Decline of the Corporate Community

Front matter

Eelke M. Heemskerk

AMSTERDAM UNIVERSITY PRESS

Decline of the Corporate Community

Preface

With the turn of the century came an end to a period of perceived economic prosperity. Many believed that the rapid innovation in information and communication technology (ICT) meant that a ‘new economy’ had emerged. The belief in this new economy was the foundation of the ICT or ‘dotcom’ bubble of the late 1990s. However, by the turn of the century, it became crystal clear that stocks in ‘new economy’ companies were no different from the highly praised investment objects in earlier economic bubbles, such as the stocks of the South Sea Company in the early eighteenth-century Britain, or tulips during the seventeenth-century Tulip Mania in Holland. As always, the bubble did eventually burst. But this time, it was not only investors who suffered great losses. As it turned out, the corporate leadership of some of the most appreciated and highly valued corporations across the western industrialised world was found to be guilty of fraud and severe mismanagement. In their quest for ever-growing market value, these corporate directors used every means at their disposal to achieve high stock appreciation, including fraudulous accounting schemes. At the same time, the directors filled their pockets with corporate revenues through extremely large remuneration packages. During the glorious days of the investment bubble, directors of corporations such as Enron, Worldcom, Parmalat and Ahold were still considered by friends and foes as no less than beneficiaries of society. But when the economic tide turned, and their dark side became clear, they were outcast, fired, penalised, and in some cases sent to jail.

The scandals and incidences of corporate fraud underlined that good corporate governance is not merely a nice and noble goal, but a necessity. And it is up to those who occupy the control centres of the corporate economy to live up to the highest standards of corporate governance. As a group, it is up to the corporate elite to assure good corporate governance. But is the contemporary corporate elite able to do so? On the one hand, the ‘old boys network’ forms a social environment which can uphold those badly needed norms of good governance and proper behaviour. On the other hand, the concentration of corporate control in the hands of a relatively small, homogeneous and closed corporate elite has long been recognised as a democratic difficulty of capitalism.

My personal interest for social networks of the corporate elite was raised on a summer afternoon in 2001, when Meindert Fennema invited me to participate in a research group on globalisation and corporate power, taking place that year at the Netherlands Institute for Advanced Study in the Humanities and Social Sciences. I took up the task of investigating the network of corporate board interlocks in the Netherlands, and found myself privileged to be working with William Carroll, Malcolm Alexander, Meindert Fennema and, most closely, Robert Mokken. By the summer of 2002, we had found that long-standing practices of intense intertwined networks of corporations at the level of the boards were slowly but steadily removed. For us, these findings raised more questions than they answered. Most importantly, we were particularly interested in the interplay between the network of corporations on the one hand, and the network of corporate directors on the other. The inter-firm network of corporate board interlocks we investigated forms one side of the coin. The social interaction network of the corporate elite forms the other side. Looking at just one of these two ‘projections’ of the network of board interlocks renders an incomplete view. Rather, both the interpersonal and the inter-corporate network must be analysed in conjunction, if we want to understand fully the dynamics of network of interlocking directorates. This book aims to do so.

This book contains an analysis of the network of interlocking directorates of the largest 250 firms in the Netherlands at three points in time: 1976, 1996 and 2001. However, if we really want to understand the role these networks play for the corporate elite and corporate governance, we need to acquire more detailed, qualitative insights as well. Therefore, a number of interviews were organised with members of the corporate elite. I am extremely grateful for the time and effort these people invested in this research. Their willingness to share their smart and keen observations has been invaluable to this book. In alphabetical order, I would like to thank them: J. Aalberts, Ir. J.G. Andreae, Viscount E. Davignon, Drs. J.A.N. van Dijk, Prof. Mr. AJ.C.M. Geers, Prof. Drs. CAJ. Herkströter, Mr. P.C. van den Hoek, Mr. E.M. d'Hondt, Drs. F.H.J. Koffrie, Drs. R.H.Ph.W. Kottman, A.H. Land, Ir. J.M. Leemhuis-Stout, Jhr. Mr. A.A. Loudon, Ing. M.I. Platschorre, Dr. A.H.G. Rinooy Kan, Prof. Dr. A.J.M. Roobeek, Mr. B. Staal, Ir. P.O. Vermeulen, Dr. J.AJ. Vink, Prof. Dr. A.H.C.M. Walravens, Drs. A. Wateler, Mr. N.J. Westdijk, Mr. A. Westerlaken and Dr. H.H.F. Wijffels.

