Norway’s SWF manager gets tough on governance with US and UK companies

Norges Bank Investment Management, the €290bn ($432bn) manager of the Norwegian Government Pension Fund, has announced a major corporate global governance campaign that will see it challenge four major US companies to split their chairman and chief executive roles. It is also throwing its considerable weight in the UK stock market – as owner of £32bn worth of UK listed shares – behind moves to push all UK corporate directors to be re-elected every year, a tougher position than recommended by the recent draft Walker review on corporate governance by Sir David Walker, former chairman of Morgan Stanley. The final Walker report is expected later this year.
Speaking at a dedicated seminar in London, this morning (October 2), Anne Kvam, global head of corporate governance at NBIM, said the fund would target US companies Harris Corporation, the Florida-based communications company, Clorox Company, the cleaning products group, Parker Hannifin, the engineering company, and Cardinal Health, to lobby the companies to split the top executive positions. Corporate governance advocates contend that separating the chairman and CEO roles improves accountability and provides checks and balances in the boardroom, and US companies are increasingly making the split. NBIM said a similar campaign at Sara Lee, the food and household goods group, had been dropped after the companyagreed to divide the CEO and chair roles. In the UK, where NBIM is one of the biggest equity managers, its decision to publicly push for annual re-election of all company directors takes it beyond the Walker draft, which only recommends that the chair of the remuneration committee should automatically stand for re-election if more than 25% of investors vote against the annual remuneration report. NBIM said it also supported better disclosure of the individual competencies of board directors in order to verify that they are up to the job. Despite these differences, NBIM said it broadly supported Walker’s recommendations, notably the introduction of a requirement for fund managers to reveal whether they have a policy on engagement with investee companies, known as the Principles of Stewardship.
More broadly, Kvam said NBIM was currently engaging on environmental, social and governance (ESG) concerns with 80 companies globally, which she said was an “all-time high” for the manager. The Norwegian Ministry of Finance recently called for a strengthening of the Government Pension Fund’s ‘engagement’ lobbying process via NBIM with companies of concern before opting for the nuclear option of blacklisting from its portfolios.