9.2.4.3 Board composition

In order to fulfil the principle of chapter 4 of the SCCG, rule 4.1 provides that the board should have a composition that is ‘appropriate to the company’s operations, phase of development and other relevant circumstances’. No instructions about how to implement this in practice is provided by the SCCG. Furthermore the board should be diverse with respect to qualifications, experience and background and should strive for equal gender distribution. With respect to independence, it has already been mentioned that the majority of the board should be independent of the company and the executive management and that two members of that group of independent directors are also independent of the major shareholders. In addition to these rules, the SCCG also requires in best practice provision 4.3 that no more than one member of the executive management of the company or subsidiary is a member of the board.

Table 9-2: .Board composition numbers of 70 large Swedish companies (56 NASDAQ OMX StockholmLarge Cap, 12 Mid Cap and 2 state owned companies), calculated using data from Spencer Stuart (2010). (MD = managing director, Empl. repres. = employee representatives)

Table 9-2 provides board composition numbers for seventy large Swedish companies. 56 companies have a listing on the NASDAQ OMX Stockholm Large Cap Index, 12 on the Mid Cap Index and two companies are fully owned by the state (Posten and Vattenfall). A majority (43 out of 70, 61 per cent) have a managing director, who is a member of the board of directors. This percentage is declining, because it was 64 per cent in 2008 and 75 per cent in 2004 (Spencer Stuart 2010: 6). The table gives a breakdown for companies with a managing director on the board and without. There do not seem to be any differences. An average board has 9.5 directors, of which 6.8 are independent of the company and its executive management and 5.8 are independent of the major shareholders. This means that 93 per cent of all SNEDs are independent of the company and management and 79 per cent of the major shareholders. The independence numbers with respect to the whole board are smaller. Furthermore, the companies in Sweden have on average 1.5 employee representatives on their boards, which is less than the maximum number of three that employees are entitled to.