Widespread ownership may mean conflicts of interest

Widespread ownership of listed companies increases the risk that the companies will not be run entirely in accordance with the owners' interests. Boards and management may have partly different interests, for example when it comes to dividend requirements in the shorter and longer term, risk, financial structure and remuneration. This is particularly prevalent in companies without strong principal shareholders, but it occurs to a greater or lesser extent in all companies with a significant proportion of shareholders who do not actively participate in the governance of the company.

Good corporate governance reduces the risk

To reduce the risk of such conflicts of interest, the legislation has been supplemented by various rules and guidelines for corporate governance. In many European countries, as in other parts of the world, this usually takes the form of a corporate governance code. In the USA, it is done instead through legislation and mandatory stock exchange rules. International organisations such as the OECD and the EU have also issued various regulatory frameworks and guidelines regarding corporate governance.

You can read more about the emergence of modern corporate governance in Sweden and internationally here. Also, you can find a brief description of Nordic and Swedish corporate governance here.