Why BP went to Sweden for its new chairman

This Scandinavian country punches way above its weight on the business world stage, with its history of innovation and trade. Richard Northedge reports

When BP ended its long hunt for a new chairman, the searchlight stopped in Sweden – a country whose GDP is smaller than the oil company's yearly turnover.

But while the Scandinavian country's population may be small, its impact on business is huge. And it has a chance to show whether it's political influence is as weighty when it takes over the EU presidency this week.

Carl-Henric Svanberg, the new head of BP, is currently chief executive of Ericsson. But even the telecoms giant is not Sweden's largest company; that honour goes to the H&M retail chain.

"Sweden has always had a large number of influential entrepreneurs over past centuries, creating companies such as Ericsson, Volvo, Ikea and Skype," says Annika Wahlberg, the managing director of the Swedish Chamber of Commerce. She could have mentioned Saab, Electrolux and Pharmacia & Upjohn. "For its size, Sweden has a varied and large range of international companies."

It is especially strong in engineering, which accounts for half the country's output and half its exports, while Britain manufacturing sector has shrunk well below 20 per cent of GDP.

Svanberg studied engineering at university in Linkoping, where Saab builds jet aircraft. His first job was with Asea Brown Boveri, the power and automation technology group, and before joining Ericsson he was chief executive of Assa Abloy, a locks company.

Sweden has a tradition of exporting innovations, and not just pop foursomes like Abba. Swedes claim credit for inventing products from roller bearings to steam turbines and from the safety match to dynamite. In communications, Sweden has been an innovator in computer-controlled telephone switching.

But Svanberg also has an MBA and the country's attitude to commerce could explain how it punches so far above its weight on the world stage. Its corporate hierarchies are notably flat. As a result, pay differentials are low, with executives typically paid just a third of what their equivalents receive at similar size companies in Germany or Britain.

At Ericsson, Svanberg is the only executive on a board that has 10 directors plus employee representatives. The non-executives are high-powered, however, including former BT chief executive Sir Peter Bonfield and Marcus Wallenberg, who chairs Saab, Electrolux and the SEB bank besides sitting on AstraZeneca's board.

And while Sweden decided three years ago not to adopt a law similar to Norwegian legislation that requires women to hold 40 per cent of public company directorships, it actively promotes them. BP, where 12 of the 14 directors are male, will seem like a boys' club by comparison.

Sweden holds the record for the greatest proportion of seats in government held by women – almost a majority at 47 per cent. But this European utopia is at the top end of many scales. It is the world's most democratic country and the least corrupt; it has the smallest gender gap, according to the World Economic Forum, which also puts it third in the environmental league and third on its index of countries that enable trade. Save The Children has it top of both its mothers' and women's indices and it is in the top 10 for life expectancy.

It also comes fourth on the global competitiveness table and is in the top 10 nations for filing patents. "We always score highly in innovation rankings," says Wahlberg. "Smaller countries have to be more inventive to succeed, and this is what has happened in Sweden."

This may all be testament to the country's education system and social policies that provide free childcare and 15 months maternity leave, thus helping women stay in work. "The government has a history of investment in and support of education and research," says Wahlberg.

The one league table Sweden is embarrassed to top is for taxation. All those state services cost money and personal tax rates have been as high as 80 per cent. The country was once in the global top five for GDP per head but now just scrapes into the top 20. High taxes may even explain why executives leave to work abroad at companies such as BP.

But the truth is that a country, with just nine million people, has to think internationally. Big countries can trade within themselves, but when companies in smaller nations sell to people outside the immediate area it is called exporting. Sweden historically saw the Baltic as its motorway system to wider markets: it grew to rely on selling to its neighbours and now the world.

For a country that depends on exports it was thus a potentially dangerous move when voters narrowly rejected joining the European single currency adopted by Finland and Sweden's main trading partners.

Svanberg supported the euro: to grow, companies like Ericsson had to move beyond their domestic markets. And to be big in business meant entrepreneurs moving beyond their home base too. Ericsson's chairman, Michael Treschow, now also chairs Unilever, while former Volvo chief Pehr Gyllenhammar chaired Britain's Aviva insurance group.

Lars Emilson also made the decision to come to London, as chief executive of the Rexam packaging group. "We were living in times when, as a Swede, you had to make a selection of whether you were going to be a local person or an international one," he says. Like Svanberg, he went international.