In some ways, I am not so different from the corporate directors this book investigates. We both draw on our social networks for help, insights, comments, critiques, resources and friendship. There are many people who contributed to this book. I wrote this book when I was at the Amsterdam School for Social science Research (ASSR) at the University of Amsterdam, the ASSR financed and supported this research. The school offers a unique heteroge-

12 PREFACE neous academic community of high standard, with a great group of talented and motivated young scholars. My time there has been a wonderful, extremely stimulating period. At the office, Hans Sonneveld and José Komen, together with Teun Bijvoet, Anneke Dammers and Miriam May form the cornerstones of the ASSR. During those years, I was lucky to be able to draw from good students. In particular, I would like to mention Mijke van Ballegooijen, who contributed much to this research while she was working on her MA thesis on corporate social responsibility. Michiel Bezemer assisted me with the collection of the data. Typical for the ASSR atmosphere, Brian Burgoon left his mark on this book as ‘reverend’ of our International Political Economy club. Our bi-weekly meetings have been an extremely fruitful place to discuss our work, and I owe much to all who participated in these meetings. I thank my colleagues for their friendship, as well as for their comments and critiques on many aspects of my work. In particular, Sjoukje, Mara, Josien, Marta and Gianluca, thanks for your support and friendships. Joost, your comradeship has become extremely precious to me. Furthermore, my friends in Ermelo, Amsterdam and abroad have been a much-needed social anchor for me in the sometimes turbulent waters of this research.

I benefited from scholarly support of many, including, Martin Höpner, Gerhard Schnyder, Gerald Davis, Andreas Nölke and Henk Overbeek. I would like to thank Bruce Kogut for getting me acquainted with a very stimulating international community of academics. Bert Schijf s knowledge on elite research has proved to be an important source of information for me. Nico Wilterdink provided comments on earlier drafts, and John Scott, Jaap Boonstra and Abe de Jong shared their comments and critique in the final stage. A special word of thanks goes to Robert Mokken, whose clear mind and ideas have been so stimulating to me. He provided me with the incentive to embark on the journey which led me to write this book. In the final stage, his comments were invaluable as well. Jelle Visser was with me throughout the entire project. He helped to shape this book by his smart and to-the-point comments. This book could have never been written without the relentless support and friendship of Meindert Fennema. It was he who put me on the trail of scientific research, and guided me all throughout the thorny path which culminated in this book. Thank you.

Froukje made it all possible. She helped me and supported me in all imaginable aspects one has to deal with when writing a book. She commented on my drafts, gave me confidence when I most needed it, and most importantly, she ensures that my life extends well beyond the confinements of academia. Thank you so much.

Finally, I pay gratitude to those who have been with me the longest. I am fortunate to have a family who has always supported me, even when my enthusiasm over quite incomprehensible topics surmounted time and

PREFACE 13 again. I thank Yuri, Mireille, and my parents, Carla and Gerard. Of course, notwithstanding the collaborative nature of writing a book, any mistakes, errors and omissions are solely my responsibility.

Eelke M. Heemskerk Amsterdam, Winter 2006.

14 PREFACE

In the early years of the twenty-first century, it became evident that directors of a considerable number of large - and very much respected firms - were engaged in corporate fraud and severe mismanagement, leading to the (near) collapse of firms such as Enron, Worldcom, Parmalat, Ahold and many more. As a result of the fraud, value worth billions was destroyed and jobs and savings were lost. The primary driving factor behind the corporate scandals was the effort of top directors to uphold the appreciation of the shares of their firms on the stock market. These directors were deeply entangled in the struggle for ongoing growth of shareholder value. The growth targets of the fraudulent firms were at extraordinarily high levels, compared to the industries averages (Cools 2005). A study of 25 fraudulent international corporations compared with 25 comparable ‘non-fraudulent’ firms revealed some additional interesting findings on the nature of the failure of corporate governance. As it turned out, compliance with formal ‘good corporate governance’ rules and regulations proved to be insignificant for predicting governance failure. While these stipulations and best practices were especially designed over the past ten years to safeguard and increase the quality of corporate control, they prove quite ineffective. Other indications proved more useful in spotting potential governance failure.

