Discussion Note 14 - 19 November 2012
In this discussion note, NBIM’s expectations on corporate governance are presented. Expectations directed at boards are discussed, as is the rationale for focusing on board ccountability and equal treatment of shareholders. In the discussion, the academic literature underpinning NBIM’s approach to corporate governance and opinions offered by leading industry ractitioners are presented. Two sets of expectations are included as appendices that conclude the note.
NBIM publishes herewith two sets of expectations on different aspects of corporate governance. In formulating these expectations, NBIM has considered the challenges of protecting its interests as a globally diversified minority shareholder in light of empirical and theoretical evidence. The literature review identifies evidence of correlation of certain governance factors with measures of company performance. As a shareholder, NBIM must apply these findings carefully, together with professional experience, in defining corporate-governance expectations.
Greater corporate-governance consensus is found in international codes of corporate governance such as OECD principles, the ICGN Principles of Corporate Governance and national codes of best practice. We question the basis for the near-consensus in such codes given the lack of academic evidence and conclude that principles should be seen as best practices and that considered deviation must be expected and welcomed. We address the practical challenges of effective ownership within an investment culture.
NBIM’s expectations have been formulated with this investment objective in mind. Our intention is not to provide another code of corporate governance for companies to comply with or report against. Rather, the ambition is to set out priorities for corporate governance as a means to foster dialogue and mutual understanding. NBIM welcomes comments from all stakeholders on the expectations at the end of this discussion note.