1 Introduction and summary
1.1 Introduction
Norway is facing a decade of major challenges. The Government is working to get more people into employment, create activity throughout the country, even-out social and geographical disparities, reduce greenhouse gas emissions, contribute towards a green transition of the business sector, improve the efficiency of the public sector and make Norway a better country for everyone to live in. As a sub-goal on the road to net zero emissions and a low-carbon society, the Government has set a restructuring goal for the economy by 2030. This is formulated in the Government platform as a goal of cutting Norwegian emissions by 55 per cent compared with 1990. This means that the Government has a national goal of restructuring both the quota and non-quota sector. The purpose is for the entire Norwegian business sector to transition to a low-emission society. The Government believes that this should be achieved in society as a whole, including through an active and forward-looking policy for the business sector. The Government wants state ownership, together with private ownership, which is the main rule in Norwegian business, to support these ambitions.
The interaction between a competitive and innovative business sector and an actively participating state is a pivotal aspect of the Norwegian social model. The Government’s work on the «Norwegian Model» for public procurements is an important part of the Government’s efforts to promote safe and responsible working conditions, and to preserve the Norwegian working life model. Earlier this year, the Government launched «the Green Industrial Initiative», which presents how Norway shall succeed in establishing new green industrial projects and strengthening existing industries.
The Hurdal Platform (the political platform for the Government) states that the Government will prepare a new white paper on ownership policy with the objective of State capital and ownership contributing to increased exports, the development of new, green value chains and more profitable jobs. State ownership will be exercised in a more active manner to promote public interests related to climate and sustainability, wages and working conditions, local ripple effects, value creation throughout the entire country, apprenticeships, the fight against social dumping and moderation in executive pay.
The State shall be an active, responsible and long-term owner that contributes to the profitability and development of the companies. The white paper on ownership policy demonstrates how state ownership can contribute to the highest possible return and good services, while also ensuring that the companies operate responsibly and contribute to accelerating the «green transition». This white paper on ownership policy sets a clear direction for state ownership.
The State’s direct ownership comprises companies where the State’s ownership is managed directly by a ministry. Since 2002, a report to the Storting on the State’s overall direct ownership (a so-called white paper on ownership policy) has been presented in each parliamentary session. In the white paper on ownership policy, the Government describes why the State has direct ownership interests in companies, what the State owns, including the State’s rationale for its ownership and the State’s goal as an owner of each company. The white paper also describes how the State exercises its ownership, including the State’s principles for good corporate governance and the State’s expectations of the companies.
State ownership in Norway is a success and contributes to strengthening national ownership. Through direct state ownership, the Norwegian State owns assets worth a total value of NOK 1.179 billion1. The State presently has direct ownership of 70 companies which are managed by 12 ministries. These companies employ more than 300,000 people and consist of everything from leading listed companies to research institutes, defence industries, performing arts institutions, investment companies, health trusts and companies that manage significant natural resources such as forests, hydropower and petroleum resources. Private ownership is the main rule in the Norwegian business sector; however, together with other forms of public ownership, state ownership makes an important contribution to national ownership in Norway.
A number of developments and trends impact how the activities of the companies and the State’s exercise of ownership should be structured. Among these developments are increased societal expectations of how companies can contribute to solving societal challenges. Climate change, energy transition, international unrest, increasing inequality, urbanisation and the consequences of the coronavirus pandemic have impacted societal development in recent years. At the same time, digitalisation and the development of new technology are still important factors. In addition, macroeconomic changes, developments in the capital market and demographic changes may impact the companies to a greater or lesser extent. The State’s ownership policy endeavours to take these developments into account.
In this white paper the key framework conditions for ownership policy remain unchanged, and continue to incorporate generally recognised corporate governance principles, standards and conventions. The Government has also further developed and adapted its ownership policy to the opportunities and challenges of this decade, with a view to generate increased value creation throughout Norway and to maintain sound and sustainable management of state ownership.
The most significant changes in ownership policy are as follows:
The consideration of sustainability in the State’s goal as owner has been clarified and strengthened.
New and further developed rationale for state ownership.
The rationale for state ownership and the State’s goal as owner have been reviewed and updated for each company.
The classification of the companies has been simplified and changed from three to two categories.
The State’s ten principles for good corporate governance have been adjusted to reflect that the State shall be an active and responsible owner with a long-term perspective.
Additional and clearer expectations of the companies. This particularly applies to the areas of climate, biodiversity and ecosystems, risk management, transparency and reporting, working conditions and wages and other remuneration.