First of all, chief executive officers (CEOs) of fraudulent firms enjoyed a very positive public reputation. They were not only mentioned more often, but also more positively in newspapers and magazines than their colleagues of the ‘non-fraudulent’ firms were. For example, in his glory days, former Ahold CEO Cees van der Hoeven was often referred to as ‘Emperor Cees’ (Keizer Cees), and frequently made his appearance in popular television programs and the columns of tabloids. As one smart investor said, “When I increasingly saw the CEO of Ahold at this kind of meetings, I sold everything’ (Cools 2005, p. 53, author’s translation; De Jong et al. 2005a provide an overview of the Ahold case; while Smit 2004 sketches the entire drama in his book).

Second, CEOs of companies where fraud has been established had eight times as many stock options and stocks than their ‘non-fraud’ colleagues (Cools 2005). This is somewhat ironic, as stock options and stocks are included in the remuneration schemes of top executives in order to align their personal interests with those of the firm and its shareholders. Granting the managers and directors pieces of (future) ownership is supposed to discipline them to act in the best interests of the shareholders. However, these mechanisms proved to serve as perverse incentives, stimulating directors to cheat and commit fraud. Looking at the past, those who are interested in predicting future corporate fraud should be watching for over-optimistic corporate results and ‘sovereign behaviour’ amongst corporate directors.

The repercussions of the failure of corporate governance reach beyond those who are directly affected, such as employees and their families, shareholders, and small and large investors. The question is whether the scandals are exceptional cases, or only the tip of an iceberg. They raise doubts about the efficacy of shareholder-oriented capitalism, which has received more and more appreciation over the past decades. Albert (1991) has made a distinction between two forms of capitalism:! Rhenish and Anglo-American. In the first form, there is a focus on long-term prospects, social welfare provisions and government involvement in business. Competition plays a role, but direct coordination (for instance in industrial relations) is quite common. In the Anglo-American form, the focus is much more on direct competition as a leading principle. Individual achievements and short-term profits determine individual and corporate behaviour. Albert’s book provoked a great number of comparative studies on forms of capitalism. A multitude of terminology emerged that describes differences in advanced capitalism. Dore (2002) speaks of stock market capitalism and welfare capitalism; Nestor and Thompson (1999) of insider and outsider systems; Berglöv (1990) chooses the terms bankoriented and market-oriented system; and Moerland explicitly speaks of network-oriented systems as opposed to market-oriented ones (Moerland 1995a; Moerland 1995b).? The common denominator in all these typologies is that they all deal with the extent to which the liberal market mechanism of competition is complemented by other means of (economic) coordination. Basically, all the ideal types can be characterised by Hirschman’s distinction between strategies of voice and exit (Hirschman 1970), where exit is embodied by arm’s-length coordination through liberal market behaviour, and voice based on coordination next to existing liberal market relations. The extent to which liberal market mechanisms can, or even should be supplemented by other forms of coordination is one of the most fundamental normative issues in contemporary political economy, as there is a very large difference across business systems in the appreciation for coordination beyond the liberal market mechanism.

Building on these prevailing notions of forms of capitalism, Hall and Soskice propose a dichotomy of market models. On the one hand, there is the liberal market economy (LME), and on the other hand the coordinated market economy (CME). Where in a LME the equilibrium outcome of firm behaviour is the result of demand and supply conditions in a competitive market, in a CME this equilibrium is the result of strategic interaction among firms and other actors (Hall and Soskice 2001a, p. 8).* The LME and CME models are close to a shareholder-oriented and a stakeholder-oriented economy. Table 1.1 summarises a number of elements and characteristics that are commonly used to discern types of capitalism.

Table l.l: Characteristics of Forms of Capitalism

Coordinated Market Economy

Liberal Market Economy

Labels

Conception of firm

Interest orientation Influencing strategy Ownership

Board structure Stock market Takeover market Coordination

Inter-firm relations

Rhenish capitalism, stakeholder model, welfare state capitalism, network oriented economy, organised capitalism Community of interests

Stakeholders

Voice

Concentrated Two-tier

Less developed

Rare

Between market and hierarchy

Durable

Anglo-American capitalism, shareholder model, stock market capitalism, market oriented economy, disorganised capitalism Value-creating instrument for shareholder Shareholders

Exit

Dispersed

One-tier

Highly developed Common practice

Market or hierarchy

Arm’s length

(soures: Fennema 1982; Freeman 1984; Friedman 1962/1982; Frooman 1999; Heemskerk, Mokken and Fennema 2003; Hirschman 1970; Nooteboom 1999; Weimar and Paape 1999).

