This article explains why Norges Bank attaches importance to voting in its portfolio companies, and why voting is a key means of safeguarding our ownership rights. Continued participation in companies' AGMs, increased efforts to ensure judicious voting, and work to promote the provision of sufficient, timely and accurate information by companies will be key elements in Norges Bank's corporate governance work in the years ahead.
Introduction
Voting is very important for safeguarding our fundamental ownership rights. Voting also helps Norges Bank to satisfy the two sets of obligations in the Ethical Guidelines for the Government Pension Fund – Global. First, the Bank has an ethical obligation to safeguard the financial interests of the Fund. Second, the Bank is to promote good corporate governance and social and environmental sustainability, as these factors are expected to have an influence on long-term returns.
Voting helps, not least, to make the board and management of a company accountable. Norges Bank is a minority shareholder, and voting at a company's general meetings is a way for minority shareholders to avoid being expropriated by management or controlling shareholders and to protect their financial interests. Voting is also a means of addressing social and environmental issues, which are increasingly being put forward as shareholder proposals at companies' general meetings. It is the general meeting that appoints and removes the company's directors. Who is elected onto the board, and their ability and willingness to take on board this type of issues, will obviously impact on a company's strategy. A large and growing proportion of the world's shares are held by pension funds and other investors with largely the same objectives as Norges Bank. In this context, it may be worth noting the following statistics. In 2005, pension funds in the OECD countries had estimated assets under management of more than USD 17 900 billion.1) The economic importance of pension funds varies from country to country, but in large markets like the UK and the US, the assets managed by funds of this type were equivalent to two-thirds and 100 per cent of GDP respectively. In the US, pension funds hold more than 60 per cent of listed equities. Pension funds in large European countries like the Netherlands and the UK have an average direct allocation to equities of more than 50 per cent, and in the US the figure is around 40 per cent.2) The Government Pension Fund – Global's equity allocation is currently 40 per cent.
Voting is an important platform for other elements of Norges Bank's corporate governance work, because engaging with companies outside the general meetings is more credible if it builds on judicious voting. Furthermore, our work on voting gives us an insight into the individual company and its operations which is fundamental to other contact with the company in a corporate governance context.
Voting at general meetings
The right to vote at general meetings puts shareholders in a position to influence the management of the company they own, either directly or indirectly through their elected representatives on the board. By exercising their voting rights, shareholders elect the company's board and decide on other matters that may be of great importance to the company.
However, it is not always the case that all shareholders agree on fundamental decisions for the company. In such situations, voting at general meetings is a mechanism for settling disagreements. In principle, all shareholders are to be treated equally. Participation in general meetingss helps to ensure that this principle is upheld, and so to protect minority shareholders from being expropriated. In some markets – and probably increasingly so in the years ahead – the general meeting is also a key arena for raising social and environmental issues. Of course, the idea is not for shareholders to use general meetings to micro-manage the company, but active participation in voting helps to ensure influence over the company's overall strategy. Norges Bank holds shares in several thousand companies, and it would be impossible in practice for NBIM to physically attend the general meetings of all of them. However, most companies now offer shareholders an alternative to voting in person, in the form of proxy voting. The way this system normally works, investors name a representative who attends the meeting and votes on their behalf. The proxy has the same rights as a shareholder to speak and vote at the meeting.
NBIM gets help from a number of sources with obtaining information and analyses of matters to be dealt with at general meetings. However, it is important for NBIM to perform independent analysis of issues of particular importance in terms of corporate governance. This applies particularly to proposals concerning areas covered by the Ethical Guidelines for the Government Pension Fund – Global.
In 2006, NBIM voted at a total of 2 928 general meetings, corresponding to 79 per cent of meetings held. A more detailed report on voting in 2006 is provided in section 4.1 of the Annual Report.
Shareholder proposals
Most matters at general meetings are raised by the company's management, but it is also possible for shareholders to introduce proposals.
There are generally restrictions on who can file shareholder proposals, and on the types of proposal that can be filed. In most countries, the backing of shareholders representing a certain percentage of the share capital is required before a matter has to be considered at a general meeting. In the US, shareholder proposals are generally only advisory, and a company may exclude a shareholder proposal from the general meeting if it concerns the company's "ordinary business" or activities that do not make up a significant part of the company's business.