The Government has a pragmatic approach to what the State should own. Unlike the previous white paper on ownership policy, reducing state ownership is no longer a goal in itself. State ownership shall be assessed in light of whether it is the best measure for achieving societal goals, or whether other measures are better suited. It may be applicable to both increase and reduce state ownership in line with what is considered to be in Norway’s strategic interests. The State shall use the entire «business policy toolbox», including state ownership, when this is the best solution.
There is disparate access to resources in different parts of the country. Rural areas may, more so than in central areas, experience barriers and market failures that hinder restructuring and value creation. This provides different framework conditions for the companies depending on where they have their operations, for example, access to relevant collaborative partners and labour with relevant expertise. The State can, both through adapted policy instruments and ownership, contribute to counteracting these types of barriers and market failures, and in so doing, contribute to local ripple effects and value creation throughout all of Norway. The national policy instrument actors play a key role in the work on realising the goals within regional and rural business development. Among other things, the partly state-owned Innovasjon Norge will contribute to triggering socio-economically profitable business development throughout the country. For its part, wholly state-owned Siva shall contribute to triggering profitable business development by making infrastructure and joint resources available to companies and regional business and knowledge communities.
An active owner with a long-term perspective
The Government has clarified in the State’s ten principles for good corporate governance that, in addition to being a responsible owner, the State shall also be an active owner with a long-term perspective.
The State being an active owner means that the State, within the framework conditions for the State’s exercise of ownership, works to ensure that the company has good goal attainment. The State achieves this by having explicit goals as owner in each company, setting clear expectations of the companies, and by following up the companies’ goal attainment and efforts regarding the State’s expectations. Follow-up typically takes place through voting at the general meeting, including election of board members, and other means of exercising ownership. Owner dialogue with the Board and management is a key part of exercising ownership. Among other things, owner dialogue enables the State to ask questions that are relevant to the company’s long-term potential for generating a return. As part of the exercise of ownership, the State may also present shareholder proposals. The State regularly considers participating in transactions that contribute to achieving the State’s goal as an owner. The fact that the State as an owner has a long-term perspective means that the State is focussed on the companies being managed in such a way that they generate high returns and good goal attainment in the long term.
Additional rationale for state ownership
A starting point for why the State is an owner is that there are certain instances in which the market alone does not produce the best socio-economic result, and that in these instances state ownership is the best policy instrument for alleviating market failure. In this white paper, the Government has expanded and renewed the rationale for state ownership, and the reasons apply across the categories.
If Norway is to succeed in the transition to a low-emission society, significant investments and new solutions will be required. New technology, new products, new infrastructure and cooperation will need to be developed within a number of industries. This is reflected in the rationale of having head office functions in Norway.
Facilitating sustainable restructuring and increased value creation has been introduced as a new rationale, based on there being some areas in which there may be multiple barriers and market failures which hinder restructuring and value creation in the Norwegian economy. Examples of this may be insufficient research and innovation, too few high-growth start-ups and early-stage companies, the need for a more rapid transition to sustainable value creation, a lack of investor expertise and capital market failure.
Infrastructure, monopolies and assigned rights is a new rationale that takes into consideration that parts of the infrastructure and services may be natural monopolies or have the character of monopolies that may be appropriate for the State to own, thus ensuring that the services offered are the best possible for society. Contributing to good national infrastructure is a key task of the public sector. State ownership can result in socio-economically profitable infrastructure development.
Public goods and/or social and geographical distribution is also a new rationale which ensures that, in some cases, the benefit to society could be increased by the State, contributing to activities or a wider range of goods and services than what would have occurred in a free market. For example, this applies to healthcare, research, culture and aid/development.
In addition, the Government has continued the updated rationales relating to civil protection and emergency preparedness, as well as energy and natural resources.
For some companies, there is no longer a special rationale for state ownership. The State’s goal as owner in these companies is achieved through continued ownership or through value-creating corporate transactions, including divestments. The State will obtain the necessary authorisation from the Storting if potential transactions are considered to be a good alternative. An overview of the State’s authority can be found at eierskap.no.
The State’s ownership is dynamic. This entails that the State, including for companies with a special rationale, will consider any proposals for value-creating corporate transactions which may result in changes to the State’s ownership interest. The Government will consider this in such instances, and, in the event of a change in the State’s ownership interest, will present the matter to the Storting.
In connection with the presentation of the supplementary report on energy policy2, the Government announced that an external study will be carried out to assess how the State can contribute to building a coherent value chain for hydrogen produced with low or no emissions, where production, distribution and use are developed in parallel. State ownership as a possible measure will be included in the study. The potential establishment of a hydrogen company must be assessed in relation to the State’s rationale for state ownership and other relevant measures.
