AP7 has concluded a three-year thematic programme on Board Responsiblity. The purpose was to develop AP7’s methods for corporate governance and voting, and to contribute to increased knowledge about the role of the board for sustainable development.
Boards serve as the link between shareholders and company management. They make decisions that influence a company’s strategic direction, risk management and long-term value creation, and thereby also investors’ returns. In recent years, the role of the board has become increasingly central in AP7’s active ownership.
In the thematic report, we describe, among other things, how climate issues can be addressed through the boardroom, and recent research on how investors can effectively contribute to increasing female representation on boards.
The thematic work was concluded with a panel discussion representing academic, investor, and board perspectives. We were joined by Kaisa Hietala, Non-Executive Director of Exxon Mobil and Smurfit Westrock and Co-founder and Chair of Greencode Ventures; Oshni Arachchi, Global Head of Active Ownership and Head of Responsible Investment in Sweden at Danske Bank Asset Management; and Dr. Vu Trinh, Associate Professor of Finance at Newcastle University Business School. The discussion was moderated by Emma Sjöström, Head of Sustainability Communications at AP7.
Watch the panel explore specific topics:
1. What is the role of the board and how has it changed in recent years?
At its core, the role of the board is to serve as the link between a company’s owners and its executive management, with a focus on long-term strategic development. According to the panel participants, the role of the board has become more complex in recent years, and the agenda has expanded. This has led to the creation of more committees dedicated to specific areas, such as sustainability or compliance. A board must be able to understand which issues may affect future returns, placing high demands on the competence of its members.
2. How can voting against individual directors affect the company?
One tool that is becoming increasingly common is director votes. It is used to signal dissatisfaction with how a company is handling a specific issue, such as climate performance. The panel discussed how this tool can be used effectively and noted that even a small proportion of dissenting votes can be enough for the signal to be clearly understood.
3. How can investors engage in constructive dialogue with boards?
The panel discussed that boards should approach investor feedback with curiosity and seek to understand their perspectives. It is also not uncommon for boards to reach out proactively to investors to gather input on proposed changes related to corporate governance, such as remuneration. In other words, dialogue can be initiated by both parties. While investors have several tools at their disposal, the most constructive dialogue arises when both sides share a common understanding of the underlying issues.
4. Why is it important to have gender-balanced boards?
The panel highlighted that board gender diversity is important to reduce the risk of groupthink and to support more well-informed decision-making. The discussion also noted that research shows a link between board gender composition and individual companies’ climate strategies. At the same time, the panel emphasized that while gender balance tends to receive the most attention, it is also important to consider other dimensions of diversity, including those that are not immediately visible.