Shareholder proposals are far more common in the US than in most other markets, partly because ownership is less concentrated. In the US, nearly 700 shareholder proposals were voted on at general meetings in 2006. There has been an increase in the number of shareholder proposals in the US in recent years, particularly those concerning social and environmental issues. In markets with more concentrated ownership, it is easier for management to have a dialogue with shareholders outside AGMs. Nevertheless, the use of shareholder proposals is growing in Europe and Asia. Most such proposals have concerned the election of directors, but proposals have also been introduced dealing with social and environmental issues. For example, various European and Canadian companies have seen proposals filed for better reporting on their operations in countries where human rights have traditionally been neglected, and some European companies have seen proposals for better reporting on their impact on the environment and society in general.
In a few cases, management supports the shareholder proposal, but often the proposal conflicts with the company's recommendation. As many shareholders normally follow the recommendations of the company's management, it is difficult for a shareholder proposal to win a majority. Another reason why shareholder proposals often attract little support is that they take a form, or entail a type of demand on the company, that may not be well suited to achieving the aim of the proposal. For example, NBIM will sometimes vote against proposals raising important social and environmental issues because it believes that other engaged ownership activities would be more effective, or because the proposal is formulated in such a way that it could prove counter-productive. However, there is a trend for a growing number of shareholder proposals, including those on social and environmental topics, to win broad support, in some cases even a majority.
Although relatively few shareholder proposals actually gain a majority at general meetings, this does not mean that these proposals have no impact. For one thing, high levels of support for a proposal send an important signal to management even if it is not passed, and will often trigger action from management, not least to avoid the proposal being reintroduced.
Paradoxically, shareholder proposals also have an impact when they are withdrawn. If it is likely that a shareholder proposal will garner high levels of support, companies will often enter into a dialogue with the proponent to come up with a mutually satisfactory solution. Almost 30 per cent of shareholder proposals filed in the US in 2006 were withdrawn ahead of the general meeting. Several of these contributed to significant changes in the companies' guidelines.
NBIM has actively considered shareholder proposals for several years now, supporting them where this has been in line with the Executive Board's Principles for Corporate Governance and international norms supported by Norges Bank. NBIM is now increasingly also contacting companies both before and after general meetings to inform them that we support shareholder proposals that management does not appear willing to follow up.
So will NBIM file shareholder proposals itself in the years ahead? This is likely, especially in the US market, where the use of these proposals is most common. However, such proposals will come only after we have made our views known to the company and attempted to find out whether there is any support for them in the company – and whether they can be accommodated without having to resort to a proposal at the general meeting. A shareholder proposal has the greatest impact if the company realises that it is part of a broader ownership strategy and not just a freestanding declaration. In this case, there is also a greater chance of the company granting our wishes ahead of the general meeting, precisely to avoid a public dispute.
It is particularly in areas prioritised by Norges Bank for its corporate governance work (see separate article on the Bank's priority areas) that we may see concrete shareholder proposals from NBIM in the years ahead. But efforts to bring about important changes will rarely be served by starting out with a shareholder proposal, or by filing a shareholder proposal without the company seeing the bigger picture of which the investor's proposal is part.
Participation in voting
There are major variations in the level of participation in voting from company to company and from market to market. In the US, participation is generally far higher than in Europe and most Asian countries. Voting participation averages around 80 per cent in the US, almost 60 per cent in the UK, and between 30 and 50 per cent in countries like Italy, the Netherlands, France and Germany. One reason for the lower turnout in many European (and indeed Asian) countries is that these markets have a high proportion of international investors, and international investors face various practical barriers to exercising their voting rights. Another reason is that companies in these markets often have a group of controlling shareholders, which reduces the other shareholders' chances of wielding any influence through their voting. Nevertheless, the trend is towards increased voting participation in these markets too.
It is interesting to draw an analogy between voting in political elections and voting at general meetings. In both cases, a low turnout is a potential problem. In national democracies, three main reasons are often cited for why a high turnout is important: it lends greater legitimacy to the elections being held, it increases the likelihood of the majority in the vote actually representing the majority of the electorate, and it makes elected representatives more accountable to voters.
Similar considerations apply to voting at AGMs. It is important for management to document that they have shareholders behind them. It is particularly important for management to have the legitimacy lent by broad support from shareholders when companies have plans to undertake major changes. The casting of a vote sends a signal even in situations where it is in a minority. Voting against management's proposals or withholding support is a clear sign of discontent which will be noted by management.
