Reassessment of the division of powers between the governing bodies of the corporation
PhD student: Mrs J.E. Devilee
Promotors: E.C.H.J. Lokin, G.J.C. Rensen
Duration: 1/10/2018 - 30/9/2022
Ever since the emergence of the corporate form, legal and economic theorists have debated over the question of the appropriate division of power over the different corporate bodies. This division of power brings about a tension that is most prominently visible at the publicly listed company. When fulfilling their task, the management board (and the supervisory board) of the corporation needs to focus on the interest of the company and the business connected with it. Long term value creation is a key aspect in this regard, and the interests of different stakeholders need to be taken into account. The shareholder is one of these stakeholders and is, as a general rule, allowed to pursue his or her own (short term) interest. Moreover, the general meeting of shareholders (AGM) has the right to dismiss a management board member if they see fit. The inherent tension this brings about has recently increased, due to two developments. On the one hand, there is the European legislator that wants to increase the rights of shareholders. This is based on the thought that strengthening the rights of shareholders will contribute to the ability of shareholders to act as countervailing power when the management of the corporation is failing. It will also contribute to the functioning of the market for corporate control, which should in theory encourage the management board of the corporation to deliver better performances. On the other hand, there is a national trend in case law and politics to limit the power of shareholders. Undesirable shareholder activism resulted in a call for protection of the company and its management- and supervisory board. Furthermore, case law has affirmed the autonomy of the management board multiple times over the past decades. Finally, the national Corporate Governance Code 2016 no longer revolves around the principle of long term shareholder value creation, but around the more general principle of long term value creation (in which sustainability and other societal interest also play a role). The opposite developments that have been briefly outlined here, call for a reassessment of the current division of powers over the different corporate bodies.