That’s why Sweden doesn’t know bank scandals

by Margherita Fabbri - 2013.03.27
That’s why Sweden doesn’t know bank scandals
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After teaching us a lesson on welfare, can Sweden also give the recipe to get out of the crisis? It would appear so. Especially after the success of the so-called ‘active ownership’ made in Sweden, i.e. an innovative management model for businesses listed in the stock exchange which doesn’t put a restricted group of overpaid managers at the heart of governance as the shareholders of the company itself.

In the traditional system (spread in the rest of Europe and in the US) ownership is dispersed among thousands of shareholders who have very little voice in managers appointments, strategies and payments. On the other hand, managers are barely subject to other shareholder’s control and often end up exerting their decisional power in an almost oligarchic way. On the contrary, in Scandinavian businesses, where there is an active ownership, board members and shareholders discuss the strategies to be adopted, and any potential success or failure is the result of a shared, aware decision.

The aim, then, is twofold: support long-term growth by making shareholders feel responsible while encouraging the introduction of promising production enterprises on equity markets, thus producing positive spillout on the entire economic system.

Yes, because Swedish industrialists believe that regulations currently in force in Europe tend to discourage the creation of new enterprises and their access to the share market, that would be used instead to finance their growth. So, active ownership may solve this problem, at least in part, and perhaps it is no coincidence that in 2011 the Swedish density index of new businesses was 7,17 companies every 1,000 inhabitants and that economy growth rate was 3.7%. Meanwhile, over the same year, Italy and Greece had 1,63 and 0,85 companies every 1,000 inhabitants respectively and their economy growth rate was 0.4%.and 7.1%.

Moreover, a business management strategy that places individuals at the heart of the company could help rebuild the relationship of trust between shareholders and markets, strongly brought into question by economic crash in the last few years.

Italy, after the Parmalat and Cirio affair, may restart from the recent MPS scandal (whose potential losses would be €730 million).

In the absence of other forms of participation, Siena’s bank shareholders created the ‘Associazione Buon Governo MPS’, to ‘introduce new elements that break with traditional schemes in the flattened bank governance, participate in corporate assemblies in order to control managers work, make alternative proposals about business strategic decisions and [...] propose lists of managers.’ A sort of ‘compulsory active ownership’ that could be the scenario for a real change, thereby the Scandinavian experiment to more Mediterranean latitudes.

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