• Startpage
• 2007 in brief
• This is Swedbank
• Letter from the Chair
• President's statement
• Vision and strategy
• Market shares Sweden
• Market shares Baltic region
• Five-year summary
• Business areas
• Employees
• Sustainable development
• The share and owners
• Board of Directors' report
• Board of Directors and Group Executive Management
• Corporate governance report
• Distribution of earnings
• Annual General Meeting

• Addresses
• Contacts
• Definitions

Corporate governance report

General

Swedbank AB ("Swedbank") is a public, listed banking company with about 315,000 shareholders and the parent company of the Swedbank group. The group operates in Sweden, China, Denmark, Estonia, Finland, Japan, Latvia, Lithuania, Luxembourg, Norway, Russia, Spain, Ukraine and the United States, and had 22,148 employees as of 31 December 2007.

In accordance with the OMX Nordic Exchange Stockholm’s listing agreement, Swedbank applies the Swedish Code of Corporate Governance ("the Code"). The Code, which is an element in the self-regulation of Swedish businesses, is based on the principle, "comply or explain." This means that a company that applies the Code can deviate from individual rules provided that the reason for each deviation is explained. This corporate governance report has been prepared by Swedbank’s Board of Directors in accordance with the rules of the Code. The report is included as part of the printed annual report, but is not part of the annual accounts and have not been reviewed by Swedbank’s auditors.

Ownership structure

Swedbank’s shares have been listed on the OMX Nordic Exchange Stockholm since 1995. As of 31 December 2007 it had 315,514 shareholders. The largest shareholders were the Swedish savings bank foundations, with 21.6 percent of the capital. 306,962 shareholders, or 97 percent, owned fewer than 1,000 shares, while 27.1 percent of the capital was owned by international shareholders. Further information on shareholders and shareholdings can be found in "The share and owners"  in the annual report.

Annual General Meeting

The shareholders exercise their rights at the Annual General Meeting of Swedbank. In addition, Extraordinary General Meetings can be called. Swedbank normally holds its Annual General Meeting before the end of April. Under special circumstances the meeting can be held at a later date, though not later than 30 June every year.

The Annual General Meeting is normally held in Stockholm, but can also be held elsewhere in Sweden, as set out in the Articles of Association. In its year-end report and on its web site, Swedbank announces where and when the meeting will be held.

The notice of the Annual General Meeting is normally published around five weeks in advance in the Swedish dailies Dagens Nyheter, Svenska Dagbladet and Dagens Industri as well as Post och Inrikes Tidningar (Official Swedish Gazette). The notice is also made available on the bank’s website.

The Annual General Meeting is held in Swedish with simultaneous interpretation into English. The material released prior to and in connection with the meeting is in Swedish, but is translated to English, including the minutes. The documents are posted on Swedbank’s website.

Right to attend the Annual General Meeting

Swedbank is a so-called VPC company, which means that its share register is maintained by Värdepapperscentralen AB (the Swedish Central Securities Depository). All shareholders who are directly recorded in the register on the fifth day before the meeting and who have notified Swedbank in time of their intention to participate are entitled to attend the meeting. Shareholders may attend the meeting in person or by proxy. Shareholders may be accompanied by a maximum of two persons.

Swedbank gives shareholders the opportunity to register for the meeting in several different ways. The notice indicates in which ways and by which dates shareholders must register and notify the bank in order to be entitled to attend the meeting.

Agenda and documents for the Annual General Meeting

Shareholders who wish to have an issue brought before the Annual General Meeting must submit a request in writing to the Board. The request must normally be received by the Board not later than seven weeks prior to the meeting.

Board of Directors and Auditors

The Annual General Meeting elects the members of the Board, including the Chair, and, if an election is scheduled, the Auditors. Board members have a term of not more than one year. The nomination of Board members, including the Chair and Auditors, is made by the Nomination Committee. The principles for appointing the Nomination Committee are set by the Annual General Meeting.

Nomination Committee

In 2007, the Annual General Meeting decided on the principles for the appointment of the Nomination Committee for the 2008 Annual General Meeting. The Nomination Committee consists of five members, one of whom is the Chair of the Board. Swedbank’s four largest shareholders or owner groups, based on holdings known as of 30 September 2007, make up the remaining four members. The Nomination Committee selects its Chair from among its members, although this person shall not be the Chair of the Board. Prior to the Annual General Meeting in 2008 the Nomination Committee presented a proposal for the Chair of the meeting, the Chair of the Board and other Board members, as well as for all remuneration that will be received by the Chair and other Board members elected by the Annual General Meeting. Lastly, the Nomination Committee presented a proposal for the principles for appointing the Nomination Committee to be decided by the 2008 Annual General Meeting.

