9.2.1.2 Managing director and chairman

When the board consists of more than one member, which is the case for listed companies, one of the members serves as chairman of the board of directors (styrelsens ordförande). The chairman is elected by the other members of the board and in the case of tie, drawing of lots will determine who becomes chairman (section 8: 17 SCA). Nevertheless, the articles of association or the general meeting can determine another selection procedure. However, rule 6.1 of the SCCG 2010 provides that the chair is to be elected by the general meeting. And if the chair relinquishes the position before the next general meeting, the other members elect a chair to serve until the next general meeting. The Swedish Companies’ Act is for private as well as public companies, whereas the SCCG is for listed public companies only. Therefore, the rule in the SCCG should be seen as an extension, which should be applied or explained by listed companies. An important part of the duties of the chairman is the distribution of information and documentation to the board. According to rule 6.3, the chairman is responsible for the information and documentation, so that the board can execute its tasks properly.

In addition, all listed companies should have a managing director (verkställande direktör)1 appointed by the general meeting, according to sections 8: 27 and 8: 50 SCA. The duties assigned to the managing director in section 8: 29 SCA emphasise his role in the daily management of the company:

In public companies, the position of managing director and chairman of the board may not be performed by the same individual, according to section 8: 49 SCA. The possibility of CEO duality is thus excluded. In order to safeguard the separation between the two positions, rule 6.2 of SCCG adds that the division of work and responsibilities between managing director and chair of the board should be clearly stated in the board’s statutory Rules of Procedure and its Instructions to the managing director.

From the description of the work of the managing director, it is clear that he should follow the instructions of the board of directors. This confirms the earlier statement that the Swedish corporate governance model is very hierarchical and allows organs to provide instructions to subordinate organs. This Swedish governance model can be classified as a unitary board with special features in comparison to the British system. The board of directors consists solely or primarily of NEDs. A graphical representation of the Swedish unitary board structure is given in Figure 9-1.

Figure 9-1: The special unitary board structure in Sweden. There is one board of directors with almost solely SNEDs, who can be divided into board members who are elected by the general meeting and employee representatives. Within the group of board members who are elected by the general meeting a distinction is made between independent and non-independent directors. Independence in Sweden is furthermore split up in independence from the company and its executive management and independence from major shareholders. In some cases a member of the executive management – in a majority of the cases the managing director – is part of the board, which is symbolised by the dashed line between the managing director and the rest of the board.