If investors holding a substantial proportion of a company's shares fail to vote, there is a risk of decisions taken by the general meeting not representing the real interests and financial risk that shareholders have in the company. This is a particular danger if the various shareholders have different interests in some areas and if the shareholders who do exercise their voting rights are not representative. Institutional investors, especially pension funds investing outside their domestic market, have traditionally been less likely to exercise their voting rights than larger shareholders, with the result that their interests have not been as well represented. However, this picture has changed significantly in recent years, and shareholders of this type are increasingly exercising their voting rights.
Participation in AGMs (or voting through a proxy) means that shareholders are increasingly becoming engaged in the issues being raised. High voting participation will therefore typically mean that shareholders are better able to control and hold management to account.
Again we must stress that the role of the general meeting is not to micro-manage the company. Rather, the general meeting enables the principals (shareholders) to assure themselves that their agents (board and management) are not using their power in a way that conflicts with the principals' legitimate interests and rights.
Costs and free riders
The Government Pension Fund – Global is one of the world's largest single-owner funds, and Norges Bank has shares in around 3 500 companies. Because we have invested in so many companies, we hold, despite our size, an average of only around 0.5 per cent of the votes in each company. This diversification of the portfolio means that our vote will rarely be decisive in the outcome of a ballot. It is therefore natural to wonder why a minority shareholder with holdings this small should vote at general meetings at all.
This issue is exacerbated by the fact that voting is not inexpensive. First, there are the administrative costs relating to the actual voting process. The use of proxy voting, voting using Web-based solutions developed by service providers, and the green light for electronic voting in a number of countries have reduced these costs, but they are still significant. For a large manager like NBIM, these costs can be justified, but they may be too great for smaller investors. NBIM is actively promoting the simplification of the voting system and the introduction of electronic voting in more markets so that as many shareholders as possible can participate in AGMs.
Other significant costs relate to analysing all the items to be voted on at AGMs. The approximately 3 500 companies in which Norges Bank holds shares will together have tens of thousands of items on the agenda at AGMs during the year. Obtaining relevant information on the items to be considered at these meetings is costly in itself. Undertaking independent analysis of all of these items would demand huge resources. Although NBIM concentrates on issues of fundamental importance and companies in which we have large investments, analysing the issues and obtaining relevant information are still associated with substantial costs.
One last type of cost concerns restrictions on the right to sell shares. In a number of markets, mainly in Europe, investors who wish to vote will have their shares blocked. This means that investors are not entitled to sell their shares in the company for a specific period until the general meeting is over. In practice, this means that investors must choose between exercising their voting rights and retaining the freedom to sell their shares without restrictions.
As mentioned above, there is also much to be gained from being an active owner, such as increased board accountability, greater control and a reduced risk of expropriation. However, these gains benefit not only the investor putting resources into voting but also all other shareholders with the same interests. A situation where the cost of an activity falls to one player but the benefits also fall to others will often result in the problem of "free riders" – in this case, shareholders who prefer other shareholders to invest resources in active ownership and are unwilling to bear the cost themselves.
The free rider problem has meant that institutional investors have traditionally been passive owners who have made little use of their ownership rights to influence the companies they own. The result is a market where the owners of companies with a broad ownership structure have had little chance of influencing how these companies behave. This has contributed in turn to numerous corporate scandals and inappropriate use of corporate resources.
Pension funds and other institutional investors have increasingly realised that they need to exercise their right to vote at general meetings, because the right to disinvest cannot sufficiently protect minority shareholders from being exploited by management or controlling shareholders. It is also important to remember that many such funds are invested very broadly in line with specific indices, which reduces the scope for completely disinvesting from companies or rapidly changing a portfolio's composition. Investors of this type are increasingly working together on active ownership practices, and this collaboration is helping to reduce the free rider problem and compensate for the small size of each individual player's holdings.
Although our stake in each company is small, Norges Bank's management of the Government Pension Fund – Global and its own foreign exchange reserves makes it one of the world's largest investors. With this comes an obligation, as we see it, to be an active owner and help to ensure that the systems for exercising ownership rights function as best possible. It is not sustainable for large investors to be free riders.
Social and environmental issues
As mentioned above, the Ethical Guidelines for the Government Pension Fund – Global require Norges Bank to include in its corporate governance work social and environmental issues that can be expected to impact on long-term returns. Voting is important in this context too.