The State’s goal as owner
In this white paper, the consideration of sustainability in the State’s goal as an owner has been clarified and strengthened. For companies that primarily operate in competition with others, the goal is the highest possible return over time in a sustainable manner. For public policy companies, i.e. companies that primarily do not operate in competition with others, the goal is sustainable and the most efficient possible attainment of public policy goals. It is important for the State that the companies are managed responsibly, which entails acting in an ethical manner and identifying and managing the company’s impact on people, society and the environment. A company will generally not be able to generate returns and remain competitive over time without balancing economic, social and environmental factors.
Simplified categorisation of the companies
The system for categorising companies in which the State has an ownership interest is continued, but simplified in this white paper on ownership policy. The companies are divided into two categories based on the State’s goal as owner. The companies where the State’s goal is the highest possible return over time in a sustainable manner have been placed in Category 1. These are companies that primarily operate in competition with other companies. The companies for which the State’s goal is sustainable and the most efficient possible attainment of public policy goals have been placed in Category 2. These are companies that do not primarily operate in competition with other companies.
The companies in the present Category 1 were previously divided into two categories based on whether or not the State had a special rationale for its ownership. It is no longer considered necessary to divide the companies based on this, because the most important factor when categorising the companies is the State’s goal as owner in each of the companies. Combining the former Categories 1 and 2 into the current Category 1 does not impact the State’s exercise of ownership in these companies.
The State’s expectations of the companies
In this white paper, the Government has further developed and strengthened the State’s expectations. This particularly applies to the areas of climate, biodiversity and ecosystems, risk management, transparency and reporting, working conditions and wages and other remuneration.
By defining additional and clearer expectations of the companies, the State wishes to be a more active owner that contributes to attaining the State’s goal as an owner. The State’s expectations are largely based on recognised guidelines, international good practice and the expectations of other leading investors.
When concerning climate change, the State expects the companies to set targets and implement measures to reduce greenhouse gas emissions in the short and long-term in line with the Paris Agreement’s goal of limiting temperature increases, which means that the world’s emissions of CO2 will be reduced to net zero by 2050, and to report on goal attainment. Similarly, the State expects the companies to set goals and implement measures to reduce the negative impact on biodiversity and ecosystems, and to report on goal attainment.
It is important that the companies can offer competitive remuneration; however, it is neither in the interests of the companies nor the State as an owner that the companies pay more than necessary to retain and attract the necessary expertise. The Government is focussed on limiting the wage differences in society, and announced in the Hurdal Platform that the Government will pursue an executive pay policy in companies fully or partly owned by the State that is based on moderation, and where bonuses will be heavily restricted. For companies in Category 2, the Government will introduce a new expectation in the guidelines for executive pay that these companies shall not have separate bonus schemes for senior executives. For companies in Category 1, the Government will use the guidelines to reduce the expectation of a maximum permitted bonus limit from 50 per cent to 25 per cent. The Government also has a new expectation for the companies that differences in the remuneration of senior executives and other employees are taken into consideration when assessing moderation, and that the company provides specific justification for salary adjustments that are higher for senior executives than for the company’s other employees.
Among other things, the companies differ in terms of their size, industry and international presence. The work that the companies do within all of the areas in which the State has expectations should be adapted to the companies distinctive nature, size, risk exposure and other factors that are of importance for each individual company.
The framework conditions for the State’s exercise of ownership remain unchanged – the state’s ten principles for good corporate governance
The framework conditions for the State’s exercise of ownership have remained unchanged since the early 2000s and are now expressed in the State’s ten principles for good corporate governance. These have worked well and have gradually obtained broad political consensus. Important elements, which are still used as a basis in this white paper on ownership policy, include:
The division of roles between the owner, the board and the general manager set out in company law.
Generally recognised principles and standards for corporate governance.
The State’s authority as owner is exercised through the general meeting.
Competent boards of directors.
A clear distinction between the State’s role as owner and other roles.
State ownership shall not give companies with a state ownership interest undue competitive advantages or disadvantages compared to companies without a state ownership interest.
These framework conditions for the State’s exercise of ownership provide predictability for the companies and capital markets. This has been a prerequisite for the companies being able to further develop their activities and to create value. The Government will continue to pursue a responsible ownership policy based on established framework conditions. In this white paper, the Government has made it clear through the State’s ten principles for good corporate governance that, in addition to being a responsible owner, the State shall also be an active owner with a long-term perspective. Furthermore, it is included in the principles that the State shall be transparent about how it votes at general meetings. Transparency regarding the State’s ownership, and how this ownership is exercised, is crucial to successful state ownership. The State’s authority as owner shall be exercised through the company’s general meeting.
