Corporate Governance: The Swedish Solution

Abstract

Sweden has changed its corporate governance system by delegating the nomination of corporate directors (and thus, in effect, ultimate control) to committees typically comprising representatives of each company’s largest shareholders. This system gives shareholders a degree of power “that only the most daring corporate governance initiatives in the rest of the world could even imagine.” By all accounts the change has been successful; no one is complaining about it.

In the United States investors have long been kept weak in corporate governance for fear that giving them a major role would damage corporations in numerous ways. The Swedish experience seems to belie these fears. This article describes the Swedish experience and discusses its applicability to the U.S. It argues that the “Swedish solution” can be equally successful here. The article concludes with a discussion of two ways in which the Swedish system might be instituted in the U.S.

Keywords: corporate governance, Sweden, United States, United Kingdom, shareholders, Corporate Governance Code (Sweden), Annual General Meeting, CEOs, conflicts of interest

JEL Classification: K22