As a long-term investor with a broad range of investments in the equity markets, NBIM is keen to see the individual portfolio companies adopting a not overly short-term approach and taking account of those who are affected by their activities. A company's board must also ensure that the company reports openly on these areas, so that its shareholders are able to assess the board's decisions and actions. The company must therefore publish information about its policies on ethical and environmental issues, the actions taken and results achieved, how it deals with employee and other stakeholder issues, its assessment of the risks associated with social, ethical and environmental issues, and any systems for managing these risks and complying with laws and regulations in these areas.
Perhaps the most important demand that shareholders can make of a company's management is that it should improve its reporting. Better reporting can be a powerful tool in addressing problems such as breaches of labour rights, corruption and environmental destruction. A high proportion of the negative effects that listed companies have on their surroundings, either directly or through their suppliers, are only able to take place because of a lack of information on what is happening. For example, few listed companies will accept gross breaches of labour rights by their suppliers if this is widely known and can be verified.
Unfortunately, it is probably the case that some companies in which Norges Bank is a shareholder are complicit in breaches of labour and human rights. This is a something which we consider to be unacceptable, and which other stakeholders (both shareholders and the company's customers) are not normally willing to accept. A lack of good information is an important reason why management is not being forced to do something about this type of problem. If reliable information is obtained, both shareholders and other stakeholders will increasingly be able to put pressure on management to act. Better information on companies' impact on the economy, society and the environment will therefore make a key contribution to solving important social problems. For this reason, NBIM regularly supports shareholder proposals calling for better and clearer reporting by companies. Some of these proposals are also withdrawn ahead of the general meeting after management and proponent reach agreement on various changes.
A number of shareholder proposals on environmental issues were filed in 2006. Several of these were motivated by concern about the effects that the companies are having on global climate problems. For example, proposals on reporting greenhouse gas emissions and measures to improve energy efficiency attracted considerable support. One proposal on energy efficiency supported by NBIM was at the general meeting of a large US retailer. The proposal attracted almost 30 per cent support, which is considered high for this type of proposal. NBIM also supported a proposal on greenhouse gas emissions at the general meeting of a US energy company, which also attracted relatively strong support. Many shareholder proposals raised local environmental issues, such as the release of chemicals and the effect of oil production on sensitive natural environments. One proposal in this area supported by NBIM was filed at the general meeting of one of the world's largest oil companies and won 26 per cent of the vote. In Japan, several proposals were filed concerning the safety of nuclear power stations, an area of great importance to long-term investors on account of the potential consequences of poor nuclear safety and, not least, nuclear waste.
Other shareholder proposals in 2006 concerned labour and human rights, and this type of proposal won greater support on average than in previous years. Several such proposals asked companies to improve their reporting and monitoring of labour standards in their foreign operations. Companies with activities in countries where human rights have traditionally not been respected, and companies that have historically not published adequate details of their policy on human rights, were asked to produce ethical guidelines on labour and human rights and to report on compliance with these guidelines. NBIM supported a proposal at the general meeting of a large US automotive component producer on improving its surveillance of fundamental labour rights, both at the company itself and at its suppliers, and the proposal won about half of the vote. Proposals to do with non-discrimination on grounds of gender and sexual orientation were also filed, and these attracted relatively broad support at some companies – for example, one at the general meeting of one of the largest US oil companies won almost 35 per cent support. Many such proposals were also withdrawn as a result of companies entering into dialogue with the proponents.
Political donations have been the target of many shareholder proposals, especially in the US. At the heart of these proposals has been a call for companies to disclose all such donations made and their guidelines for making them. NBIM supported one such proposal at the general meeting of a large biotechnology company, which won around 75 per cent of the vote after management itself gave its backing to the proposal.
In the above, we have given examples of the types of issue that shareholders raise through their participation in AGMs, and that NBIM considers and, in many cases, supports. In its future work on voting, NBIM will concentrate particularly on issues that are part of Norges Bank's focus areas (see separate article), and on how voting and the associated analysis can be combined with other active ownership practices in these areas. However, we will actively consider shareholder proposals in other areas too.
Protecting shareholder rights
Since the general meeting is the fundamental channel of influence in a number of important areas, it is crucial that the voting system actually works. This is especially important for minority shareholders who have few other opportunities to influence decisions made at the companies they own. In the absence of good corporate governance systems, minority shareholders can be exploited by those who are in a position to shape or decide the company's behaviour, such as senior executives, directors and large shareholders. Many shareholder proposals at general meetings therefore seek to increase shareholders' influence and ensure a board which is independent of management and is accountable to shareholders. A number of such cases are presented below, some of which are closely related to NBIM's priority areas.
