Litmus test for Dutch bank’s plans to give voting rights to non-investor stakeholders

State-owned Volksbank is working on a new governance model

De Volksbank, the former SNS Bank that has been owned by the Dutch state since it was rescued in 2013, is working on a new governance model aimed at creating a level playing field between shareholders and other stakeholders

The viability of that plan could be tested during the privatisation of the bank that has been agreed by the coalition government.

De Volksbank’s ambition is to shift from the current dominant shareholder value primacy model to a “Shared Value principle” where there is room for “banking with a human touch”.

CEO Maurice Oostendorp has explained the bank’s ambitions at different forums.

For example, during keynote speeches at French business school INSEAD and at the annual conference of Dutch investor group Eumedion, he described his “views on the stakeholder versus shareholder discourse”.

Oostendorp said the “traditional way of thinking attributed to banking” and “deeply rooted patterns” are a challenge for a CEO who wants to “reverse the bank model by not measuring via the usual returns norms, but along the yardstick of human returns”.

“Every organisation, and certainly banks, can only exist in the long term if we are there in the good times and in the bad times. To give the umbrella when it rains, not take it away at that most vulnerable moment,” he said.

Responsible Investor understands that de Volksbank’s ambition involves empowering stakeholders such as employees and customers by creating an AGM where they can vote on a par with shareholders.

Asked about how this new governance model would be put into practice, de Volksbank declined to comment.

RI understands that Jaap Winter, professor of corporate law and partner of governance consultancy firm Phyleon, could be advising de Volksbank in the design of the new governance model.

Winter was the chairman of the High Level Group of Company Law Experts that advised the European Commission on corporate law and corporate governance in the early 2000s and was involved in the drafting of the Dutch Corporate Governance Code in 2003.It emerged in a September 2018 letter from the Ministry of Finance to the Dutch Parliament that de Volksbank had hired Goldman Sachs in preparation for the IPO.

Asked whether de Volksbank’s stakeholder-centric ambitions could hinder the IPO process, a Goldman Sachs spokesperson told RI that the firm just rendered a short-term contract at the bank and it is no longer an advisor. Therefore, the spokesperson declined to comment further.

“To give the umbrella when it rains, not take it away at that most vulnerable moment”

The Ministry’s letter stated that the relevant options for the future ownership structures will be further elaborated once de Volksbank is ready for go public.

NL Financial Investments (NLFI), a body created by a parliamentary resolution, has the mandate of exercising shareholder rights at de Volksbank.

NLFI’s latest progress report on de Volksbank, dated October 2018, concluded that the bank is not ready yet for privatization.

“De Volksbank needs more time to further develop the Shared Value strategy and strengthen its identity as a social bank,” the report stated, among other reasons.

Rients Abma, Executive Director of Eumedion, told RI: “We are sceptical whether an agency model with multiple principals will improve accountability and transparency. It may also increase complexity in decision-making by the so-called stakeholders meeting. Paralysis may be the consequence.”

Abma added that under current Dutch company law and the common governance structures shareholders of Dutch issuers have no formal influence on a company’s strategy.

“Shareholders don’t have the right to approve the company’s strategy. The executive board of an issuer has ample room to execute its own strategy and policy, also a ‘Shared Value’ strategy,” he said.