Compliance with the Code

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This thesis takes the form of a case study which is an in-depth, multifaceted investigation through the use of qualitative research method (Feagin, Orum & Sjoberg, 1991). It is often stated that a case study is used when there is a need to study a number of organizations with regard to a set of variables (Ghauri & Grønhaug, 2010). This case study will encounter an amount of variables, in the form of disclosure, compliance, changes in the amounts of pension benefits and other soft variables. Such parameters will be of use through the examination of the compliance, disclosure and development of pension benefits of executive directors in chosen general retailers. There is also a definition of that in a case study, the researcher does not have control over the event and the focus is on current real-life phenomena (Yin, 1994). The purpose of this case study relates to a nowadays recognized issue of pension benefits in the field of corporate governance and therefore corresponds to the use of a case study. The main advantage of a case study such like this, is that first-hand information can be collected and that there is a more in-depth understanding of the situation. Although a case study is favorable in this thesis, there are limitations and disadvantages with such a study. The possible disadvantages with a case study are that observations are made by individuals, and there could be a difficulty of transferring the observed happenings into useful information (Ghauri & Grønhaug, 2010).
The collection of data in this case study is done through a qualitative research method. There are two sorts of research methods: a qualitative and a quantitative. The understanding of the qualitative and quantitative research methods is of importance to enable the author to meaningfully analyze the data. Due to this, many authors choose to draw a distinction between the methods (Bryman, 1989; Easterby-Smith, Thorpe, Jackson & Lowe, 2008).
The qualitative method comprises all data that is non-numerical or data that has not been quantified while the quantitative data is numerical and often result in standardized information (Saunders, Lewis & Thornhill, 2009). According to Robson (2002) qualitative data has the characteristics of exploring a subject more in-depth and in as real terms as possible. The nature of the purpose of this case study and the relevant available information is best suitable for a qualitative research method. The aim of this case study is to have an in-depth look at companies’ disclosure of pension benefits, and by the use of a qualitative research method adequate data will be collected for answering the research purpose.
Qualitative research methods have a tendency of being inductive or deductive. Deductive approach to theory draws logical conclusions based on theories which are extracted from existing relevant literature (Ghauri & Grønhaug, 2010). This case study attempts to describe the disclosure of pension benefits and as a consequence, its impact on shareholders. The relationship between shareholders and the management is described and explained by the agency theory, which therefore is applicable in this case study.
The base for this case study is the use of literature and relevant information in the form of secondary data. The information has the possibility of being either secondary or primary data. Secondary data is information that is collected from a third party and is raw data with little processing, or data that has been summarized and is not intentionally produced for the specific research issue (Saunders et al. 2009). The primary data on the other hand is collected specifically with the focus on the research issues. Primary data is not taken from a third party and is therefore viewed as new data; free from others interpretations and analysis (Bell, 1995). Annual reports, country specific corporate governance codes and documents related to the issue of pension’s benefits are secondary data which are of use in this case study. The gathered data provides the case study with valuable information on the companies and on the disclosure of pension benefits. Data from annual reports is presented in a common currency of euro (EUR) (Appendix 2). The currency is based on a flexible exchange rate and conversions are made on the last day in each year of this study. Conversions are made to have a possibility of making a comparison between the countries for the studied period.
In addition to the mentioned data above, other secondary data is also of importance to obtain the theoretical background of this case study. Therefore sources such as scientific journal articles, textbooks and search engines have been used. Some of the search engines from which information was obtained are JSTOR, Business Source Premier and Science Direct.
