Giant Norway fund manager to vote against shareholder say-on-pay proposals

Management knows best, says manager of Norway’s Government Pension Fund Assets.

Norges Bank Investment Management, the arm of the Norwegian central bank which runs the NOK2.7trn (€339.4bn) Government Global Pension Fund, has introduced a new policy to vote against shareholder “say-on-pay” proposals at company annual general meetings. It says company boards and management are “more qualified” than shareholders to set pay. The move bucks a growing trend for shareholders to demand a say in setting company remuneration structures.
NBIM says it revised the fund’s voting guidelines in the first quarter of 2010. It said today: “The new voting guidelines also highlight our view that the board of a company should be responsible for remuneration terms for senior management, a policy that is coming under pressure from shareholders who want more say on pay at companies. The remuneration systems at the companies we invest in are varied, complex and constantly evolving. The board’s in-depth knowledge of a company and its management makes it more qualified than shareholders to set pay terms.”
NBIM said a fundamental part of a board’s responsibilities is to hire and oversee management and, consequently, executive pay. As a result, it concludesthat the best way to control remuneration is to elect board members who are capable of representing investor interests and being held accountable for unacceptable practices. The Norwegian fund manager owns around 1% of the world’s listed companies. It said its new voting guidelines emphasised the need for companies to have chairmen who are independent of management. NBIM said it routinely votes against board candidates seeking to be chairman of a company where they are already CEO.
NBIM also said it plans to open an office in Singapore on June 30, in addition to its bases in Oslo, London, New York and Shanghai. It says Singapore “offers new investment opportunities and proximity to many emerging markets” and that the new office will focus on investment and trading.
Almost 10% of the fund manager’s assets were in Asian countries including Singapore, China, Japan, South Korea, Malaysia and Thailand at the end of 2009.
The Norwegian Government Pension Fund returned 3.9% on its investments in the first quarter of 2010, 0.4 percentage points above benchmark.
Link to NBIM Q1 report