Work on the Board of Directors in Companies with Different Kinds of Owners – Similarities and Differences

Boards of directors in risk capital companies work more efficiently than boards of directors in listed companies and state-owned companies. This is shown by the study Work on the Board of Directors in Companies with Different Kinds of Owners – Similarities and Differences, by PER STRÖMBERG, Professor of Finance at Stockholm School of Economics. The report has been produced within the framework of SNS Corporate Governance Seminars & Roundtable and was presented at an SNS seminar on February 3, 2015.

– An important question is how well the board of directors fulfils the role as an intermediary between the company management and the company owners. The study shows that companies with risk-capital ownership are better than other forms of ownership at ensuring a good communication among the board of directors, the owner and the management, according to Per Strömberg.

One of the starting points of the study is that efficient work on the board of directors presumes that the board of directors has good knowledge about the owner’s objectives.

– Something that surprised me was that the knowledge of the owner’s objectives and wants was the lowest in state-owned companies – despite the fact that they only have one owner, says Helena Levander, founder and chairman of Nordic Investor Services, who has carried out the qualitative part of the study.

CONOR KEHOE, who has established and is the head of McKinsey’s European Private Equity Practice, participated in the seminar and explained that the economic crisis made analysts in the US and Britain consider the position of boards of directors and owners when banks made bad decisions. He thinks that this has led to increased requirements for boards of directors to actually exercise control.

– Boards of directors must be more involved and spend more time on their assigned task.

The main owners should be less timid, more decisive, have a stronger view and communicate this view. This would be favourable for the companies, according to Conor Kehoe.

KIA ORBACK PETTERSSON, who has many years of experience from work on boards of directors and who is, among other things, Chairman of the Board of Directors at NAI Svefa AB, Ponderus Invest AB and Teracom AB, commented on the report:

– Just as is shown in the report, my experience is that the similarities are larger than the differences between various forms of ownership. In my view, it is what phase that the firm is currently in that is of the greatest importance for how well the board of directors works.

– Mutual trust between the management and the board of directors and a high competency in the board of directors can create good dynamics and strengthen a company independently of the form of ownership. But it might be difficult to document such things in this type of study, according to Johan Bygge, Director of Business at EQT Partners AB.