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Deficiencies in governance and administration when universities and other higher education institutions run holding companies

The Swedish National Audit Office (Swedish NAO) has examined how higher education institutions run their holding companies and has found that deficiencies in governance and administration result in the companies not being run in a sufficiently business-like and effective manner. The deficiencies are partly due to the Government’s governance of universities and other higher education institutions.

Scientists looking in microscope, laboratory environment.

Photo: Andreas Kindler

In the 1990s, the Riksdag decided that a number of holding companies would be affiliated to Swedish universities and other higher education institutions. The purpose was to facilitate commercialisation of research results and innovations for the benefit of society.

There are currently 18 such holding companies. The Swedish NAO’s audit shows that, overall, the higher education institutions do not manage them actively and professionally with value creation as the overall goal. The conclusion is based on the following findings, among others:

  • most of the companies have deficiencies in risk management
  • seven companies lack economic operational objectives, three lack both objectives and strategies and five companies lack a strategy for divesting project companies
  • there is a great risk of conflicts of interest, since more than half of the chairmen of the companies are also vice-chancellors or deputy vice-chancellors
  • some of the work is funded by grants, despite the fact that the operations must be run on a commercial basis
  • more than one third of the companies work with contract education assignments, without having an agreement with the higher education institution.

“Far too high a proportion of the companies are not governed in a business-like, effective manner with sound financial management,” says Emelie Lilliefeldt, project leader for the audit.

The Swedish NAO considers that these problems are partly due to deficiencies in the Government’s governance, which has not provided the higher education institutions with the conditions for active, professional administration.

The audit findings also include the following:

  • the Riksdag has not received information about the holding companies in the same way as for other state-owned companies,
  • the Government has not published a follow-up of corporate governance since 2012, nor a follow-up of whether the work on economic objectives functions as it should
  • the effects and results of the holding companies’ work have not been investigated.

“With the exception of appointing an inquiry in 2019, the Government’s governance in this area can be described as half-hearted at best. The fact that the higher education institutions have in many cases chosen to govern the companies with the same lack of commitment, makes the situation worse,” says Auditor General Helena Lindberg.

Recommendations in brief

The Government is recommended to clarify which operations may be included in the companies, and how responsibility should be split between the company and the higher education institution. The Government should also investigate how the reporting chain between companies, education institutions and the Government can be developed.

The higher education institutions should develop their work on goals, strategies and risk management in the companies, and develop follow-up of the assignments agreed with the holding companies.

In order to develop the companies and avoid the risk of conflicts of interest, higher education institutions that have appointed the vice-chancellor or deputy vice-chancellor as chairman of the board should also consider appointing a chairman with clear business skills.

See the report for full recommendations.

Press contact: Olle Castelius, phone: +46 8-5171 40 04.

Presskontakt: , telefon: 08-5171 42 06.

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Updated: 15 April 2020

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