Leiden Law Blog

A Difficult Conversation

Posted on by Cees de Groot in Private Law
A Difficult Conversation

On 11 September 2013 the Committee on Good Governance in the Semi-Public Sectors pre-sented its report ‘A Difficult Conversation’ (‘Een lastig gesprek’) to the Dutch Minister for Economic Affairs. The principal remit of the Committee was to draft best practice provisions on professional and ethically responsible management and supervision in the semi-public sec-tors. In its report the Committee described the semi-public sectors as primarily those organizations that are responsible for education, social housing, health care and public transport services.

Surprisingly, the Committee did not draft a code of best practice provisions for the semi-public sectors as a whole, but argued that the semi-public sectors would be better served by the introduction of separate codes or the continuation of already existing codes for each of the constituting parts. As for the separate codes, the Committee drew up a number of broad suggestions. Semi-public sector institutions should define both their mission, vision and strategy in terms of their role in society. In particular, the defined mission should guide institutions in their decision making. Executive directors of semi-public sector institutions are ultimately responsible for the functioning of the organization. Non-executive directors of semi-public sector institutions should take on the role of ‘employer’ and as such evaluate periodically the functioning of both the executive directors and the organization. Furthermore, both executive directors and non-executive directors should strive for permanent education. Semi-public sec-tor institutions should draw up realistic long-range budgets, and – when lending money – should restrict themselves to ‘treasury lending’, meaning lending from government agencies. An external accountant should not only evaluate the annual accounts of semi-public sector institutions, but should also issue a forward-looking public statement on the organization’s prospects and risks.

In the Netherlands, semi-public sector institutions are for the most part organized either as associations or foundations under private law (‘QANGOs’) or as part of government (‘QUA-GOs’). In the latter case, they are sometimes simply branches of government or have legal personality under public law. Semi-public sector institutions are for the most part funded from public means. In a number of cases they have run into trouble as a result of inter alia opera-tional mismanagement, paying out excessive remunerations and using risky financial hedging techniques. The fact that they have run into trouble whilst receiving public funds has been at the root of much discontent. This makes it all the more regrettable that the Committee on Good Governance in the Semi-Public Sectors declined from drafting a code of best practices for these organizations.

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