Venture Capital- Backed Investment: Impack on Corporate Governance in Sweden
Independent thesis Advanced level (degree of Master (One Year))Student thesisAlternative title
MASTER's THESIS 2006 (Swedish)
Title: VENTURE CAPITAL-BACKED INVESTMENT: IMPACT ON CORPORATE GOVERNANCE IN SWEDEN Author: John Gartchie Gatsi Supervisor: Anders Hederstierna Department: School of Management, Blekinge Institute of Technology Course: Master’s Thesis in Business Administration, 10 Credits Background and problem discussion: Sweden is one of the small open economies with flourishing venture capital investments. Much research has not been conducted into corporate governance in Sweden when venture capital is involved. I therefore studied how venture capital investments affect corporate governance and performance in Sweden. The research question focuses on board chairperson’s separation from the CEO, independent audit and compensation committees and other board members. Purpose: The study was conducted to understand how corporate governance has developed into the management of Venture Capital backed investments in Sweden since, Sweden ranked third to Venture Capital investment destination currently. The result will add to the limited existing literature on the subject in Sweden with venture capital as the focus. Theory: The study was conducted using both complementarities framework and governed corporation principle in which venture capital firms and their portfolio firms in Sweden benefit from each other. Analysis: Data for the thesis was collected from selected Venture Capitalists who are members of the Swedish Venture Capital Association through simple Open and closed ended self administered questionnaire. Conclusion: Venture capitalists ensure active participation in the portfolio firms through board representation but do not consider appointment of board chair as a means to enhance corporate governance. Separation of the board chair from the CEO of a portfolio firm is a clear characteristic of corporate governance in venture capital backed investments in Sweden. More importance is placed on collective decision making than Audit and Compensation Committees.
The essence of this thesis has been set out in the research question to investigate into whether board chairpersons of Swedish Venture Capital firms are separated from the CEOs and whether they have independent auditing and compensation committees. The determination of other board members by management has also been investigated. Separation of the board chair from the CEO of a portfolio firm is a clear characteristic of corporate governance in venture capital backed investments in Sweden. Audit and Compensation Committees are not an important consideration to enhance corporate governance in the venture capital industry in Sweden, though some Venture Capital firms place some importance on these committees. They rather put premium on collective and collaborative decision making process that produces the best ideas, and strategies to end up in mutually beneficial exits. Swedish Venture capitalists are active investors who monitor their portfolio firms in diverse ways including demanding consistent reports, budgets, minutes of important meetings as well as business plans coupled with intermittent questionnaire. They augment this with regular presentations by portfolio firms to give “ready to analyse” data about the performance of their investment. In order to enhance transparency and fairness in the governance of their portfolio firms, Swedish Venture Capitalists permit managers/entrepreneurs to appoint other members of the board of directors. They widely encourage the use of stock options as means of compensation for board members and CEOs to maintain focus on achieving targets that will provide useful exits. Even though Swedish Venture Capital firms do not place much currency on the use of audit and compensation committees to influence the level of corporate governance practices, they do not rule out their importance. They rather wholeheartedly accept outside and independent representation on the board to add credibility to the accountability provided by the board of directors. Finally, they participate actively on the boards to influence the decision making process and thereafter monitor and support managers and CEOs to implement decisions effectively.
Place, publisher, year, edition, pages
2006. , 42 p.
Venture Capital Investment, Corporate Governance, Governed Corporation and Complementarities.
IdentifiersURN: urn:nbn:se:bth-5466Local ID: oai:bth.se:arkivex2CC8ECBCF9F18950C12571A00043D1DCOAI: oai:DiVA.org:bth-5466DiVA: diva2:832848
UppsokSocial and Behavioural Science, Law
Hederstierna, Dr. Anders
email@example.com Box LG 367, Legon, Accra Ghana.2015-04-222006-07-032015-06-30Bibliographically approved