Sweden’s governance body resists investor pressure over board elections

Governance panel rejects demands from €5.8trn investor coalition

The body which oversees corporate governance in Sweden is resisting pressure from global institutional investors to improve board election procedures.
It’s the latest assault on the vaunted ‘Swedish governance model’ that has been undermined by the corporate jet scandal at the turn of the year which led to widespread boardroom upheaval and shone a light on the country’s network of cross-shareholdings.
The Swedish Corporate Governance Board was responding to a letter sent in August by a group of investors led by APG Asset Management and including PGGM, RPMI Railpen, the Florida State Board of Administration, CalPERS, USS and major asset managers (full list below). The investor groups manage a combined €5.8trn and APG’s Corporate Governance Specialist Mirte Bronsdijk (Mirte.bronsdijk@apg-am.nl) is the point person for the engagement.
Currently, votes on directors at Swedish listed firms are bundled together for the most part and the investors want new rules to let shareholders submit votes on the individual election of board members “at the earliest opportunity”. The investors have also sought the same improvement from companies themselves.
The investors argue there are no legal or regulatory obstacles to this, though they do acknowledge the Swedish market culture of consensus decision-making. Allowing investors to vote on individual directors would not only improve corporate governance standards but “increase the attractiveness of the Swedish market for foreign investors” the investors conclude. The broadside follows a position paper published by Norges Bank Investment Management in May.

Although not signatories to the letter, Swedish state funds AP2 and AP3 have expressed support for the international investors’ demands – which is intriguing given that AP2’s CEO Eva Halvarsson is a director at the governance board (amends from earlier version which incorrectly said she was with AP3).
The governance board has now responded to the investors, saying it “does not find sufficiently strong grounds” for individual ballots or automatic counting of votes at the election of directors.It argues Swedish company law and the Swedish Code allow individual shareholders to request a ballot for each director – and to request a vote count for each decision at the AGM. And it says international shareholders can also do this via proxies.

It stresses the process is a product of the country’s system of shareholder-led nomination committees. So it will leave it to each company and its shareholders to decide upon how to conduct board elections. The board goes on to say it will continue to monitor developments.

“It would be unfortunate if Swedish corporate governance were to be perceived internationally as reactionary and protectionist by not taking into account the noteworthy demands of foreign owners,” it says.

Writing in the board’s annual report earlier this year – which makes no mention of the corporate jet scandal – chairman Arne Karlsson admits he is “seriously concerned” for the future of the country’s governance model. His complaint centres on the “cannonade” of regulations from the EU. “The EU appears to believe that its job is to introduce the Anglo-Saxon corporate governance model for the whole of Europe,” he laments. Link


Aviva Investors
AXA Investment Managers
BMO Global Asset Management (formerly F&C)
Columbia Threadneedle Investments
Fidelity Worldwide Investment
Florida State Board of Administration
Legal & General Investment Management
RPMI Railpen
Standard Life Investments
USS Investment Management