The Nomination Committee for the Annual General Meeting in 2008 consists of the following persons:

Ulf Christoffersson, representative of the Savings Banks and the Swedish Savings Banks Association; Annika Andersson, representative of the Fourth Swedish Pension Fund; Sarah McPhee, representative of AMF Pension and AMF Pension Fondförvaltning (Asset Management) AB; Lorentz Andersson, the Chair of the Nomination Committee, representative of Sparbanksstiftelsernas Förvaltningsaktiebolag and the Savings Bank Foundations; and Carl Eric Stålberg, Chair of the Board of Swedbank.

The Nomination Committee convened five times, in addition to other contacts. Its members have not received any compensation from Swedbank for their work.

The Nomination Committee has received the evaluation of the Board’s work conducted in part through discussions between the Chair and each Board member and in part through a written questionnaire. The Nomination Committee has discussed the Board’s competence needs and the composition of the Board taking into consideration the strategies of Swedbank. Shareholders were able to present proposals to the Nomination Committee until 25 January 2008. No proposals were received by the Nomination Committee other than from shareholders represented in the committee.

Composition of the Board, etc.

The Annual General Meeting in 2007 elected eight members. The Board includes two members appointed by the Financial Sector Union of Sweden. Furthermore, the Financial Sector Union and the Swedish Confederation of Professional Associations have each appointed one deputy. The deputies normally do not participate in the Board’s meetings. The President is not a member of the Board, but attends its meetings. The Head of Internal Audit and the Secretary of the Board also attend Board meetings.

The new Board members elected by the Annual General Meeting in 2007 have received introductory training from Swedbank. They have also received training arranged by the OMX Nordic Exchange Stockholm.

Prior to each Board meeting, a proposed agenda is distributed along with additional material. The documents are normally distributed a week in advance. The material from meetings is saved electronically, including documents that are not attached to the minutes.

The Board’s organization and work

The Board’s working procedures are set out in a instruction. The delegation between the Board and the President, including the Chair of the Board and the President, is stipulated in the Board’s rules of procedure and instruction for the President. The Board has a Compensation Committee, a Credit Committee and an Audit Committee. The only committee with the right of decision-making is the Credit Committee. In addition, the Board has at its disposal an independent audit function directly subordinate to the Board (Internal Audit). Internal Audit’s responsibility is to review and evaluate efficiency, governance, risk management and control in the group. The function works proactively to propose improvements to internal control.

The Chair of the Board has certain specific areas of responsibility, including:

• Overseeing the President’s work and providing a discussion partner and support, as well as monitoring that the Board’s decisions and instructions are implemented;
• Ensuring that the Board maintains its responsibility for risk control through the necessary instructions and risk reports;
• Ensuring that the Board maintains its responsibility for the independent audit function (i.e., that the function works and reports according to established instructions);
• Organizing and managing the Board’s work, encouraging an open and constructive discussion within the Board, and initiating the development of the Board’s competence in issues of importance to operations, including the evaluation of the Board’s work.

The Board’s rules of procedure mainly cover the Board’s strategic and supervisory roles, responsibility for risks, conflicts of interest and disqualifications, the Compensation Committee and other committees, special issues decided by the Board, the decisions taken at the statutory meeting following the Annual General Meeting, signatories, evaluations, confidentiality and formalities (e.g., the distribution of information prior to meetings, the attendance of individuals other than Board members, presentations, and the signing, content and distribution of the minutes).

At least twice a year, the Auditors’ Chair reports to the Board on the Auditors’ reviews and observations, once in the presence of the President. In addition, the Auditors’ Chair regularly meets the Chair of the Board and the Chair of the Board’s Audit Committee.

Board work in 2007

In 2007, the Board held 16 meetings, including one in-depth meeting and two held per capsulam. Board meetings are normally held in Stockholm, but during the year one meeting was held in Tokyo.

The Board establishes an annual plan for its work, normally at the statutory meeting, where it decides which issues will be treated in depth during the year. The issues in 2007 included the strengths and weaknesses of strategic business areas, succession planning, the capital market’s opinion of Swedbank and the impact of climate change on Swedbank. Major decisions made by the Board involved the acquisition of the Ukrainian bank OJSC Swedbank (formerly CJSB TAS-Kommerzbank) and the cooperation with Folksam in property insurance and asset management. The Board has evaluated the performance of the President in 2007 and set goals for him for 2008.

The Board continuously monitors the risks and the capital situation, for which it receives a risk report at each meeting. The Board also receives reports on security and compliance.

No objections were noted at any decisions during the year. See table for members’ attendance at the meetings in 2007.

In 2007 the auditor reported his observations at three of the Board’s meetings. At one meeting neither the President nor any other member of the Group Management was present.

