Key features: a government authority for economic sectors
Virtually every sector of the economy in the Netherlands is organised in one way or another, usually to ensure that certain sector-specific affairs are properly regulated. One particular regulatory structure is the commodity or industrial board.
Such boards can be found in a wide variety of different sectors, including horticulture, arable farming, retail, plastering and hospitality. It is up to every sector to decide whether to install a board. That is why some sectors have boards and others do not.
One of the most significant features of a board is that it covers the entire sector. In other words, all enterprises in the sector are required to adhere to the board’s rules.
That means that the boards are public administrative bodies – in other words, a government authority just like the municipal or provincial government. But they are a special government authority, and their duties are limited to specific sectors. In all their activities, the boards must make both the general interest and the interests of the relevant sector a key priority.
As unique government authorities with exceptional powers, the boards must be properly monitored. This task is entrusted to various ministries and to the Social and Economic Council.
Formation of the boards
The formation of the boards is covered by the Dutch Constitution and further regulated by the Industrial Organisation Act (Wet op de bedrijfsorganisatie). Each board is headed by an executive committee (of: council) of which the members are nominated by the employers’ organisations and trade unions. In general, each executive committee comprises an equal number of representatives from each of these two groups, and the chairman of each board is appointed by the Crown.
Difference between a commodity board and an industrial board
There are two types of board: commodity boards and industrial boards. Commodity boards represent enterprises that work with the same product, from raw material to finished product. Industrial boards represent enterprises that fulfil the same function in the economy, for example all retail businesses or all hospitality establishments.
Duties of the boards
The boards act for a sector when it is impossible for individual enterprises or associations of employers and employees to do so on their own, when the relevant activities are considered to be in the general interest, and when competition is not obstructed by their doing so.
In practical terms, the boards generally concern themselves with such matters as employee training, quality management and control, and joint export promotion.
In addition to their own duties, some boards are also responsible for implementing rules and regulations set by central government. They are in an ideal position to do so, thanks to their knowledge of their specific sector and their powers as a government authority. The central government remunerates such boards for their ‘co-governance’ duties.
A very Dutch phenomenon
While other countries have institutions that do similar work to that of the Dutch commodity and industrial boards, these are usually either national government agencies (France) or set up by business associations (Germany). The particular form that these institutions take in the Netherlands, which is based on cooperation between employers and employees, is almost unique.
Commodity and industrial boards and European integration
European integration imposes restrictions but also opens up new opportunities. The elimination of Europe’s internal borders means that the Dutch commodity and industrial boards may not introduce any measures impeding free movement between the Member States. Brussels makes sure of that. The boards must therefore support open competition, and that is precisely where they can play a significant role for their sector.
Being part of Europe also means having to comply with EU Directives and Regulations, for example within the context of the Common Agricultural Policy. As experts in their sectors, the boards are often involved in preparing European legislation. They also assist in transposing EU law into national rules and regulations and in implementing those rules and regulations in their sector.
More than a million employees – or one quarter of the Dutch labour force – work for enterprises covered by a commodity or industrial board. There are approximately 400,000 of these enterprises, most of them small ones. A total of 17 boards were active in 2008 (eleven commodity and six industrial boards), with a joint workforce of 900 employees.
The boards had a collective budget of EUR 257 million in 2008. Two thirds of that budget (EUR 174 million) was spent on activities and projects that the board contracted out to third parties. The boards also receive almost EUR 17 million from central government for their ‘co-governance’ duties.
Boards represent all companies within their sector, and the rules a board sets are binding for all those companies. As each board’s activities benefit its sector as a whole, all companies within that sector must pay a compulsory contribution towards its costs. This prevents companies from ‘free-riding’ behaviour (i.e. deriving benefits without contributing).
What does the Social and Economic Council monitor?
The commodity and industrial boards are public administrative bodies. Various ministries and the Social and Economic Council monitor the way the boards exercise their powers and other matters, pursuant to the Industrial Organisation Act [Wet op de bedrijfsorganisatie]. The Social and Economic Council is responsible for the following:
Approving the boards’ decisions
The board’s executive council is empowered to take decisions affecting the entire sector. The scope of such decisions is stipulated at the board’s founding.
The Social and Economic Council checks these decisions on two important points: the decision must not conflict with the law and must not be detrimental to the overall interests of the business community. For example, boards may not issue regulations concerning prices or business locations. They may also not take any decision that impedes healthy competition in the sector. Their decisions must also comply with European rules and legislation.
The Social and Economic Council assesses whether the decisions taken by an executive council meet certain criteria; it does not evaluate the substance of those decisions.
Approving the boards’ finances
The commodity and industrial boards have an annual budget of approximately EUR 260 million. They need that money in order to finance their many activities. To ensure that this money is in fact properly spent, the Social and Economic Council monitors the boards’ finances every year.
It not only audits the boards’ annual accounts, but also looks closely at the decisions underlying those accounts, for example orders concerning budgets and charges. The Social and Economic Council must approve such orders and decisions, which total around 300 to 400 a year.
Code of conduct
The Code for Good Public Governance for commodity and industrial boards was introduced on 1 July 2007. It was drawn up by the boards themselves in an effort to achieve greater transparency with respect to their conduct and the quality of their services. The purpose of the Code is to encourage the boards to act in a socially acceptable and responsible manner and to account publicly for their actions.
The Industrial Organisation Act [Wet op de bedrijfsorganisatie] was amended in 2009. The principles of the Code for Good Public Governance have now been incorporated into the amended Act.
Four-year approval ratings
Every four years, each of the commodity and industrial boards must conduct an opinion poll among all the companies falling within its remit. The poll is meant to gauge support for the board. The relevant companies are asked to rate the board’s activities, the future of the board, the way in which the board informs them, and how it involves them in decision-making. The Social and Economic Council is responsible for monitoring the polls.
If it becomes clear that there is little support for a board and its activities, the board must repeat the poll within two years. Based on the outcome of the repeat poll and the recommendations of the Social and Economic Council, the Minister for Social Affairs and Employment then decides on the future of the board.