And living in a small country requires learning new languages if traders are to communicate with customers. "You have to look abroad," says Emilson. "We've a language that no one understands outside Sweden."

Sweden's basic resources are trees, water and minerals. To become a high-wealth nation meant adding value to such commodities. Out of forestry came cardboard and thus the packaging industry, spawning companies such as Svenska Cellulosa and providing Emilson with a route into international management; from water came the country's hydroelectric industry. The state-owned Vattenfall - "waterfall" – generates the power for Swedish industry. Already Sweden has the highest level of energy from renewable sources, 40 per cent, but wants to raise that to half by 2020.

At BP, Svanberg is joining a company running down its alternative power programme, but, he says: "I'm hugely excited about joining the energy industry. I look forward to it with relish."

Ericsson's development of high-tech electronics demonstrates the concentration on value industries, as do the aerospace and pharmaceutical companies. Other major Swedish companies – many operating in the UK - include tooling firms Atlas Copco and Sandvik, bearings maker SKF, the Skanska building group, telephones business Telia Sonera, Scania trucks and Securitas, the security group that employs almost 250,000 staff worldwide.

If Stockholm's banking sector suffered less from the crunch than some, it is because its financial industry was hit hard in 1992 when the housing market plunged and the state had to rescue the banks. Luckily it left Sweden's banks too badly bruised to be hit again.

The Swedish government recently refused to provide aid to rescue the Saab car business, however, not wishing to transfer taxpayers' money to the firm's parent, General Motors. Instead, the business is being sold to another Swedish carmaker, Koenigsegg. Ford is still seeking a buyer for Volvo, the country's biggest car company.

Many Swedish companies have avoided hostile takeovers. Sometimes they forge mergers instead, like AstraZeneca, the Swedish-British drugs giant, or ABB, the Swiss-Swedish engineering group. The Swedes made a cheeky bid for the London Stock Exchange in 2000.

But the country's industry also has a track record for new inventions. Tetrapak has added even more value to packaging; Skype, the internet telephony company, was developed by a Swede; the original Metro, a free daily newspaper, started in Stockholm before being copied in British cities; and Pirate Bay, the file-sharing music website is based there too.

Wahlberg is not surprised BP has turned to her home country for its chairman. "Choosing a Swede may be seen as a non-political and neutral choice, as well," she suggests – though this is a country where voting turnout exceeds 80 per cent.

Svanberg knows London from when he ran Assa Abloy, the lock company, which has a base in the capital. He and his wife, Agneta, intend to move here and Emilson, who chose to stay in London after retiring from Rexam, has words to welcome his fellow countryman. "England is an easy country to live in," he says. "Britain's culture is not too far away from Sweden's and the sense of humour is the closest of two countries I've ever seen."

From the land of the midnight sun

Carl-Henric Svanberg, BP's new chairman, was born in May 1952, just as the long winter nights in Porjus were yielding to the midnight sun. Just over 300 people live there now but tourists flock to watch the northern lights at this landlocked village in Swedish Lapland. The trip south to university in Linkoping was the start of a longer journey that would see Svanberg chair one of the world's largest oil companies.

Svanberg read engineering but his pleasure was ice hockey. He played for Umea, a town on the Baltic coast, and belongs to Djurgarden, the exclusive sports club on the royal island in Stockholm. He has added sailing to his interests, with an ocean-class yacht.

Armed with his MSc degree, Svanberg joined engineering group Asea Brown Boveri in 1977, working on export projects. Nine years later, he moved to Securitas, the security and money-handling group, becoming vice-president in 1990. He was appointed chief executive and president of lock-maker Assa Abloy Group in 1994.

After taking a business degree at Uppsala University – where his wife, Agneta, is an associate professor and where he sits on the board – Svanberg joined Ericsson in 2003 and reformed the electrical company, splitting its mobile phones arm from the transmitter business, halving the workforce and buying most of Britain's Marconi.

He and Agneta have three children and live in outer Stockholm.

He was a friend of murdered Swedish foreign minister Anna Lindh but is not overtly political, despite wanting his country to join the euro and saying that he is committed to corporate responsibility issues including human rights, climate change and the UN millennium development goals. He sits on the Confederation of Swedish Enterprise board and is a non-executive director of investment group Melker Schorling.

At Ericsson, he is paid £2m a year. He will join the BP board in September and become chairman in January, replacing Peter Sutherland, who earns £600,000. The search for a new chairman started in 2007 but several potential candidates shunned the high-profile role, while others were unavailable.