The entire Board of Directors (except one member), the Group Executive Management (except one member) and the Chief Auditors attended the Annual General Meeting 2007.

The Credit Committee held 21 meetings during the year. The Chair of the Committee is the Chair of the Board, Carl Eric Stålberg. The other members are Ulrika Francke, Göran Johnsson and Anders Nyblom. The President participates as a co-opted member. The Committee decides on credit issues that are not handled by the Board as a whole.

The Audit Committee held six meetings during the year. The Chair of the Committee is Ulrika Francke. The other members are Gail Buyske, Berith Hägglund-Marcus and Caroline Sundewall. The Head of Internal Audit, Håkan Berg, is a co-opted member. The primary duties of the Committee are to provide the Board with greater access to information on potential deficiencies in routines and organization through governance, risk management and control. The Audit Committee reviews the reliability and effectiveness of the financial reporting and whether the Auditors’ work is being done effectively and otherwise satisfactorily. All members are independent according to the definition of the Code.

The Compensation Committee held four meetings during the year. The Chair of the Committee is the Chair of the Board, Carl Eric Stålberg. The other members are Ulrika Francke and Berith Hägglund-Marcus. The President holds a presentation for the Committee. Ulrika Francke and Berith Hägglund-Marcus are independent according to the definition in the Code. The Committee prepares remuneration issues for resolution by the Board and has handled the salary adjustment for the President and remuneration according to the guidelines established by the Annual General Meeting and short-term incentive models for use in 2008 for senior executives who are not covered by these guidelines.

Compensation principles

The 2007 Annual General Meeting adopted guidelines for the compensation of senior executives in accordance with the Board’s proposal. Please refer to "Guidelines for the remuneration of senior executives" in the Board of Director's report for further information.

Swedbank did not have any share or share price-related incentive programs in 2007.

The Board’s independence

The Board’s composition complies with the requirements of the listing agreement and the Code in terms of independent Board members.

Listing agreement: None of the Board members elected by the Annual General Meeting are senior executives of Swedbank or its subsidiaries. More than half of the Board members elected by the Annual General Meeting are independent in relation to Swedbank and its Group Executive Management. Of the eight Board members elected by the Annual General Meeting, one has been independent according to the definition of the listing agreement. At least two Board members elected by the Annual General Meeting, who are independent in relation to Swedbank, are also independent from Swedbank’s major shareholders, and at least one of these two has experience with the requirements placed on a listed company.

The Code: The majority of the Board members elected by the Annual General Meeting are independent in relation to Swedbank and its Group Executive Management. At least two of the Board members elected by the Annual General Meeting who are independent in relation to Swedbank and its Group Executive Management are also independent in relation to Swedbank’s major shareholders.

Auditors

The appointed auditor is Deloitte AB, Sweden, with Authorized Public Accountant Jan Palmqvist as Chief Auditor. Jan Palmqvist has supervised auditing duties for Swedbank since 2003. Aside from Swedbank, he has auditing assignments for the following publicly quoted companies: D. Carnegie AB, HEBA Fastighets AB and Sveriges BostadsrättsCentrum AB (SBC). He is also auditor for Aktiespararna (the Swedish Shareholders’ Association) and Länsförsäkringar Stockholm.

Jan Palmqvist has no assignments for other companies that affect his independence as an auditor of Swedbank.

Compensation for the group’s auditors is reported in Note 9 of Swedbank’s annual report for 2007. The Financial Supervisory Authority did not appoint an auditor for 2007.

President and Group Executive Management

The President is responsible for day-to-day management of Swedbank. The delegation of responsibility between the Board and the President is stipulated in the Companies Act as well as the Board’s rules of procedure and its instruction for the President. The President leads the work of the Group Executive Management and makes decisions after consulting its members. The Group Executive Management consists of the President, the Head of Baltic Banking, the Head of Swedish Banking, the Head of Customer and Product Offerings, the Head of Hansabank in Lithuania, the Chief Financial Officer, the Head of Swedbank Markets, the Head of Strategic and International Banking and an employee representative, totalling nine members. The Group Executive Management normally meets twice a month.

Internal control

The following information relates only to the organization of internal control over financial reporting and does not contain an opinion on how well control has worked. External financial reporting in Swedbank comprises interim reports, the year-end report and the large part of the annual report.

The internal controls in the most important processes in financial reporting, based on the largest income statement and balance sheet items in the group, have during the year been evaluated in the parent company Swedbank AB, including Swedbank Markets, Swedbank Hypotek, Swedbank Robur and Baltic Banking operations.

As a basis for this evaluation and for the account given below, Swedbank has used the COSO model.

