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Norway’s Sovereign Wealth Fund Issues Stance on Executive Pay

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The world’s largest sovereign wealth fund is taking a principled stance on corporate CEO pay, arguing the current model adopted by most companies is flawed. Norges Bank Investment Management (NBIM), the manager of Norway’s Government Pension Fund Global (GPFG) crafted a policy paper on CEO remuneration.

Yngve Slyngstad

Yngve Slyngstad

Like the corporate activist pension California Public Employees’ Retirement System (CalPERS), NBIM has voiced its concerns on a wide variety of issues such as environmental matters across corporate boards globally. NBIM is also a shareholder in most major companies. For example, at the end of 2016, Norway’s GPFG owned 5.2% of equity in BlackRock Inc. At the end of 2016, the Norwegian sovereign investor was invested in 8,895 companies, having an ownership stake of more than 2% in 1,158 companies, according to its annual report.

War Against Long-Term Incentive Plans

With regard to listed companies, CEO remuneration is a touchy topic. NBIM wants to realign the interests of the CEO and its shareholders, by altering the current pay model for a more simple and transparent compensation scheme. The wealth fund argues that a good number of long-term incentive schemes are ineffective, flawed and opaque. In addition, in a shift in thinking, NBIM desires listed companies to force their CEOs to own a substantial ownership stake in the company. Ideally, the wealth fund wants the CEO to own stock in the company for 10 years, or 5 years at a minimum. NBIM is generally more concerned about pay structure versus pay levels. The wealth fund hopes that companies enact and reveal pay ceilings for the following year.

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Oman SGRF Contemplates $1 Billion Infrastructure Fund

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Oman’s State General Reserve Fund (SGRF) is in discussions on forming a US$ 1 billion infrastructure fund. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Norway’s GPFG Banned from Investing in 9 Companies Over Nuclear Weapons

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The recent false alarm caused by a state employee in Hawaii (who was not terminated and reassigned to a new position), triggering the Emergency Alert System message at 8:07 a.m. caused pandemonium in the state. After decades of failure in diplomacy between the United States and North Korea, the threat of a nuclear missile attack has grown since. The states of Alaska and Hawaii are the closest states to North Korea.

Besides the recent news in the world of nuclear missiles, Norges Bank oversees the management of the country’s sovereign wealth fund. The central bank has moved to ban nine companies from the Government Pension Fund Global. In addition, one company has been placed under observation. The Executive Board of Norges Bank’s decisions on exclusion were made on the basis of recommendations from the Council on Ethics. However, before moving to exclude a company, the central bank may consider other options, such as the exercise of ownership rights. In these instances of companies, the board determined that it was appropriate to use other measures in these cases.

The Council on Ethics’ recommendations to exclude:
Risk of severe environmental damage and serious or systematic violations of human rights
Evergreen Marine Corporation (Taiwan) Ltd
Korea Line Corporation
Precious Shipping PCL
Thoresen Thai Agencies PCL

Unacceptable risk of serious or systematic violations of human rights
Atal SA

Over involvement in the production of nuclear weapons
AECOM
BAE Systems
Fluor Corporation
Huntington Ingalls Industries Inc
Honeywell International Inc (already previously excluded)

Placed Under Observation
Pan Ocean Co. Ltd

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Sistema to Pledge Assets to Help Fund Settlement

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The Russian Direct Investment Fund (RDIF) is helping a settlement situation between two Russian economic powerhouses. In January 2018, Sistema, under a settlement, is mandated to pay Bashneft oil company, which is owned by energy behemoth Rosneft, 100 billion roubles (US$ 1.8 billion) by March 30, 2018.

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