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04-01-2022 14:21

Ideal Owners: Type of owner matters less than having the right management

Gunnar Axheim, board member of Swedish state-owned mining group LKAB, reflects on how a company's ownership model affects its corporate governance in the latest Nordea On Your Mind.
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In the Nordea On Your Mind report, "The ideal owners," Gunnar Axheim (GA), board member of Swedish state-owned mining group LKAB, and chairman of SVK Gasturbiner and GeoVista, talks to Nordea's Johan Trocmé (JT) about how the type of owner impacts corporate governance. Drawing from 50 years of experience with some 40 different boards and multiple senior management roles, he has seen a convergence in governance between smaller and bigger, state-owned and private companies over time. He sees an advantage in having financially strong owners, but sees the greatest benefit from having the right empowered management that is able to execute.

JT: You have over your professional career held senior leadership positions in large companies with family as well as state and institutional major owners. Have you noticed any general differences in how the owners exercise their influence? For example, how involved they get, how board members or leaders are selected, or how they otherwise make their voice heard in the company's governance?

GA: When I started at the Luleå University of Technology 50 years ago, I was part of its first generation of students, and when I graduated I joined state-owned LKAB and fairly soon advanced to managerial roles.

After ten years I had an opportunity to join the Iggesund paper and forestry group, which also had the allure of being stock exchange-listed. I started in a role as head of maintenance, and my predecessor greeted me on my arrival by jokingly saying, "Here the union calls the shots – not you." It worked out really well, but three years later I was recruited by the mining group Boliden, then part of Trelleborg, to run the Rönnskär copper smelter.

I had quite a bit of interaction with Boliden's board, particularly after I was put in charge of both Rönnskär and the Aitik copper mine. Later on, I became the Director of Mining Operations for Boliden and was responsible for all mines. It was quite an experience to be responsible for running the mines at the time Boliden was spun off from Trelleborg and listed on the Toronto Stock exchange in 1995, with very high demands on documentation, transparency and accuracy in reporting.

After a time, I was not too happy about the strategic direction of the company – its relentless pursuit of growth which subsequently put it in financial difficulties. So I left in 1998 and ended up in a state-owned work environment again, at the power utility Vattenfall. I stayed there until I retired in 2014. My plan was to enjoy my private time, exercise and travel, but I started to get requests to involve myself in board memberships within professional athletics, startup companies, family businesses, a regional housing association and LKAB. Since leaving Vattenfall, I have been a member of 15 different boards. So much for retirement. So I have both interacted with boards as a member of senior management and been a board member or chair myself.

Corporate governance has evolved significantly from 20 years ago. In the past I think exercising ownership influence was often more direct in privately owned companies, but stricter requirements from society at the national as well as the EU level have reduced these differences. There are of course contrasts between very large corporates and smaller family businesses, but the governance approach of these smaller businesses is typically becoming more similar to those of large companies. I see a lot of clear directives from owners, and concrete mandates for the board and group management.

With that said, I have seen smaller businesses where owners or founders get too closely involved in the operations. And I know examples of startup companies which could use their boards in a much better way. Instead, there is some kind of tug-of-war between a very driven management keen to ramp up and grow with little regard to anything else, and a board acting more as a brake to maintain financial and operational diligence.

Did I see a big difference in governance or expectations and follow-up from above when I moved from Boliden to Vattenfall? Not really. The approaches were quite similar. Was there more bureaucracy or rigidity at Vattenfall? Perhaps. But I would put this down to the nature of the business, inherent for a power utility, rather than any big differences in governance.

JT: Do you think the speed of decision-making is affected by the type of major owner a company has? Do management tend to be more or less empowered by different types of owners?

GA: Mandates can certainly vary among companies. A typical example is a private company, where the founder or family owner is deeply involved in the business. Decisions may well be quick, but the CEO may not be the one fully authorised to make them. At the other end of the spectrum you may find a municipally owned company, where the CEO has a very strong mandate. Historically, I think state-owned companies have required a longer process to make big decisions. Today, I think these processes have become more similar among large companies.

