Norway's Shareholder Activism

Citywire reports on the Norwegian Government Pension Fund – Global’s shareholder activism:

The world’s second largest sovereign wealth fund has taken its first ever steps into active shareholder participation, according to its latest quarterly results.

Norges Bank Investment Management (NBIM), which operates the $750 billion Norwegian Government Pension Fund Global, said it intends to take a more involved role in companies which it has a substantial share of the voting rights.

Outlining its plans in its second quarter 2013 results, NBIM said it would present expectations in terms of corporate governance and management to companies.

It has also formed a corporate advisory board to help aid this push.

Norway’s efforts are definitely out of the norm for sovereign wealth funds, but the report suggests that what Norway is doing is more, well, newsworthy, than I think it actually is.  First, Norway has been active in governance matters for some time–well before the second quarter of 2013.  Here, for instance, is a memo on their governance efforts from 2009, and here is a discussion note from last fall.  Norway has developed its corporate governance capabilities gradually over the years, but it has been an engaged owner for many years. 

Ah, but Norway is not merely engaging in governance–the report says it is now actually engaging directly with companies and putting people on boards:

NBIM has taken two steps to engage with companies, the first of which is to file shareholder proposals to improve board accountability in several companies in the United States.

In addition, for the first time ever, NBIM has exercised its right to put forward a representative to a company’s nomination committee. This has seen it name NBIM CEO Yngve Slyngstad as a representative on the committee of Volvo.

Commenting on the decision, NBIM said: ‘This is the first time the fund has exercised its right to sit on a company’s nomination committee and reflects our long-term goal of closer contact with companies’ boards to safeguard the fund’s values.’

But here’s my second point as to why this may not be an important shift in corporate governance activism: other public funds have been doing this kind of thing for a while–even putting people on boards from time to time (such as the Ontario Teachers’ Pension Plan’s representative on the Maple Leaf Sports & Entertainment board). 

Norway’s activism highlights another reason why labeling funds can be problematic.  No surprise if a public pension fund is activist, but a sovereign wealth fund?    Some needlessly worry because of the label, and I don’t like articles like this because they tacitly suggest that because a “SWF” is involved something sinister may be going on.  Although the ties between Norway’s fund and government may be somewhat different from Ontario’s fund and government and the funds may have somewhat different purposes, if you look at how Norway’s operationalizes its corporate governance initiatives and how the fund insulates itself from political influence, its activities should be no more worrisome than CalPERS or the OTPP.  Sure, managers and other observers may not appreciate their brand of activism, but it should not raise the kinds of concerns that justify protectionist responses.

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