The Ownership Structures Influence on Corporate Governance in Denmark and the Use of Stockoptions

Christian Reimar

Student thesis: Master thesis


In the last fifteen to twenty years Denmark has seen a big development in the corporate governance area. There is now an organization, Komiteen for God Selskabsledelse, who is responsible for maintaining an updating the guidelines which all companies listed on the Copenhagen Stock exchange must consider if they wish to follow or not. Many see the so-called follow or explain principle as a strong and flexible tool, which allows companies to change and adapt the corporate governance guidelines to their company.
The corporate governance tradition in Denmark is largely based on that of the Nordics. Many of the Nordic countries have a long tradition of concentrated ownership of companies. This is typically for a company that has remained within the founder’s family. This means that the large owner would like to ensure a close control with the company. This is done through a board, selected on a general assembly. Contrary to other countries/regions the Nordic corporate governance model focusses on a strong and independent board. The personal on board is also different from the C-level management of the company, something that is common in UK and USA where the CEO also sits at the board of the company.
As well as a strong corporate governance tradition, the Nordics and thereby Denmark is also characterized by a lot of rules and regulations which companies have to address. As an opponent to this, is the American economic professor Jonathan Macey. He suggests a market based approach where the market should act as corporate governance stabilization and punish those who do not act in the best interest of the owners. Macey has the opinion that the traditional corporate governance tools have fallen short of securing that the owner’s best interest is being met.
The owner and general corporate governance climate also affects the incentive systems in the C-20 companies. The systems design might be the same as can be seen elsewhere in the world. The main difference is the split between fixed salary and the proportion that can be paid out as a bonus. In other countries it is normal for CEO’s to get a bonus many times their annual salary, whereas in Denmark a 20-40 % of the base salary is more common. This creates less risk appetite as the majority of a person’s income is already secured regardless of the company’s financial results. This ties in with previously mentioned Nordic owner structure. A concentrated owner typically has less risk appetite, therefore he wishes for the company to take on risk corresponding with his own risk willingness. The incentive system is therefore an attempt to solve the agent-principal problem. The agent-principal which describes the contrasting interests of two persons is also a big part of the corporate governance discussion where the dilemma is not between the board and a CEO, but between the owner and the company as a whole.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2016
Number of pages107