Good practice for effective Boards in
State Owned Enterprises
Lars Johan Cederlund
Director, Senior Advisor
Ministry of Industry, Employment and Communications
Sweden
Ministry of Industry, Emp loym ent and Com m unications
Overview
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State Owned Companies – the Swedish structure
Administration
Tools
Board nomination - principles
Processes
Board members
Remuneration
Examples
Rules of Procedure for the Boards
Efficiency evaluation and conclusions
Ministry of Industry, Emp loym ent and Com m unications
State owned companies in brief
• 59 companies – 44 wholly owned and 15 partly owned
• Four listed companies – the state is the largest single owner on the
Stockholm Stock Exchange (approx. EURO 10 billon)
• Total turnover EURO 37 billion
• Total assets: EURO 107 billion
• Average no of employees: approx. 200 000
• Estimated value: Between EURO 35 and EURO 45 billion
• More details at
www.industry.ministry.se/inenglish/areas_of/state_owned
Ministry of Industry, Emp loym ent and Com m unications
State-owned companies by sector
By value
25%
27%
17%
4%
8%
Ministry of Industry, Emp loym ent and Com m unications
8%
11%
Telecom
Retail
Power
Transport
Financial
Basic Industry
Real Estate
Estimated total value:
35-45 USD billion
Ownership Administration – objectives and prerequisites
• Separated responsibility for sector policy and ownership issues
• Professional boards and managements
• Value creation.
• Companies operating under market conditions are to operate under
the same conditions and have the same demands made on their
activities as other players.
• Some state-owned companies are primarily intended to fulfil special
societal interests.
Ministry of Industry, Emp loym ent and Com m unications
Administration
the Parliament (Sveriges Riksdag)
The Government
The Board
The Ministry of Industry
CEO
The Division for State-owned
companies
Management
 The Government appoints the
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Ministry of Industry, Emp loym ent and Com m unications
Board
The Board appoints the CEO
Ownership Administration – framework and tools
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The Swedish Companies Act provides the framework for the companies and
the articles of association specify the general direction of the company’s
activities. Three tier system and part time board members
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All legal regulations follow private sector regime, no specific regulations for
state owned companies
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The boards bear full responsibility.
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Special commissions are decided upon by the Swedish Parliament, the
Riksdag, regulated by law or by agreement between the company and the
state.
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Guidelines for external reporting, terms of employment, etc.
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The Government Offices continuously evaluates the performance of the
boards and deals with the ownership matters that arise.
Ministry of Industry, Emp loym ent and Com m unications
Board nomination – principles
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Chairman – independent from civil service
The Chairman has a key function
Relevant competence to fulfil the strategy of the company
Independent from the management
The person responsible at the Ministry is on the board
In companies fulfilling societal interests some special competence may be needed
e.g. political
• Employee representation following the same law as private companies
Ministry of Industry, Emp loym ent and Com m unications
Processes
• All boards reviewed every year following a standard procedure
• Evaluation concerning competence needed, present board structure,
competence on the actual board
• Need for change, competence, age etc
• Search for names – 59 boards, 400 members
Ministry of Industry, Emp loym ent and Com m unications
Board member structure and work
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Total number approx. 400 appointed by AGM
140 employee representatives (64 deputies)
7-9 members and 2+2 employee representatives
42 per cent women
Recommended internal work plan in the board
Internal evaluation every year
Ministry of Industry, Emp loym ent and Com m unications
Remuneration
• Fees in line with private sector – the importance of the company and
the responsibility are key factors
• Between 40-60 per cent of CEO monthly salary, chairman twice as
members
• Employee representatives, reduced fee
• Few deputy board members, half the normal fee
• In case the CEO is on the board, no separate board fee
Ministry of Industry, Emp loym ent and Com m unications
Examples
• Vattenfall AB, power production and distribution
• Sveaskog AB, forestry
• Telia-Sonera AB, telecoms, listed
Ministry of Industry, Emp loym ent and Com m unications
Board of Directors, Vattenfall AB
(50 per cent of domestic power production)
• Chairman: Mr D Klackenberg, former legal secretary Foreign Office,
Managing Director Swedish Trade Association, now private sector
• Three industrialists
• Two Ministry of which one from the Division for State Enterprises
• 3 employee representatives
• 6 + 3 =9
Ministry of Industry, Emp loym ent and Com m unications
Board of Directors, Sveaskog AB
(18 per cent of Swedish forest land)
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Chairman: Mr B Dockered, Honorary Dr of Agriculture, Private sector
Three, industrialists
One Ministry from the Division for State Enterprises
One MP
One civil servant Swedish Institute of Food Economics
One forest manager, Swedish Church
3 employee representatives
7+3=9
Ministry of Industry, Emp loym ent and Com m unications
Telia-Sonera AB (Telecom operator, listed in Stockholm
and Helsinki)
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Chairman :Mr T Hintikka, industrialist
Vice Chairman: Mr C Bennet, industrialist
One public sector, former Prime Minister
One academic
5 private sector industrialist/economists
3 employee representatives
9 + 3 = 12
Ministry of Industry, Emp loym ent and Com m unications
Rules of Procedure for the Boards
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Division of responsibility
Information
Board meetings
Evaluation
Board committees
Ministry of Industry, Emp loym ent and Com m unications
Efficiency evaluation and conclusions
Results
• Good profitability
• Openness to restructurings
• Devoted board members including employee representatives
Crucial points
• Structured nomination process necessary
• Evaluation and contacts with the chairman before nomination
• The board members have to be comfortable with state ownership
Ministry of Industry, Emp loym ent and Com m unications
Success factors
• Board nominations is the most important tool in combination with
transparent and clear financial goals
• Structured process
• Competence is the key factor
• Responsibility – no interference from the owner in day to day business
• Reasonable remuneration
Ministry of Industry, Emp loym ent and Com m unications