The Nordic Corporate Governance Model

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The Confederation of Swedish Enterprise has sponsored and supported a project aimed at defining a common Nordic model of corporate governance within SNS (the Centre for Business and Policy Studies), Sweden’s leading policy research institute, in co-operation with leading researchers, experts and business people from Denmark, Finland, Norway and Sweden. As a result the book “The Nordic Corporate Governance Model” was launched.

The book combines an overview of the common features of Nordic countries’ corporate governance systems with individual country details of their differences. The most important conclusion of the book is that the Nordic countries constitutes a single unit with a clear and effective corporate governance model of its own that well defends its place among other models in Europe. The key observation of the book is that the Nordic corporate governance model allows the shareholder majority to effectively control and take long-term responsibility for the company that they own. The alleged risk of such a system – the potential that a shareholder majority misuses its power for its own benefit at the expense of minority shareholders – is effectively curbed through strong minority protection provisions. The result is a governance model that encourages strong shareholders to engage in the governance of the company in their own interest, while creating value for the company and all its shareholders.

The Nordic countries stand out by being home to a notable share of world-leading companies, which by far exceeds the region’s share of the world economy. About 60 Nordic companies qualify on the Forbes list of the world’s 2000 largest publicly listed companies. This significantly exceeds the number for Germany, although the combined size of the Nordic economies is less than half of that of Germany. 

The European Commission is actively pursuing an agenda of harmonization of corporate governance rules and practices within the EU. This has led to a steady stream of regulatory measures determining the development of corporate governance in the Member States. Those measures have to a large extent been based on the Anglo-Saxon corporate governance model and often leaving Member States no room for flexibility when implementing them due to the great detail in which they are formulated. Since this model differs significantly from those of the Nordic countries, regulatory measures at EU level have frequently turned out to be badly suited for the Nordic governance framework, thus causing considerable difficulties in their transposition into national regulation.

The book can strengthen the Nordic voice regarding corporate governance issues within the EU. If policy-makers and regulators within the EU administration better understand the specific nature of the Nordic governance framework, it would significantly increase the weight of Nordic viewpoints within the EU.

Another aim is that the book will give foreign investors, directors and corporate governance advisors a better understanding of the structures and principles of corporate governance in the Nordic countries when investing in Nordic companies or advising investors to do so or when serving on Nordic boards. Hopefully the book could turn out to be a significant contribution towards a more integrated Nordic capital market, thus increasing the competitiveness of the Nordic area on the international capital market.

Still the Nordic markets are generally characterized by a high degree of ownership concentration in listed companies. For the region as a whole, 62 % of all listed companies have at least one shareholder controlling more than 20 % of the total number of votes. In the UK, the European market most generally associated with highly dispersed ownership of listed companies, the corresponding figure is 27 %. That the Nordic model works well also for the many listed Nordic companies with widely held shareholdings is witnessed by the many successful Nordic companies of this kind. In fact, the model is highly flexible, providing a generally shareholder-friendly governance framework that works well within a wide range of different ownership structures.

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