On the Concept of Corporate Culture

Abstract

The Dutch Corporate Governance Code, published in 2016, stipulates in its Principle 2.5 that the executive board is responsible for creating a culture aimed at longterm value creation by the firm and that the supervisory board is tasked to monitor the actions implemented for this by the executive board.1 In the best practice 2.5.1, the Code stipulates that the executive board defines values for the firm that contribute to a culture aimed at long-term value creation, to be discussed with the supervisory board. In the same best practice, it is stipulated that the executive board stimulates behaviour that matches these values and that the executive board sends a message to the organisation with respect to these values by demonstrating exemplary behaviour. In best practice 2.5.4, the Code stipulates that the executive board must give account on culture by reporting on the values and the way these are embedded in the organisation of the firm. The Dutch Corporate Governance Code is mandatory for public corporations, but the courts, including the Dutch Supreme Court, tend to take the Code also as a standard for good practice in business administration in all other cases. The Dutch Corporate Governance Code 2016 moves the phenomenon of corporate culture from the domain of informal administrative instruments to the domain of the legal aspects of business administration. The phe-