Norges Bank Investment Management, the arm of the Norwegian central bank which manages the NOK3trn (€385bn) Global Pension Fund, has called for a “market-wide rethink” on the approach investors take to executive pay.
And it slammed voting on company remuneration reports as a “time and resource consuming distraction”.
“We are wholly unconvinced by the prominence awarded to this aspect of governance policy making,” the giant investor said – adding that it has not found any evidence a shareholder vote has proved an “effective lever to raise board accountability or stem the asymmetry between pay and performance”.
“If our appeal for a market-wide rethink on the approach investors are taking to remuneration is premature then, at the very least, if a vote is mandatory then the outcome should be binding.”
The comments come in NBIM’s submission to the European Commission’s Green Paper on corporate governance, whose consultation period ended last month.Norges also called for better regulation of comply or explain regimes in European corporate governance.
“We believe the EU can significantly advance the quality of corporate governance across authorised markets by establishing better regulation of comply or explain regimes,” the influential investor states in the submission.
“NBIM recognizes shareholders must be the primary body for corporate governance oversight of comply or explain regimes. But, we must always find a workable solution to the challenge of managing a globally diversified portfolio with many thousand equity holdings.
It would support any initiative to find “alternative and additional methods for independent monitoring” of companies’ comply or explain statements.
NBIM also said the European proxy voting system needs reform. It called for full disclosure of proxy firms’ activities, governance, revenue breakdown and conflicts of interest matters.
The proxy voting chain was inefficient, has too many intermediaries and “gives opportunity to misuse confidential information”. NBIM’s submission