How Norway’s State Manages Its Ownership Of Companies


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Norges Bank / Flickr

Last week, I wrote a post about Norway’s social wealth fund reaching $1 trillion. A common question I received in response to that post was: how does Norway manage its shareholder rights? Is it a passive owner that just sits back and collects dividends? Or is it an active owner that votes on shareholder resolutions and tries to influence the behavior of the companies it owns?

This is an interesting question because, in US discourse at least, the idea that the state should be an active owner in corporations is widely rejected. Even CEPR’s Dean Baker who proposes that the federal government take a large minority ownership stake in US corporations insists that the equity issued to the federal government be in the form of nonvoting shares.

Norway takes the opposite approach, declaring in all caps on their social wealth fund’s website: WE ARE AN ACTIVE OWNER. Like any other active investor, Norway’s fund tries to influence companies through shareholder proposals, shareholder votes, and discussions with companies.

In 2016, the fund voted at 11,294 shareholder meetings, a vote rate of 97.9 percent. Its voting decisions are based on voting guidelines adopted by the fund and applied on a case-by-case basis. The guidelines include things like 1) promote long-term value, 2) promote company transparency, and 3) promote environmentally and socially sustainable business practices.

In that same year, the fund also met with 1,589 companies a total of 3,790 times to discuss some particular topic of concern to the fund. The key topics include things like 1) board members should have independent industry expertise, 2) board chairpersons should be independent from CEOs, and 3) companies should operate sustainably and respect human rights.

In addition to voting on resolutions and meeting with companies, the fund also periodically publishes position papers that set out its future voting intentions and try to influence corporate governance more generally. The last such paper, published in April of this year, was on CEO pay. In it, the fund argues that complex CEO pay schemes that often hinge on dubious short-term performance conditions should be replaced with a simple pay package that consists of a cash amount and a specific number of shares that are locked-in for five or ten years in order to ensure CEOs are oriented towards long-term value creation.

Finally, the last significant thing Norway’s fund does is exclude some companies entirely from investment. The fund has adopted a set of guidelines for when companies will be excluded. The guidelines include product-based exclusions such as 1) weapons that violate humanitarian principles (e.g. cluster munitions and nuclear weapons), 2) tobacco, and 3) coal. They also include conduct-based exclusions such as 1) serious human rights violations, 2) severe environmental damage, and 3) gross corruption. These guidelines have been applied to exclude more than 100 companies from the fund’s portfolio.

So, in short, Norway is very much an active investor, even though it is a state owner. It has demonstrated that it is not ridiculous to suppose that a state-owned social wealth fund should vote its shares and try to directly influence company behavior. Norway’s fund has also shown how to do so responsibly and predictably without requiring an enormous amount of day-to-day legislative attention. The legislative body or an appointed cabinet member could establish the general guidelines for how the fund should exercise its ownership rights and then employees of the fund could apply those guidelines on a case-by-case basis, explaining their reasoning in each instance. This is very similar to the way administrative adjudication already works in the US.