When writing a thesis it is important to consider the term of reliability and validity. Reliability is a measurement of the accuracy of the measuring procedure. The accuracy of the procedure is based on doubling or repeating the collection techniques and data. The level of reliability is concerned with yielding similar results by using same procedures. In practice, the same results of a case study should be obtained if another researcher uses the same procedures. Threats to reliability of the data are present when there is an assessment of the results. Different individuals’ judgment of such results can have the effect of being subjective. Further the assessment of the results, in a long term period, may affect the reliability of the data and the consistency of the results (Arbnor & Bjerke, 1997). The research questions in this case study are answered through collection of data from general retailers’ annual reports. The information found in annual reports is to a certain point consisting of numbers, indicating a low level of subjectivity. To minimize the level of subjectivity, the data on the disclosures is gathered from annual reports and in accordance to specific corporate governance codes. A level of subjectivity may be present since the interpretation and evaluation of data are done by individuals and through a grading system. Annual reports as data are seen as reliable since they are revised and audited before publication. The reliability of the corporate governance codes is high due to their function as official documents in the field of corporate governance. Even though there is a possibility of a small level of subjectivity, we consider that the data in this case study is reliable. Besides the reliability, the data should directly tie to the purpose of the study. Validity measures the usefulness and value of data in relation to the purpose. There should be a linkage between the data and the specific purpose of the thesis (Arbnor & Bjerke, 1997). In our case study, the data has been collected in line with the research questions and purpose and therefore corresponds to a high level of validity.
Information on the level of pension benefits found in the annual reports of the ten chosen general retailers has been subject to a grading system. The aim of the system is to simplify the presentation of the findings and to categorize the level of disclosure, based on specific parameters. The grading system is used in the disclosure of both Swedish and UK executive directors’ level of pension benefits.
The grading system is divided into three numbers corresponding to a scale of one to three. Grade one (1) is when there is complete disclosure, where all executive directors’ pension benefits are individually disclosed, meaning both the CEO and all other executive directors.
Grade two (2) corresponds to disclosing individual pension benefits of the CEO in an understandable way while having disclosure of other executive pension benefits at a non-individual basis.
Grade three (3) requires disclosure in compliance with the Swedish Code but entails complex and non comprehensible manners of CEO pension benefits disclosures. In addition, grade three discloses other executive directors’ pension benefits but not at an individual basis.
This case study focuses on a sample consisting of five listed general retailers in Sweden and UK, which have been extracted from the respective stock exchange. Five of the companies are listed at the London Stock Exchange (LSE) while the remaining five are listed at Stockholm Stock Exchange (OMX Stockholm)1. OMX Stockholm categorizes such companies under consumer discretionary, where several of the companies are seen as general retailers. Out of the 18 listed companies there were only five suitable, where those were listed before 2006 or in the same year and had the available public information that was needed. One of the chosen retailers was thought as being listed in 2006. When further examining the data it was obvious that preparations were made for listing in 2006 but official listing occurred in 2007. This general retailer was chosen despite the non-listing, due to the limitation in the amount of retailers and to the desired sample size.
LSE has 55 companies under the sector general retailer, where only five of them were suitable for the conducted study. These five companies have been listed for a longer period of time, giving that there was available public information and the time frame matched those companies originating from OMX Stockholm. The time frame of this case study was additionally limited by the publication of the Swedish Code in December 2004. The respective corporate governance codes contain recommendations on the remuneration component pension benefits and are therefore of importance for this case study.
The chosen Swedish listed companies are; Kappahl Holding AB Publ. (Kappahl), Bilia AB Publ. (Bilia), Clas Ohlson AB Publ. (Clas Ohlson), Mekonomen AB Publ. (Mekonomen) and Fenix Outdoor AB Publ. (Fenix Outdoor). The chosen UK listed companies are; Debenhams PLC (Debenhams), Dunelm Group PLC (Dunelm Mill), Halfords Group PLC (Halfords), JD Sports Fashion PLC (JD Sports) and Brown (N) Group PLC (N Brown Group)2.

