SAS AB is an airline company that offers transportation services in routes to and from Scandinavian cities. It transports both people and cargo as a differentiation strategy in the market. The company also owns a number of regional airlines in the Nordic area. The company has been enjoying the strong market in Scandinavian cities where as of December 31, 2011; it had provided transportation services to 90 destinations with 638 daily flights (Goergen, 2012). 638 flights are a larger number compared to Norwegian airline that made 62 flights over the same duration. Corporate governance is one of the issues that have been taken up seriously in the industry whereby they aim at addressing shareholder issues, managing the group and the Board of Directors, committees and auditors. This is being achieved by the group working towards developing systems that will ensure adequate and in real time dissemination of information to shareholders as a way of showing quality management and an effective board of governors (Smith. and Milligan, 2011). This is also targeted at ensuring transparency and accountability. The group has been highly performing since 2001 as it has been listed on the NASDAQ OMX Stockholm with secondary listings in Copenhagen and Oslo (Clarke and Rama, 2008; OECD Publishing, 1998). The Stockholm Stock Exchange introduced the Swedish Corporate Governance Code as part of the listing agreed by the stakeholders. This report is aimed at showing how corporate governance in the SAS Group has been since the introduction of the code in 2005.

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Business Structure

The board structure comprises is two-tier comprising of seven duly elected members (with no deputies) and three employee representatives (each with two personal deputies). In other boards, in the industry, the number of members ranges from six to eight. The average age for board members is 59 years and among the seven two of them must be women. This is crucial as a way of ensuring gender balance, which is crucial in management, is enhanced (OECD Publishing 1998; Smith and Milligan, 2011). The Monitoring in the organization is done by the Board as a way of looking at the financial position of the group. The structure of the board gives a balance on both sides of stakeholders. This is crucial as it ensures that, through the audit committees, transparency is enhanced. There is also an audit committee that provides annual audit reports to the board as in line with the Annual Account Act. Remuneration policies for the group are formulated and presented by the Remuneration Committee (Johnson, Scholes, and Whittington, 2008; Soffer and Wand, 2005). This is later represented to shareholders in a meeting in order to adopt. The board of the company is highly praised, which has in one way or the other led to increased competitiveness of the group. This has even been seen in the handling of crises that have faced the group. The positive image of the board is crucial in attracting investors.

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Board Structure

An annual report of the SAS Group showed that the Board comprised seven duly elected members (with no deputies) and three employee representatives (each with two personal deputies). The employee members of the group are appointed by the employee groups in Sweden, Denmark and Norway in line with governing legislation and special agreements (Schermerhorn, 2007; Waldersee and Tywoniak, 2007). Deputies are allowed to attend meetings in the absence of an ordinary member. The board is observed by a special representative of the SAS pilot’s organization (Douma and Hein, 2013). The board has shown much support for corporate governance and competitive ability-creation in the industry as seen in the Group’s 4Excellence Next Generation Plan where the board members decided at an annual general shareholders’ meeting to reduce their board fees by 30 percent as of November 5, 2012 (Douma and Hein, 2013). This makes the shareholders be directly involved in assessing the performance of the board. The shareholders have, however, been over empowered when it comes to the activities of the group. This is probably because of the fact the top ranked shareholders are governments. The president who is also the CEO of the group is usually appointed by the Board (Goergen, 2012). The Agency theory in the group is under shareholder orientation. The main shareholders in the industry are the Swedish, Danish, and Norwegian governments. These are block-holders which forces the board to be oriented on the shareholders rather than the firm. This is not the case with the Norwegian group as they have minor investors who do not exercise pressure on the internal organization of the group. There is also the low concentration of shareholders in SAS Group as the greater shares are held by the three governments. The Swedish government owns 21.4 percent, the Danish government 14.3 percent and the Norwegian government 14.3 percent. This threatens the internal organization as they have to work around the clock to provide all the statistics to the government. Most of the activities are, therefore, controlled indirectly by the stakeholders.


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Stakeholder Governance and Scandinavia

Stakeholders in the SAS Group are as important as the shareholders. This is because they are directly involved in the work of the group. Stakeholder governance is, therefore, very crucial, and there is a CEO in the group who ensures that all the activities in the organization are well coordinated. Employees from Norway, Sweden and Denmark have their groups, which they use to communicate any issues (Goergen, 2012). This ensures that there is a healthy relation between the board and the employees. There remunerations are also part of the Board’s duty, and since they have three ordinary members in the board, this gives them a chance to campaign for good remunerations. At times, the employers have raised issues, but this has been handled at lower levels, and for the bigger ones the CEO has always exercised authority. There exists parity between the stakeholders and the shareholders which may be a limitation as in other groups in the industry it is enhanced in one or the other (Clarke and Rama, 2008). The group’s customers are another stakeholder group that is well maintained through quality services. Transparency and accountability are two core values of the company. The CEO provides monthly reports to the board which at the end of the year are compared to what is got from the audit committee. The CEO also communicates with the stakeholders and shareholders as a way of ensuring that openness is enhanced. There are financial communication guidelines set that the president of the group has to follow to the latter (Johnson, Scholes, and Whittington, 2008).

Institutional Investors

Investment in the SAS Group is not limited to specific individuals. Investors of any type are allowed provided they will agree with the set guidelines for investment. They must also show their concern by attending shareholders meetings since in the meetings one vote is counted as one share (Wagner, Bicen and Hall, 2008). The group does not work towards disadvantaging any; thus all investors have a duty towards the group performance. The guidelines on investment are clear and distinguish institutional investors from other investors (Kotler and Armstrong, 2007). This is crucial to ensure that investment in the group is healthy, and stakeholders who are also shareholders are served with diligence.

Financial Performance

SAS Group on Stockholm Stock Exchange was at 12.25SEK. An annual report of 2012 showed that the price change was 0.20kr with the previous close at 12.05kr and open at 12.00kr. Shares were outstanding at 329.00M. Market Cap (M SEK) was at 4,030.25M. In 2012 many shareholders and stakeholders had expected that the profitability of the SAS Group would decrease, but this was not the case (Goergen, 2012). Corporate governance has enhanced competitiveness in the industry, which has, in turn, moved towards better performance and increased profits in the group. In the group, there is an audit committee that gives financial advice to the board. This ensures that funds in the company are well utilized towards enhancing competitiveness. The number of employees in the group reduced from 18,786 to 14,801 in 2010. On the side of Norwegian, the number of employees increased from 1,852 to 2211 over the same period. Despite the size of Norwegian airline, it is showing a positive trend in employee number while SAS is showing a negative trend. There is a probability that, over the period, the downgrading of employees was used by the SAS to sustain their profitability trend.

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