The Oslo-based Norges Bank Investment Management (NBIM), which manages the USD 650 billion Government Pension Fund Global, has published a discussion note setting out its expectations on corporate governance in equities it owns around the world. In particular, the firm outlines reasons it concentrates ownership resources on board accountability and equal treatment of shareholders.
In defining its expectations, NBIM has considered the challenges of protecting its interests as a globally diversified minority shareholder in light of empirical and theoretical evidence. Such a perspective has led the firm to question the basis for the near-universal consensus in support of features appearing in corporate governance codes, given that NBIM finds gaps in academic evidence for many of them. The discussion note takes the view that principles should be seen as best practices only. Deviations from them, if well thought out and persuasively justified, should be both expected and welcomed, in NBIM’s view.
NBIM’s intention is not to provide another code of corporate governance for companies to comply with or report against. Rather, it seeks to set out priorities for corporate governance as a means to foster dialogue and mutual understanding. Underlying the firm’s expectation statement is the idea that market practices should conform to high-level universal principles rather than to detailed prescriptive rules. To this end, NBIM invited input and testing of its views by a number of practitioner and stakeholder groups. The firm continues to welcome comments from all stakeholders, as mentioned at the end of the discussion note.