Financial Times: Investor confrontation 'shocks' VNU chief: “Aad Jacobs, the 69-year-old VNU chairman whose illustrious career spans posts at Royal Dutch Shell and ING, was reportedly "shocked" to be confronted by investors barely half his age calling the shots over company strategy, recalls one Dutch chief executive: "It is not how he is used to being treated.": Monday 5 December 2005
By Ian Bickerton
Published: December 5 2005
A growing number of Dutch companies has been forced to scrap strategy or ditch management because of shareholder protests as investor activism makes itself more felt.
This development has been highlighted by events at VNU, the business information group that last month abandoned a $7bn US takeover. This has raised concern and confusion in Netherlands' boardrooms, leading shareholder representatives say.
In a country that places great store on consensus, relations between investors and management have rarely been so strained. The list of companies that has been, or continues to be, on the receiving end of investor revolts includes VNU, Unilever, Royal Dutch Shell, CSM, Laurus and Versatel.
While institutional shareholders say their complaints are company-specific, the sheer number has raised questions, nearly two years after the introduction of the Tabaksblat corporate governance code - heralded at the time as among the most advanced in the world.
Peter Paul de Vries, director of VEB, the Dutch shareholders' Association, says: "The traditional Dutch structure was of a management board that decided things and a supervisory board that approved those decisions.
"What happens now is that you have a system of checks and balances. For the older board members, who have had 15 or 20 years in management and 10 to 12 on a supervisory board, it will be very difficult to adapt. I think their eyes have been opened during the last few weeks."
Aad Jacobs, the 69-year-old VNU chairman whose illustrious career spans posts at Royal Dutch Shell and ING, was reportedly "shocked" to be confronted by investors barely half his age calling the shots over company strategy, recalls one Dutch chief executive: "It is not how he is used to being treated."
The ground was laid by events in the late 1990s when Dutch institutions reduced the proportion of domestic shareholdings in their equity portfolios, said Mr de Vries.
Insurance companies such as ING and Fortis, which had historically held sizeable stakes in Dutch companies, pulled out of those holdings - spreading what had been guilder-denominated investments across the eurozone, Mr de Vries said.
That followed the introduction of the euro and the subsequent decline in share values with the collapse of the dotcom boom, which raised solvency concerns, particularly for insurance companies.
The shares were snapped up, predominantly by UK and US institutions with an Anglo-Saxon attitude to investor relations. The Netherlands offered large international companies reasonable credibility and a discount on valuations in relation to other European markets, he says.
This influx of foreign investors partly explains the near-silence of Dutch institutions during recent protests. UK or US funds such as Fidelity, Templeton and Knight Vinke have made the running, not ABP or PGGM, the giant Dutch pension funds.
Paul Frentrop, of Deminor, which represents the rights of minority investors, estimates 80 per cent of shares on the AEX Amsterdam index are in foreign hands.
"The Dutch pension funds while large in terms of assets have relatively few Dutch shares," he said.
"Their asset mix might be 40 per cent shares, of which 30 per cent are in Europe and of that only 5 per cent in the Netherlands. They are not like Templeton or Fidelity which buy 15 per cent in VNU."
The emergence of lobbying on behalf of shareholder rights in the wake of corporate scandals such as that of Ahold, the food retailer, is another factor.
Some companies appear to be listening. CSM, the food ingredients company accused by investors of moving too slowly and in the wrong direction, has acted to heal a rift with shareholders. Last week it announced it would strengthen its executive board.
Gerard Hoetmer, chief executive, has promised "more efficiency and speed of action". Hermes Focus Asset Management Europe, Franklin Mutual Advisers and Lansdowne Partners - which together represent more than one-third of CSM stock - said it was "a move in the right direction".
Laurus, the troubled supermarkets group hammered by a domestic price war, has also called a shareholders meeting for January in response to demands by Amber Fund, which holds 11.5 per cent.
Even where there continues to be resistance, time favours the investors, says Mr de Vries. VNU continued to claim its strategy had been correct even after abandoning it. Mr Jacobs accused shareholders of putting short-term interests above the long-term future of the company.
Mr de Vries says: "I don't think many people even in the corporate world support that view. He is a representative of the old way, and he is due to soon stand down."
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