Academic journal article Management : Journal of Contemporary Management Issues

Trends in Dutch Executive Compensation

Academic journal article Management : Journal of Contemporary Management Issues

Trends in Dutch Executive Compensation

Article excerpt

Received: 19. 05. 2008

Accepted: 03. 12. 2009


UDC 65.012.4(492)

This article describes the trends in Dutch executive pay contracts. To increase our insight into this subject area, we conducted an empirical study on the basis of remuneration data provided by the executive board members of 71 Dutch listed companies over the period 2002-2004. The study starts from the premise that the characteristics of a unique corporate governance regime, together with the environmental context, shape compensation arrangements. Based on a theoretical research study, which combines our empirical research results with a literature overview, we argue that an optimal compensation arrangement is a trade-off among complying with corporate governance standards, optimizing potential incentives, preventing perverse incentives and offering a competitive pay package. It appears that this trade-off differs with each company at any moment in time. The relevance of this study may be threefold. First, its results can help shape the public debate about the pay of top executives in the Netherlands. Second, it could serve as a blueprint for future research on executive compensation in the specific context of the Dutch governance system. Furthermore, it could help remuneration committees in designing optimal compensation packages.


One could regard the Dutch corporate governance system as a combination of the Anglo-Saxon and Continental-European governance systems2. A study of how executive compensation practices have evolved in such a landscape is therefore an interesting one. Since a couple of years now, Dutch executive compensation and corporate governance practices have been the subject of a heated debate. Large share price increases and subsequent option gains in the late '90s led former Dutch prime-minister Wim Kok, as one of the first, to openly agitate against the 'exhibitionistic self-enrichment' of top executives. Since then, in 2002, the disclosure of the remuneration data of all individual members of the executive board was made compulsory; each year around springtime, when excessive amounts of compensation are revealed, a carnival of social outrage and debate breaks out.

In addition, as a result of the accounting scandals at the beginning of the 21st century, the Dutch corporate governance environment has profoundly changed. The prime exponent of this changing corporate governance environment was the implementation of the Dutch Corporate Governance Code in 2003, more commonly referred to as the Tabaksblat Code3. The combination of a unique governance system and a rapidly changing business environment makes Dutch executive compensation an interesting topic for research. This research could shed light on the influence of the public pressure on and political interference in compensation practices in an environment of increasing shareholder pressure, in which shareholder value creation has become the prime measure of business success.


Typical of the Dutch corporate governance regime is its two-tier board structure in which the executive board ('Raad van Bestuur') is responsible for the daily operations of the firm and the supervisory board ('Raad van Commissarissen') carries out the tasks of appointing, monitoring, suspending and dismissing (if necessary) the members of the executive board as well as assessing and ratifying major business decisions. The members of the supervisory board are appointed by co-optation for a four-year term (Van Ees et al., 2003). Under the influence of a number of Anglo-Dutch companies and the increase in Anglo-Saxon shareholdings, one can observe a slow shift in preference for the Anglo-Saxon unitary board structure.

In the past, this system could be characterized by a large degree of protectionism and managerial entrenchment. By issuing preference shares, tradable depository receipts and priority shares with limited voting rights as well as installing administration offices, ownership was effectively separated from control, thereby ensuring take-over defences in the case of a hostile take-over bid. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed


An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.