All questions

Corporate leadership

i Board structure and practicesStructure

A Swedish limited liability company is organised as a unitary structure in line with the Anglo-Saxon one-tier model. The general meeting of shareholders, acting as the company's supreme decision-making body, inter alia elects a board that appoints a managing director. The general meeting, the board and the managing director together with the auditors comprise the four corporate bodies recognised by the Companies Act and the first three are, in descending order, subordinated in relation to each other. The auditors, whose main responsibility is to keep the accounts in order, are, however, independent in relation to the others. Thus, under the Swedish corporate governance structure, there is no two-tier model with a supervisory board overseeing the administration of the company as traditionally can be found in continental Europe.

Composition of the board

In general, the board in Swedish listed companies includes five to 10 members and primarily consists of non-executive directors. According to the Code, a majority of the directors of the board elected by the general meeting must be independent from the company and its executive management. A minimum of two of these directors must also be independent from the company's major shareholders. In addition to this, the Code stipulates that no more than one board member elected by the general meeting may be part of the executive management of the company or of a subsidiary to the company. Thus, boards of listed companies normally consist of non-executive directors only. The managing director of the company may not be the chair of the board, but may however be a board member.

Recurrently, the low percentage of female board members has come under review, and within the public debate there are those who argue that legislation is required to balance the gender ratio between female and male board directors. Under the Code, the board shall have a composition appropriate to the company's operations, its phase of development and other relevant circumstances. The board members elected by the general meeting shall collectively exhibit diversity and breadth of qualifications, experience and background. Moreover, the company must also strive for gender balance on the board.

In 2006, the Ministry of Justice introduced a proposal for a provision, under which at least 40 per cent of boards of listed companies would be required to comprise female directors, and in 2015, the Minister stated that the parliament may be required to amend the law to reach the goal of more gender-balanced boards. It was further stated by the secretary that a bill would be presented to the parliament within a year in the event that companies did not have female representation of at least 40 per cent before that point in time, and in 2016, the government presented a legislative proposal to this effect. However, the proposal did not have sufficient support in parliament, and no new proposal has been put forward since. Thus, at this time, there is no legal requirement as regards female representation on boards of directors.


In general, under the Companies Act, the right to represent and sign on behalf of the company in all matters is vested in the board as a whole. If a managing director has been appointed, he or she has the right to sign on behalf of the company as regards the day-to-day operations. In addition to this, the board may authorise a board member, the managing director or any other person to represent the company by way of special company signature. The managing director or the chair, each alone, as well as two board members or another special signatory, are typically entitled to represent and sign on behalf of the company.

Legal responsibilities of the board and the chair of the board

According to the Companies Act, the principal duties of the board comprise the responsibility for the organisation of the company and the management of the company's affairs. Furthermore, the board is also to ensure that the company's organisation is structured in such a manner that accounting, management of funds and the company's finances in general are monitored in a satisfactory manner. In addition to this, board members as well as the managing director have an overall duty in all matters to act in accordance with the interests of the company. The chair of the board has no specific duties or powers other than a responsibility for convening the board and leading the work of the board.

Another key task of the board is to appoint and dismiss the managing director. Whereas the board is responsible for the overall management of the company's affairs, the managing director shall attend to the management of the day-to-day operations pursuant to guidelines and instructions issued by the board.

Thus, boards in Swedish companies have an extensive decision-making authority, but also their limitations, primarily by way of the legal provisions giving the general meeting exclusive powers as regards specific matters (e.g., share issues, amendments to the articles of association, and the election of board members and auditors).

Remuneration of directors and compensation from shareholders

The board remuneration is resolved upon by the annual general meeting, and the board decides the remuneration for the executive management. All share and share price-related incentive schemes for the executive management shall, however, be resolved upon by the general meeting. According to the Code, the remuneration and other terms of employment are to be designed with the aim of ensuring that the company has access to the competencies required at a cost appropriate to the company, and that they have the intended effects for the company's operation.

The basic rule is that directors receive their remuneration from the company concerned. There are, however, no rules directly prohibiting a director from also accepting compensation from a shareholder who has nominated him or her. In practice, the director may, for example, be employed by the nominating shareholder. In some cases, a director being employed by the nominating shareholder waives his or her remuneration from the company. Such arrangements should be factored in when determining whether the rules regarding disqualification of a director to decide on specific matters involving such a nominating shareholder are applicable. If a board member receives compensation from a shareholder, he or she is not deemed independent from that shareholder.

ii DirectorsLegal duties

Board members have a fiduciary duty to act in good faith and in the best interests of the company, which entails a duty to act in the interest of all shareholders. For that reason, the board may for instance not consider an activist proposal under any different standard of care compared to other board decisions, and individual shareholders may not be given an unfair advantage compared to the other shareholders in the company. However, the board may cooperate with an activist as long as the board does not breach the duty of equal treatment of all shareholders.

Provided that it is not in conflict with the Companies Act or the applicable articles of association, the board is also obliged to follow any specific instruction decided upon by the general meeting.

Liability of directors

According to the Companies Act, a board member as well as a managing director may be liable for damages to the company, the shareholders or third parties (e.g., creditors). If, in the performance of his or her duties, he or she intentionally or negligently causes damage to the company, he or she shall compensate the damage. Liability towards a shareholder or a third party may, however, only arise when damage is caused as a consequence of a violation of the Companies Act, which includes provisions on fiduciary duties, the applicable annual reports legislation and the articles of association. The board may delegate specific tasks to individual members or other employees, but is not able to avoid liability for the company's organisation or the duty to ensure satisfactory control of the finances of the company.

Further, members of the board and the managing director may also be held liable under general principles on tort and, if applicable, the Swedish Tort Liability Act. As for the board, there is no collective liability per se, and an in casu judgement must be made as regards each claim and each director. Moreover, a Swedish company is not itself capable of committing a crime, which implies that it is the natural person who commits the crime who ultimately will be held responsible.

Appointment, nomination and term of office

Under the Companies Act, the board is elected by the general meeting. In listed companies, director nomination is done by the nomination committee, which in Sweden is not a board committee, but rather a committee set up by the general meeting that includes the largest shareholders. The Code stipulates that a company shall have a nomination committee that, inter alia, shall nominate candidates to the board. The general meeting elects the members of the nomination committee, and thus large shareholders generally have great influence over the composition of the committee. However, at least one of the members shall be independent in relation to either the company's largest shareholder or group of shareholders that cooperate regarding the management of the company.

Any shareholder may, however, nominate directors for election to the board and have the nomination included in the notice to attend the general meeting, as long as the proposal is presented to the board within the time frame stipulated in the Companies Act and otherwise complies with the applicable provisions in the Companies Act. Furthermore, if the matter of election of members of the board is already on the agenda of the general meeting, a shareholder has the right to propose a candidate as late as at the time of the meeting itself.

The nomination committee shall safeguard the interest of all shareholders in its nomination of candidates. The nomination committee's proposal is presented in the notice to attend the general meeting. The board is elected by a majority vote, unless the articles of association stipulates otherwise. Market practice in Sweden has been to elect the members of the board by a single vote. However, this is not required by law, and some international investors in Sweden have shown tendencies to start raising demands on listed companies to switch to separate voting for each member of the board. Large international institutional investors have been campaigning for individual board election and transparency of voting at general meetings.

Staggered boards are non-existent (each board member is elected annually, and there is no way of preventing a new majority shareholder from replacing the board immediately).