This article addresses the role of formal institutions and informal networks on corporate governance practices. The existing corporate governance literature has mostly examined the formal institutions, such as the effect of legal systems. Our contribution is to consider the effect of informal ‘small world’ characteristics of ownership and board networks. We use the case of Scandinavia (Denmark, Norway and Sweden) to examine these effects. Our empirical results reveal large differences in formal board and ownership structures between the Scandinavian countries, but strong similarities in terms of law enforcement, political stability, government effectiveness, rule of law, control of corruption as well as voice and accountability. We find that all three countries can be characterized as ‘small worlds' in which trust, information diffusion and reputation mechanisms are active governance mechanisms.

Manuscript Type: EmpiricalResearch Question/Issue: It is proposed that informal governance mechanisms such as social control, in the form of norms and corporate networks, may complement formal governance mechanisms, such as laws, in providing investor protection. Research Findings/Results: A comparison of stock markets and investor protection for Denmark, Germany, Italy, Sweden, the UK, and US shows that the Swedish stock market is larger and more vital than would be expected from an evaluation of its formal investor protections. Subsequent analyses show that Scandinavian business standards are of the highest level, with the UK, the US, and Germany close behind, and Italy last. Comparison of owner networks using small world methodology show that whereas Germany has the most connected network, Sweden has a far tighter one than Denmark, Italy, the UK, and the US, being the least connected network of all. Theoretical Implications: The findings suggest that social norms upheld in a close network may complement formal investor protection, but perhaps not substitute for it. Thus, more research on the importance of informal governance mechanisms is called for in addition to the study of formal ones. Practical Implications: The results of this study strengthens the idea that there may not necessarily be one ideal corporate governance system, but that such systems develop historically according to path-dependent antecedents, with time finding their own balance. As such, the recent diffusion of Anglo-American corporate governance norms may prove upsetting to these systems, as their values may clash with already existing ones.

Gendering processes often take the form of organizational subtexts, that is, seemingly gender-neutral practices that have gender implications. The purpose of this article is to study performance evaluations, which, based on management by objectives systems, may appear neutral, but tend to be based on male norms of what is regarded as good performance. We analysed the careers and performance evaluations of 391 newly licenced Swedish auditors, using an open-ended question survey. In this industry 50 per cent of new employees and 92 per cent of partners are men. Even in the early stages of their careers, there are notable differences between women and men. The women achieved less and show lower career ambitions and expectations as well as greater intentions to leave the auditing industry. Performance evaluations are also perceived differently, men focusing on what is evaluated (reflecting the perceptions of those at higher hierarchical levels) and women focusing on who does the evaluating and how.

Despite Sweden being considered one of the most equality‐minded countries, the uppermost organizational levels are so male dominated that mandatory board of director gender quotas are considered. Homogeneity may only be decreased with difficulty, as it arises through basic social mechanisms such as homosocial reproduction, that is, people prefer and, therefore, recruit people who are similar to themselves. Present structure is perpetuated. Previous research suggests that such reproduction occurs on an organizational, top management and/or interpersonal level. In this paper, simultaneous analyses of these three levels regarding gender, nationality, age and tenure show that homogeneity arises between superior and subordinate. As for top management team composition, there is in general one woman per company, whereas non‐Swedes are twice the number of women, cluster together and have line responsibility. Owing to need for critical mass, present composition and position responsibility, we may, therefore, expect gender homogeneity and some nationality heterogeneity to remain.