We would like to ensure that you are still receiving content that you find useful – please confirm that you would like to continue to receive ILO newsletters.
11 October 2005
As of July 1 2005 all Swedish companies on the Stockholm Stock Exchange's A List and all Swedish companies on the O List with a market capitalization exceeding Skr3 billion must apply the Corporate Governance Code as soon as possible and must have fully implemented the code before their 2006 annual general meeting.
Under the code, a special report on corporate governance - including a statement on whether this report has been reviewed by the company's auditors - must be attached to the company's annual report. The company should state that it is applying the code and give a brief description of how it has applied the code in the most recent financial year. The company should also indicate whether it has departed from the code's rules and, if so, explain clearly the reasons for such departure. Unless already included in the annual report, the report must include the following, among other things:
With respect to board members, auditors and the managing director, the report should contain certain information on the assessment of their competence and independence.
Under the code, the board of directors must submit an annual report on how internal controls dealing with financial reporting are organized and how well they have functioned during the most recent financial year. The report must be reviewed by the company's auditor and shall be attached to the company's annual report. In companies that do not have a special internal audit function, the board must evaluate the need for such a function annually and explain the position taken in its report on internal controls.
Under the code, the board of directors must ensure that the company has a formal process - transparent to all board members - for establishing the company's remuneration policy and other terms of employment for senior management, and for deciding the managing director's remuneration and other terms of employment. The board must establish a remuneration committee with the task of preparing proposals on remuneration and other terms of employment for senior management. In companies with smaller boards, the entire board may perform the remuneration committee's task, provided that directors who are also members of senior management do not participate. The board must present a proposal on the company's policy on remuneration and other terms of employment of senior management to the annual shareholders' meeting and obtain approval. The policy must include the following, among other things:
The board's proposal must state whether the terms recommended differ significantly from the policy approved by the shareholders' meeting and how matters of senior management remuneration are decided by the board. The shareholders' meeting must decide all share and share price incentive schemes for senior management.
Companies applying the code must have a special section on their websites for corporate governance matters. The information should be kept reasonably current, which suggests that the information should be updated at least after every shareholders' meeting and in connection with the issuance of interim reports. Therefore, much of the information required for the corporate governance report should be made available on the company's website before the corporate governance report is formally published in conjunction with the annual report.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.