This paper considers a distributed PI-controller for networked dynamical systems. Sufficient conditions for when the controller is able to stabilize a general linear system and eliminate static control errors are presented. The proposed controller is applied to frequency control of power transmission systems. Sufficient stability criteria are derived, and it is shown that the controller parameters can always be chosen so that the frequencies in the closed loop converge to nominal operational frequency. We show that the load sharing property of the generators is maintained, i.e., the input power of the generators is proportional to a controller parameter. The controller is evaluated by simulation on the IEEE 30 bus test network, where its effectiveness is demonstrated.