CCG NEWSLETTER

June 2022

Willful blindness – did we all get the true risk of globalization wrong?

For more than 70 years the Nordic countries have enjoyed an incredible wealth development due to liberation of different markets and from the fruits of globalization. But did business leaders, scholars and politicians get it all wrong, - were they all suffering from willful blindness in a pursue of creating economic wealth, concurring new markets, and building global empires without judging the true risks correctly, including the financial and reputational risk? Or, are the Nordic corporations faced with “that the international political society is a world outside morality, - a world of power and force” (as mentioned by Morgenthau) and will be swimming in an unpredictable business environment outside the OCED countries.

Danish companies have invested more than 70 billion DKK in Russia, now most of it will have to be written off, as a consequence of the war in Ukraine, - and from an investor and board perspective there could be a similar risk attached to other emerging, nonruled-based/non-democratic markets in the future. One must ask the question, is the current outlook for corporations acting on a global scale today as challenging compared to what the financial sector went through in 2008/2009? Furthermore, it raises the question, do board members ignore the obvious, as highlighted by Margaret Heffernan in her book Willful Blindness? Do board members de-facto underestimate medium-term risks and are not clear about what should be the real purpose of the corporation?

Unfortunately, it looks like the gods have left earth, but mankind is still there...

Lars Ohnemu s, Director, Center for Corporate Governance

Ukraine War – Strategic and Operational Risk Management

Russia’s invasion of Ukraine has fundamentally altered the political and economic landscape of Europe. The human costs are tragic. Only time will reveal the complete picture.

In the meantime, people and businesses that struggled with the COVID-19 pandemic must now contend with a Ukraine war promulgated by a nuclear power. Sweden and Finland have abandoned their centuries old non-military foreign policy stance and are now aligned with NATO against the aggressor. Denmark is a founding member of NATO.

For businesses, Russian aggression in Ukraine is a Black Swan event and a throwback to Soviet era tactics. Strategic and operational risk management should be at the top of every company’s board agenda for the foreseeable future. Operationally, firms must address their exposure to international business ties, and logistics networks, that are impacted by the Russian aggression. Strategically, companies should re-assess their business associations and medium-term investment decisions with Russia. Prominent companies, including Carlsberg and Heineken, have already pulled out of Russia. A.P. Moller-Maersk has halted container shipping to and from Russia.

Likewise, investment managers and pension funds should consider their portfolios and exposure to Russian assets, especially investments in companies that are supported by the Russian polity. Socially responsible investing has been a core business mantra for a while. Now is the moment for all business to decide where they should ethically deploy their future investments.

No matter the duration of the war, the business effects will last for years or decades. Companies need to address the new risk landscape now. Boards should set aside the time and resources to develop new and resilient long-term business strategies for a changed world.

Martin Conyon, Professor, Bentley University

Colin Mayer – Honorary Doctor

By recommendation from Prof. Steen Thomsen, Copenhagen Business School appointed Prof. Colin Mayer an Honorary Doctor on May 18. Colin is an expert within the areas of governance and the role of the corporation in contemporary society. Colin is the Peter Moores Professor of Management Studies at the Saïd Business School at the University of Oxford. He is a Fellow of the British Academy, the Centre for Economic Policy Research and the European Corporate Governance Institute.

Professor Mayer was appointed Commander of the Order of the British Empire (CBE) in the 2017 New Year Honours for services to business education and the administration of justice in the economic sphere.

Receiving his Honorary Doctorate Colin gave a speech on the importance of purpose in businesses and chimed in on CBS’ strategy that states to “transform society with business” by being curious, critical and innovative. Professor Mayer opened his speech by referring to Milton Friedman’s famous words that the social responsibility of business is to increase its profits. While elegantly elaborating on why Friedman’s definition was not wrong, however also not sufficient, he extended the definition: The purpose of the corporation is to increase profits by solving problems for society, and not by profiting on the creation of obstacles and new problems.

Later in the day Colin participated in a conference held by the The Danish Board Leadership Society and addressed that company boards are facing a new world order with Russia’s invasion of Ukraine and geopolitical risks. Furthermore, energy security is threatened and energy prices are skyrocketing. The World Bank warns that global economy is facing grim outlook. Covid-19 remains a drag on world trade and production in countries like China. Supply chains are disrupted and out of sync. Climate change demands a fundamental transition of the world economy to net zero emissions. At the same time, digitalization is disrupting and transforming existing business models.

Colin Mayer stressed that more than ever companies and company boards must reconsider purpose and values and must adapt and innovate to survive and succeed in the new reality. The world needs it and the younger generations demands it.

Congratulations to the other Honorary Doctors who were appointed the same day: James Tybout, Suprateek Sarker, and Wanda Orlikowski.

Conference on proposal for a Directive on Corporate Sustainability Due Diligence

Together with the Confederation of Danish Industry and Board Leadership Society, CCG hosted a conference May 9 where people from academia and the business society were invited to discuss the consequences of the new proposal from the EU-Commission. Focus was on mandatory net zero plans, climate incentives for directors and on companies’ obligations to include climate action, human rights and the environment including those steaming from value chains into corporate strategies. Professor Steen Thomsen, was among the speakers together with the chairman for The Committee on Corporate Governance Lars Rasmussen, Deputy Director General Emil Fannike Kjær, DI and MEP Pernille Weiss. In general, the participant agreed that the proposal could be a challenge for all companies to implement and lead to lack of competitiveness internationally due to the major administrative burden and bureaucracy. It was stressed that the EU Commission should focus on Better Regulation and in a period of much instability, financial uncertainty and even war in Europe help business not the opposite.

