SWEDEN – Tredje AP-fonden, the 16.6 billion-euro Third Swedish National Pension Fund, has said Sweden’s proposed new corporate governance code may lead to higher costs.
“The Swedish code is considerably more detailed than equivalent international codes,” the scheme has said in a commentary on the new code. “This high level of detail risks further increasing companies' costs. It is therefore desirable that consideration is paid to reducing the scope of the code and scaling back the regulations.”
The 60-page proposed code was put together earlier this year under a group headed by former finance minister Erik Åsbrink, with a view to its being put into practice in early 2005 following a consultation period.
Pointing out that the code was primarily written for large companies, AP3 says that small firms may face problems. “There is a risk that these companies will be forced to enlist expensive legal assistance in governance issues. At worst, companies may feel tempted to de-list in order to avoid having to comply with the code. This would reduce AP3's ability to invest in these companies.
It called for a model whereby small companies could be exempted.
It added that shareholders have an important role to play in determining whether a company’s deviations from the code are acceptable. “Institutional shareholders have a key role to play in developing standards of best practice in this area. AP3 aims to promote clear and straightforward governance reports in which any explanations of deviations are not overly detailed or legally complex.”
And it said that companies in the region are becoming increasingly pan-Nordic – yet separate governance codes are being introduced in the different Nordic countries.
“This makes it very difficult for companies to meet the standards of best practice in the various countries.” AP3 called a harmonised Nordic corporate governance code.
And it pointed out that company managers would face extra pressure. “Introduction of the code will place greater demands on the time of directors,” it said, adding: “We as owners must be prepared to accept an increase in directors' remuneration levels as well as the payment of special fees to committee members.”
The proposed code calls for institutional owners such as pension funds to make their ownership policy public and to provide information about conflicts of interest.
Meanwhile, sister fund AP2 has launched a tender for external managers of global active equity portfolios. It said: “The service required by AP2 is discretionary asset management of global equities.
“Several managers are each to be awarded a mandate on active management of global equities in the tracking error range above three percent.” It added that the size of each mandate would be in the 150 to 700 million-dollar range.