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Insights into Danish Corporate Governance: Structures, Challenges, and Foundation-Owned Firms

This presentation explores Danish corporate governance from a European perspective, focusing on its unique structures like one-tier and two-tier systems. It examines the role of supervisory boards, insider and outsider dynamics, and the impact of foundation ownership on company performance. Key examples include A.P. Møller Group and Novo Nordisk. The analysis covers board diversity, employee representation, and the performance of foundation-owned companies in Denmark's top 100. Additionally, it addresses current trends in governance, including private equity and social responsibility.

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Insights into Danish Corporate Governance: Structures, Challenges, and Foundation-Owned Firms

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  1. BCC Presentation 19. September 2008 Danish Corporate governance in a European perspective Steen Thomsen st.int@cbs.dk Center for Corporate Governance Copenhagen Business School http://uk.cbs.dk/ccg

  2. Corporate Governance Systems

  3. Boards One-tier system Two-tier system Supervisory board The Board Outsiders Management board Insiders Company Company Employees

  4. Non-profits that own/operate business firms..ties to founder/family Creation by donation Independence (no owners, no members) Governance by Charter Business activity Industrial foundations

  5. 1. A. P. Møller Gruppen - APM OG CMMs Fond 2. J. Lauritzen - J.L. Fondet 3. Carlsberg – Carlsbergfondet 4. Novo Nordisk - Novo Nordisk Fonden 5. Skandinavisk Holding - Augustinus Fonden 6. Danfoss - Bitten & Mads Clausens Fond 7. Lego - Legofonden 8. Grundfos- Poul-Due Jensens Fond 9. Lundbeck - Lundbeckfonden 10. Gutenberghus - Egmont H. Petersens Fond 11. Løvens Kemiske fabrik - Leo Fondet 12. J.C. Hempel - J.C. Hempels Fond 13. Carl Allers Etablissement - Allerfonden 14. V. Kann Rasmussen - V. Kann Rasmussen Fonden 14 foundation-owned firms in Denmark´s top 100

  6. Foundation Donations (optional) Minority Investors (optional) > 50% Company (normal joint stock co.)

  7. An Example Oticon Foundation Other Investors 39% 61% Donations William Demant Holding PLC 100% 100% Oticon Hearing Aids Other Businesses

  8. Foundation-owned companies should fail lack a personal profit motive limited risk diversification But they perform well Profitability, growth, survival..vs. family- and investorowned companies No tax advantages for the company The Foundation Puzzle

  9. Two tiers Employee representation (1/3) Managers on board (but less frequently in listed companies) Mandatory Separation of chair and CEO Small boards Denmark: Board structure

  10. Board Diversity in Scandinavia 2005

  11. Chair education DK (%)

  12. Danish Board diversity (Largest companies 1994, 2000, listed companies 2005)

  13. The Danish Board network 2001

  14. The ownership network 2001

  15. Activities and incentives

  16. Listed Danish companies1983-2006(Ken Bechmann 2008)

  17. DK

  18. Danish owners are relatively strong (family/foundation ownership…) The board is relatively independent of management (two-tier system) Boards are relatively small Employee representation => Management is relatively weak (c.f. low levels of compensation) A Conclusion on Denmark

  19. Not the classical agency problem (weak owners, strong managers) Nor the Stakeholder problem (cf. Investor protection, Employee representation etc) => Active ownership is key The pertinent governance issue

  20. Novozymes – foundation ownership Coloplast – family ownership ISS – private equity Topdanmark – investor ownership Danisco – investor ownership Company cases

  21. Future Trends • Risk and governanceAudit committees, regulation.. (29. oct..) • Private equity • Social responsibility (climate….)Signing Global Compact (8. October) • Women on board • Employee ownership revisited

  22. Thank you!

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