Majority voting
The directors are there to represent shareholders' interests, and so it is natural for shareholders to have an opportunity to approve who sits on the board. However, at most companies in the US and Canada, shareholders have little say in practice in who represents them on the board, as the directors are elected through plurality voting. Under this system, a director is elected if he or she gets more votes than any other candidate. A director can therefore be elected without having the support of the majority of shareholders. In practice, it is enough to get just a single vote if there is no other candidate (as is generally the case). Of course, shareholders can, in principle, nominate their own candidates, but the costs associated with this, both financial and bureaucratic, are so high that it is not a realistic option for most shareholders. This is because shareholder nominees are not included in the agenda for the meeting (proxy statement) distributed by the company, which means that the nominating shareholders themselves have to get this information sent out to the other shareholders, which is difficult and costly in practice.
One important topic at many AGMs in the US and Canada has therefore been shareholder proposals on the introduction of majority voting, so that directors have to win a majority of the votes cast to be elected. NBIM has actively supported this. More than 150 shareholder proposals calling for majority voting were filed in the US in 2006, and 36 of these were passed by an absolute majority. Furthermore, a large number were withdrawn when the companies concerned voluntarily introduced guidelines asking directors who do not win the backing of a majority of shareholders to step down. In Canada, half of the 60 biggest companies decided to introduce guidelines of this kind. Work is also now under way on making it easier to put forward alternative nominees.
One important development in shareholders' influence over director elections in the US came in September 2006, when a state court ruled in favour of pension fund AFSCME that shareholders have a right to file proposals for the amendment of corporate bylaws to allow shareholder-nominated candidates to be included in the agenda (proxy statement) sent to shareholders by the company. It is uncertain whether the Securities and Exchange Commission (SEC) will revise its interpretation of shareholder rights in this respect; if so, this could be very significant for shareholders' rights in the context of director elections.
An independent and accountable board
Many shareholder proposals aim to increase the board's independence and make it more accountable to shareholders. This is also an important issue for NBIM, as shareholders can best safeguard their interests by having a real influence over who represents them on the board. A high proportion of shareholders at some American and Asian companies are concerned about board independence, because independent directors are not in the majority, and because directors who are not independent of management sit on board committees where it is particularly important for them to be independent, such as nomination, remuneration and audit committees. One expression of this concern is the way that many shareholders in companies without a majority of independent directors are unwilling to support candidates nominated by management.
Another factor which can undermine board independence is where the chairman of the board is also the company's chief executive officer. In such cases, shareholders are increasingly voting against the reelection of the chairman. In the US, Canada, Europe and Australia, we have seen dissatisfaction with executive pay resulting in shareholders withdrawing their support for directors, or even voting against them. After the CEO of one of the largest home improvement retail companies in the US had received USD 200 million over five years despite the company's earnings falling significantly during the period, ten of the company's 11 directors received between 30 and 36 per cent withhold votes – a very clear sign of dissatisfaction from NBIM and other shareholders. NBIM also supported the election of shareholder-nominated candidates at a large US food producer, because we believed that change on the board would be good for the company's long-term strategy and value. The shareholder-nominated candidates won considerable support, and a majority of them were elected to the board.
An accountable board should listen to advisory shareholder proposals that attract high levels of support. If directors ignore shareholder proposals that win a majority, this provides grounds for voting against their reelection. This has, for example, been the case at a number of US companies where directors have for several years ignored shareholder proposals to remove poison pills (see next paragraph) or introduce annual reelection of all directors even though these proposals have been backed by a majority at AGMs.
Another important element in the work to make directors more accountable is removing anti-takeover mechanisms. One such mechanism is the staggered board, where not all directors come up for reelection each year, which would prevent a new owner from actually controlling the company. Many shareholders are therefore voting against proposals preventing the annual re-election of all directors, and supporting shareholder proposals calling for annual re-election of all directors. The average level of support for the more than 40 shareholder proposals of this kind that were put to the vote in 2006 was almost 70 per cent. NBIM lent its support to these proposals. Another anti-takeover mechanism is the poison pill, which gives management carte blanche to issue shares in the event of a takeover bid, so making it less attractive to acquire the company. In some cases, the sitting management or board may have a legitimate reason to protect itself from a takeover in this way. However, according to the principles to which NBIM works, these mechanisms must be openly put before and approved by shareholders before being introduced, and must not be renewed without being put before them once again. Proposals to give management the right to introduce or extend poison pills without shareholders' approval have therefore met with considerable opposition. Shareholder proposals requesting that such proposals be approved by the general meeting before being adopted won more than 55 per cent support on average.
