“Culture eats strategy for breakfast.” Magnus Billing, chief executive of Alecta, quoted management consultant Peter Drucker with that line in an article on his fund’s website, then argued Sweden’s corporate governance code should say something about it.
Alecta is Sweden’s largest pension fund, with SEK934bn (€87bn) under management. Billing wants the code to push companies toward healthy corporate cultures and strong values. The Swedish Corporate Governance Board is due to present amendments to the code the following month, and he told the board to take its cue from the UK, where the Financial Reporting Council revised its own code the year before and made corporate culture a key part of how a company is governed.
“I hope the proposal the Swedish Corporate Governance Board now intends to present will take this opportunity and be inspired by the FRC and develop the Swedish code to support and promote strong corporate cultures,” Billing said. “Corporate cultures that build long-term sustainable values and do not destroy them in an instant.”
Scandals as the backdrop
Billing pointed to the string of corporate scandals in the Nordic countries and elsewhere. Emissions testing and money laundering cases, he said, have hit major European companies including Volkswagen and Swedbank and “destroyed enormous shareholder values.”
Repairing that damage starts with trust, in his telling. “A prerequisite for restoring the demolished values is first and foremost the restoration of confidence in the organisation and its ability to create long-term sustainable values,” he said. He added that there are not enough clear goals and well-designed strategies and business plans for that to happen.
The FRC’s reasoning, as Billing described it, was that companies operate inside a wider society and have to relate to it if they want lasting shareholder value. He said the same applies to Swedish boards and managers, who “must build and maintain good relationships with a large number of stakeholders, such as customers, authorities, employees, owners and others.”
What comes next
Expectations for the revision are modest. The governance board has already said the proposed code should not bring major changes apart from remuneration. After the amendments, it will publish a new recommendation on pay and, following consultation, expects to issue rules that take effect on 1 January 2020.
Separately, a group called Nordic CEOs for a Sustainable Future, formed in 2018, met the prime ministers of the five Nordic countries on Tuesday at the Nordic Council of Ministers’ meeting in Reykjavik. Chief executives from Storebrand, Swedbank, Íslandsbanki, Equinor and Nokia, among others, presented plans to meet the UN Sustainable Development Goals through closer public-private cooperation. “The global capital markets are one of the most powerful tools we have in the fight against climate change,” said Odd Arild Grefstad, chief executive of the Storebrand Group.
