Sweden's clean corporate image dealt blow with insider trading case
04/11/2016 11:13
* Hexagon's CEO questioned for alleged insider trading,
denies wrongdoing
* Sweden's clean corporate image under scrutiny following
spate of corporate scandals
* Sweden not immune to corporate governance issues
* Analysts say Sweden's corporate culture is too insulur
By Mia Shanley
STOCKHOLM, Nov 4 (Reuters) - The arrest of Hexagon chief
executive Ola Rollen, one of Sweden's most successful CEOs, on
suspicion of insider trading could not only threaten the
company's standing but also the business reputation of the
country.
Sweden has traditionally been seen as one of the world's
cleanest, least corrupt nations. It ranks third in Transparency
International's corruption perceptions index for 2015.
But the Hexagon affair follows a string of scandals among
blue-chip companies involving alleged bribery, offshore tax
havens and the misuse of corporate money that have dented that
image.
Sweden, said Markus Kallifatides, an associate professor at
the Stockholm School of Economics, was not immune to "human
greed, stupidity and disloyal behaviour".
Rollen was arrested on Oct. 26 by Norwegian authorities for
questioning over potential insider trading in Next Biometrics
ASA NEXT.OL in a deal unrelated to Hexagon. He denies
wrongdoing and Norwegian police have not made formal charges.
Norway's public prosecutor said on Thursday police would
release him from custody no later than Saturday, but that the
investigation into the matter would go on.
Hexagon Chairman Melker Schorling has reiterated his support
for Rollen, who was named just this month by Harvard Business
Review as one of the world's top 100 best-performing CEOs.
But the affair has sent the technology company's shares
tumbling and analysts have expressed concern over the
potentially longer-term impact on it.
The 51-year-old protege of prominent businessmen Melker
Schorling, Rollen is credited with turning Hexagon from a
sprawling conglomerate into one of Sweden's most valuable and
celebrated companies.
"Ola Rollen has a really good track record at Hexagon, so
it's clear that he, hypothetically, would be hard to replace,"
said Asa Vasshagen, who is responsible for corporate governance
issues at the Swedish Shareholders' Association.
The timing is also a blow for Hexagon as its chairman,
Schorling, announced only a week earlier that he would be
stepping down due to health issues.
ARE WE BETTER?
Sweden's corporate world was already shaken, with more than
a dozen executives from major companies replaced following
scandals involving a company controlled by Industrivarden
INDUb.ST , one of the country's biggest investment groups.
Sweden saw a 14 percent rise in registered economic crimes
in 2015 from the previous year, according to the Swedish
Economic Crime Authority.
"Are we better? No, I don't think so. There is no difference
between how Swedish companies behave versus other countries,"
said Sasja Beslik, head of sustainable finance at Nordea.
A spending scandal involving the misuse of a corporate jet
and lavish hunting parties at hygiene products firm SCA
SCAb.ST last year prompted change at Industrivarden.
Industrivarden and Wallenberg-backed Investor AB INVEb.ST
control more than half the Swedish stock exchange.
Nordea NDA.ST , the country's biggest bank, has been fined
for serious deficiencies in tackling money laundering and was
named more than 10,000 times in the Panama Papers for helping
clients set up accounts in offshore tax havens.
Two top executives at Swedbank SWEDa.ST were allowed to
conduct property deals as a side business, sometimes with the
bank's customers. The bank chairman and CEO were both ousted
when it came to light they had approved of the dealings.
Telecoms operator Telia Company TELIA.ST got into hot
water for its dealings in Eurasia when bribery allegations
resulted in the exit of the company's former CEO and most of the
board.
The former CEO of Fingerprint Cards FINGb.ST , a competitor
of Next Biometrics ASA, has also been accused of insider
trading. He has denied any wrongdoing.
Fredrik Erixon, head of Brussels think tank European Centre
for International Political Economy, said that Sweden's
corporate culture was too insular.
"There are not that many individuals in a decision-making
position for nominating board members and deciding on the
general corporate governance structure of many firms," Erixon
said.
"I would say that if you know 100 people in Sweden, you
basically know them all."
The insular culture made it difficult for some leaders to
take tough decisions, he said.
About 23 percent of directors in Sweden are on three or more
boards, versus the 11 percent EU average, a Heidrick & Struggles
survey from 2014 showed.
Another problem is that institutional investors have taken
bigger stakes in recent years in Sweden's biggest firms but did
not tackle corporate governance issues head-on and did not act
like long-term owners, he said.
"No one knows exactly at the end of the day who exactly is
responsible," Erixon said.
Institutional investors make up about one quarter of owners
in Sweden compared with below 15 percent for the European
market, according to a 2015 report from the International
Finance Corporation.
Kallifatides said he thought corporate leaders may have
grown too far removed from ordinary shareholders, something
exaccerbated by rising inequality.
This could be contributing to more "unorthodox practices" in
both the public and private sector.
"Whenever there is power and money there will also be bad
judgment, excessive greed and also power struggles, of course,"
he said.
(Additional reporting by Olof Swahnberg, Johannes Hellstrom
and Johan Ahlander, and Simon Jessop in London, Editing by
Alistair Scrutton and Angus MacSwan)
((mia.shanley@thomsonreuters.com; +4687001004; Reuters
Messaging: mia.shanley.thomsonreuters.com@reuters.net))
Keywords: SWEDEN BUSINESS/