The manager of Norway’s NOK19trn (€1.6trn) sovereign wealth fund has written to the Council of Institutional Investors (CII) saying it largely agrees with plans to bolster its policy on unequal voting structures at companies – but that it should go further.
Norges Bank Investment Management (NBIM), which runs the Government Pension Fund Global (GPFG), said in a letter responding to the CII’s proposed amendments regarding two policies on stealth dual-class structures, and a policy on reincorporation, that it supported the planned expansion of all three policies.
In the letter signed by NBIM’s chief governance and compliance officer Carine Smith Ihenacho and by Snorre Gjerde, its lead policy adviser, the central bank unit said: “We support both the expansion of policy 3.3 to address alternative structures that misalign voting rights and economic ownership, and the addition to policy 2.6 emphasising that boards should not enter into agreements that substantially reduce their independence in overseeing management.”
Regarding the proposed amendment to policy 1.8, NBIM said it backed the effort by the US body – an association of pension and public asset funds – to expand its reincorporation policy beyond the current focus on US companies moving offshore.
“While companies may have legitimate business, operational, or strategic reasons to consider reincorporation, we share CII’s concern about reincorporations that result in weakened shareholder rights and protections,” the NBIM duo wrote.
NBIM said it shared CII’s concern about mechanisms aiming to create disproportionate control through alternative means to multiple class shares, “notably side agreements, complex ownership structures, and contractual arrangements”.
Suggesting adding an extra dimension to the policies on stealth dual-class structures, the NBIM pair said: “Beyond discouraging boards from entering into such agreements, CII may wish to consider elaborating on how these principles should apply to alternative control structures that boards may have already entered into.”
For such existing arrangements, said Smith Ihenacho and Gjerde, NBIM believed they should at least be subject to enhanced disclosure requirements – to allow investors to better understand the true allocation of control rights and assess potential risks to their interests.
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