9.2.4.4 Board committees

The decision whether a director is independent of the company and its executive management and/or independent of the major shareholders has implications for the rules in the SCCG 2010 about board committees. Rule 7.3 requires that the audit committee should consist of at least three board members. The majority of the audit committee members have to be independent of the company and its executive management. At least one of the members of the audit committee, who is independent of the company and its executive management, has to be independent of the major shareholders as well. None of the members may be an employee of the company. This means that the managing director may not be a member of the audit committee. No restrictions are given in this respect for the chair of the board.

The nomination committee in Sweden is, as was mentioned earlier in section 9.1, not a pure subcommittee of the board of directors. Rule 2.2 of the SCCG 2010 provides that the general meeting must appoint the nomination committee or specify how the members are appointed. The number of members is at least three, according to rule 2.3. One of the members chairs the committee and the majority of the members have to be independent of the company and its executive management. No single member of the executive management, including the managing director, may be a member of the nomination committee. In addition to the requirement of independence with respect to the company and its executive management, the SCCG requires that at least one member is independent of the ‘company’s largest shareholder in terms of votes or any groups of shareholders that act in concert in the governance of the company’. Rule 2.4 requires that the members of the board may not comprise a majority of the nomination committee. The other members are shareholders or representatives of shareholders. The position of chair of the nomination committee may not be held by the chair of the board of directors or any other member of the board of directors. If more than one member of the board of directors is included in the nomination committee, at most one of them may be dependent of a major shareholder in the company.

The third committee that has to be established by the board of directors is the remuneration committee, according to rule 9.1 SCCG 2010. Rule 9.2 provides rules with respect to the composition of the remuneration committee. The chair of the board may also chair the remuneration committee. Other members of the remuneration committee, who are appointed by the general meeting, have to be independent of the company and its executive management. In cases where the board considers it appropriate, the entire board may perform the tasks of the remuneration committee. However, a member of the executive management or the managing director may be involved in this work.

Table 9-3 gives an overview of the board committees of 70 large companies in Sweden. The number of board committees ranges from 0 to 5 and the average number is 2.9; most companies have 3 board committees. The audit committee and remuneration committee consist almost completely of board members. Ericsson has an audit committee as well as a remuneration committee with one non-board member. Swedbank has a remuneration committee with one non-board member. The average numbers of the nomination committee show different results. On average 24 per cent of the nomination committee members are a board member. Hence, the nomination committee is not a subcommittee of the board and according to rule 2.4 board members may not constitute a majority of the nomination committee.

Table 9-3: Average numbers of board committees and board committee composition, calculated using data from Spencer Stuart (2010).