Today, Swedish corporate governance has much in common with how corporate governance has developed internationally in recent decades. At the same time, it differs in certain significant areas, both from the Anglo-Saxon one-tier model and the two-tier model which is found in much of continental Europe. The differences include matters concerning attitudes to the role of owners, the division of power and responsibilities between the different governance bodies, the formation of boards and the role of the auditor.
There are basic similarities in corporate governance among the Nordic countries, both with regard to legislation and other regulation, such as traditions and common practice. At the same time, the corporate governance codes that were introduced in these countries soon after the turn of the millennium show significant differences. This causes practical difficulties, particularly for companies with shares quoted on more than one Nordic stock exchange, and it makes continued integration of the Nordic capital market more difficult.
Against this background, a joint working group for the code monitoring bodies in Denmark, Finland, Iceland, Norway and Sweden was set up in June 2007 to analyse similarities and differences between the countries' corporate governance systems and to evaluate the potential for increased coordination of self-regulation. As a first step, the group has produced a booklet, Corporate Governance in the Nordic Countries, giving a general overview of the common features of corporate governance in these countries.
The Swedish Corporate Governance Model
The corporate governance of Swedish companies is regulated by a combination of statutory rules, self-regulation and unwritten practice and traditions.
Key elements of the framework include the Swedish Companies Act, the Swedish Corporate Governance Code and the listing requirements and agreements applicable on the respective stock exchanges. Another key aspect is the statements issued by the Swedish Securities Council regarding what is regarded as accepted practice on Swedish stock markets.
The Swedish Companies Act
The Swedish Companies Act contains fundamental rules regarding company organisation. The Act stipulates which corporate bodies a company is required to have, the tasks of each of these bodies and the responsibilities of the people within each body. The Code acts as a complement to the Act by setting higher demands in some areas, but also allows companies to deviate from Code rules if this leads to better corporate governance, (comply or explain).
The four governance bodies
The Swedish Companies Act stipulates that a company must have three decision making bodies in a hierarchical relationship: The Shareholders' Meeting , the Board of Directors and the Chief Executive Officer. There must also be a controlling body, the Auditor, appointed by the Shareholders' Meeting.
The Swedish Corporate Governance Code
The Swedish Corporate Governance Board published their 2018 Annual Report in September 2018 (accessible here). The report contains the Board’s activity report and statistics on companies’ application of the Swedish Corporate Governance Code (the Code). Each year, the Board reviews all corporate governance information from all companies whose shares are admitted to trading on a regulated market in Sweden – reading every corporate governance report and checking every website.
The Swedish Corporate Governance Board is one of three bodies that constitute the Association for Generally Accepted Principles in the Securities Market, an association set up in 2005 to oversee Swedish self-regulation within the securities market. The other two bodies in the association are the Swedish Securities Council and the Swedish Financial Reporting Board. The principals of the Association are nine organisations in the private corporate sector.
The Board has no supervisory or adjudicative role regarding individual companies’ application of the Code. Ensuring that companies apply the Code in accordance with stock exchange regulations and the Annual Accounts Act is the responsibility of the company auditor and the respective exchanges. The responsibility for evaluating and judging companies concerning their compliance or non-compliance with individual rules in the Code, however, lies with the actors on the capital markets. It is the current and future shareholders and their advisers who ultimately decide whether a company’s application of the Code inspires confidence or not, and how that affects their view of the company’s shares as an investment.
Interpretation of the Code is not a matter for the Board either. This is the responsibility of the Swedish Securities Council, Aktiemarknadsnämnden, which issues interpretations on request.
The most recent major revision of the Code took place in 2015. This resulted in a number of Board Instructions being issued, and a new, revised version of the Code came into force on 1 December 2016. This version of the code is the one that currently applies. The Corporate Governance Board is to commence a new review of the Code in 2018. Key issues are outlined in the Annual Report 2018.
The Swedish Corporate Governance Board conducts regular surveys and analysis in order to monitor how the Code is applied and to evaluate its functionality and effects on Swedish corporate governance. As in previous years, the Board commissioned a study of each Code company’s application of the Code based on information published in annual reports, in corporate governance reports and on company web sites. Results are contained in the report.
Click here for Comply or Explain analysis (2018).
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- Why is it not mandatory for a listed company’s nomination committee to present its nomination of members of the board as a number of individual proposals, one for each proposed board member, with the voting at the shareholders’ meeting then occur- ring individually for each proposed candidate?
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A Brief History of Corporate Governance in Sweden
The breakthrough for corporate governance in Sweden came at the beginning of the 1990s, when the Companies Act Committee began working on a revision of the Swedish Companies Act. The end result - the new Swedish Companies Act - came into force on 1 January 2006. The Swedish Shareholders Association published the first Swedish ownership policy in March 1993. This was a set of guidelines for the ownership role within listed companies. Since then, most significant Swedish institutional investors have issued similar guidelines.
The first major practical impact of this new approach is considered to have taken place in the Volvo-Renault deal in 1993. The boards and executive management teams of both companies had planned to merge the two companies, but the deal was blocked by the intervention of a number of major institutional investors.
During the ensuing decade, a number of rules, guidelines and recommendations concerning important corporate governance issues were published by various self-regulating bodies, most notably by the Swedish Industry and Commerce Stock Exchange Committee and the Swedish Securities Council. The Stockholm Stock Exchange also introduced a number of corporate governance rules in its listing requirements.
In January 2003, the Swedish Academy of Directors (StyrelseAkademien) published its Guidelines for Good Board Practice, the first comprehensive code of practice for boards of directors of Swedish companies.
In September 2003, the Code Group, a joint working group of the Commission on Business Confidence and a number of private sector organisations, was set up to devise a Swedish corporate governance code. The Code Group issued its first draft of the Swedish Corporate Governance Code in April 2004. After this proposal had been widely circulated for comment, the final version was presented in December 2004. The Code came into force on 1 July 2005, and applied to all companies listed on Stockholm Stock Exchange A List and to all companies on the O List with a market capitalization exceeding SEK 3 billion, around 70 companies in total at that time.
The Swedish Corporate Governance Board was set up in 2005. The duties of the Board include monitoring and analysing how the Code is applied in practice and the introduction of any modifications or changes deemed necessary and appropriate. Three years after the introduction of the Code, the Board conducted a major review with the aim of broadening the Code's application to cover all companies listed on a regulated stock market in Sweden. The revised code came into force on 1 July 2008 and applies to all Swedish companies that have their shares traded on NASDAQ OMX Stockholm and on NGM Equity, a total of around 300 companies.
A second revision of the Code was carried out, resulting in a number of new rules taking effect from 1 February 2010. The most recent major revision of the Code took place in 2015. This resulted in a number of Board Instructions being issued, and a new, revised version of the Code came into force on 1 December 2016. This version of the code is the one that currently applies. The Corporate Governance Board is to commence a new review of the Code in 2018. Key issues are outlined in the Annual Report 2018.
The Swedish Corporate Governance Board: http://www.corporategovernanceboard.se/
Chapter 6.14 of The Handbook of International Corporate Governance, Institute of Directors, London 2009 (Accessible here)