A brief history of corporate governance

The following is a brief description of how modern corporate governance has developed since the early eighties in the U.S., Europe and Sweden, with the aim of providing a broader context for the Swedish Corporate Governance Code and the work of the Swedish Corporate Governance Board.


Modern corporate governance began to take shape in the United States in the early 1980s. A number of powerful and arrogant boards and executives of major listed corporations had been acting in ways that were not considered consistent with the interests of the owners, who were mainly small private investors, represented by pension funds and other institutional investors. This caused leading institutional investors to intervene by exercising their power as owners and formulating special corporate governance guidelines for how corporations should be run.

The 1990s and the beginning of the 21st century saw the introduction of binding regulations on the major American stock exchanges, primarily the NYSE and Nasdaq, as well as increasingly detailed legislation. One example of the latter is the Sarbanes-Oxley Act, which came into force in July 2003. Unlike in other parts of the world, however, events in America have not led to the introduction of corporate governance codes. One likely reason for this is that American corporate legislation is an issue for individual states and there is therefore no national legal foundation on which to build a national code. Another may be lower confidence in the power of "soft law" in American society than in many other countries.


The breakthrough for corporate governance in Europe came with the publication of the Cadbury report in the United Kingdom in 1992. This came in response to a number of corporate scandals in the UK in the late 1980s. The report introduced the comply-or-explain model, which has since provided the standard for corporate governance codes in many countries. Cadbury was followed by a number of other reports on different aspects of corporate governance within British companies. A number of these were then collected in the Combined Code, which was originally introduced for British companies in the mid 1990s and has been updated several times.

Towards the end of the 1990s, numerous national corporate governance codes were devised in Europe and other parts of the world. The first code in the Nordic region was introduced in Denmark in 2001, with the other Nordic countries following a few years later.

The European Commission has had an active corporate governance agenda since 2003, when it adopted its Action Plan for Corporate Law and Governance. This stated that far-reaching harmonisation of corporate law or governance codes was neither possible nor desirable within the foreseeable future. Instead, the Commission expressed its expectation that all member states introduce national corporate governance codes, based on their own legislation and other conditions. It also decided that harmonisation would be limited to certain key issues within corporate governance. Since then, the Commission has issued a significant number of recommendations and directives concerning corporate governance, many of which have been implemented in the member states through legislation.


The breakthrough for corporate governance in Sweden came at the beginning of the 1990s, when the Companies Act Committee began working on a revision of the Swedish Companies Act. The end result - the new Swedish Companies Act - came into force on 1 January 2006. The Swedish Shareholders Association published the first Swedish ownership policy in March 1993. This was a set of guidelines for the ownership role within listed companies. Since then, most significant Swedish institutional investors have issued similar guidelines.

The first major practical impact of this new approach is considered to have taken place in the Volvo-Renault deal in 1993. The boards and executive management teams of both companies had planned to merge the two companies, but the deal was blocked by the intervention of a number of major institutional investors.

During the ensuing decade, a number of rules, guidelines and recommendations concerning important corporate governance issues were published by various self-regulating bodies, most notably by the Swedish Industry and Commerce Stock Exchange Committee and the Swedish Securities Council. The Stockholm Stock Exchange also introduced a number of corporate governance rules in its listing requirements.

In January 2003, the Swedish Academy of Directors (StyrelseAkademien) published its Guidelines for Good Board Practice, the first comprehensive code of practice for boards of directors of Swedish companies.

In September 2003, the Code Group, a joint working group of the Commission on Business Confidence and a number of private sector organisations, was set up to devise a Swedish corporate governance code. The Code Group issued its first draft of the Swedish Corporate Governance Code in April 2004. After this proposal had been widely circulated for comment, the final version was presented in December 2004. The Code came into force on 1 July 2005, and applied to all companies listed on Stockholm Stock Exchange A List and to all companies on the O List with a market capitalization exceeding SEK 3 billion, around 70 companies in total at that time.

The Swedish Corporate Governance Board was set up in 2005. The duties of the Board include monitoring and analysing how the Code is applied in practice and the introduction of any modifications or changes deemed necessary and appropriate. Three years after the introduction of the Code, the Board conducted a major review with the aim of broadening the Code's application to cover all companies listed on a regulated stock market in Sweden. The revised code came into force on 1 July 2008 and applies to all Swedish companies that have their shares traded on NASDAQ OMX Stockholm and on NGM Equity, a total of around 300 companies.

A second revision of the Code was carried out, resulting in a number of new rules taking effect from 1 February 2010.