Published in Svenska Dagbladet, 2024-10-24. Translated from Swedish.
The extraordinary general meeting at Klarna is over and the major shareholders got what they wanted. Sebastian Siemiatkowski strengthens his grip ahead of the listing. Why did the other shareholders let it happen?
“Minor administrative amendments to the articles of association” is not an agenda item that normally excites shareholders. But in Klarna’s case it concealed something that should have made the company’s shareholders furious — assuming they understood what it meant. There is much to suggest that many of them did not.
SvD has reported on the power struggle that preceded the extraordinary general meeting held in London on Thursday. Among the proposals passed was the ability for the board to remove members found to have breached their duties, and to appoint new members. Klarna — which now has a British parent company — is permitted to do this under British company law. In Sweden it would not have been possible: in a publicly listed Swedish company it is the shareholders, through the general meeting, who appoint at least half of the board members.
Power is now shifting from the general meeting to the board — which strengthens those already represented there, including CEO Sebastian Siemiatkowski and chairman Michael Moritz from venture capital firm Sequoia, while major shareholders such as co-founder Victor Jacobsson will lose out. His board representative, Mikael Walther, was forced to resign as a consequence of Thursday’s meeting.
What is not standard is that shareholders vote to reduce their own influence — at least not if they understand that is what is happening. According to Klarna itself, the move of the parent company to the United Kingdom was made to prepare the company for a listing, on the grounds that British law is internationally recognised and well understood by larger investors. Given that the listing will most likely happen in the United States rather than the UK, there were probably other options for domicile. But restructuring a company ahead of a listing is in itself neither unusual nor controversial — it is practically standard.
What is not standard is that shareholders vote to reduce their own influence. At least not if they understand that is what is happening. The decision to relocate was made in March this year. A share in the Swedish Klarna could be exchanged for a share in the British Klarna. It sounds simple, and shareholders reasonably did not want to stand in the way of the approaching listing — the prospect of liquidity beckoned. But then there was that matter of company law.
What Klarna voted through at its extraordinary meeting on Thursday was correct and legal under British company law. The equivalent manoeuvre in Sweden would not have been possible. So why did shareholders vote to reduce their own control over the company? Did they understand that the move — indirectly — entailed more than just listing preparation? A simple safeguard would have been to incorporate the same articles of association as in Sweden into the British company — to keep the same rules as before. But that safeguard was absent.
Whether this was a deliberate move or an unforeseen consequence can only be speculated about. The situation is now what it is. Power has been consolidated among existing board members, and a new standard articles of association has been established for Klarna — one that will likely be the framework presented to new investors at the listing going forward. Given the expected destination of the listing — the United States — that is unlikely to cause problems. The American stock market is full of companies with governance structures different from what Swedes are used to. Among the larger tech companies it is more the rule than the exception. The clarity it provides has probably helped several of them. Everyone understands who is driving and who decides. Zuckerberg is boss at Meta, and if you don’t like that, you shouldn’t invest in its shares.
But that reasoning only applies to the prospective new shareholders in Klarna — those who may come in after the listing and going forward. For the existing shareholders who have now lost much of their control and influence to the board, the situation is not so clear. They appear to have voted themselves out. The question is whether they understood that is what was happening.
