Poldering on a World Stage

The supervisor of an intermediate holding company struggling between just being compliant and long term value creation

The polder model in brief
The “polder model”, or “poldering”, is a method of decision-making based on consensus. The term refers to the required co-operation to defend large parts of the land against flooding.  Nowadays, the terms is often used for the tri-partite cooperation between employers’ organisations, labour unions and the government on labour issues and the triple helix for innovation. More generally, the term implies a consensus-based decision-making process in which all stakeholders are involved and all parties give their consent to, and subsequently execute their part of an agreement. The current legislation on (large) intermediary holdings aims to give the employees a voice at the governance table whilst maintaining control for the shareholder.

Non-executive or supervisory board members who supervise a Dutch subsidiary of a multinational company (an “intermediate holding company”) play a relevant part in corporate governance. However, they often run into a number of challenges such as limited formal possibilities, cultural and information barriers and a dependence on the relationship with the shareholder, the local management board and the works council. On top of that, the challenges posed by the Covid19 crisis hamper the possibilities to have personal contact and feeling with the Dutch intermediate holding company. SMC has acquired in-depth knowledge and experience to help supervisors to increase their added value for all stakeholders and help shareholders (top-holdings) to optimise value added by the subsidiary within the Dutch context.

Supervising is more than signing documents

Intermediate holding companies constitute an important part of the Dutch economy. However, the (internal) supervision on intermediate holding companies often lacks substance, meaning it does not meet the expectations that one might have based the general norms for good governance. From our research “Poldering on a World Stage” on the role of the non-executives of intermediate holding companies, we found that:

  • One third of the non-executives sees his or her own role as “merely a formality”;
  • More than half of the non-executives does not fill in the role of employer and networker at all;
  • One third of the non-executives is not or barely involved with long term value creation and risk management.

Our research has shown that the supervision on intermediate holding companies is more than occasionally a paper tiger, which can be characterised by legitimising decisions from the shareholder, without any real supervision, to make sure they are compliant with Dutch regulations. Non-executives run the risk of being stuck between legal boundaries and his or her responsibilities toward long term value creation and society. Besides the fact that supervision is a legal obligation, it also offers benefits to various stakeholders, such as the shareholder and the local management board. Non-executives are often highly qualified professionals from the field of business, politics or academics who can play a valuable part in strengthening long term value creation and mitigating risks at the local level.

Example 1:
A supervisory board of an international intermediate holding company approaches SMC for the facilitation of their self-evaluation. During the interviews, it appears that information sharing between the shareholder and the supervisory board does not run smoothly. Occasionally, information from the top finds its way to the supervisory board through the media. During the self-evaluation, SMC suggests to the supervisory board to get in contact with the corporate secretary, which led to an efficient information protocol allowing the supervisory board to more proactively assist local management to influence stakeholders.

In addition, he or she may often have an interesting network that can be mobilised in order to establish a link with innovation funds, fundamental research or public affairs. A non-executive executing substantial supervision is therefore of added value for all stakeholders.

Example 2:
A supervisory board of a multinational in the Netherlands asks for advice on the positioning toward the shareholder in the USA. The supervisory board struggles to get a grip on long term value creation and risk management. Based on a small number of interviews, it appears that the shareholder considers the supervisory board to be of little strategic importance and a threat to its centralized governance model. SMC organises a workshop during which “the polder”, the added value of the supervisory board and the two-tier governance model are explained. The shareholder learns to makes better use of the supervisory board and in turn, the supervisory board is able to fulfill its task more comfortably.

How can we help you?

SMC has integrated practical and scientific findings on substantial supervision from our research “Poldering on a World Stage” in our services.

First of all, we are able to help foreign shareholders by getting the best out of the “Polder” rather than minimalizing or eliminating local involvement. We have seen too many acquisitions perish because of shareholders missing the synergies possible of the stakeholder model. Our focus is to assist shareholders leveraging.

Secondly, we help non-executives to fulfil their roles in a substantial way when it comes to strategic decisions and procedures “that matter”, such as nomination procedures, investments, preparations for reorganizations et cetera. Additionally, we seek to strengthen the formal tasks and obligations of the non-executive and to embed these in procedures and regulations.

Thirdly, as self-evaluation is considered a best practice for supervisory boards, we assist boards in a made to measure way in the process of self-evaluation and related issues, such as the top structure and organization of local governance.

Our deep knowledge and experience with regard to the dynamics of intermediate holding companies is made available through (incompany) workshops aimed at enhancing substantial supervision and improving the interplay between the supervisory board, local leadership, works council and shareholder interests.


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