The Board determines the overall organization and financial objectives for the President and operations, and evaluates the President’s performance and results. The President ensures that other senior executives are evaluated.

The President is responsible for and ensures that the group has a well-structured process for succession planning.

The policies laid down by the Board apply to all companies in the group after adoption by each company. Areas in which the Board has established policies include ethics, gender equality and diversity, communication, crisis management, environmental concerns, compliance, risks, security and outsourcing. Policies and instructions at the Board and President’s level follow an established structure. For financial reporting, there is a group-wide regulatory system, Swedbank Accounting Policies. There is also a group-wide system for internal accounting principles, planning and follow-up processes and report routines. There are detailed instructions at company level for practical account registration and reconciliation routines.

The Board establishes reporting requirements to ensure effective information on financial outcomes as well as the risks in the group’s operations and how outcomes and risks are affected by various scenarios. Monthly reports on risks are compiled by Group Risk Control. Other data reported monthly is compiled by Group Finance. Reports are also presented to the President and Group Executive Management. Since 2006, the compliance and security functions serve the entire group in order to safeguard the group’s perspective and independence.

The President annually establishes a business plan, including an IT plan. The risks inherent in the Swedbank Group are included. The business plan is managed by each business area based on local demands and needs.

Risk assessment: A structured risk assessment facilitates the identification of significant operational risks. Through self-evaluation processes, Swedbank has documented where the relevant risks exist at the company, business unit, function and process level. This means that risks in the financial reporting process are also iden-tified and clarified early on. The organization to assess risks mainly consists of Group Risk Control – which is responsible for managing operational risk, credit risk, financial risk, security and compliance – and the group’s credit staff. In addition, each business unit has functions to monitor and limit risks, including IT risks. Moreover, Internal Audit performs an annual independent risk analysis to serve as the basis for its annual audit plan, which is adopted by the Board after preparation by the Audit Committee.

Control activities: The group has overall control activities which are shared by several processes. Continuous work is done to evaluate, improve and document control activities in all significant processes. A special process is in place to ensure that identified deficiencies are remedied. Examples of significant processes include lending to the public, lending to credit institutions, deposits from the public, borrowing from credit institutions, issuance of securities, card processing services, asset management, human resource administration, invoicing services, financial accounts and consolidation of group entities and associates. Examples of control activities include routines for duality, risk classification and other routines for credit decisions, payouts, reviews and monitoring of credits, compilation of the total credit portfolio and the risk profiles. In other areas, examples include limit monitoring, manual and automated reconciliation of various positions, stress tests, self-evaluations and risk and vulnerability analyses.

Control activities associated with financial reporting mainly relate to reconciliations – manual and automated – against ledger and sub-ledgers and comprise routines to ensure the existence of assets and liabilities and that assets, liabilities and business transactions have been correctly recorded. System development gradually improved through various control activities, e.g., by replacing manual routines with automated rou-tines.

A special process for the testing and approval of new products is in place to ensure that new products can be handled in the system and are correctly reported.

Information and communication: During the year, a group-wide intranet was introduced. In addition, each country has its own intranet in which all applicable rules are available to all employees. Current policies, instructions, guidelines and manuals are continuously updated. Moreover, there are channels for all employees to communicate significant information to relevant recipients, ultimately the Board when necessary. Swed-bank has implemented a whistleblower system.

A clear policy with guidelines is in place for communication with external parties. The purpose of the policy is to ensure that information obligations are met in a correct and thorough manner.

Monitoring: The monitoring units within the group are primarily Group Finance, Group Risk Control and Internal Audit. Monitoring is performed monthly based on balanced scorecards, in which profitability, efficiency, risk, sales and market shares, customer satisfaction and employee involvement are reported and evaluated. Each quarter, more in-depth monitoring meetings are held with the President, the CFO and the Head of Group Finance and each business area. Monthly monitoring reports are prepared within the business areas based on the balanced scorecards. Results, risks and events are always traceable to specific customers and departments. Monitoring meetings are held monthly or at least quarterly at all levels within each business area. Risks are also monitored at least once a month by the President and the Board.

Among other duties, Internal Audit’s purpose is to review and evaluate internal control. All audit work in the group is coordinated, that is, reviews are planned, implemented and reported using the same approaches and methods. Internal Audit is the executive management’s independent review function directly subordinate to the Board. The Head of Internal Audit regularly reports to the Board, the Audit Committee, the President and the external Auditors. Reviews are summarized each quarter in reports to the Board that also contain a separate report on Internal Audit’s review of the annual and interim accounts. The written report contains an opinion of internal control in various areas, including financial reporting, based on the reviews conducted.

Tables

The Board's composition and number of meetings 1 January - 31 December, 2007