1.  The Swedish Corporate Governance Board 1 Say on Pay – pro or con good governance? Presentation at the ecoDa/IFC Roundtable, Brussel 2013-12-17 Per Lekvall The Swedish Corporate Governance Board

2.  The Swedish Corporate Governance Board 2 Brief update on background and current status  Say on Pay = “The vote of shareholders at a general meeting on the policy and/or various components of compensation of executives and/or non-executives, depending on the country.” (IFA report, Nov. 2013)  Originally conceived by the Cadbury Commission, the concept was introduced into the EU CG agenda through the European Commission’s Recommendation of 2004 on remuneration of directors in listed companies  Since then implemented in a variety of versions in many EU Member States and other parts of the world (cf. IFA report). Examples of variations include: ­ ex ante policy/ex post report ­ including/excluding non-executive directors ­ voluntary /mandatory vote ­ binding/advisory decision ­ and others...  Expected to be implemented throughout the EU through the upcoming new Shareholders’ Rights Directive, due before the end of the year: ­ Part of a broader agenda to encourage shareholder engagement in their investee companies ­ But also to increase transparency of executive compensation

3.  The Swedish Corporate Governance Board 3 Is Say on Pay good for governance? PURPOSES / ALLEGED ADVANTAGES e.g.  Giving the shareholders control of overall prihciples for executive remuneration, thus tilting the balance of power more in favour of the shareholders  Gives shareholders incentives to get more involved in the governance of companies QUESTION MARKS / POSSIBLE DRAWBACKS e.g.  Deprives the board of one of its most powerful instruments for carrying out its fiduciary duties to the shareholders – i.e. to hire/fire and remunerate management  Who can be held accountable for bad remuneration decisions by the AGM?  “Upward delegation” from the board to the AGM does not necessarily imply better corporate governance

4.  The Swedish Corporate Governance Board 4 Conclusions  In jurisdictions where shareholder power is weak and shareholder engagement generally in short supply:  SoP may well be a suitable cog in the wheel towards empowering shareholders and incentivize them to engage in the governance of companies  In jurisdictions with strong shareholder power and little general lack of shareholder engagement:  The drawbacks may well override the advantages, leading to worse rather than improved corporate governance standards Therefore a mandatory Say on Pay requirement should not be implemented indiscriminately across the EU