Corporate Governance in Denmark
Compliance is a big issue in Denmark for big and many midsize corporations and much more than before, time is devoted to it in the
board rooms.
For foreign companies wishing to act in Denmark through a Danish company it is of value to know the position of and the understanding
of good Corporate Governance so an insight into the current trends may be of big importance.
I will provide a brief overview of the current focus in this article.
The company legislation has been changed much over the past years. We have a new Companies Act and follow-up legislation
introducing new obligations for board members and directors and new terminologies and company forms. It is possible to have
companies with almost no capital and more trust is placed with board members that are allowed to make more decisions than before
without auditor’s reports and declarations, and at the other end of the scale, we have a more rigid interpretation and follow-through on
issues of corporate governance. Especially scandals in financial institutions and big companies have shaped the new legislation i.e. the
demand for transparency on remuneration contingent upon results etcetera.
To supplement the hard law we have had new soft law and have a few years ago instituted a comply or explain structure around a set
of recommendations on Corporate Governance. The Committee of good Corporate Governance is reviewing these on a regular basis to
ascertain whether they comply with what is sensible and appropriate and target the right goals efficiently. The Committee also conducts
annual compliance investigations.
The recommendations on Corporate Governance are primarily aimed at Danish companies whose shares are admitted to trading on
a regulated market. The objective is that the recommendations are appropriate for such companies and comply with Danish and EU
company law, OECD’s Principles of Corporate Governance and more generally recognised best practice.
The recommendations are based on, and supplement, company law and stock exchange regulation, and such rules and regulations are
presumed known.
However, for other companies the recommendations or parts of them provide inspiration. This could be the case for state-owned
companies, other companies of special public interest and certain companies owned by funds, but also for other companies of a certain
size that wish to show an interest in adhering to such standards and complying with rules they in fact wouldn’t need to comply with.
The recommendations enable the individual company to organise its governance optimally in accordance with the ‘comply or explain’
principle. Thus, non-compliance is not inconsistent with the spirit of the recommendations, but merely a result of the fact that the
company has chosen a different approach.
The Committee for good corporate governance has just issued its report for 2014-2015. It includes a compliance investigation which is
conducted with the assistance of Nasdaq Omx Copenhagen A/S.
The report concludes that the degree of compliance is very high in the C20-companies and Large Cap-companies, reaching almost 100
%. However, there is still room for improvement as explanations for not following are still found to be unsatisfactory to some extent.
The Committee has had its focus on board evaluation, remuneration, independence and diversity. Especially the Recommendations on
remuneration and diversity seem to lack in compliance and the Committee will focus on those areas in the coming year.
It is recommended to seek advice on recent development in the corporate legislation and the soft law targeted at good governance in the
board rooms of large companies.
For further information, please contact:
Flemming Keller Hendriksen, Attorney-at-law HD
fkh@kellerlaw.eu
