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NBIM to publish written expectations on board accountability

One of six strategic focus areas for influential investor

Norges Bank Investment Management, the arm of the Norwegian Central Bank which manages the NOK3.2trn (€413bn) Government Pension Fund, is set to formalise its expectations of how company boards should behave.

It will shortly release written expectations on board accountability for 2012, said Anne Kvam, NBIM’s global head of ownership policy.

“With 8,000 holdings we can’t talk to every board member,” she told the Local Authority Pension Fund Forum conference last week.

“We are happy to entrust the board to be steward of our capital but that only works if we hold them accountable,” Kvam added.

NBIM already has a brief description of its board expectations on its website. But its published expectations on other strategic issues such as water management and children’s rights are much more detailed; NBIM also publishes annual compliance reports.

The move comes amid a push by NBIM to increase its focus on how companies are managed. In its submission to the European Commission’s consultation on corporate governance, for example, Norges stated that shareholders are responsible for overseeing a board’scorporate governance practices, which should be supported by “more transparent, standardised and enforceable regulation”.

The investment giant also called for greater transparency on board members’ qualifications and advocated developing a system to better monitor companies’ compliance with corporate governance standards. Board accountability/shareholder influence is one of six strategic focus areas for NBIM’s ownership activities. The others are equal treatment of shareholders, efficient markets, children’s rights, climate change risk management and water management.

“With 8,000 holdings we can’t talk to every board member”

In addition, Kvam told delegates to the conference that NBIM sees no real value in investor say-on-pay, asking: “Do we need to go through 8,000 60-page reports?”
Kvam suggested there were just two firms of headhunters in London’s City financial district responsible for selecting board candidates. She added: “We don’t think it’s a good idea for the board to elect itself in an insider job.”