The supervisory council of Norway’s central bank has issued a sharp reprimand to Norges Bank’s executive board over its mismanaged recruitment of hedge fund magnate Nicolai Tangen as the next head of the Government Pension Fund Global (GPFG).
In a four-page letter, the 15-strong panel of overseers say: “Confusion in this matter and the possible future organisation of the personal interests of the CEO of Norges Bank Investment Management (NBIM), carry the risk of violations of laws, rules and guidelines.”
The panel, which ensures the bank’s rules are observed and consists of 15 members chosen by the Storting (Norway’s parliament) was responding to the executive board’s letter of 29 April which dealt with multiple concerns about Tangen’s appointment made public a month earlier.
The hiring has aroused heated debate in Norway since it came out that Yngve Slyngstad, the current head of NBIM – which runs the GPFG sovereign wealth fund – had attended an extravagant seminar hosted by Tangen last autumn and also been flown home at the tycoon’s expense.
But the scandal has encompassed many other issues, including Norges Bank’s mishandling of the appointment process, its failure to satisfy the public that Tangen’s fortune will not create conflicts of interest in his new role and Tangen’s use of tax havens such as the Cayman Islands.
In the letter signed by the council’s leader Julie Brodtkorb, and Jan Frode Jakobsen, director of the office of the supervisory council, the panel said the accession of a new SWF CEO should happen in a way that maintains high confidence in Norges Bank and the GPFG – both in the Norwegian population and among international market players.
“It is important that Norges Bank does not manage this in a way that weakens confidence,” the council wrote.
“Doubts about the employment relationship, potential conflicts of interest and uncertainty about tax ethics could pose persistent challenges if these issues are not resolved quickly and clearly,” it said.
Part of the problem has been Tangen’s absence from the published list of applicants until two days before his appointment was announced – an error the bank’s executive board has already admitted.
Addressing this, Brodtkorb and Jakobsen wrote: “There is great public interest in hiring for the position of chief executive of NBIM. In the Supervisory Board’s opinion, Norges Bank has not handled transparency about the applicant list as should be expected.”
When he was appointed, Norges Bank said Tangen would step down from all positions associated with his asset management firm AKO Capital and the associated charitable AKO Foundation, so the entities’ investments would be made independently of him.
However, the supervisors said documents planted doubt that enough distancing was taking place.
“The supervisory board believes it is very unfortunate that on the one hand it has been stated that Tangen is breaking all ties to the AKO system, while submitted documentation from Tangen’s lawyer shows that he is still the principal owner and has voting control in AKO Capital,” they wrote.
Documents from lawyer also said that 100% tax exemption for Tangen’s donations to AKO Foundation was essential for the organisation going forward, the panel said.
“The supervisory council believes these circumstances show that Tangen is not breaking all ties to the AKO system,” the panel wrote.
“The supervisory council believes these circumstances show that Tangen is not breaking all ties to the AKO system”
Norges Bank Supervisory Council
The bank’s overseers also said the executive board should have said sooner whether Slyngstad did break the rules by accepting hospitality and a private flight from Tangen.
“When it comes to the question of cost coverage for Slyngstad’s participation in the seminar, the supervisory board believes that, for reasons of clarity to all employees, the executive board should have responded earlier about whether this was in breach of Norges Bank’s ethical regulations,” they wrote.
Slyngstad himself has already apologised in an internal message to all staff at NBIM for this, admitting he made a mistake.
The supervisors concluded their letter saying they would discuss the matter further after the executive board’s scheduled 27 May meeting to conclude work on resolving possible conflicts of interest with Tangen’s private property and ownership interests.
Responding to this morning’s letter, the executive board said it was now working on Tangen’s employment contract and would take the comments into account in that work.
Øystein Olsen, Norges Bank governor, addressed the council’s remark that it was unfortunate not all conflicts of interest between Tangen’s finances and his future role leading NBIM had been clarified before his employment, saying:
“In our letter of 29 April 2020, the executive board addresses why specific solutions to ensure sufficient distance could not be in place until after the employment had been made public.”
In that late-April letter, the executive board said the need for confidentiality had meant details of how the separation between Tangen and his assets was to be achieved would have to be worked out after the appointment was announced.
Among other criticisms levelled at Norges Bank’s executive board in yesterday’s letter, the supervisory council also said the bank’s ethical guidelines seemed “unclear when it comes to practical application.”