Corporate Governance for Sustainability

The current model of corporate governance needs reform. There is mounting evidence that the practices of shareholder primacy drive company directors and executives to adopt the same short time horizon as financial markets. Pressure to meet the demands of the financial markets drives stock buybacks, excessive dividends and a failure to invest in productive capabilities. The result is a ‘tragedy of the horizon’, with corporations and their shareholders failing to consider environmental, social or even their own, long-term, economic sustainability. With less than a decade left to address the threat of climate change, and with consensus emerging that businesses need to be held accountable for their contribution, it is time to act and reform corporate governance in the EU. The statement puts forward specific recommendations to clarify the obligations of company boards and directors and make corporate governance practice significantly more sustainable and focused on the long term

Convergence of National Corporate Governance Systems : Localizing and Fitting the Transplants

The purpose of this thesis is to elucidate the phenomenon of legal transfers from the perspective of the dominant comparative corporate governance research paradigm. Drawing on legal studies and empirical observations, the thesis develops a terminology for understanding the legal transplant metaphor in comparative corporate governance and problematizes the debate on the convergence or divergence of corporate governance systems. This purpose is achieved through five empirically-based articles that are included in the thesis. The first article concerns a change in the Swedish Companies Act that allows for stock repurchases. The second article discusses the voluntary and then mandatory introduction of nomination committees. The third and the fourth articles focus on the introduction of the Swedish corporate governance code. Finally, the fifth article discusses the role played by independent directors in the Swedish corporate governance setting. The focus on legal transplants broadens the framework of comparative corporate governance in three respects. First, it develops and applies a clearer framework for distinguishing between accepted and rejected legal transplants (based on Watson, 1974, Miller, 2003 and Mattei, 1994), thus refining the debate regarding convergence or divergence of corporate governance systems (e.g. Hansmann and Kraakman, 2004, and Branson, 2001). Second, the empirical studies demonstrate how imported regulations can be “localized” (Gillespie, 2008a) by local regulators and/or “fitted” (adapted from Kanda and Milhaupt, 2003) by other local actors. The studies show that fitting often precedes localizing. Third, the thesis ads to a growing body of research (e.g. Buck et al., 2004; Lutz, 2004 and Collier and Zaman, 2005) emphasizing that convergence and divergence are not necessarily two empirically or analytically distinguishable processes. Rather, depending on the perspective of the scholar, convergence and divergence might refer to very similar – or even identical – processes. Finally, in focusing on the transplant process, this thesis offers a description and analysis of the role played by various key actors in the Swedish corporate governance system

Stubborn Swedes : The persistence of the Swedish corporate governance system under international reform

Despite a number of corporate governance reforms introduced following an Anglo-American blueprint, the Swedish corporate governance system still contains several country-specific traits. In this article, we try to understand this continuity of the national corporate governance system. We do this by outlining a model for describing the processes of change built on Mary Douglas’ (1986) theory of ‘institutional thinking’ and applying this model to a case of the implementation of regulation on independent directors in Sweden. The results highlight (i) that continuity is ensured through the use of ‘sacred objects’ and (ii) that compromises between the old and the new is made possible by the uses of concepts with ‘positive connotations’. Hereby a form of assimilation to the international blueprint occurs which may – or may not – lead to convergence in the long run

Doxa of shareholders and owners : on the threshold of financialization

Following financialization, there has emerged an understanding of what it implies to be a shareholder based on the shareholder value perception. However, as this shareholder value perception spreads internationally, it clashes with traditional perceptions. In this paper, we apply the language developed by Bourdieu to a Swedish public debate on equal treatment of shareholders in connection with the reform of the Swedish market for corporate control. Using Bourdieu’s conceptual framework, we describe how a global development interacts with the persistence of national practices. We conclude that in Sweden, local institutional investors have allied themselves with international institutional investors to enhance their positions in the restricted field of Swedish corporate control. Shareholder value is then used by these local actors as an argument to strengthen their position. At the same time, some of the controlling shareholders depart from their traditional position as industrial entrepreneurs and embrace a more financial approach to ownership, thereby altering both the power constellations and the capital, in Bourdieu’s sense, of the field

The unlikely root of stock market development : labour influence on transparent accounting

