Stockholm (NordSIP) – In 2002 Helena Levander co-founded Nordic Investor Services (NIS), the Nordic advisory firm on corporate governance. She has handed over the operational responsibility but remains a very engaged chair of the company. NordSIP met with her to talk about where she sees governance presently and going forward.
“Anyone working with sustainability must focus first on the G since good governance is a prerequisite for sound qualitative work on the E and the S.” Helena Levander states.
“The positive thing about having good governance is that if you are an active owner your actions can have a direct effect whether they are aimed at a listed company or a private one”, she explains. Nordic Investor Services has many times seen companies act after institutional investors have persisted in sending letters about the same issues and voting, in the same way, year after year.
Good governance work must be implemented at many different levels from pure hygiene factors to real actions where an institution with large ownership in a company, large or small, can have a clear impact. Simply buying voting services and external research doesn’t add any real value according to Helena Levander. “Having real impact takes systematic governance work and investors need to fully integrate this work in the investment management organisation and process,” she stresses.
Nordic Investor Services is a boutique firm that works very close to its clients. The individual client’s ownership policy serves as a base. On issues not included in the policy, NIS investigates and makes a recommendation. Most clients are large or medium-sized. Up till now, the company has found it hard to reach the smaller institutions. According to Levander these institutions generally believe that they are active enough by attending the yearly shareholder meeting and by being on nomination committees. NIS is working on developing a packaged solution for smaller capital owners with the aim to be able to offer reduced administration costs in combination with increased governance activity perhaps by selecting a few yearly issues to focus on. NIS’s coverage is around 1200 companies in 25 markets, something which requires them to know an extensive number of relevant laws, rules and procedures. They also must be updated on which issues to deal with at all general meetings and select which ones to focus on and write letters about.
Levander believes the market is too narrow in its definition of sustainability. “Swedish politicians have made a difference in state-owned companies”, she says. “The UN SDGs have been a big help but the environmental issues, she believes, are dominating un-proportionately”. Levander would like to see more active governance work. “If more institutional owners press for good compensation programs, diversified boards etc and there is an active discussion on governance issues, we will reduce the risks of corruption, child labour, environmental disasters etc”, she argues.
Many see governance work as a legal process where a lawyer produces a complex text. Helena Levander wants more direct action; owners should demand from each company that they explain their statements, what the purpose is with their governance work, which suggestions are put forward etc. “Claiming that governance work by small capital owners is meaningless is not true,” she says. When the SRDII (the EU shareholders’ right directive) goes into effect on July 1, 2019, companies will have to show for example the result of their remuneration policies. SRDII will also force institutions to present information on policies and how they vote. This could well lead to an increased focus on the G in ESG.
Picture © NordSIP