Tis the Season for Swedish Scandals, Fal, la,la,la la la la la la

It is ironic that although Sweden has been named one of least corruption ridden countries in the world as pointed out by the Transparency International, it is at the same time marred in some large, public business scandals.

Sweden is not alone in these problems. It is quite clear that the United States has had its share of corporate scandals including some of the biggest (i.e., Enron, WorldCom, etc.). But, the question is: “Do Americans view these business scandals differently than Swedes do?” The answer is yes. Americans generally make a distinction between big corporations and entrepreneurial firms. In the US entrepreneurs are national heroes, while that is rarely the case with corporate managers.

This is not the case in Sweden. The vast majority of Swedish youth do not aspire to be entrepreneurs. Furthermore, there are some indications that Swedes do not as readily make the distinction between value producing entrepreneurs and self-enriching corporate managers. This is unfortunate.

Additionally, large corporations and organizations in Sweden are much more closely associated with the State government. To the public it often appears that top government official and the top business managers work together to steer policy in a type of “state corporatism”. Therefore, with this linkage with big business and the State, these scandals can have the effect of shaking the public’s confidence in both.

My recommendations are these. First, business must be run for the benefit of the owners, not managers. Second, I call for greater and more direct ownership by management (i.e., stock, not options). As a result, management’s interest will be more closely aligned with the interest of shareholders (as they will be one and the same). Third, I call for the elimination of multiple classes of stock. The stockholders that bear the risk should reap the rewards and have a voice commensurate with their ownership. Finally, I call for greater organizational transparency. Outside stakeholders as well as inside stakeholders should have a clear and unobstructed view into corporate operations, processes, and compensation systems.

Greed and dishonesty exist and will continue to exist; however, they represent just a small (but highly visible) fraction of business activity. The system is not bad; there are just a few rotten apples.

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