Empirical Findings

The findings display the compliance with respective country corporate governance code, the disclosure of pension benefits of individual directors and the development in levels of pension benefits. The compliance and disclosure of pension benefits is presented in tables while the level of pension benefits is presented in company specific graphs3. The graphs display the developments on a yearly basis. The CEO pension benefits are put in relation to the pension benefits of other executive directors. The amount of pension benefits of other executives is a yearly average based on the relation between the amount of pension benefits and the number of directors.

Compliance with the Code

Annual reports from the respective companies were reviewed as to gather information on the compliance with the Code. The compliance of chosen Swedish general retailers is displayed in the findings of Table 1.

Disclosure of pension benefits

The information on the disclosure of pension benefits was collected from official documents from respective company. The findings have been subject to a grading system and are displayed according to granted grades.


Bilia complied with the Swedish Code during 2006-2010. The company also disclosed pension benefits of the executive directors in accordance with the Swedish Code. The disclosure has been consistent and equally graded for the period. Table 2 displays that Bilia has been rewarded with a grade of two (2) which is consistent with having disclosure of pension benefits to the CEO but not individually to all executive directors. The number of other executive directors has changed in between the years but there is no information on these directors regarding their names, ages or other valuable information. The disclosed information on the CEOs pension benefits is given in an easy comprehendible way creating a relative transparent disclosure and an easy access to information (Bilia, Annual Reports 2006-2010).

Clas Ohlson

Between 2006-2010, Clas Ohlson complied and disclosed pension benefits in accordance to the Code. The disclosure is granted a score of two (2), representing individual disclosure of CEO pension benefits while no individual disclosure of other executive directors. The presented information has relevant transparency in the disclosure of CEO pension benefits while lower transparency in disclosure of other executive directors. The low transparency is due to the lack of disclosure of what each individual other executive director received in pension benefits. The disclosure of pension benefits for other executive directors is given in a lump sum with a referencing to a number of executive directors without any name or other relevant information (Clas Ohlson, Annual Reports 2006-2010).

Fenix Outdoor

Fenix Outdoor complied with the Swedish Code, with the exception of 2006. The score granted for disclosure of pension benefits is a three (3) from 2006-2009 and a two (2) in 2010. Overall Fenix Outdoor has a complex and non-comprehensive disclosure on pension benefits for both CEO and other executive directors. The transparency is low; giving that to obtain information is not a simple task. Much more effort was required in order to obtain any sorts of information regarding the pension benefits of all executive directors. The disclosure is not structured in a simple way and therefore there are difficulties of comprehending the disclosed information. In 2010 this improved with more easily understandable disclosures of CEO pension benefits. However, there is still a lack in the individual disclosure of other executive directors’ pension benefits (Fenix Outdoor, Annual Reports 2006-2010).


During the studied period Kappahl has complied with the Code and is granted an average of two (2). The disclosure on pension benefits for the CEO of Kappahl is done in a transparent way, while the disclosure of other executive directors is not done at an individual basis. The pension benefits granted to other executive directors is disclosed as a lump sum, implying the same sort of pension benefits disclosure as Bilia, Clas Ohlson and Fenix Outdoor in 2010 (Kappahl, Annual Reports 2006-2010).


Mekonomen has the grading of two (2), as the majority of the companies and has also complied with the Swedish Code. The disclosure contains pension benefits for the CEO but no individual disclosure for other executive directors. The disclosure of pension benefits to other executive directors is given in a lump sum. No names are mentioned and the sum of referred directors has a tendency of not corresponding to the number of other executive directors found in the annual reports, creating non-transparent and inconsistent disclosures for other executive directors (Mekonomen, Annual Reports 2006-2010).

The level of pension benefits

Presented findings below relate to the development in the levels of pension benefits and such information is extracted from annual reports.


The CEO of Bilia was Jan Pettersson, with a beginning age of 57 in 2006. Pension benefits were throughout 2006-2010 calculated as defined contributions. Other executive directors’ pension benefits were ranging from 28 % to 45 % of the base salary. One of the executives had on the other hand a calculation of 10 % of the base salary. The defined contribution schemes calculation for CEO pension benefits is somewhat more complicated and contains several different components. These defined contributions are deferred to a third party, often a legal entity, leaving no further obligations for company contribution after the executive’s retirement. The retirement age of executives in Bilia is 60 with a possible prolongation to the age of 65.

Table of Contents
1 Introduction
1.1 Background
1.2 Problem
1.3 Purpose
1.4 Outline of the thesis
2 Frame of Reference
2.1 Definitions
2.2 Agency theory
2.3 Corporate Governance Codes
3 Method
4 Empirical Findings
4.1 Sweden
4.2 United Kingdom
5 Comparative Analysis
5.1 Compliance with the Code
5.2 Disclosure of pension benefits
5.3 The level of pension benefits
6 Conclusions 
7 Discussion 
8 List of references
Pension benefits of executive directors A comparative study of general retailers between 2006-2010

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