Nomination Committees, Pension Funds and Board Turnover: Evidence from the Swedish Code of Corporate Governance

Abstract: It is a general belief that pension funds influence corporate govern-ance. However, the corporate setting is likely to determine the extent of their influence. In this thesis, we study the characteristics of the Swedish code of corporate governance and if its implementation has increased the power of pension funds. Specifically, we study nomina-tion committees and the effect from the presence of Swedish AP funds on board turnover. We find that controlling owners and use of dual class shares increases the probability that firms do not comply with the code. Most importantly, our results suggest that the presence of AP funds in committees increases board turnover in small firms. We find no effect on large firms. This is possibly due to the limited finan-cial resources of AP funds. As another explanation, we stress that it is easier for AP funds to affect corporate governance in small firms after the code since these firms may need to make more changes to comply with the rules. Furthermore, we find no indication that ownership changes from AP funds affect board turnover. This, we argue, indicates that the power of pension funds increases when they acquire large stakes and are active owners. Overall, we confirm the conventional wisdom that pension funds influence corporate governance.