Change to the Code of Corporate Governance in Sweden

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The Swedish corporate governance board has conducted a review of the corporate governance code and decreases the amount of rules to 26 in a revised code proposition.

The proposition for a revised Code is easier to work with than the present Code. The corporate governance board has learnt from its experience of the first years with a code in practice

The Swedish corporate governance board has conducted a review of the corporate governance code and decreases the amount of rules to 26 in a revised code proposition.

The changes clarify the role of the nominating committees of listed companies. Their sole purpose becomes to prepare the ground work for elections and honorary fees to the board for the annual stock holders meeting. The members of the nominating committee should take all shareholders viewpoints into consideration in their nominations. A majority of the election committee should be independent from the company and the company board.

The purpose of a revised Code is that it shall be the same for all 320 Swedish companies, listed at the OMX Nordic Exchange Stockholm and NGM Equity from the first of July this year.

"The proposition for a revised Code is easier to work with than the present Code. The corporate governance board has learnt from its experience of the first years with a code in practice," says Hans Dalborg, President of the Swedish corporate governance board and board president of Nordea.

SIGNIFICANT CHANGES
The Code is simplified, without easing the ambition for thorough Swedish corporate governance. The amount of rules are decreased from 69 to 43 and are shortened to provide a reviewable structure. There are less overlaps with other rules and the current Code has been incorporated into the new one.

At least one of the members of the company's nomination committee has to be independent from the company's capital stock holder. If more than one board member is included in the nomination committee, only one of them can be dependent of the capital stock holder.

The same rules are introduced for board members as for the stock exchanges and the stock exchange rules are applicable.

All boards can choose to complete revision and the duties of the honorary fee committee on the complete board. (excl. the members that are included in the company management). However, the new legislation that follows the 8th corporate directive can affect the rules of the revision committee.

The report for internal control becomes legislation when the changes in the 4th and the 7th corporate directives are carried through. Most likely with demands on material revision. The Code refer to this legislation -- without current referral to FAR SRS and the Confederation of Swedish Enterprises guidance.

The corporate governance report also becomes legislation and the code refers to this, but invokes greater demands concerning explanations and motivations of reservations when companies are using the principle of "comply or explain". The explanations should include a description of the alternative solution the company should have chosen and the motives for such a choice.

"The current code has been good for smaller companies too. I know this from my own experience. But the simplifications that are currently taking place, makes the Code into a great help for a lot of the smaller listed companies that now start to use it," says Leif Lindberg, member of the corporate governance board and earlier board president in Intellecta AB.

BACKGROUND
The background to a revised Code is that most 'Code companies' -- along with many small companies -- apply the current Code without any difficulty and with the flexibility that it intends to provide. This has led to a considerable quality increase of Swedish corporate governance and has increased the trust in the listed companies.

As the Code becomes applicable to all listed Swedish companies on a regulated market, the review has intended to strengthen weaknesses in the current Code. The Code has also been adjusted to the smaller listed company prerequisites and prepared for a harmonization with the Nordic countries.

"The Code has strengthened Swedish corporate governance and improved the nomination processes and internal control. Even smaller listed companies now receives a rule framework that makes them more interesting for the larger owners," says Lars Otterbeck, vice president in the corporate governance board and president in Hakon Invest AB.

AGENDA
2008-02-01 Proposition for revised Code is presented
2008-03-28 Last day to present suggestions to change the proposition
2008-05-06 A final revision is presented
2008-07-01 A revised code is put into place for listed companies at the OMX Nordic Exchange Stockholm and NGM Equity

MORE INFORMATION
Hans Dalborg 46 8 614 78 01
Per Lekvall 46 707 519 099
Lars Otterbeck 46 705 100 036
Leif Lindberg 46 8 756 74 45

To read the complete proposition and a comparison between the revised Code and the current one, please go to http://www.corporategovernanceboard.se/.

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