Norway's titanic sovereign wealth fund takes a stand against executive pay

When Norway — historically one of the poorest countries in Europe — struck oil in the North Sea, the country put the proceeds into a "sovereign wealth" fund that invested it in other industries and used the returns to pay for an extensive welfare state that has given Norwegians one of the highest standards of living in the world.

Over the years, the Norwegian fund has grown $870b, making it one of the world's largest investors, with significant positions over 9,000 companies.

Norges Bank has announced that it has had enough of its portfolio companies spending shareholder money on exorbitant executive compensation schemes (one of Thomas Piketty's prime culprits for global wealth disparity). It will find a company whose executives are significantly overpaid and use that company as an example of how managers are overpaid to investors' detriment.

It's a radical departure for the Norwegians, who have never taken a position on executive pay until now.

"The Norwegian state sovereign wealth fund has always been quite passive in how it has approached its shareholdings, if a company has done something it hasn't liked it's sold the shares and walked away," said Russ Mould, investment director at AJ Bell.

"I think now it is taking a more active stewardship approach, i.e. debating with the company," he added.

Last month 59% of BP shareholders voted against a 20% pay rise for chief executive Bob Dudley, that would have netted him £14m.

Executive pay crackdown by Norway's huge public fund

(Image: Norges Bank Kirkegata, Mahlum, public domain)