JT: Have you seen differences in time horizons for planning, strategies and major investments? Shorter-term versus longer-term focus?

GA: When I ran the mine and smelter for Boliden, I presented our business plan to the board. We discussed long-term assumptions behind investment decisions. What were our expectations for copper prices? What about zinc prices? Where will scrap metal prices go? The same topics will be discussed today, in addition to issues such as how we should make the whole business sustainable and emission-free. I am convinced that there will be exactly the same types of discussions at LKAB as at Boliden.

In short, I don't think the type of owner is normally a critical factor in the time horizon for corporate planning and focus. It is rather very much up to the nature of the business.

JT: Do you think having a committed major owner affects a company's appetite for risk, or its ability to make big long-term strategic investments? Is there a benefit from a perceived security of having a strong owner?

GA: In the decision-making forums I have been a member of or presented to over the years, I would say the views on risk and appetite for risk have generally been quite similar. The ability and willingness to take risks or commit to long-term investments has not so much been a function of the type of owner, as a function of the owner's financial strength. Financially strong owners are able to make decisions and to have patience for them to pay off. Financially constrained owners have less freedom in what decisions they can make, and more potential downside if they don't play out as expected.

JT: Does a state-owned business have any specific challenges from its ownership structure? Higher demands on transparency, governance, sustainability? Other issues?

GA: Again, I think actual governance processes have converged a lot over the past two decades. Yes, the bar may be set even higher for state-owned or municipal companies, but I would say differences are today quite small. Society has evolved and puts greater demands on private and public companies than 20 years ago. There is a greater pool of experienced board members with a relevant skillset today, and companies recruit board members with experience from other companies to be able to benchmark practices and governance. This has contributed to spreading modern and robust governance more broadly among companies.

Let us say that Boliden and LKAB were both interested in starting up a new mine in northern Sweden. Would LKAB be at a disadvantage from being state-owned, in having even greater demands on transparency and sustainability because of its owner? I don't think so. The process would be similar.

JT: Do you think different types of owners can be particularly suitable for different types of businesses, or companies going through different phases of their development? For example, investing heavily in growth versus mature cash cows? High or low risk?

GA: Companies in capital-intensive industries where big investments can have major consequences for years or decades can clearly benefit from having financially strong owners. It is a source of comfort and stability that there is a robust committed owner who can act as a backstop if things go wrong.

It is important to remember that big state-owned companies such as Vattenfall and LKAB cannot disregard the short-term perspective. They release quarterly financial reports. They have responsibilities to lenders, bond investors and other stakeholders. They need to be disciplined and vigilant both in the short and long term. I would argue that scrutiny and accountability are comparable in big state-owned companies with private or listed companies. When I was the business area head for Hydro Power at Vattenfall, we were certainly on our toes ahead of monthly and quarterly reports being compiled.

Overall, I would say it matters less what type of owner a company has than having the right management, able and willing to execute, once decisions have been taken.

Nordea On Your Mind is the flagship publication of Nordea Investment Banking’s Thematics team, which produces research for large corporate and institutional clients. The research does not contain investment advice and typically covers topics of a strategic and long-term nature, which can affect corporate financial performance.

Top decision makers at Nordea’s large clients across the Nordic region receive Nordea On Your Mind around eight times per year. The publication’s themes vary widely, and many are selected from suggestions by clients. Examples of covered topics include artificial intelligence, wage inflation, M&A, e-commerce, income inequality, ESG, cybersecurity and corporate leverage.


Corporate governance has converged between different types of owners in the past 20 years.

Gunnar Axheim, board member in LKAB and chairman of SVK Gasturbiner and GeoVista

Founders of private companies can remain too deeply involved in operational matters.

Financially strong owners can make decisions and have patience to see them pay off.

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Top decision makers at Nordea’s large clients across the Nordic region receive Nordea On Your Mind around eight times per year. I

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