This column is about Cola. And about our Code Corporate Governance. Our Code has more than one hundred and eighty rules of conduct. These rules of conduct have to be observed by managing directors and supervisory directors of state-owned entities. State-owned entities are companies that have been established by the government. The Country of Curaçao can thus be shareholder of a limited liability company. The Country can also have the right to appoint one or more managing directors or supervisory directors in a foundation. In that case, one consequently speaks of a “state-owned entity”. Examples are Aqualectra, FKP, “Stichting Onderhoud Scholen” (School Maintenance Foundation), “Refineria di Korsou” (Curaçao Refinery), Curoil, etc. In Curaçao we have approximately sixty state-owned entities. So there are quite a few.

Comply or explain
Complying with the Code is not entirely mandatory for these companies. For if these companies do not want to comply with the Code on some aspects, it is permitted, however, based on the law they have to explain why they cannot or do not want to. This is the so-called “comply or explain” principle.

Code often too complex
The rules of conduct in the Code are very detailed. This is because our Code is mainly based on the Dutch Code “Tabaksblat”. This Dutch Code was written for companies listed on the stock exchange. They are often very large, sometimes with tens of thousands of employees; hence this complexity. We do not know this type of gigantic companies in the Dutch Caribbean. We only have a few companies with more than one thousand employees. The majority of the companies in our country are relatively small, also the state-owned companies. Yet, this complicated code applies to all state-owned entities. It is a system of one size fits all. I am not an advocate of it. Therefore, I argue to develop a “Code Light”, just like there is Cola “Light” in case you want fewer calories. Or: maintain the current Code for the large state-owned entities, but develop a simpler version for the smaller companies.

An example of the current complexity is how managing directors and supervisory directors are assessed. According to the Code Corporate Governance, you have to assess the performance of the managing directors and supervisory directors twice a year. In isolation, assessment is great. However, according to the Code it has to be done twice a year for the board as a whole and also for each managing director in particular. It also has to be done twice a year for the supervisory board as a whole and also for each supervisory director in particular. In addition, an external body has to be created that has to assess everyone on top of this. All these assessments have to be presented to the General Meeting of Shareholders and be discussed there. If you do all this at a small limited liability company, you will do nothing but assess. You will not have time left for your ordinary work. This completely misses the point.

State-owned foundations
The one size fits all system of the Code Corporate Governance also seriously fails in another aspect. The Code also applies “as much as possible” to state-owned foundations. This does not work at all, however. The majority of the Code Corporate Governance cannot possibly be applied to the often small state-owned foundations we know. An entire chapter of the Code concerns the General Meeting of Shareholders, for instance. A foundation does not have shareholders. So this section is not applicable. The Code also requires a state-owned foundation to have a supervisory board. This supervisory model is not suitable at all and not necessary either for small foundations. Another example: state-owned foundations have to have their financial statements audited by a certified accountant. Nice for the accountants in this country, but absolute nonsense. A small foundation pays more to its accountant than it receives in respect of subsidies. This cannot be what was meant by the code. I therefore argue to create a separate code corporate governance for these (small) foundations. A Code “zero”, so to speak: simple, light, and effective.

Do you have a question about corporate governance yourself? Please e-mail it to governance@ekvandoorne.com and perhaps your question will be discussed in the next column!

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