Some people think he’s a showboat. He sometimes speaks for hours at shareholder meetings, grilling executives on what seem to be nitpicking points. More than one CEO has tried to shut him up only to be forced to relent after shareholders revolted. If there is a corporate scandal in the Netherlands, Peter Paul de Vries will be in the middle of it, fighting for the rights of investors.
As director of the Hague-based shareholder lobby group, the VEB (Veregniging van Effectenbezitters), De Vries has been occupied with some of Europe’s biggest corporate stories, including the accounting irregularities at Ahold. The VEB represents 6,000 Ahold investors and plans to file suit against the company either for misinformation (if the executives knew about the problems at its US unit where earnings were inflated) or for mismanagement if they did not know. The VEB has ten to 15 lawsuits against Dutch companies running at most times – usually involving mismanagement or misinformation – and has helped get back millions of euros for disgruntled shareholders.
But De Vries says the emphasis is on good working relationships with Dutch companies. ‘We know all of the Dutch managers. We try to have a decent relationship with them, but we skip the luxurious dinners in favor of more formal settings,’ says the serious Dutchman, who, along with his 20-person staff, attends 150 shareholder meetings a year. The group has 27,500 institutional and retail investor members, many from other European countries and the US.
De Vries’s biggest frustration is seeing the same issues coming up repeatedly – corporate governance has improved little in his 13 years at the VEB and lack of transparency is rampant, as are devices designed to shield management. ‘We want to hear clear goals and strategies. We’ve made progress, but difficult economic times make it hard for companies to present concrete goals,’ he says, ridiculing firms that have published unrealistic targets to boost shares or grown revenues only through acquisitions, ultimately adding little value.
‘Companies blamed shareholders for demanding higher targets. But it didn’t happen like that,’ De Vries says. ‘Investors have never asked companies to cheat. We’ve called for transparency, but the real figures were hidden by acquisition accounting… You can hide a lot of bad results by taking provisions.’
The biggest barrier to shareholder empowerment in Europe is the use of anti-takeover tools which keep management safe, he says. ‘In France or Germany you have more natural takeover protection because large companies and the governments own large stakes. But in the Netherlands you have legal constructions written to protect management and boards. These were adopted in the 1970s when profit was a dirty word.’ De Vries partly blames anti-takeover clauses and the absence of real compliance enforcement for the steeper falls in European share markets than those in the US: ‘The US investors get out at the first sign of trouble as they know little can be done.’
One change he likes is the trend toward quarterly reports in Europe. The frequency of reporting gives already skittish investors a chance to review their investment decisions. ‘We are now in a more healthy part of the cycle as investors are questioning everything and not giving companies their money. Companies are focusing on good cash management and that’s a healthy reaction to the excesses of the period up to 2001.’
While US pension funds have been calling management to account, De Vries laments the feebleness of most European investors: ‘Large shareholders don’t want to vote against management because the banks are the largest shareholders and they don’t want to lose business. Pension funds are afraid of making waves.’ The VEB works closely with other shareholder groups like Germany’s DSW and Sweden’s Aktiespararna, but De Vries says that in other European countries, shareholder lobbies are less active.
De Vries says most IR people are working with their hands tied. ‘They can do their best, but good IR depends on a commitment at the board level to be open about information. If that’s not the case, you cannot have good IR,’ he says, adding that the job is now more difficult than it was in boom times. Still, he is critical of IROs for being a one-way conduit: ‘They should be listening to shareholders. If they are only conveying the message of the board, then it’s not a healthy relationship with investors.’