With this as a starting point, the ownership policy is clarified and further developed. Regular development of the State’s ownership policy through white papers on ownership policy and follow-up of this are the Government’s most important measures for ensuring good management of the State’s ownership interests. Norway aims to be an international leader in the exercise of state ownership.
1.2 Summary
The following is a summary of Chapters 2–12 of the white paper.
Why the State is an owner and the State’s goals as owner
Why the State is an owner
The starting point for why the State presently has direct ownership in companies is that the market alone does not provide the best socio-economic result. The State has six different rationales for when state ownership may be an appropriate measure for meeting various societal needs:
Head office functions in Norway
Civil protection and emergency preparedness
Energy and natural resources
Facilitating sustainable restructuring and increased value creation
Infrastructure, monopolies and assigned rights
Public goods and/or social and geographical distribution
Even if the State has a rationale for when direct state ownership is a beneficial measure, state ownership may also entail potential challenges. The State’s ownership policy, which is presented in this white paper, aims to mitigate these challenges and to contribute to the best possible goal attainment in each of the companies.
The State’s goal as owner
The consideration of sustainability is clarified in the State’s goal as owner. For companies that primarily operate in competition with others, the goal is the highest possible return over time in a sustainable manner. For public policy companies, i.e. companies that primarily do not operate in competition with others, the goal is sustainable and the most efficient possible attainment of public policy goals.
It is important for the State that the company is managed responsibly, which entails acting in an ethical manner and identifying and managing the company’s impact on people, society and the environment. A company will generally not be able to generate returns and remain competitive over time without balancing economic, social and environmental factors.
Categorisation of the companies
The companies are divided into two categories based on the State’s goal as owner. The companies that primarily operate in competition with others are in Category 1. The companies that do not primarily operate in competition with others are in Category 2.
Category 1 comprises the companies where the State’s goal is the highest possible return over time in a sustainable manner.
Category 2 comprises the companies for which the State’s goal is sustainable and the most efficient possible attainment of public policy goals.
The State’s rationale for ownership and the State’s goal as owner are presented for each company in Chapter 7.
What the State owns
The State’s direct ownership currently comprises 70 companies. The State’s ownership is substantial in terms of both the number of companies and their total value. At year-end 2021, the value of the State’s ownership interests in companies where the State’s goal as owner is the highest possible return over time in a sustainable manner was estimated to be NOK 999 billion. The State’s shares listed on Oslo Stock Exchange accounted for NOK 844 billion of the total value. In the other companies, the State’s share of book equity minus minority interests amounted to NOK 180 billion at year-end 2021.
The State regularly assesses the rationale for its ownership and its goal as an owner in each company to ensure that these are updated and relevant, and to enable the State to efficiently solve different tasks or safeguard different needs.
How state ownership is exercised
The State shall be an active owner
The State’s exercise of ownership shall contribute to the attainment of the State’s goal as an owner, whether this be the highest possible return over time in a sustainable manner or sustainable and the most efficient possible attainment of public policy goals. Among other things, this occurs through the State setting clear expectations of the companies, electing competent boards, systematically following up the companies, voting at general meetings, and being transparent about its exercise of ownership.
The State shall be an active owner with a long-term perspective. Active ownership shall be exercised in accordance with the division of responsibilities and roles laid down in company law between the State as owner of companies ,on the one hand, and the board and general manager on the other. Together with the State’s ten principles for good corporate governance, the division of roles laid down in company law establishes the framework conditions for how the State follows up its ownership interests. State ownership shall not be an obstacle to exercising value-creating ownership. The State as owner will actively utilise the room to manoeuvre within these framework conditions in line with the practices of good and responsible private owners.
The State is transparent about its ownership and exercise of ownership through, among other things, white papers, the State Ownership Report and the Government’s website. In its capacity as owner, the State manages substantial assets on behalf of society as a whole. Transparency creates predictability and is important if the general public is to trust that these assets are being managed in an optimal manner. Democratic considerations are thereby safeguarded. As a result of the State’s extensive ownership in Norway, transparency is also important if investors are to have trust in the Norwegian capital market.
The State’s ten principles for good corporate governance
The State’s principles for good corporate governance and the State’s goal as an owner together form the basis for how the State exercises its ownership within the framework of company law. The key elements of the framework conditions for the State’s exercise of ownership are collated in the State’s ten principles for good corporate governance, see Chapter 10 and Figure 10.1.