In coordinated market economies the concept of the firm is one of a community of interest, where all that have a stake in the firm should be able to voice their concerns. Ownership of the corporation is typically concentrated in only a few hands. The stock market is relatively underdeveloped, as is the market for corporate control (the market for large pieces of corporate ownership which will render the owner effective control over the firm). A two-tier board structure with a separate executive and supervisory board is common in CMEs. On the contrary, in LMEs the firm is first and foremost a value-

INTRODUCTION 17 creating instrument of the shareholders. Ownership is dispersed and fragmented, and exit strategies of influence are preferred over voice. Capital and takeover markets are relatively developed. A one-tier board structure is common in LMEs. The coordination mechanisms of an LME are hierarchy within the firm and competition between firms. On the contrary, in a CME coordination can also come about through networks positioned in between markets and hierarchies. In a LME, durable corporate networks are a liability, while in CMEs they are considered to be an asset.*

The stark differences in normative or political consensus on how the economy should be organised shows in the legal framework as well. Corporate law defines what a corporation is, its responsibilities, opportunities and possibilities. Law is frozen politics: an outcome of political struggles between stakeholders, and as such a codification of particular norms and values, convictions and political trade-offs. A general distinction can be made between the extent to which regulation is based upon rules and legislation, or upon principles. On the one hand, rule-based corporate governance (or per se prohibition) is firmly based on legislation; all corporate governance stipulations are codified in law. Rule-based corporate governance is strong in countries such as the USA. Principle-based governance (or rule of reason), on the other hand, is well appreciated in continental Western Europe. Trying to avoid the rigidity of rule-based governance, principle-based governance leaves room for self-regulation and self-organisation of business, on the basis of commonly accepted business principles. Thus, in the USA, building on a long tradition of rule-based intervention in corporate governance, the Enron debacle in 2001 led to the (hasty) construction of the Sarbanes-Oxley Act. Rules and legislation are used to confine and discipline corporations and the corporate elite. Many European countries, however, endorse a principle-based code of good governance, which leaves room for manoeuvring and flexibility. A crucial element in principle-based codes of good governance is the concept of ‘comply or explain’. A corporation can divert from the guidelines and principles of a code, as long as they explain why they choose to do so.”

A key issue in comparative studies of business systems is whether national varieties of capitalism endure, or whether convergence between different forms of capitalism across the globe results in an ever similar, global form of capitalism. More specifically, the question boils down to whether Rhenish countries are becoming more and more Anglo-American. The failure of corporate governance as it was revealed through the cases of fraud and mismanagement at the beginning of the twenty-first century further provokes the issue of national forms of capitalism. This revealed that the dominant, shareholder-oriented form of capitalism was not flawless at all. In fact, methods carefully designed under the aegis of shareholder interests to increase the quality of corporate governance proved to be ineffective or even counterproductive in disciplining corporate directors. The international scope in strategy, finance and operations of the firms that fell victim to corporate fraud underscores the potential importance of the internationalisation of business and finance in these matters. One consequence of such globalisation is that corporate directors are less embedded in national elite networks.

For a long time, social networks between the top decision-making bodies of the largest corporations contributed to the cohesion of business and the corporate elite. Throughout the twentieth century, big business in the Western industrialised world has been organised in national business communities. Foundational elements of these business communities are corporate board ‘interlocks’, where corporate directors sit on multiple boards. These interlocking directorates tie together a corporate elite network that spans the corporate control centres of the economy. But in recent times, the architecture of these ubiquitous networks of interlocking corporate directorates has changed. In countries as diverse as Norway (Grønmo and Leyning 2002), Germany (Beyer and Höpner 2003), Spain (Rodriguez 2002), Switzerland (Schnyder et al. 2005), Canada (Carroll 2002), New Zealand (Roy, Fox and Hamilton 1994), the United Kingdom (Windolf 2002), the USA (Davis, Yoo and Baker 2003) and the Netherlands (Heemskerk, Mokken and Fennema 2003; Stokman, Van der Knoop and Wasseur 1988), networks of corporate board interlocks show signs of decline.® At the level of corporate directors, it might very well be the case that the national business communities they were once embedded in are now gone. This ‘disembedding’ of corporate directors alters the social reality of the corporate elite. One of the arguments this chapter advances is that the business community can function as a touchstone for behaviour, providing for norms and values that guide conduct.

