US embassy cable - 03THEHAGUE2177

UNCLAS SECTION 01 OF 02 THE HAGUE 002177 
 
SIPDIS 
 
State pass Securities and Exchange Commission 
 
Treasury for OASIA/Mathieu 
 
USDOC for 4212/USFCS/MAC/EUR/OWE/DDEFALCO 
USDOC FOR 3133/USFCS/OIO/OWE/ESLETTEN/PBUCHER 
 
E.O. 12958 N/A 
TAGS: EFIN, EINV, NL, EUN 
SUBJECT: Netherlands: Corporate Governance Issues High on 
Agenda 
 
 
1.  Summary: Dutch officials told the Ambassador that 
Sarbanes-Oxley implementation is still a matter of great 
concern to the Dutch financial community.  They acknowledge 
that U.S. regulators have some flexibility in implementing 
the law's provisions but fear European voices will not find 
a receptive audience.  Given the prominence of Dutch 
multinationals in transatlantic trade investment and the 
great many Dutch officials with prominent financial 
positions in the EU, we believe U.S. officials charged with 
transatlantic corporate governance issues would find it 
worthwhile to add The Hague to their itineraries. 
Meanwhile, changes to Dutch corporate governance structures 
should increase shareholder and supervisory board influence 
at the expense of managing boards.  End Summary 
 
TRANSATLANTIC CONCERNS 
 
2.  As the government and parliament get back to work after 
the end of summer holidays, corporate governance issues -- 
both local and transatlantic - have assumed new prominence 
on the Dutch economic policy agenda.  Finance Minister Zalm 
has been briefed on the major issues by both his staff and 
senior officials of major Dutch companies, such as the Dutch 
Chairmen of the four major international accounting firms. 
Treasurer General van Dijkhuizen told the Ambassador that 
U.S. implementation of Sarbanes Oxley continues to be of 
major concern particularly because of the administrative 
burden placed on Dutch auditing companies by its 
registration requirements adopted by the Public Company 
Auditing Oversight Board.  Van Dijkhuizen acknowledged that 
the law provided the SEC with considerable discretion as far 
as implementation but thought that the political climate in 
Congress was unlikely to allow the SEC much flexibility.  He 
said that Dutch firms did not believe they could effectively 
lobby the SEC or Congress regarding Sarbanes Oxley 
implementation having received the impression that their 
voices, no matter how insistently raised, would not be 
listened to. In a separate meeting with the Ambassador, the 
Dutch chairmen of the four international accounting firms, 
said that Sarbanes Oxley would make companies less likely to 
list on a U.S. stock exchange and identified the main 
problems as 1) the law raises costs to European companies 
while providing no real benefits and 2) it places a 
burdensome fiduciary responsibility directly on corporate 
heads. 
 
DOMESTIC ISSUES 
 
3.  Meanwhile, a Dutch blue ribbon committee headed by 
former Unilever Chairman Morris Tabaksblat has issued an 
extensive list of far reaching recommendations for reform of 
Dutch corporate structures and behavior (the entire text of 
the recommendations can be found in English at 
http://www.commissiecorporategovernance.nl/Co nceptcode). 
The recommendations strengthen the position of shareholders 
and the supervisory board at the expense of the management 
board.  They contain limitations on the remuneration of 
management board members, limit the number of executive 
board memberships that can be held by an individual, and 
require the supervisory boards to be more intimate with the 
details of company management.  The Dutch establishment has 
reacted negatively on two levels: 1) supervisory board 
members fear adoption of the recommendations would break up 
the cushy old boys network that has dominated Dutch 
corporate life  and 2) many management board members dislike 
the proposed remuneration limits.  Finance Minister Zalm has 
said, however, that if Dutch companies do not adopt the bulk 
of the recommendations voluntarily (through a "comply or 
explain" system) he will push for their legislative 
enactment. 
 
RECOMMENDATION 
 
4.  We believe that it would be worthwhile for senior U.S. 
officials involved in transatlantic financial officials call 
on relevant Dutch officials when they come to Europe. 
The Netherlands is preparing for their 2004 (latter half) EU 
presidency, and Dutch officials hold several influential 
European and international financial positions, for example: 
 
-- Treasurer General van Dijkhuizen is Chairman of the 
ECOFIN's Financial Services Committee; 
 
-- Financial Markets Authority Chairman Docters van Leeuwen 
is also Chairman of the European Securities Regulators; 
 
-- Central Bank Chairman Wellink is also Chairman of the 
Bank for International Settlements; 
 
-- Rotterdam lawyer Jaap Winter is Chairman of an Experts 
Group advising the European Union on Corporate Governance; 
 
 
5.  Engagement between senior Dutch and U.S. officials at 
this juncture would seem particularly important because the 
Dutchmen with whom we have been interacting are either 
downplaying or unaware of USG initiatives to increase 
dialogue and address European concerns with Sarbanes-Oxley. 
Discussing issues with Dutch officials directly would likely 
bring real benefits. 
Sobel