The State’s expectations of the companies
By defining clear expectations of the companies, the State wishes to contribute to attaining the State’s goal as an owner. Clear communication of the expectations also contributes to transparency regarding what is important to the State as an owner, and what the State will follow-up when exercising its ownership.
The companies’ work on the different areas in which the State has expectations should be adapted to the distinctive nature, size, risk and issues of importance to each company. The expectations are largely based on good practice and internationally recognised guidelines.
The State has expectations of the companies relating to ambitions, goals and strategies, social, environmental and financial factors, and corporate governance. The State’s expectations are described in more detail in Chapter 11 and summarised in Figures 11.10 and 11.11. Examples of good practice in selected areas have also been provided as inspiration for the companies’ work.
Board composition and remuneration that contribute to goal attainment
The State has expectations of the companies relating to ambitions, goals and strategies, social, environmental and financial factors, and corporate governance. The State is not represented on the boards. One of the most important tasks of the State as an owner is to contribute to the composition of competent and well-functioning boards of directors that meet the needs of the companies and safeguard the interests of all shareholders.
Relevant expertise shall be the State’s main consideration in its work on the composition of boards of directors. If the requisite expertise is available, the State shall place an emphasis on capacity and diversity.
The remuneration of the companies’ governing bodies is decided by the owners at the general meeting, or, if relevant, by the corporate assembly. Having the right remuneration can be crucial in terms of attracting and retaining board members with relevant and good expertise, and contributes to ensuring that board members devote sufficient time to the position. When assessing the remuneration of the board, the State emphasises that the remuneration reflects the board’s responsibility, expertise, time spent on board work, and complexity of the company’s activities. The Government also has a focus on there being a moderate level of remuneration. This means that remuneration shall not be higher than is necessary for contributing to the board having relevant and good expertise and should reflect the board’s responsibilities and workload.
Follow-up of the companies shall contribute to the attainment of the State’s goals
The State’s goal as an owner is the starting point for how it exercises ownership. As a responsible owner, it is the Government’s desire that the State’s exercise of ownership will contribute to goal attainment and promote responsibility in the companies in which the State has ownership interests. When following up the various companies, the State will place emphasis on factors that are of importance to goal attainment and the areas in which the State can best contribute to goal attainment in both the short and long term.
The State holds regular meetings with the companies. Through contact with the companies, the State can raise matters, ask questions and communicate points of view that the company can consider in relation to its activities and development. Such dialogue is intended to serve as input to the company, not instructions or orders.
By following up the companies, the State seeks to understand how the companies work in an integrated and systematic manner with the State’s expectations and how this contributes to the State’s goal as an owner.
The State’s goal as owner in the companies in Category 1 is the highest possible return over time in a sustainable manner. When the State assesses a company’s return over time, the total return achieved is normally compared with a calculated required rate of return, comparable companies and, if relevant, benchmark indices.
For companies in Category 2, the State’s goal as owner is sustainable and the most efficient possible attainment of public policy goals. Among other things, the companies’ goal attainment and efficiency are assessed on the basis of the company’s reporting and the State’s owner dialogue with the company. It may be relevant in this context to look at comparable enterprises, the company’s development over time and other evaluations of the business.
The results achieved and the company’s outlook are discussed with the company’s board and management. In the event of poor goal attainment over time or significant deviations from the State’s expectations, the State will consider how this can be followed up. This primarily takes place through the owner dialogue.
The State generally takes a positive view of strategic initiatives and transactions in the companies that can be expected to contribute to the attainment of the State’s goal as owner.
Distinguishing between the State’s different roles and fair competition
The State has several roles, for example, as regulatory and supervisory authority, principal and owner. In order to create legitimacy for the various roles, the State should be aware of the role it has assumed at any given time, and, by its actions, clearly distinguish the role of owner from the State’s other roles. Considerations that are not justified by the State’s goal as an owner must be addressed by using policy instruments other than state ownership.
State ownership shall not give companies with a state ownership interest different competitive conditions in comparison with companies without a state ownership interest.
Organisation of the State’s ownership management
The Central Ownership Unit, which is the Ownership Department in the Ministry of Trade, Industry and Fisheries, serves as a resource centre and centre of expertise for the State’s direct ownership, both in relation to other ministries and internally within the Ministry of Trade, Industry and Fisheries. Unless special considerations dictate otherwise, the State’s ownership interests in the companies in Category 1 shall be managed by the Central Ownership Unit. Unless special considerations dictate otherwise, the State’s ownership interests in the companies in Category 2 shall be managed by the relevant sector ministry.