This study investigates the leading firms and the corporate elite of one West-European country: the Netherlands. The Netherlands is a small, internationally oriented country with a relatively large number of multinational corporations. It is widely considered to be a Rhenish country, and has relatively strong corporate networks. Although some early research already revealed patterns of interlocking directorates in the early twentieth century, it was not until the 1970s that an entire network of corporate board interlocks was exposed. The accumulation of many corporate board positions by the corporate elite has led to concerns about the concentration of too much (positional) power in the hands of a few. Concentration of (economic) power by means of board interlocks remained topical throughout the twentieth century (Davis 1996; Dooley 1969; Haunschild 1993; Levine 1972; Means 1939; Mintz and Schwartz 1981; Palmer 1983; Pennings 1980; Sonquist and Koenig 1975; Sweezy 1953; Useem 1984). Some early research already revealed patterns of interlocking directorates. These studies start with a few

INTRODUCTION 19 of the largest firms or banks, and map the relations of its directors with other firms, with the goal of understanding the way in which corporate power and control coincide in a small group in society: the corporate elite. However insightful the findings might have been, it remained a highly limited approach in that it lacked a full understanding of the overall structure of the network in which the largest firms are embedded at the highest level of corporate control. It was not until the early 1970s that a network of corporate board interlocks in the Netherlands was revealed.

Corporate Power and the Corporate Elite

By the late 1960s, concentration of corporate power became topical in the Dutch public debate. Interlocking directorates in particular were targeted as signposts of the concentration of corporate power in the hands of a relatively small group of corporate director. In 1968, the Catholic trade union leader PJ.J. Mertens addressed the issue of corporate power in a speech, arguing that a group of roughly two hundred men controlled the Dutch economy. According to Mertens, this group of directors was well acquainted, not in the least place because of their shared board memberships. He described them as a group which is ‘as skilled and financially strong as it is frightening’.” Since then, the ‘Mertens 200’ became the shorthand expression for excessive concentration of economic power in the Netherlands. While there is no indication that Mertens himself had strong empirical evidence to support his claim,’ it was not the first time that the number 200 had come up. In France, bankers were attacked as early as 1869 for the many board positions they held. It was said that a group of 200 people were running French business through a network of their directorships and shareholdings (Zeldin 1973, p. 53-54, quoted in Schijf 1993). And, in 1934, the French radical socialist, Edouard Daladier, spoke of two hundred families who ran businesses as well as politics in France (Schijf 1993, p. 16).

Inspired by the public debate about the ‘Mertens 200’, new techniques and methods of computer-based network analysis were applied to map and analyse the network of interlocking directorates for the largest 86 corporations in the Netherlands (Helmers et al. 1975; Mokken 1971). The results of this study (entitled Traces of Power) were astonishing. Not only did the analysis show that all but two of the 86 largest Dutch firms were indeed connected in one network of interlocking directorates, they also corroborated Mertens’ thesis. The 84 firms were connected through 873 interlocks, which were in turn carried by a group of 195 directors, only five people less than Mertens had predicted. The publication of the preliminary research report hit like a bomb, and stirred public debate even more than Mertens’ initial speech had done three years earlier. The media was excited about finding a dense network of corporate directors spanning the control centres of the economy, as might have be expected. However, the uncovering of the corporate elite network aroused particularly fierce reactions from within the circles of the corporate elite itself.

While the researchers stressed that, for them, power rests with institutions (i.e. the firms) rather with individuals, the media immediately used the analysis as an empirical basis of the Mertens 200. J.R. van den Brink, chairman of the AMRO bank, was portrayed as the most ‘powerful’ person in the Netherlands, since his firm was found to be the most central one in the network. Although Van den Brink did see merit in the personalistic perspective on corporate power, he expressed his deep concerns regarding the impact the study had. He felt he was being portrayed as no less than a monster. Moreover, he was deeply concerned because ‘the trust in those in Dutch business who bear the responsibilities is lost’ (De Bruijn 1972). A similar strong reaction came from De Pous, a former minister and chairman of the socio-economic council. For instance, where the scholars used shared occupational background as a basis for group cohesion, De Pous argues that ‘these former members are unrelated individuals, who do not communicate with each other, and who do not propagate any policy whatsoever’ (De Nieuwe Linie 1972, authors translation). (Interestingly, only one year earlier, the trade unions N.V.V. and N.KV. demanded the departure of De Pous as chairman of the SER, precisely because of his many directorships (De Nieuwe Linie 1972).) What caused these spokespersons of the Dutch corporate elite to react so strongly to the accusation of corporate power?

