Netherlands: Corporate Governance Issues High on

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