When Norway's $1 trillion sovereign wealth fund said it wanted companies to curb excessive and opaque top-management pay, it meant business.
Since releasing a position paper in April, the world's biggest wealth fund has increased the number of votes against management compensation proposals in the companies it invests in, Carine Smith Ihenacho, its global head of ownership strategies, said in an interview in Oslo.
It has this year voted against pay plans at Alphabet Inc., Google's holding company, offshore driller Noble Corp. and media company Liberty Global, among others. The Government Pension Fund Global was unable to provide aggregated statistics on its publicly available votes, but plans to do so in connection with its annual report on responsible investment, due in February.
Built on the country's petroleum income over the past 20 years, Norway's wealth fund has more than doubled in size since 2012 and crossed the $1 trillion mark earlier this year. It owns about 1.5% of all listed stocks in the world and invests in almost 9,000 companies, having opted to hold equities, bonds and real estate abroad to avoid spurring inflation in Norway.
The fund operates according to a set of ethical guidelines that span from human rights to environmental issues, and has cut its investments in tobacco and certain weapons producers, as well as in mining and in utilities that rely heavily on coal. It's also taken on a more activist role in voting on management proposals, after flagging preferences such as the separation of CEO and chairman positions.
The fund earlier this year urged companies to ensure that a "substantial proportion" of annual pay be provided as shares that are locked in for at least five years, but preferably 10. Pay practices should also be simple and total remuneration should be transparent.
The fund has strict guidelines of its own. For example, it bars its senior executives from receiving performance-based bonuses and sets management wages at "competitive levels" while avoiding becoming the market leader. Its CEO, Yngve Slyngstad, earned $810,000 last year.
NBIM regularly talks to individual companies, including about pay, Ms. Smith Ihenacho said, declining to comment on how the fund plans to vote in the next big round of general meetings in May and June next year.
"We have issued a position paper on what we believe to be good remuneration practices," she said. "We're primarily hoping that companies will follow those, rather than us finding a lot of companies to vote against."