Good Corporate Governance

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New recommendations on Corporate Governance

On 1 January 2021 new Danish corporate governance recommendations entered into force. The recommendations really only applies to Danish listed companies, but Danish owner-managed companies can for inspiration also benefit from the recommendations.

Slightly popularly said, the recommendations are about predictability, transparency and propriety. The recommendations regulate issues not already regulated by law and thus supplement the Companies Act and the Danish Financial Services Act and regulation of Stock Market law. This is especially true in areas such as management, recruitment of board members and the company’s social responsibility.

The recommendations built on the ‘follow or explain’ principle by which a company can choose to follow the recommendations or explain why the company does not follow the recommendations. The company may choose for itself how to organise and follow the recommendations. The company’s compliance with the recommendations may be incorporated into the company’s annual reporting or reported on the company’s website or in a separate report.

The Corporate Governance Committee submits an annual report each year with a summarisation of the extent to which the recommendations are being followed. From the annual report for 2019/2020 it follows that as many as 97% of all listed Danish companies comply with/follow the recommendations.

The new recommendations replace the recommendations from 2017 that have been changed either due to new legislation or societal developments in general. For example the duty to disclose the Board of Directors’ remuneration/remuneration policy is now regulated directly in the Companies Act. The same applies to the recommendations on active ownership, which now appear in the Financial Services Act. These rules regulate e.g. life insurance companies’ investments in listed companies and require an active investment policy.

Online General Assembly

The recommendations encourages to organise the General Assembly in such a way that shareholders can follow meetings via webcast or other digital transmission. A similar provision was also found in the 2017 recommendations, but now the recommendation has been clarified and webcast or video conferencing have been made a common way of communicating with shareholders. This is, of course, an absolutely necessary step in these COVID-19 times.

Corporate Social Responsibility

The company’s corporate social responsibility has also been clarified and expanded compared to the 2017 recommendations. The company’s social responsibility deals with the company’s ‘sustainability’ from both an environmental and a human or social perspective. It is encouraged that the company has a policy on the subject and that the Board of Directors supervises the compliance of the policy. The company’s position on how it will handle its social responsibility is thus placed at the highest management level and the Board is encouraged to take responsibility for not only the financials of the company but also the company’s corporate social responsibility. This can be in the form of ESG policies (Environmental Social Governance) or D&I policies (Diversity and Inclusion). It follows from the Danish Financial Services Act that the company may choose to report on compliance with its own policies directly in the annual report.

Within the same area, the recommendations encourage the company’s management to ensure and promote a sound culture and healthy values and for this to be included in the management’s report in the annual report or on the website.


The recommendations also include helpful advice on the composition of the Board of Directors. The key word here is diversity. It is clarified that diversity in relation to “age, gender or educational and business background increases the quality of the work and interaction in the Board and ensures a diverse solution of the Board’s tasks”. It is recommended that the company has a diversity policy and that the company ensures relevant diversity at all management levels in relation to the company’s activities. It is suggested that the company in it diversity policy explains what the company does to actively increase diversity, including the gender balance in the management layers.

Section 139c of the Danish Companies Act and sections 99a and 99b of the Danish Financial Services Act already regulate the obligations of a listed company to set targets for corporate social responsibility and the gender balance of its governing body. As mentioned the recommendations supplement the rules and give concrete suggestions on how this can be done.

The recommendations are, as a whole, quite detailed with regard to a company’s information on the composition and competencies of board members and not the least, the recruitment of board members. Specifically, it is recommended that in any election of a new board member, information is presented about the candidate’s competencies, other management positions, other demanding organisational tasks and independence. The Corporate Governance Committee also recommends that members of the Executive Management Team are not members of the Board of Directors at the same time and that a resigning member of the Executive Management Team does not join the Board of Directors upon resignation. The Board should thus not in this way be self-supplying.


The Corporate Governance Committee has prepared a set of relevant and current recommendations which, in addition to taking into account specific legislative changes, also keep an eye on currents in society and the expectations both civil society and individual shareholders will have to listed companies in the future. In particular, the detailed comments on the composition of the Board of Directors, diversity and recruitment of board members are worth noting. In any case, it is not the lack of good advice that is the reason for the lack of diversity in the boardrooms around the country.

Good corporate governance is ultimately also about risk management; if the listed company does not live up to the expectations of customers, shareholders and civil society – however diffuse they may be – it can lead to significant losses.

It therefore comes as a surprise that the recommendations do not mention one of the greatest contemporary threats to any modern company; the risk of an IT security breach. Either in the form of an external cyber ‘attack’ or in the form of an unintentional leak of information from the company itself. This may, of course, be due to the fact that recommendations on cyber security for boards exist already. The recommendations have been prepared by the Danish Board Association’s Centre for Cyber Competence in collaboration with the Danish Industry Foundation. However, let it be a request from here that the Corporate Governance Committee at the next revision of the recommendations include a section on IT security.

Follow the links to read (in Danish) the recommendations from the Corporate Governance Committee and the recommendations: Cyber Security for Boards.