The Nordic model of corporate governance was clearly established in the 2014 Lekvall report. It shows that almost 2/3 of listed companies have a shareholder above 20 percent and 1/5 above 50 percent.
The Nordic corporate governance system is a dual executive system with:
• A combined management
• But with two clearly separated organs
• with different functions
• and a hierarchical structure
To ensure that the company is run in the interest of its owners, the Nordic institutional framework is characterized by concentrated ownership structure of listed companies, a general positive view of controlling owners typically concentrating their investments to one or a few companies where they engage actively in the governance of the company. The primary means of dealing with running the company in the best interest of its owners is the hierarchical governance structure allowing strong owners to efficiently control and take long-term responsibility of their companies balanced by extensive minority protection measures that effectively curb the scope for control owners to extract private benefits at the expense of minority shareholders.
The Nordic model is designed to allow strong owners to largely control their companies in the belief that such owners will have stronger incentives and greater resources to engage in and take a long-term responsibility for the companies than what can generally be mustered by minority investors.
The board work is characterised by non-executive director, executives, and employee representation. In the Nordic region, there are both provisions in law and collective agreements on how to secure workers participation in governing bodies. These assigned responsibilities should not be jeopardized in the aim of creating more harmonized European framework and we are happy to see this recognition in the proposed guidelines.
NFU finds the notions of suitability as sufficiently clear. NFU finds it important that rules or guidelines on suitability of board members does not affect the right of the trade union to select their employee representative on the board.
There are difference in national legislation in the Nordic countries.
In Sweden this right is found under the law (1987:1245) om styrelserepresentation för de privatanställda. Any new demands on suitability should not hamper the right of trade unions to designate their employee representative on the company board.
As far as the Danish legislation is concerned, there are no rules giving a trade union the right to appoint members of the board.
NFU supports and agree with the need and right of training for the members of the management body. With regards to that, NFU wants to ensure that the resources put into training at the institution also includes the right to training for the employee representatives on the board.
There are national rules on the initial training for board members, cf. the Danish Executive Order no. 1424/2016 on course for members of the Board of banks, mortgage and insurance companies. This only covers the ‘start up’ training for new board members, so it is still important also to have focus on the onward capacity building.
NFU fully supports diversity policies for management bodies, diversity is key for long-term oriented corporate governance, it will help to avoid group thinking and help to foster better governance in the company. The value of employee input in this context cannot be overestimated. Employees have a crucial part to play in corporate governance, either as members of the board or as providers of information to the board. It is of utmost importance that any legislation or guidelines in this area takes the employee dimension into account, not least from the perspective of systemic stability. Employees are an asset for any company, providing experience, knowledge and expertise to corporate governance. Creating structures for employee involvement in the management of a company is a win-win measure that benefits all stakeholders.
NFU is therefore happy to read in paragraph 96 that the ESAs recognise employee representatives as a way to add a day-to-day practical knowledge and experience of the internal workings of the institution. NFU means that diversity on company boards through employee representation is a key issue for sound and long-term oriented corporate governance. Rules on how to govern companies are an important part of achieving sustainable finance. Employee representation is very common in the Nordic countries but not as much in the rest of Europe. The right to have employee representation on company boards is also protected under national legislation in the Nordic countries, as the ESAs most likely are aware of. Under Swedish law it is the local trade union at the company in question that selects the employee representatives to sit on the company board.
Employees are an asset for any company board – providing shop-floor experience, knowledge and expertise to board-level decision-making. The above qualities from the employees improve management decisions and thereby the company’s economic performance, not least because of the long-termism encouraged by the employee perspective. Employee representation in company boards also gives the employees the possibility to be informed and consulted on the governance of the company, thereby ensuring work-life democracy. Employee representatives should, were applicable, be appointed by a trade union. This increases their democratic legitimacy when representing the company’s employees.
NFU finds it important that rules or guidelines on suitability of board members does not have an effect on the right of the trade union to select their employee representative on the board. In Sweden this right is found under the law (1987:1245) om styrelserepresentation för de privatanställda. Any new demands on suitability should not hamper the right of trade unions to designate their employee representative on the company board.