How Nordic Boards Create Exceptional Value

How Nordic Boards Create Exceptional Value

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How Nordic Boards Create Exceptional Value

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    Year after year, Nordic companies outperform the global average in The Boston Consulting Group’s annual study of value creation. This impressive feat holds true whether we look at annualized returns over time periods of 5, 10, or 15 years. (See Exhibit 1.) Nordic companies’ superior performance is also evident across most industries.


    While many factors contribute to Nordic companies’ superior returns, we believe these companies’ unique model for corporate governance plays an important role. The Nordic model establishes a board of directors that does not include any of the company’s executives. This nonexecutive board’s responsibilities include appointing and monitoring the CEO, approving the corporate strategy, and overseeing legal compliance and risk management.

    Although the Nordic model shares some attributes of the two more widely used governance models, key differences give Nordic nonexecutive boards a more active role in steering their company. (See “A Comparison of Governance Models.”)

    A Comparison of Governance Models

    Despite country-specific variations, the Nordic corporate-governance model is distinctive for establishing a powerful nonexecutive board that is separate from the executive management. The model establishes a direct hierarchical chain of command running from the shareholders’ general meeting to the board to the management. This structure gives the board a unique role, empowering it to act with the shareholders’ mandate to directly control the management. Through this mechanism, the Nordic model aligns the management’s incentives with those of the shareholders and strikes an effective balance between risk taking and stability. The nonexecutive board also has a clear role in determining the company’s overall goals and strategy.

    Like the Nordic model, the two-tier model used in continental Europe establishes a separate nonexecutive board, called the supervisory board. But, unlike the Nordic model, the continental Europe model limits this board’s power to appointing and dismissing (only for a material reason) the executive directors and vetoing certain management proposals.

    In contrast to both the Nordic and continental Europe models, the one-tier model often used by companies in the UK and the US establishes a single board comprising both nonexecutive and executive members. In practice, though, the recent pressure to increase the number of nonexecutive directors and give them a greater role has meant that non-executives dominate the boards of most large companies. Even so, especially in the US, the CEO also serves as the board chair of many large companies. (A study found that 56% of S&P 500 companies had a combined chair and CEO in 2015.)

    In a recent study, BCG sought to understand the best practices that enable nonexecutive boards to create superior value for the company’s owners. While previous research on the nonexecutive board’s role has primarily considered governance issues, our study is distinctive in that it focuses on the board’s role in value creation.

    In conducting the study, we interviewed more than 50 CEOs, chairmen and -women, and nonexecutive board members of leading Nordic companies and surveyed more than 100 other CEOs and nonexecutive board members of Nordic companies. (See “Expert Participants in Our Study.”) These participants work for companies that have total revenues of approximately €430 billion ($482 billion), equal to 30% of Nordic countries’ GDP. Although the research considered only Nordic companies, we believe that our findings are relevant globally.

    Expert Participants in Our Study

    We thank the following chairmen and chairwomen, board members, and executives for their valuable contributions in discussing the topics and findings of this report. (This list includes only those who have agreed to make their names public.)


    Ole Andersen
    Flemming Besenbacher
    Anders Colding Friis
    Niels Jacobsen
    Eivind Kolding
    Peter Kürstein
    Jesper Lok
    Jens Due Olsen
    Michael Pram Rasmussen
    Vagn Sørensen


    Sari Baldauf
    Helene Biström
    Berndt Brunow
    Jorma Eloranta
    Stig Gustavson
    Taavi Heikkilä
    Antti Herlin
    Kim Ignatius
    Jouko Karvinen
    Tapio Korpeinen
    Matti Lainema
    Mikael Lilius
    Raimo Lind
    Markku Pohjola
    Juha Rantanen
    Bo Risberg
    Matti Ruotsala
    Risto Siilasmaa
    Eeva Sipilä
    Heikki Westerlund


    Karl-Christian Agerup
    Wenche Agerup
    Odd Christoffer Hansen
    Ole Eirik Lerøy
    Jo Lunder
    Anders Misund
    Egil Myklebust
    Harald Norvik
    Dag Opedal
    Olaug Svarva
    Leif Teksum
    Kim Wahl


    Leif Johansson
    Tom Johnstone
    Ronnie Leten
    Johan Molin
    Mikael Ohlsson
    Per-Arne Sandström
    Helena Stjernholm
    Lars Westerberg

    Impressively, all of the Nordic CEOs we surveyed believe that their company’s nonexecutive board understands the factors that promote high performance. In contrast, a survey of CEOs globally by Colin Carter and Terry Atkinson found that only approximately two-thirds held this view about their board. CEOs in our study also nearly universally involve the board in urgent strategic decisions. Such results suggest that the best practices of Nordic companies may serve as a model for companies in other regions that seek to promote greater board involvement in strategy and value creation. We also identified clear improvement areas for Nordic companies and a wide variety of practices for addressing these issues.

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