Few, if any, corporate governance related issues have been given as much research interest as ownership dispersion and ownership concentration of listed corporations: ‘Why is that some countries, such as the US and UK, has dispersed ownership of corporations listed there, while others, such as France and Germany, has concentrated ownership of corporations listed there?’. This is a question that has been given countless answers since the seminal work of La Porta et al (1997) laid the Berle and Means (1932) understanding of corporate ownership to rest. Scholars from business history (e.g. Morck & Steir, 2005), legal studies (e.g. Coffee, 2001), economics, (e.g. La Porta et al, 1998), political science (e.g. Roe, 2003), and even creating its own sub-field comparative corporate governance (e.g. Aguilera & Jackson, 2010), has all provided insights to topic. Often minority shareholder protection has been the main issue, although the role of transparent accounting is also highlighted (e.g. La Porta et al, 1998; Roe, 2003; Höpner, 2005). Arguable, transparent accounting is a necessary precondition of ownership dispersion, as few minority shareholders are likely to surface in absence of it. This indicate that the development pattern of transparent accounting may be one of several aspect to look into when explaining ownership structuresIn this paper we empirically investigate the regulatory processes that created the first wave of transparent accounting in Sweden during the 1970s. Theoretically the paper draws on a path dependency perspective (e.g. North, 1990). Elsewhere in the literature, it has been acknowledged that Swedish pre-IAS harmonization accounting was the most transparent accounting in the world (La Porta et al, 1998). In this paper we argue that the development of transparent accounting in the 1970s was one of the triggers for the remarkable development of the Swedish stock markets that began in 1980s (see further Jonnergård & Larsson-Olaison, 2016) that later on created stock-markets comparable to those of the US and the UK regarding width and depth (see Sinani et al, 2008). This dispersion of ownership occurred despite continuous concentrated control in the listed corporations (see e.g. Lekvall et al, 2015), thus making Sweden an ideal case for exploring the role of transparent accounting. In this paper we develop and test a preposition that organized labour interest during the 1970s made way for transparent accounting in Sweden, which later on favoured outside ownership of listed corporations. Thereby the paper contributes to the discussions of the antecedents and reasons for increasing transparent accounting

Worker representation on corporate boards from a longitudinal perspective : Between corporate governance and industrial relations

At the intersection between industrial relations and corporate governance - i.e. board level worker representation - this paper attempts to bridge four perspectives from the industrial relations literature (unitary, pluralist, radical and egoist) by observing changes in board director perceptions over time. Empirically, a longitudinal survey (1994-2014), filled out by both shareholder- and worker-elected directors in the largest listed Swedish corporations, is utilized to map differences and similarities between the two director populations regarding ‘perception of responsibility’, ‘governance efficiency’ and ‘board norms’. The findings indicate that some of the different industrial relations perspectives are relevant for understanding worker representation on corporate boards at different times and in different populations. Specifically, we observe that shareholder-elected directors become more financialized in their perceptions over time, whereas worker-elected directors remain more stakeholder-oriented, while to a growing extent acknowledging the interest of the controlling shareholders. Thus, the paper contributes to the industrial relations literature by linking perspectives on industrial relations, often understood as incommensurable, by considering a longitudinal development in perceptions among relevant actors

The unlikely root of stock market development : labour and professional influence on transparent accounting

The development of transparent accounting is often theoretically linked with the development of financial markets. In this paper we argue that such an understanding of transparent accounting does not necessarily consider the temporality of the historical context where transparent accounting is invented. To illustrate this argument we empirically investigate the raise of transparent accounting in Sweden during the 1960s and 1970s. This time-period in Sweden is characterised by underdeveloped financial markets and a strong stakeholder-orientation mostly aimed at economic democracy and strengthened employee voice in corporate decision-making. By providing an alternative understanding of transparent accounting to dominant law and economics scholarship, this paper contributes to our knowledge on the link between accounting and financial markets, especially regarding the role of other interest groups than shareholders influencing accounting development

The dark-side of resource dependency theory : from economic democracy to financialization

The issue of the pro’s and coins with representatives from different interest group on corporate board is lively discussed. Will representatives from stakeholders work in the interest of the stake they represent or in the interest of the companies where they are a director? The issue has a renewed topicality as claim for e.g. consumer groups or experts on environmental issues have been raised. In this paper we invest the group that once started the discussion, i.e. the employees representatives on the board of directors. From a resource dependency perspective we are interested in two issues (i) are there significant differences between the perception of responsibility for the firm from owners representatives and employees representatives on the board? (ii) if so, do these differences sustain over time? We report a longitudinal investigation of board of directors in Swedish board indicated a convergence over the last twenty years between employees and owners representatives on corporate board. This convergence is mutual, indicating that it might be something else than the difference in whom you represent that drive the development

The construction of status in the auditor–audit committee relationship

This chapter investigates the construction of status in the relationship between the auditor and the audit committee. Such a study is merited considering that regulation as a driver of corporate governance has been designed towards a regulatory concern with lax audit practice, where the audit committee was presented as a solution. This is, however, a problem not manifested in the Swedish context. The driver was instead connected to the need for companies to follow suit with an Anglo-Saxon regulatory development. The study is informed by interviews with audit committee members and external auditors in large, listed companies and contributes novel insights to the understanding of the transformation of the role of the auditor due to the regulatory driver represented by the audit committees. The findings show a rather paradoxical development where the auditors increase their status through direct access to the board of directors, while also decreasing their status by being reduced to a supplier, among other suppliers of trust and comfort to the directors. The findings are of interest to accounting firms, as well as clients and investors, to recognise the transformation of the status of the auditor in spite of regulations to protect the role