Proxy voting - Has Sweden got it right?

In the debate about investor-stewardship, the name of one country keeps coming up – Sweden. The Nordic state is often regarded as something of a special case: an interesting example of what is theoretically possible working in practice – but not in a practice that anyone else could duplicate. From its peculiar social democracy, where high earners seem happy to pay high taxes, to its sense of freedom despite sometime draconian law, it is a place of contradictions. In corporate life, it is a country where dominant shareholders, supported by a system of unequal voting rights, seemingly don't abuse the power they have. Instead, the stewardship of Sweden's large family-shareholders is held up as an example of how we might hope to do it around the world.

Norse invaders? The European Commission is debating a regulatory push for asset management something along the lines of the new stewardship code in the UK, where the new government is thought to be looking to Sweden for advice. One idea that's come up is giving certain shareholders not just extra voting rights but also direct representation in what have traditionally been matters reserved to boards of directors – the nomination process. Rather than giving them proxy access, as the US has done, with the probably result of competing candidates and a possibly divided board, Swedish law allows large shareholders to join the nomination process.

Checking against the facts: Because Sweden – Swedish society – is something of a special case, there's danger in adopting its models without quite careful examination. A group of scholars, all Europeans working either at the Tuck School at Dartmouth College in the US or the Norwegian central bank's investment trust, have compiled a thorough dossier on how Swedish stewardship really works. They highlight voting impediments and examine recent regulatory attempts to make the voting process both more efficient and conforming to the European Union's Shareholder Rights Directive from 2007. How Swedish listed firms have adapted to Sweden's share-voting system? You'll find that out, too.

Source document: The working paper "Efficiency of Share-Voting Systems: Report on Sweden," by B. Espen Eckbo, Giulia Paone and Runa Urheim, is a 226-page pdf file.