Report Says Norges Bank Voted Similarly to Large U.S. Index Funds on Executive Pay in 2018
September 29, 2018
Despite the greater focus on the influence of Norges Bank Investment Management in seeking less complex executive compensation arrangements, Bloomberg this week reported that the Norwegian sovereign wealth fund “endorsed executive compensation plans at about the same clip as the largest U.S. asset managers and at a far greater rate than several European peers.” Norges owns 1.4% of the world’s publicly-traded stock
Based on its own research and data from Proxy Insight, Bloomberg notes that over the past year, Norges Bank “opposed executive compensation plans at 8 percent of the 380 or so S&P 500 companies it holds.” By comparison, BlackRock Inc., Vanguard Group Inc. and State Street Corp., “rejected 3 percent to 7 percent of pay plans for firms in the index.” It also notes that some European funds, such as the asset management businesses of Paris-based BNP Paribas SA and Deutsche Bank AG “opposed or abstained from voting on pay plans for two-thirds and one-fifth of companies in the index, respectively.” Trond Grande, deputy Chief Executive Officer of NBIM, indicated that the investor has engaged in increased dialog with the companies it holds and that ““We have to some extent increasingly voted against pay packages that haven’t been in line with our principal views.”
In 2017, Norges Bank released a paper explaining its views on executive compensation, stating that current long-term incentive arrangements are either too complex or insufficiently correlated with shareholder returns. It recommended that incentive plans be designed to ensure that they produce payouts aligned with returns for investors (consistent with the Center's drive for tools and approaches that align metrics with TSR), and that CEOs hold stock for five or even 10 years after payout. In response, the Center released an analysis on the debate around pay simplification that looks at different approaches to aligning strategy and pay.