Norway’s Oil Fund is the biggest sovereign wealth fund in the world with assets of US$870 billion and was set up by the Norwegian government to manage the vast profits that accrued to Norway during the oil boom.
Wealth funds have traditionally not bothered with corporate governance issues, believing they are simply a financial investor. Over the past 11 years, the Oil Fund has increased in size by 700% and this has forced the Fund to conclude that it cannot escape its responsibilities as a large investor in world stock markets. The Oil Fund owns almost 1.3% of every listed company in the world.
Initially, the Fund began a big push to be more active in corporate governance issues such as the election of directors and the composition of boards. It led a successful campaign to persuade many Swedish companies to allow for the election or directors individually rather than as an entire team. In the USA, it has been part of a big push on proxy access which allows shareholders to propose board members.
More recently, in its most radical step to date, it has begun to publish its voting intentions ahead of Annual General Meetings.
Up to now, the Fund has not been prepared to interfere in the decisions about how much senior executives are paid and tended to only comment on the structures in place to award remuneration rather than on the actual amounts payable.
Across the world, shareholders are scrutinising executive pay levels and there is a lot of anger at the excessive remuneration being paid to the leaders of companies. The recent case involving the remuneration of the CEO of the Irish Farmers Association and resultant fall out and anger of ordinary people is just one local example of what is quickly becoming a major issue.
The fund recently announced it believes remuneration has become a global issue and it intends to launch a position paper on remuneration setting out what it expects from the 9,000 companies it is invested in. A lot of CEOs should worry about their future pay packets.