Norway’s oil fund criticises bundled board member voting

Norway’s NOK6.9trn (€812bn) sovereign wealth fund has spoken out against shareholder voting practices that stop asset owners from being able to single out individual company directors when they are unhappy with them.

In a paper on the issue, Norges Bank Investment Management (NBIM), which manages the Government Pension Fund Global (GPFG), warned it may vote against whole boards if the system means it cannot express dissatisfaction with an individual member of that board.

NBIM said: “We find that the balance of arguments are clearly in favour of a policy requiring each board candidate to be a separate voting item, with individual count at the shareholder meeting and subsequent disclosure of vote statistics.”

Board elections were a mechanism for making boards accountable to shareholders, and having an individual vote count of each board member seemed to work well in markets where this was the normal practice, it said.

The cost of doing this was negligible, NBIM said, countering arguments that cost was a reason for gathering board candidates into just one voting item.

“In cases were votes are effectively bundled, we may need to vote against the board slate if we have serious concerns with individual board candidates,” NBIM said.

Although this ran contrary to usual practice in certain markets, the asset manager said proper recording and reporting of shareholder votes in board elections would support the integrity of the board election process. 

It outlined many different ways that boards are elected and votes counted across different markets, including the practice of votes being given by show of hands, which allows no vote count by share.

“We encourage all stakeholders in the proxy voting chain, including companies and regulators, to contribute to an individual-vote count market standard,” it said.

It said that its conclusion was backed by the trend to move away from bundling and towards individual votes in markets such as France, Germany and Spain.

Sweden and Finland were among the few remaining advanced markets that had bundled board elections, it said.

Bundled elections are also usual practice in Brazil, Chile, Colombia, Indonesia, Luxembourg and Turkey, and are common in Greece, Italy, Mexico and South Korea, according to NBIM.

The manager has recently changed its approach to engagement, and will now disclose select voting positions ahead of AGMs.