Norges Bank Investment Management (NBIM), the central bank arm which runs Norway’s sovereign wealth fund, has singled out in a consultation the aspects of good governance which it sees as most relevant – including clarity of leadership, independence and the contribution companies make to society.
The manager of the NOK10.5tn (€977bn) Government Pension Fund Global – which is still reeling from its own governance crisis – outlined its key beliefs around corporate governance in a letter to the International Corporate Governance Network, giving feedback for its review of the network’s Global Governance Principles (GGP).
Carine Smith Ihenacho, NBIM’s chief corporate governance officer, and senior analyst Ola Peter Krohn Gjessing, wrote in the letter: “We support companies reflecting on their contribution to society.”
Companies choosing to articulate a purpose should, the pair said, take a comprehensive approach and translate it into culture, strategy, targets and actions.
They said NBIM had a vested interest in well-functioning markets in financial instruments, the efficient allocation of capital and risk, and long-term economic growth – and that strong corporate governance practices contributed to these aims.
Smith Ihenacho and Gjessing wrote that their organisation continued to support the GGP, and were responding in the letter to the questions of greatest relevance to NBIM.
“We concur with the GGP’s emphasis on the role of the board, clarity of its leadership and a composition marked by relevant knowledge, independence, competence, industry experience and diversity of perspectives,” they wrote.
Boards should set executive remuneration in a transparent manner, the pair wrote.
“We support that remuneration should be designed to effectively align the interests of the CEO with those of the company and its shareholders to help ensure long-term performance and sustainable value creation,” they said.
Among other issues mentioned, NBIM said in the letter that – as stated in one of its own published papers – boards should make sure company reporting reflected all material sustainability risks and opportunities.
In the months before NBIM’s new chief executive officer Nicolai Tangen started work at Norges Bank’s Oslo offices at the start of September, the central bank’s Chair and Governor Øystein Olsen weathered a storm of public criticism over his handling of Tangen’s appointment.
As a final concession to political demands, Tangen agreed just days before starting work to divest his hedge fund management business entirely and put all of his personal investments into the form of bank deposits - in order to avoid even the semblance of conflicts of interest.
Contributing to the arts has been one of Tangen’s most well-known priorities, with the Norwegian billionaire having set up a charitable foundation alongside his AKO Capital fund management business, and being set to donate his large collection of Nordic art to a proposed new museum building in his hometown of Kristiansand.