Perhaps it was because in the Netherlands the concentration of power within the corporate elite had never been a big issue before. Only socialist and communist intellectuals outside academia were engaged in this kind of research. In 1913, F. Wibaut copied the research design of Otto Jeidels (1905) and mapped interlocking directorates between Dutch banks and industry. He found 300 firms interlocked with the nine largest banks (Wibaut 1913, p. 342). Similarly inspired by Marxist theory, F. Baruch published a two-volume study on the Netherlands entitled ‘Big Power in a Small Country’ (Baruch 1962). He mapped the interlocks between the four largest banks and a number of industrial firms. This study, however, did not circulate outside the sphere of influence of the communist party. Yet, not long after publication of Baruch’s study, the capitalist system as it had developed came under attack in a much broader public debate. In the political climate of the early 1970s, ‘power’ had in general a very strong, negative connotation. To make things worse for the corporate elite, the accusation of concentration of power was further induced by a wave of mergers that swept Dutch business, and finance in particular, during the 1960s (see appendix I). Additionally, relationships between banks and industry were becoming increasingly intense. Firms were unable to finance new investments from retained earnings, as they were used to. They now had to rely on the banks for credit, and

CORPORATE POWER AND THE CORPORATE ELITE 21 the banks consequently tightened their relationships with industry. Within this setting of growing institutional power of financial institutions, the corporate elite fell victim to the accusation of possessing too much and uncontrolled power.

Besides the political perspective on the situation, there is also a structural aspect which might help us to understand the reaction of the corporate elite. The structural aspect is not restricted to a specific political period in time. The bottom line is that for those outsiders without power, the ‘old boys network’ of corporate directors appears as a cohesive and highly powerful and influential group. Those who are inside these elite circles however, typically have a different view altogether. They stress the limits of their influence, and the lack of cohesion in their community. So, when commenting upon the first findings of the Dutch network of board interlocks and the public debate it aroused, AMRO chairman Van den Brink argued that, ‘For me, power is just one side of the coin. The flipside is responsibility. I feel that pressure very strongly’ (De Bruijn 1972, author’s translation). Likewise, the first president of the European Central Bank, W. Duisenberg, had a similar view. He explicitly denied that he should be considered as a powerful person (Tegenlicht 2003). Outsiders are inclined to stress the agency at the level of the group, where concerted action of the corporate elite leads to outcomes favourable to those who are in power. However, those within the corporate elite are eager to stress the limitations of their own individual agency. As a result, a banker might rightfully point at his limited ability to influence his surroundings, while outsiders can argue, with the same validity, that the bankers as a group have an enormous impact on the economy.

These two views on agency and (corporate) power also found their way into the academic debate on power and elites. In the second half of the twentieth century, the debate on elites was divided in two main camps: the pluralists and the elitists. The elitists would argue that a cohesive ruling or power elite dominates society. These scholars saw the group of connected business people as a relatively closed ‘power elite’ (Domhoff 1967; Domhoff 1970; Domhoff 1980; Mills 1956/2000). This power structure research was founded on the early work of C. Wright Mills (Mills 1956/2000) and Floyd Hunter (Hunter 1953). The main object of study is the ruling class, which brings together people from business, government and the military. Theorists of the ‘power elite’ were opposed by pluralists such as Robert Dahl (Dahl 1968; Dahl 1961/1989). Pluralists would point at the irreconcilable differences that exist between factions of the elite, and argued that that there was not enough overlap among various power structures to speak of a single ruling elite. It is this latter point of view which those who are inside the corporate elite would presumably adhere to most.

In the end, the power and influence of the group of corporate directors (Le. the corporate elite) are difficult to assess precisely. It does not have our prime interest either. Rather than using power (or influence, for that matter) as the primary lens through which to analyse the corporate elite, it might prove more fruitful to take the concept of community as lens for investigating the role and function of the corporate elite because it allows for a more sociological analysis of corporate governance. Together, corporate directors form a distinctive, more or less cohesive group in society. The social structure binding them together in and of itself creates opportunities for collective action and coordination. It is this ability to act which is the underlying basis for any power (or influence) they might possess as a group. As such, the corporate elite network is part and parcel of the Dutch form of capitalism.