Norway’s giant sovereign wealth fund has called for greater executive pay transparency and further use of ‘locked in’ shares for remuneration purposes.
The fund, officially titled the Government Pension Fund Global, has approximately $575 billion in equity markets alone. It has investments in more than 9000 companies and holds more than 1% of the total global equity market.
In a position paper published on April 7, the pension fund criticised “so-called incentive plans” as often being opaque and ineffective.
Greater transparency in remuneration, the fund said, would limit the prospect of ‘unanticipated and outsized awards that challenge legitimacy’.
The paper specifically singled out performance conditions as encouraging short-term behaviour and said a simplified pay structures would ensure CEOs, board members and shareholders can focus on the company’s strategic aims.
Yngve Slyungstad, the CEO of Norges Bank Investment Management, who manage the fund, told the Financial Times: '[The fund is] signalling that we expect change in the way remuneration is constructed.
'Over time, we expect long-term incentive plans to be gradually phased out, particularly with regards to the recruitment of new chief executives.'
The fund has form for activism in pursuit of what it perceives as ethical and shareholder interests. Since the foundation of an Advisory Council on Ethics in 2004 Norway’s Oil Fund has become known for refusing to invest in a range of companies it considers to have breached its ethical guidelines.
These have included Lockheed Martin for producing nuclear weapons, Walmart for alleged human rights violations, and British American Tobacco. In 2014 the fund divested from 53 coal companies across the globe.
Last year the increasingly activist fund voted against 6,700 board recommendations.
The issue of executive pay continues to rise in prominence. Just yesterday it was also announced that BP cut the pay of Chief Executive Bob Dudley by 40% last year from $19 million to $11.6 million last year after criticism from shareholders.