The government is not automatically an ‘ordinary’ shareholder

It is obvious that in a small community such as that of Curacao, with only a limited choice when it comes to directors and supervisory directors to be appointed, and in which (family, social) networks seem to play an important role in making choices, there is a field of tension. It is even more important therefore that government has a clear vision regarding its shareholdership and that there are good and transparent procedures, e.g. regarding the appointment of directors and supervisory directors.

Does the obligation exist for the government to, briefly stated, appoint the best candidate as director instead of the candidate of the political party of the Minister in question? I do not think Curacao corporate law imposes such an obligation on the shareholder. The shareholder is free to appoint whoever he wants as long as he does not abuse his voting rights and appointing political friends (if they at least are able of marginally standing up to the quality test) is, in my opinion, in principle not a form of abuse in the sense of corporate law. Perhaps it is a form of abuse in the sense of (political or) administrative-law, but that is, in principle, a different matter.

Has everything therewith been said then? In 2005, the OECD issued the ‘Guidelines on Corporate Governance of State owned Enterprises’. Among other things, the following has been laid down:

The State should act as an informed and active owner and establish a clear and consistent ownership policy, ensuring that the governance of the state owned enterprises is carried out in a transparent and accountable manner, with the necessary degree of professionalism and effectiveness. (…) The government should not be involved in the day-to-day management of SOEs and allow them full operational autonomy to achieve their defined objectives. (…) The state should let SOE boards exercise their responsibilities and respect their independence.

Thus, it is demanded from the government that, e.g. policies are formulated, so that it is clear how the government should behave as shareholder, where the basic principles are ‘transparency’ and the ‘accountability of a state (to the public)’, while the government is also expected to take a professional and result-oriented attitude. According to the OECD that also means that the government must not be involved in the daily management (the ‘day-to-day business’) and that the government has to allow the enterprise full operational autonomy.

The government as shareholder of ABN Amro Bank was briefly discussed before. The role of the government as shareholder raises all kinds of questions, the answer to which will (partly) depend on the vision that is held regarding that role. It concerns a great variety of questions, such as for example:

  • Is the government as shareholder allowed to use the voting rights attached to the shares to promote the public’s interests, for example by ordering banks to use favorable conditions to credit applications for investments in sustainable energy?
  • Will the government, as shareholder of these banks, behave differently from the ‘ordinary’ shareholder since it now concerns pillars of the financial system that ‘cost what it may’ have to be kept standing?
  • Is the government, as shareholder, allowed to pursue a more stringent policy concerning bonuses because it is simply the policy of the government, even though an ‘ordinary’ shareholder possible would not do so for business reasons?
  • Is the government allowed to give instructions to a state bank to take out loans with government-owned companies against more favorable conditions than those applied for other companies?
  • Is the government allowed to use information it receives as shareholder about situations of abuse within the NV or about environmental offenses in its public duty as enforcer of the law?
  • When and to what extent does information that is connected to the shareholdership fall under the rules for open government?
  • In which cases can employees of an NV of which the government holds all shares be considered and in which cases can they not be considered a ‘civil servant’ in the sense of the Penal Code?
  • Does the shareholdership of the government constitute conflicts of interest or the appearance thereof, e.g. when the NV of the government does (promptly) get a concession, but a privately held NV does not?

These questions show that the government is not automatically an ‘ordinary’ shareholder. (To be continued)

Karel Frielink
Attorney (Lawyer) / Partner

(7 June 2012)


Jun 2012


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