Tine Roed, Senior Advisor, CCG

Nordic Corporate Governance Network Seminar

The Nordic Corporate Governance Network is a network of Nordic researchers in corporate governance. It was founded in 2010 with the aim of contributing to a deeper international understanding of the Nordic corporate governance model. After a few years of online-meetings due to Covid-19, the network finally meet in person for a 2-day seminar at Copenhagen Business School on June 2-3. Around 40 researchers from the 5 Nordic countries met and presented their work in the areas of:

·         The Nordic corporate governance model
·         Sustainable corporate governance
·         Corporate ownership structures
·         Long-term ownership
·         Board structure and board behavior
·         Board diversity
·         Executive compensation and managerial incentives
·         Corporate governance of banks and other financial intermediaries
·         EU initiatives that may affect the Nordic countries

CCG aims to develop the network and strengthen the bond between the Nordic researchers. If you wish to join the network and our mailing list, then please send an email to ccg@cbs.dk. You can read more about the network and our mission at: www.nordiccorporategovernance.com.

Folkemødet - The People's Meeting

Lars Ohnemus is participaiting in Folkemødet on Bornholm this year. You can see Lars on the G15- Blockchain Scene June 16 from 12.00-12.45 debaiting on the possibilities and consequences of the E-krone and cryptovaluta. Feel free to have a chat with Lars after the debate.

Click HERE to see where you can meet other CBS researchers at Folkemødet and on what stages they are debating.

Research News

AML & Compliance

In terms of AML & Compliance, Denmark has made major progress over the last few years, and will probably pass the next FATF Assessment in a much better state than last time. Having said that, in our opinion much needs to be done, as from Finanstilsynet downwards risk based assessments have not been properly, leaving a system that is far too expensive and cumbersome for its purpose. Our back of the envelope calculations showed that all financial institutions in Denmark spend about US$1bn per year, in our opinion a phenomenal amount of money. The focus needs to be to move from too much box-ticking to automation of detection systems, for which we have a number of suggestions.

Tom Kirchmaier, Professor, CCG

Masterclass: Business Innovation in Life Science

Do you want to play a central role in growth and innovation? This masterclass, created by CGG in collaboration with Atrium, is for life science leaders and professionals who want to improve competencies in engaging and leading innovation processes.

WHAT YOU WILL LEARN

- Insight into what drives growth and innovation in life science.
- General knowledge about strategy, governance, and business models.
- Knowledge about various approaches to innovation.
- Understanding of the importance of being able to lead and work across professional and organizational boundaries.
- Understanding of the value of data science as a means to risk mitigation.

Join the masterclass this fall. In the video below you can meet some of the teachers and hear their views on the masterclass.

Date: 27 - 28 September & 25 - 26 October 2022

Featured Publications

Tom Kirchmaier, Edmund Schuster, Daniel Ferreira & David Kershaw: Management Insulation and Bank Failures.

Gudrun Erla Jonsdottir, Olaf Sigurjonsson, Ahmad Rahnema Alavi, Jordan Mitchell: Applying Responsible Ownership to Advance SDGs and the ESG Framework, Resulting in the Issuance of Green Bonds.

Olaf Sigurjonsson, Hildur Magnúsdóttir, Audur Arna Arnardottir: Á tilnefningarnefnd að vera undirnefnd stjórnar eða hluthafa? Skoðanir ólíkra hagaðila.

Niels Westergård-Nielsen (2021). Tab af arbejdspladser ved konkurser?

Lars Ohnemus, et.st (2021): Hvis Danmark ikke får en e-krone, mister vi mulighed for selv at bestemme.

See all CCG publications

Staff news - VIP

Gudrun Johnsen

We are pleased to announce that Gudrun Johnsen has started as Assistant Professor at Center for Corporate Governance within the Department of Accounting.

Gudrun conducts interdisciplinary research within Industrial Organization, Law & Finance. She holds a PhD in Economics from ENS in Paris, and a dual masters' degree in Applied Economics and Statistics from the University of Michigan, Ann Arbor. She has written extensively on the Great Financial Crisis, especially the colossal banking failure in Iceland in 2008.

Her current research focus is on the role of the financial network, credit risk of business groups, gender risk aversion in corporate finance and executive compensation. She has previously worked as a senior researcher for a Parliamentary Special Investigation Commission looking into the causes and events leading up to the fall of the Icelandic banking sector in 2008. Gudrun worked at the IMF from 2004 -2006 and has extensive board experience from financial institutions.

Att CCG Gudrun is currently working on the Life Science project within Long-Term Ownership in the Financial Sector and the Nordic Model doing research on the corporate governance and stewardship of pension funds.

Staff news - TAP

Trine Vestergaard

Trine Vestergaard started as an Academic Officer at CCG May 1st. 2022. Trine comes from other (temporary) positions at CBS. Latest in a position as Programme Manager at Academic Affairs. Trine is experienced within project management from the private sector and helds a master degree in Communication and Cultural Encounters (2010) from Roskilde University.

As an Academic Officer Trine will handle project management, coordination and administration of budgets, int./ext. communication, HR, planning of seminars and conferences among other exiting stuff.

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