrangements every time supervisory directors of financial institutions intent to grant a bonus to one or more directors. They are looking for 'radical' changes, and don't believe the comply-or-explain feature of the Dutch Banking Code 2009 will work in practice.
Spuugzat
‘We zijn het spuugzat’, zei CDA-kamerlid Frans de Nerée tot Babberich, ‘het roer moet radicaal om.’ De christendemocraten stellen minister Bos voor om de Nederlandsche Bank een preventieve toets in handen te geven. De raad van commissarissen van een bank moet elk bonusvoorstel eerst ter goedkeuring voorleggen aan de centrale bank. Ook stellen de christendemocraten voor om de verhouding vaste/variabele beloning vast te leggen in de wet.(...)
Code Banken te vrijblijvend
Daarmee gaat het CDA verder dan de gedragscode die banken zelf hebben opgesteld voor beheerste beloning. Deze Code Banken stelt voor dat een prestatiebonus in beginsel niet meer dan één keer het vaste salaris mag zijn. Als een bank meer wil betalen, moet de bank daarover publiekelijk verantwoording afleggen. ‘Wij willen geen “pas toe of leg uit”’, zegt De Nerée, ‘wij willen vooraf toetsen. Nu ook de Britse regering de bonussen aan banden wil leggen voor het financiële centrum, is het tijd om dat ook in Nederland in de wet vast te leggen.’
Right. This would effectively mean that the Dutch National Bank, and not the corporation, would set the limits to bonus arrangements and thus would in the end be at the corporate bonus pay-switch. A sortlike mechanism was recently proposed in the US by the Federal Reserve. As Steve Bainbridge notes, such an approach has serious downsides that need serious consideration before implementation takes place:
My guess would be that government bureaucrats will be over conservative. They won't want the Washington Post and NY Times writing articles about how they were asleep at pay switch. If so, all the problems outlined above [SB mentions four of them, BFA] will be exacerbated. I'm not saying that risk management failures didn't contribute to the financial crisis. They did. I'm not saying that pay policies didn't contribute to those failures. They did. I'm just saying, the Fed damn well better be sure it knows what it's doing here ... and I'm dubious that it does.
Also see Larry Ribstein about "the folly" of regulating pay to reduce risk. All noteworthy stuff. My guess is that these politicians haven't really looked at these or any other downsides, but are rather agressively looking for ways to tackle the renumeration/bonus dilemma and show the public they're really 'hands-on' dealing with this subject. I share Bainbridge's and Ribstein's scepticism in this respect. Why not give the code a chance? If it doesn't work as expected, there's always time and room to think about taking additional steps.
2. Feminism in corporate law land hasn't come to an end, at least not in the Netherlands. This week, some 200 women at the top of their professions have signed a 'Manifesto' for a quota, that was sent to all members of Congress. In it, the signatories try to shatter the glass ceiling by flat-out demanding
legislation for a 40% quota for women on all non-executive Boards of listed companies, and governmental and semi-governmental organisations. The Manifesto, initiated by Woman Capital, an executive search firm, was sent today to the members of the Dutch Parliament, the Cabinet and the Social Economic Council.
The Manifesto commemorates that in spite of many earlier initiatives and commitments given by corporations and other organisations, gender diversity has not been implemented at top management levels. The number of women on Dutch Boards has never risen above 6%; at the current rate the expectation for 2035 is 12%. Bercan Günel, partner at Woman Capital, makes it clear that women’s patience has run out. ”Women have been understanding of the fact that change takes time and they have trusted the common sense of organisations. They had hoped that top management would understand the need for diversity. But far too little has been achieved. We are therefore forced to request Parliament to implement quota legislation.”
The Manifesto also sets a time frame for implementation: within 5 years. By 2014 there should be 40% women appointed to non-executive Board positions. The experience in Norway, where a law was enacted in 2006 for a 40% quota by 2008 , shows that a quota is both achievable and effective. Gunel: “Gender diversity at the top management levels leads to better performance, women at the top are role models for younger women. As women become more visible and more accepted they are more likely to be appointed to other top positions.”
Society currently has a great need for change. With the political agenda focused on resolving the economic crisis, it is the duty of politicians, managers, labour union leaders and shareholders to use every possible measure that will contribute to substantial improvement in the performance of organisations and society as a whole. During this time of transformation the participation of women is indispensible. Günel: “We hope that policy makers in The Hague will realize that they are now responsible for making this happen. Not appointing women in top positions is a huge waste of talent. Women are not the problem, they are the solution.
Nice initiative, that can be seen as a follow-up to the Dutch corporate governance code - updated in December 2008 - that says a few things about diversity on boards, but doesn't really cover this issue. For the manifesto, as well as the list of signatories, go here. Of course, sending out the manifesto is one thing, actually changing the status-quo in the real world is something entirely different and way more difficult to accomplish. But it's a first step. The second step is a proposal by one political party to introduce an aspirational number of 30% for women in boards of directors, to be discussed in Congress in October.
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