Norwegian government fund seeks to nominate directors at big US firms

Norges makes its first ever ‘proxy access’ move

Norges Bank Investment Management (NBIM), the manager of the NOK3.2trn (€413bn) Norwegian Government Pension Fund, is seeking the right to nominate board director candidates at six major US companies.
It has filed shareholder proposals for so-called proxy access, which gives shareholders the right to nominate candidates for board elections on company ballots, at Wells Fargo, Charles Schwab, Western Union, Staples, Pioneer Natural Resources and CME Group as part of its efforts to strengthen shareholder rights. The six companies will hold their annual general meetings in the second quarter of 2012.
It’s the first time the fund – which has stakes of 0.6-1.1% in the firms worth a total $1.4bn – has ever filed proxy access proposals. And it’s believed that NBIM, one of the most influential investors in the world with investments in around 8,000 companies globally, is the first major institutional investor to go public with such requests.
NBIM was a signatory to a statement from a $2trn investor group in September urging the Securities and Exchange Commission to issue new regulations on proxy access in the wake of a controversial appeals court decision which invalidated the SEC’s plans to introduce universal proxy access. The appeal had been brought by business lobby groups the Business Roundtable and the Chamber of Commerce.
In the absence of such a rule, NBIM says it will seek to change the bylaws at US companies where it is particularly important for shareholders to be able to nominate alternative board members – where firms have poor corporate governance or unsatisfactory financial performance.The first proxy access proposal that was made known was filed last month by shareholder activist Ken Steiner at MEMC Electronic Materials, according to proxy research firm ISS. Since then Steiner has filed resolutions at Bank of America, Sprint Nextel, Ferro Corp. and Textron.
ISS said it’s likely the companies targeted by Steiner will try to get permission from the SEC to keep the proposals off their proxy statements, by persuading it to issue so-called ‘no-action’ letters. It’s probable that the companies identified by NBIM will try to do the same.
NBIM says the right to nominate directors at listed companies is a fundamental principle of good corporate governance. While this is upheld by US law, NBIM says, the process is “cumbersome and costly” as shareholders must submit alternative agendas at company annual general meetings and distribute documentation to investors.
Proxy access simplifies this by allowing shareholders to put their nominees straight on the company’s agenda.
“Board members must be held accountable,” says Anne Kvam, global head of ownership policy at NBIM. “When they fail to meet our expectations, we as shareholders should be able to propose alternatives without incurring prohibitively high costs.”
NBIM proposes each company establish a procedure for shareholders to nominate candidates to the board on the company’s ballot, subject to limits. Shareholders should own a minimum 1% of the company’s stock for at least one year to nominate members and may propose no more than 25% of a board’s members.
Earlier this week, Responsible Investor reported that Norges is set to publish a set of written expectations of board accountability. NBIM statement