Article | Last updated: 22/11/2019 | Ministry of Trade, Industry and Fisheries
The Government’s ambition is that the Norwegian state’s exercise of ownership shall be in accordance with best international practice.
The state’s exercise of ownership shall contribute to the attainment of the state’s goal as an owner
The Government aims for the highest possible value creation in a sustainable manner and to provide good services for the population. Here, value creation through state ownership means attaining the state’s goal as an owner, either the highest possible return over time or the most efficient possible attainment of public policy goals.
The state’s exercise of ownership shall contribute to the attainment of the state’s goal as an owner. In order to achieve the highest possible return or the most efficient possible attainment of public policy goals over time, the company must be sustainable. A sustainable company balances financial, social and environmental factors in a way that contributes to long-term value creation, while ensuring that today’s needs are met without limiting the possibilities of future generations. The state also emphasises that the companies conduct their business in a responsible manner. This entails identifying and managing the risks the company poses to society, people and the environment. The consideration for sustainability and responsible business conduct are reflected in the state’s expectations of the companies and how the state follows them up.
The state’s ten principles for good corporate governance
Together, the state’s principles for good corporate governance and the state’s goal as an owner form the basis for how the state exercises its ownership. The key elements of the framework for the state’s exercise of ownership – about which there has been a broad political consensus over time – are included in the state´s ten principles for good corporate governance
The state’s expectations of the companies
As an owner, the state has clear expectations of the companies, through which it wishes to contribute to attain the state’s goal as an owner in a sustainable and responsible way.
The companies’ work on the different areas in which the state has expectations should be adapted to the companies’ distinctive nature, size, risk exposure and what is material to each individual company. The expectations are largely based on international good practice and recognised international guidelines.
The expectations are found here and are explained in Chapter 10 in the white paper on ownership policy. There are also examples of good practice in selected areas, as inspiration for the companies’ work.
Transparency about the state’s ownership
The state is transparent about its ownership and how it exercises its ownership, including through white papers on ownership policy, the State Ownership Reports and the Government’s website. As an 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 managed in a good way. Democratic considerations are thereby safeguarded. As a result of the Norwegian state’s extensive ownership, transparency is also important if investors are to trust the Norwegian capital market.
One of the most important tasks of the state as an owner is to contribute to composing competent and well-functioning boards of directors that meet the companies’ needs and safeguard the interests of all shareholders. The state is not represented on the boards.
Relevant expertise is the state’s primary consideration in its work on the composition of boards of directors. Together, the board of each individual company should have the expertise required based on the company’s business (object), industry, opportunities and challenges, and the state’s goal as an owner. The state also emphasises capacity and diversity based on the distinctive nature of the company.
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 people with relevant and necessary expertise, and contribute to ensuring that board members devote sufficient time to their office. 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 the complexity of the company’s activities, and that the remuneration is at a moderate level.
The state’s goal as an owner governs how it exercises ownership. As a responsible owner, the state contributes to sustainable value creation and promotes responsibility in the companies. In its follow-up of the company, the state will emphasise what is material to goal attainment and the areas where the state can best contribute to goal attainment in the short and long term.
The state holds regular meetings with each company. In its dialogue with the company, 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 as input to the company, not instructions or orders.
The state’s follow-up of the companies is structured around the following topics:
- Assessment of goal attainment.
- Corporate governance.
- Capital structure and dividend.
- Transparency and reporting.
- Composition of the board.
In companies in Categories 1 and 2, the state’s goal as an owner is the highest possible return over time. When the state assesses a company’s return over time, the total shareholder return achieved is normally compared with a calculated required rate of return, comparable companies and, if relevant, benchmark indices. The total shareholder return and the company’s outlook are discussed with the company’s board and management.
In the companies in Category 3, the state’s goal as an owner is the most efficient possible attainment of public policy goals. The company’s goal attainment and efficiency are assessed on the basis of, among other things, the reporting from and the 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.
The state endeavours to understand how different aspects of a company’s corporate governance contribute to sustainable goal attainment. Topics and expectations relating to corporate governance are included in the owner dialogue based on their materiality to goal attainment. The development of the company’s performance is also important.
Moreover, the state promotes a capital structure that contributes to efficient goal attainment, and expects transparency and good reporting by the companies.
In the event of poor goal attainment over time or significant deviations from the state’s expectations, the state will consider how this should be followed up. The follow-up is primarily done 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 an owner.
The state has several roles, for example as supervisory and regulatory authority, principal and owner. To create legitimacy in its different roles, the state should be aware of which role it is acting in all times, and, in its actions, clearly distinguish its role as owner from its other roles. Considerations that are not justified by the state’s goal as an owner must be addressed by other means than ownership.
State ownership shall not give state-owned companies undue competitive advantages or disadvantages compared to companies without a state ownership interest.
The central ownership unit, 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. The state’s ownership interests in companies in Categories 1 and 2 are managed by the ownership unit unless special considerations indicate a different solution. The state’s ownership interests in companies in Category 3 are currently managed by the relevant sector ministry, unless special considerations indicate a different solution.