OSLO: Norway’s sovereign wealth fund, the biggest in the world with shares in more than 9,000 companies, will add its influential voice to those of investors increasingly concerned by executives’ skyrocketing pay.
Worth nearly 7 trillion kroner (757 billion euros, $868 billion), the fund will lay out its stance on the thorny subject in a “position paper,” a spokeswoman for the division of the Norwegian central bank responsible for managing the fund said.
“It is a theme that we will watch,” Martha Skaar said.
Positions taken by the fund, which holds the equivalent of 1.3 percent of world market capitalization, are seen as important indicators to other investors.
The publication date of the position paper is not yet known, but it will certainly spike the interest of investors who see the Norwegian fund as a good role model, and who are irritated by the ballooning pay of some executives.
The issue has come to a head in recent weeks at some industry giants.
BP shareholders overwhelmingly rejected on April 14 a pay deal worth $19.6 million (17.3 million euros) for chief executive Bob Dudley, up from the $16.4 million he currently receives, as the group clocked up a loss of $6.5 billion for 2015.
And last week, Renault shareholders also said no to a pay deal for chief executive Carlos Ghosn.
“7.2 million euros for a part-timer?,” thundered the Proxinvest financial consultancy, which contested the remuneration, in an allusion to the fact that Ghosn also serves as head of Japanese carmaker Nissan.
While the shareholder votes were purely non-binding and will not be followed, they illustrate just how sensitive the issue is.
In a report published on April 21, international influential business figures said executive pay at major British companies sometimes rewarded failure.
The following week, several British groups saw their pay deals rejected or contested by shareholders.
In Germany, Volkswagen drew public ire for paying out 63 million euros to 12 top executives for 2015, as the company suffered its first loss in more than 20 years because of an emissions-rigging scandal.
Nonetheless, negative votes like those at BP and Renault remain rare.
In France in 2015, shareholders approved pay packets 87 percent of the time, compared to 92 percent in 2014, according to an analysis of 95 annual general meetings conducted by the specialized magazine L’Hebdo des AG.
The Norwegian fund, which voted in favor of Dudley’s pay raise, has not been too critical of executive pay so far.
In 91 percent of cases, it approved the salaries paid out to the top-paid US executives in 2014, according to Norwegian financial daily Dagens Naeringsliv.
But times are changing.
“We have so far looked at this in a way that has focused on pay structures rather than pay levels. We think, due to the way the issue of executive remuneration has developed, that we will have to look at what an appropriate level of executive remuneration is as well,” Yngve Slyngstad, CEO of the fund, told the Financial Times.
In a globalized world with highly-competitive sectors, companies are torn between the need to attract top-notch talent, and the need for moderation, especially in hard times when cutbacks are called for.
The Norwegian fund has itself come in for criticism.
Dagens Naeringsliv has in recent days revealed that the fund paid out bonuses that were sometimes as high as 200 percent of employees’ fixed wages, far more generous than the EU recommendation of up to 100 percent, or 200 percent in exceptional cases.
The Norwegian fund’s investment policy is run according to strict ethical rules, with a focus on sustainable economic, environmental and social development.
Those rules bar it from investing in companies accused of serious violations of human rights, child labor or serious environmental damage, as well as manufacturers of “particularly inhumane” arms, and also tobacco firms.