Norges Bank Investment Management will publish and explain all votes against company boards at shareholder meetings starting Wednesday.
The firm, which runs the assets of the 10.2 trillion Norwegian kroner ($986 billion) Government Pension Fund Global, will publish rationale for its votes against a company board one day after shareholder meetings. "In most cases, we will support the board's recommendation," NBIM said in a statement on its website.
NBIM made the move to be more transparent over its voting decisions to help the market better understand its positions.
"As a global investor, we depend on an efficient voting process," Carine Smith Ihenacho, chief corporate governance officer, said in the statement. "We see that in several markets, there are still manual voting processes, several layers of intermediaries and a lack of electronic solutions. We depend on issuers, investors, business participants and regulators cooperating to make relevant information available, propose improvements, develop good electronic voting solutions and modernize frameworks."
As part of the move NBIM also published Wednesday four position papers clarifying its views on board independent, multiple-share classes, shareholder rights in equity issuances and related-party transactions. The positions outlined in the papers "will serve as a basis for our discussion with boards," NBIM said.
Regarding board independence, NBIM said a board should "guide company strategy and monitor management performance without conflicts of interest. A majority of shareholder-elected board members should be independent of management, dominant shareholders and business relationships," the position paper said. "In majority-controlled companies, at least a third of board members should be independent."
Additional safeguards should also be in place where board decisions "are particularly vulnerable to conflicts of interest," with managing not serving on audit or remuneration committees, for example. How conflicts of interest are avoided should also be demonstrated by boards, with disclosure on which members or candidates are considered independent and details of their assessments for independence.
However, "independence should not outweigh all other qualifications on the board. As such, we recognize the need for industry expertise on the board," the paper said.
Regarding multiple-share classes, all shareholders should have the right to vote on fundamental decisions concerning a company, in order to protect their investments.
One share should give one vote to holders and any unequal voting rights "should be aligned with cash flow rights over time," the position paper said. There should also be a so-called sunset clause in place for unequal voting rights, which either restricts the transfer of those shares or limits the structure of the voting right to a set period of time.
On shareholder rights in equity issuances, NBIM said existing shareholders should have the right to approve new issuances. These shareholders should have the right to participate pro rata to maintain their shares and benefit from any potential discount associated with new issuances. And regarding related-party transactions, they should be carried out "on market terms and be clearly beneficial to all shareholders," the position paper said. Company boards are responsible for managing conflicts of interest to ensure shareholders are treated fairly. Further, boards should provide disclosure on transactions with related parties.
