 |
| The authors of the Norby
Report from left to right: Jorgen Lindegaard,
Lars Norby Johansen, Mads Ovlisen and Waldemar
Schmidt. |
| Courtesy Danish Commerce
and Companies Agency |
In most of the world, caveat emptor still rules.
Did you ever think there would be a watchdog website
for charities? How often, doing deals overseas,
does one wish for a sort of globalized Better Business
Bureau? Denmark has one -- its practices and bywords
are openness, transparency, responsibility and equality
of treatment.
In March 2001, the Danish minister for Business
and Industry, Ole Stavad, asked Lars Norby Johansen,
CEO of Group4 Falck, to head a committee to look
into the need for better corporate governance in
Denmark. Norby Johansen enlisted Jorgen Lindegaard,
CEO of SAS, Waldemar Schmidt, former CEO of ISS,
and Mads Ovlisen, former CEO of Novo Nordisk, and
together they took their expertise and connections
and went to work.
This was not a gang of lightweights. Group4 Falck,
Norby Johansen’s company, started out as a
fire brigade in 1906; last year it bought Wackenhut.
The result of their research was "The Norby
Committee's Report on Corporate Governance in Denmark
-- Recommendations for Good Corporate Governance
in Denmark.”
Defining corporate governance
Good corporate governance is defined as: “The
goals according to which a company is managed and
the major principles and frameworks which regulate
the interaction between the company’s managerial
bodies, the owners as well as other parties who
are directly influenced by the company's dispositions
and business (in this context jointly referred to
as the company's stakeholders). Stakeholders include
employees, creditors, suppliers, customers and the
local community.”
The group wants to stimulate debate about corporate
governance. They feel that a clean house will attract
more foreign investment, increasing the Danes’
access to capital. They want to inspire Danish companies
to be ready for the challenges of globalization.
They think that it can also be in the company’s
own interest. They are not alone.
The Financial Times, writing in Sept., called
corporate governance and clear accounting “a
social responsibility -- and a lucrative one.”
According to Morgan Stanley, shares in companies
with the best board behavior outperformed the lesser-disciplined
ones by 10 percentage points over three years. “The
most egregious sinners, meanwhile, sowed the seeds
of their own demise.”
Because the Norby Report was written well before
the recent U.S. scandals, some of the points make
eerie reading. “Remuneration to the directors
and the managers’ performance-related pay may
result in conflicting interests between the shareholders
and the managers and may lead to the managers focusing
on increasing the value creation of the company.
It is important that there is openness about all
important issues regarding incentive schemes.”
Thoughtful CEO
Lars Norby Johansen is a thoughtful CEO, one of
the few with an academic background. From 1965 to
1981 he held various assistant and guest professorships
in political science all over the world, culminating
in a stint at Harvard. He entered the business world
in 1985, and 11 years later he was a CEO. He presides
over a company where the rescuers -- who may drive
a tow truck or do CPR -- require over three years
of training.
Speaking of the report, and his own practice of
strict corporate governance, he says, “We foresaw
that if companies themselves become better at running
those companies in a good way from a corporate point
of view, the more we can hopefully avoid legislation.”
Would this be like preventative medicine? “Exactly,"
says Norby Johansen. "But if you look at the
system of corporate governance in Denmark, it’s
very different from the Anglo-Saxon model. The major
difference is that we have a two-tiered system,
with a pretty sharp distinction between the executive
management side, and the board side. The board side
is composed of non-executive board members, even
the chairman. This is Danish law. The CEO and the
chairman cannot be the same. The fundamental principal
is checks and balances.”
Also, incentive schemes, while in place, are “much
more modest, so the temptation to be shortsighted
is really diminished. Finally, transparency and
disclosure is always higher in this part of the
world.”
Norby Johansen even thinks Europe could leave the
U.S. behind in this regard. “If there is a
relationship between share price development and
trust and confidence in the companies, then corporate
governance is very important in the sense of stimulating
trust, a crucial factor,” he says. This is
the attraction of European companies – they
could market that aspect.
"We want to stimulate responsibility,"
says Norby Johansen. “Criminal law is another
matter. You can’t catch all these people with
legislation.”
It all boils down to disclosure. “Because
it’s the threat of disclosure that pushes through
the changes that you need," says Norby Johansen.
"Otherwise it’s just paper.”
For more information on this topic please visit:
www.corporategovernance.dk
|
