Norway's oil fund ups pressure on joint CEO-chairman roles

Jonathan Boyd
Norway's oil fund ups pressure on joint CEO-chairman roles

Norway’s sovereign wealth fund, the Government Pension Fund Global, has upped the pressure on companies it holds by releasing a position paper alongside its quarterly report for 26 October, in which it argues strongly for a separation of the CEO and chairman roles.

The giant fund also announced that it is seeking improvements across boards of all companies in which it invests, by requiring expertise relevant to the industry in which individual companies operate.

Carine Smith Ihenacho, chief corporate governance officer in Norges Bank Investment Management, said: “The board should collectively have a thorough understanding of the industry in which the company operates and at least two independent members should have worked in the industry. In addition, the board should exercise objective judgement on corporate affairs and be able to make decisions independently of management. To ensure this the board should be chaired by an independent non-executive member.”

NBIM, the manager of the fund, votes on some 60,000 board members annually.

In its position paper on separating the CEO and chairman roles, the manager said: “The board should exercise objective judgement on corporate affairs and be able to make decisions independently of management. The board should be chaired by an independent non-executive member. The roles of chairperson and CEO should not be held by the same individual.”

“Combined roles are on the decline globally, even in the US where they are still dominant among the largest companies. In the UK, combining these roles has become rare since a recommendation on separation was codified in 1992.

“Some jurisdictions allow the combination of board chairperson and executive positions. The German, Dutch and Scandinavian markets do not allow combined roles. We note that the separation of chairperson and CEO can be a source of contention between shareholders and boards.

“The responsibilities of the board include hiring, remunerating, monitoring and, when necessary, replacing the CEO. For the board to be independent in carrying out these responsibilities, it cannot be chaired by the CEO.”

The manager does note in the Position Paper, that there are some strong arguments against separating the roles. Firstly, there are many successful companies that are steered in this way; if the roles are separate and lead to conflict it can undermine investor confidence;  and companies may struggle to find the best candidates for the CEO position if the roles are split.

However, it also says that there is no empirical evidence to suggest that a combined role is better, and that on balance its view as a global investor is that it prefers an independent non-executive chairman. The full Position Paper can be downloaded here: position-paper—ceo-chair-separation.


Commenting on its latest quarterly results, the fund’s management said it made a return of 2.1% over the period – some NOK174bn (€18.3bn).

Equity investments returned 3.1%, unlisted property 1.9% and fixed income -0.3%. Overall return was 0.2% lower than the benchmark index.

North American equities advanced over the period, but other global equity markets performed less well. The overall value of the fund was also negatively affected by the appreciation of NOK against many other currencies – the oil price has been rising, which typically sends NOK higher – with a calculated decreased value in the fund of some NOK46bn. Inflows to the fund in the quarter were NOK12bn (€1.3bn).

As of 30 September, the fund’s market value was NOK8.478trn (€890bn), with 67.6% invested in equities, 29.7% in fixed income, and 2.7% in unlisted property.

Speaking about market developments over the period, NBIM CEO Yngve Slyngstad said: “The market development was affected by expectations of differing economic growth and uncertainty about the effects of increased trade barriers.”

Jonathan Boyd
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Jonathan Boyd

Editorial Director of Open Door Media Publishing Ltd, and Editor of InvestmentEurope.