OSLO (Reuters) - Executive pay is firmly in the crosshairs of Norway’s $1 trillion sovereign wealth fund as it puts its votes to work at some of the more than 9,000 companies it is invested in.
The world’s biggest sovereign wealth fund, built on Norway’s oil revenues, has become a more active shareholder in recent years and since 2017 has called for changes including the scrapping of long-term incentive plans and simpler and more transparent packages.
So far in this year’s annual general meeting season, data shows the fund voted against a stock option plan for Tesla (TSLA.O) CEO Elon Musk, which would potentially be worth $2.6 billion to the electric carmaker’s founder..
It has also voted against the pay of Disney (DIS.N) CEO Bob Iger, Christian Dior (DIOR.PA) CEO Sydney Toledano, Peugeot (PEUP.PA) CEO Carlos Tavares, Vinci (SGEF.PA) CEO Xavier Huilliard and Vivendi (VIV.PA) CEO Arnaud de Puyfontaine.
The fund’s chief executive Yngve Slyngstad said that transparency remains a sticking point on pay.
“It is the transparency and that is quite often linked to the simplicity,” Slyngstad told Reuters on the sidelines of an earnings presentation on Friday.
“If you get to a situation where we have a possibility to voice our opinion on pay, it has to be reasonably well defined in advance — what kind of pay package it will lead to.”
The main way to influence was to determine the pay of incoming CEOs, rather than existing ones since their compensation has already been agreed, he said, adding that change could take five to 10 years.
He declined to speak about individual companies except for engineering firm The Weir Group (WEIR.L), which the fund praised this month for being willing to “challenge conventional thinking on remuneration” by being simple and transparent.
“The Weir Group has led by example to a different degree than others and were very clear in the way they were doing it. We wanted to highlight them,” said Slyngstad.
“We have not outlined any other companies that we would want to do the same for in advance. We are watching.”
The fund is also against CEOs doubling up as chairmen and has voted against the elections of Bank of America (BAC.N) CEO Brian Moynihan, L’Oreal (OREP.PA) CEO Jean-Paul Agon and Walt Disney (DIS.N) CEO Bob Iger on their respective boards.
It is also against board members being elected as a group as it cannot then have a say on individual members. This season it therefore voted against the reelections of the boards of both Sweden’s Alfa Laval (ALFA.ST) and Atlas Copco (ATCOa.ST).
The fund posted its first loss in two years in the first quarter, primarily due to falling stock markets, and Slyngstad told an earnings presentation that rising protectionism could impact the fund’s equity investments as the top 100 world multinationals account for 20 percent of its equity portfolio.
“Any changes to the global supply chain, or tariffs that will hit the global supply chain, will of course be quite important for this fund ... Any action that reduces world growth will usually affect earnings and will affect pricing of the companies we are invested in,” Slyngstad told reporters.
Some 66.2 percent of the fund’s assets were held in stocks at the end of the first quarter, 31.2 percent in fixed income and 2.6 percent in real estate.
The fund’s return was minus 1.5 percent in the quarter, slightly better than its own benchmark but lagging the positive return of 3.5 percent in the last quarter of 2017.
The most negative contributions were Nestle (NESN.S), Facebook (FB.O) and Wells Fargo (WFC.N). Nestle was the fund’s third-largest equity holding at the end of the quarter, worth 46 billion crowns, fund data showed.
The Norwegian government withdrew 11 billion crowns during the first quarter to pay for public expenses, compared with 61 billion crowns for the whole of 2017.
($1 = 8.0083 Norwegian crowns)
Reporting by Gwladys Fouche, editing by Terje Solsvik and Alexander Smith