Management remuneration
The remuneration of executives and directors has been a hot topic in both the national and international debate in recent times. There has been particularly strong dissatisfaction in the American market with the disclosure and design of executive pay packages. NBIM has voted against management on this type of issue on several occasions.
One key concern has been that management remuneration has not been linked closely enough with a company's results. In particular, many shareholders have been critical of management at poorly-performing companies receiving excessive remuneration. Many shareholders have also reacted to the high level of and rapid growth in executive pay. These concerns are also due to reporting on the design of executive pay packages (including information on option agreements and pension schemes) often having been insufficient and unclear. Close media scrutiny of companies where management is suspected of having manipulated the design of option agreements has heightened these concerns.
In the US, Canada, Europe and Australia, this dissatisfaction has led to shareholders withholding support for directors or voting against them. Shareholder proposals on the design of management remuneration systems have increasingly been filed. A number of pay-for-performance proposals have attracted high levels of support at general meetings. NBIM has supported many such proposals, including one at one of the world's largest investment banks, which was supported by more than half of the votes cast. Proposals requiring shareholders to approve the introduction of golden parachutes have also won considerable support, several being passed by absolute majorities. Shareholders have also asked for better information about management remuneration.
Regulators in several markets have introduced new rules to improve the disclosure of information to shareholders. In countries such as Australia, the UK and Sweden, shareholders must now be given a chance to vote on remuneration reports in an advisory ballot, and in the Netherlands these votes are binding on the company. Several shareholder proposals in this area were filed in the US in 2006, and more are anticipated in 2007. In July 2006, the SEC approved new rules on the disclosure of executive pay, and there is considerable interest in how companies will implement these rules in 2007.
The one-share-one-vote principle
It is a commonly held view that shareholders' voting rights should be proportional to the capital that they are risking in the company. Most listed companies in the US observe the one-share-one-vote principle, but this is not the case in large parts of Europe, where various departures are made from this principle. One is where some shares carry multiple voting rights. Very many companies in France, Sweden and the Netherlands have this type of share, and this creates an imbalance between financial ownership and voting power. Another departure is special/golden shares, which give their holders special rights irrespective of the size of their shareholding. Shares of this type are most common at Dutch companies. A third departure from the one-share-one-vote principle is voting ceilings. Ten per cent of European companies – mainly in Spain, Switzerland, Italy and Germany – have upper limits on the number of votes a shareholder can exercise, however many shares he may hold. A fourth departure is where some shareholders have no voting rights at all. These shares may or may not be preference shares with special rights to dividends.
Through its principles, voting and other corporate governance work, NBIM is promoting the principle of one-share-one-vote with no upper limits on the exercise of voting rights. As part of the updating of company law in the EU, the European Commission has tabled proposals for a directive on shareholder rights and invited tenders for an independent study of issues relating to the one-share-one-vote principle in Europe.
Conclusion
Pension funds represent the economic interests of much of the population, and hold an increasingly large proportion of the world's shares. In the US, pension funds and similar funds already hold more than 60 per cent of listed equities. Because these funds have a long-term investment horizon and typically a diversified portfolio, it is in their interests to promote both good governance systems and socially and environmentally sustainable development.
Despite their size, pension funds have, with a few important exceptions, been largely passive owners and have not used their ownership rights to influence the companies in which they are shareholders. One important reason for this is the restrictions that shareholders often face when exercising their ownership rights, especially when operating outside their domestic market. Even if a majority of shareholders would like a company's activities to take greater account of shareholders' preferences, it may therefore still be difficult to bring about changes. One key goal for Norges Bank's corporate governance work is therefore to help adjust the voting system so that companies' boards better reflect the interests and values of the majority of share-holders, but without shareholders ending up micro-managing the company or taking away the board's responsibilities and room for manoeuvre.
The combination of increased voting participation and changes in the voting system will increase the influence that pension funds and similar funds wield over developments at listed companies. As pension funds are typically broadly invested and have a long investment horizon, this will make an important contribution to the creation of a business world which better protects shareholders' long-term interests. It will also result in companies managing their impact on the outside world in a sustainable manner. This is in the interests of both shareholders and society as a whole.
