Report No. 13 to the Storting (2006-2007)

An active and Long-Term State Ownership

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1 Introduction and summary

It is the basic position of the Government that the Norwegian State shall be an active, long-term and predictable owner of some important Norwegian companies. Through its ownership, the State aims to contribute to a sound and stable development of business and industry in Norway. The present Report to the Storting (White Paper) concerns companies that are wholly or part-owned directly by the Norwegian Ministries. The Report clarifies the Government’s objectives for state ownership of the individual enterprises. This will serve to provide a better basis for active ownership. It will also ease the strategic undertakings of the board of directors of companies in that it clarifies the expectations and objectives of the State in its role as owner.

Through its ownership, the Norwegian State shall contribute to the companies’ long-term growth and industrial development. This dictates the need for an active ownership policy to set out the expectation for the boards to pursue high ambitions. The Government will impose requirements regarding return on investment and dividends which underpin the companies’ long term objectives. State ownership must be exercised in line with generally accepted corporate governance principles.

The Government will assess the size of its shareholdings in each individual company from the viewpoint of an active ownership and the society’s needs. The Government aims for the State’s involvement in Norwegian business and industry to remain at the same level as it is at present. In line with this, the Report to the Storting serves notice that the Government will propose that the Storting revoke mandates granted in previous parliamentary periods to reduce State shareholdings through divestment of shares.

The Government has long-term objectives for the State’s ownership of companies. These entail that considerations with respect to the environment, restructuring, diversity, ethics, research and development must be taken into account by the board of directors in the interests of promoting long-term development. If wholly-owned companies are instructed to make investments or undertake other activities that their board does not find commercially sound, such companies shall be compensated through separate allocations.

Processing of Norwegian raw materials in Norway is an important objective for the Government, provided a sound financial basis. Enterprises that are central to interaction with research and innovation environments should be further developed in Norway. This is important in order to maintain and strengthen business and industry clusters and value chains.

The Government attaches great importance to assessing the work of the board of directors properly and systematically, and to composing competent boards qualified to serve the best interests of shareholders.

The Government has presented proposals for amendments to the Public Limited Companies Act to enable increased shareholder influence and access to information concerning executive remuneration, among other things in connection with the exercise of share options. Research into share-based remuneration gives little indication that options schemes are necessary in the type of companies in which the State is normally a shareholder. The Government proposes that the State votes no on proposals for share options in companies comprised by this Report to the Storting. In addition, the Government expects the boards to put a ceiling on the value of any incentive arrangement relative to base salaries. This is an important instrument for gaining control over executive pay trends.

The Government wishes to contribute to greater transparency and information concerning state ownership of companies. The Ministry of Trade and Industry will therefore be producing a new annual document to provide a public statement on the Government’s ownership policy as it is communicated to the Storting, and in conformance with guidelines laid down by the Storting. This document, which will be coordinated with the State Ownership Report, will set out the State’s positions on areas such as corporate governance, R&D, ethics, equality, environmental issues, executive remuneration, requirements regarding operational efficiency, return on capital, reporting, etc. The Government will continue and develop the current organisation of the state ownership administration.

In line with the Soria Moria Declaration (on the Norwegian governments political commitments for the next four years), the Government will pursue a predictable dividend policy, and in this Report refers to the State’s long-term dividend expectations for the wholly-owned companies. There is no proposal to amend existing legal regulations governing the determination of dividends in the wholly-owned companies.

The Government will propose to establish a separate government fund for marine industries. Further, the Government will review the need for and the possible structure of government funds in order to promote improved access to capital in areas where a special need is identified. An evaluation of the need for extended State involvement in seed funds will be included in this. An initiative will be taken for a review of entrepreneur financing and assessment of the establishment of an entrepreneur bank. In addition, the Government will prioritise measures to promote increased commercialisation of research-based business concepts.

Chapter 2 of the Report presents a summary of the scope and development in commercial ownership in recent years. Chapter 3 indicates how ownership administration is organised, including how separation of roles and rules of law governing state ownership of companies. It also sets out key corporate governance principles, to which the Government attaches importance in its exercise of state ownership. Chapter 4 outlines corporate governance of state-owned enterprises in some other OECD countries. The preparatory committee on state ownership ( Statseierskapsutvalget) submitted its report on 16 March 2004. It made a number of recommendations and assessments concerning state ownership. These are presented in Chapter 5, together with key statements from the hearing. Chapter 6 sets out assessments of access to capital in Norway. The Government’s policy for active and long-term ownership is set out in Chapter 7. This chapter presents assessments concerning corporate governance of state-owned enterprises and social responsibility, the objects of state-ownership and organisation. The preparatory committee on state ownership’s opinions and recommendations are described in the process. For a more detailed discussion of the Government Pension Fund administrated by Norges Bank and Folketrygdfondet (National Insurance Scheme Fund), readers are referred to Report to the Storting no. 1 (2006 – 2007).

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