Norway targets US firms over combined CEO role
NORWAY - Norges Bank Investment Management (NBIM) has for the first time submitted shareholder proposals to four US companies requiring them to have an independent chairman.
Around 50% of US companies have a combined role of chief executive and chairman, but NBIM - which has around $66bn (€455bn) invested in US equities through the NOK2.5trn (€290m) Government Pension Fund - Global - claimed "the roles of chairman of the board and CEO are fundamentally different and should not be held by the same person".
Anne Kvam, head of corporate governance at NBIM, said the separation of these roles "is a prioritised area for us, and not just in the US. It's a problem in all markets and we will pursue this."
She revealed the bank votes against all resolutions regarding a combined CEO/chair role, and said the organisation has written letters to all US companies which have AGMs during the autumn to inform them that they will not have NBIM's support for the combined role. "That has created a lot of reactions from these companies," added Kvam.
NBIM has therefore submitted shareholder proposals at four US companies with AGMs in October and November requesting there be a change to the company bylaws requiring an independent chairman. They are:
A fifth proposal for a similar amendment has been withdrawn from the Sara Lee Corp's AGM following constructive dialogue with the company, including several discussions with the lead independent director, and discussion by the full board.
NBIM revealed this led to an amendment of Sara Lee's corporate governance guidelines which will alter the bylaws and split the roles, and require an independent director to be appointed chair.
Kvam said: "It doesn't have to be an immediate change. If the company has a plan in place and clearly commits to it then that is fine. We are happy with that."
She said in addition to the letters and shareholder proposals, NBIM has also addressed the topic at SEC hearings.
"We are using a lot of the tools at our disposal, such as investor networks, engagement and work on policy. We are pursuing this with all our means," said Kvam.
However, she noted that the proposals still require the support of other investors to vote on them at the AGMs, as while most European institutional investors are likely to support the idea, it is likely to be somewhat different for US investors who are content to maintain the current system.
Kvam said: "In our current challenging markets, we believe that an independent chairman is essential. An independent chairman will be a strength to the company when the board must make the necessary strategic decisions and prioritisations ahead to sustain a strong share price and to create shareholder value over time."
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